Disclaimer: This article is general information only. It is not legal advice, it does not create an advocate-client relationship, and it is not an advertisement or solicitation.
A commercial suit can fail before the judge reads a single page of the dispute. The reason is often a step that sits quietly in the statute: mediation before filing. For businesses in Kerala that chase unpaid dues or enforce supply contracts, it is worth understanding before the plaint is drafted.
Contents
What Section 12A says
Section 12A was added to the Commercial Courts Act in 2018. In plain terms, a plaintiff whose suit does not contemplate urgent interim relief must first try pre-institution mediation. It applies to commercial disputes as the Act defines them, which include supply of goods or services, joint ventures, agency and distribution, and similar business contracts, above the specified value.
For years, courts differed on whether this was a formality. The Supreme Court settled the question in Patil Automation Pvt Ltd v. Rakheja Engineers Pvt Ltd in 2022, holding that the step is mandatory and that suits instituted on or after 20 August 2022 without it are liable to be rejected under Order VII Rule 11 of the Code of Civil Procedure. In Dhanbad Fuels Pvt Ltd v. Union of India (2025 INSC 696), a bench of Justices J.B. Pardiwala and R. Mahadevan repeated that position and dismissed an appeal in a freight dispute of about Rs 8.73 crore where no urgent relief had been sought.
How the process runs
The application goes to the Legal Services Authority under the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018. In Kerala districts that means the District Legal Services Authority. The authority notifies the other side and tries to bring the parties to a settlement. The period allowed is three months, which can be extended by two more months with the consent of the parties.
If the parties settle, the settlement is recorded in writing and signed. If they do not, the authority issues a non-starter or failure report, and that report is what allows the suit to be filed. The time spent in mediation is excluded when calculating limitation under Section 12A(4), so a genuine attempt should not cost the claim its time. Parties should still check the rules and the authority's current practice before relying on any date.
When urgency allows a direct suit
The statute carves out suits that contemplate urgent interim relief, such as an injunction to stop assets from being moved. This is where most disputes about Section 12A arise. In Dhanbad Fuels, the Supreme Court said the test is whether urgent relief can be contemplated from the plaintiff's standpoint, judged on the nature of the suit and the cause of action, and not whether the relief is finally granted. It also warned that urgency must not be used as an excuse to avoid mediation.
In October 2025, a later bench decision, Novenco Building and Industry A/S v. Xero Energy Engineering Solutions Pvt Ltd, applied the same idea and said a proforma prayer for urgent relief, added only to skip mediation, will be ignored, and the court may require compliance with Section 12A.
| Situation | Mediation first? | Why |
|---|---|---|
| Plain claim for an unpaid invoice | Yes | No urgent relief is contemplated. |
| Documents show assets about to be moved, injunction genuinely needed | Likely not required | Urgency appears from the plaint and documents. |
| Injunction prayer added only as a formality | Yes | Courts look past formal prayers. |
| Dispute outside the Act's definition of commercial dispute | Not under this section | Section 12A speaks of commercial suits. |
Mistakes worth avoiding
The first is treating the urgent relief prayer as a drafting trick. It invites an early objection and can cost months. The second is ignoring the paper trail: contracts, notices and correspondence that show the dispute are the same documents a court will read to test urgency. The third is sending a junior representative to mediation without authority to settle, which turns a useful forum into a delay.
It also helps to understand how neighbouring remedies work. Our earlier note on cheque dishonour complaints explains why some money disputes follow a separate track, and our checklist on franchise agreements shows how dispute clauses can be written before a conflict begins.
FAQ
Does Section 12A apply to every business dispute?
No. It applies to commercial disputes as defined in the Commercial Courts Act, 2015, and to suits that do not contemplate urgent interim relief.
How long can mediation last?
Three months, which can be extended by two months with the consent of the parties, as the Supreme Court noted in Dhanbad Fuels.
What happens if a suit is filed without mediation?
For suits instituted on or after 20 August 2022, the plaint is liable to be rejected under Order VII Rule 11 of the Code of Civil Procedure, unless the urgency exception genuinely applies.
Questions on a specific matter depend on the facts, and advice should be taken before acting.