The Sikkim High Court has clarified that Section 12A of the Commercial Courts Act, 2015, mandating pre-institution mediation, does not apply retrospectively to commercial suits filed before 20 August 2022. This judgment underscores the prospective operation of the Supreme Court's ruling in M/s Patil Automation Private Limited v. Rakheja Engineers Private Limited, protecting litigants from procedural hurdles in pending cases.
Background & Facts
The Dispute
The petitioner, M/s Yuksom Breweries Limited, filed a money suit against the respondents, M/s Thomas Enterprises and its proprietor, seeking recovery of dues. The dispute originated from a commercial transaction, with the petitioner alleging non-payment by the respondents despite repeated demands.
Key Facts
- 18.08.2016: Petitioner filed Money Suit No. 03 of 2016 before the District Judge, Namchi, seeking recovery of dues.
- 30.07.2018: The District Judge decreed the suit in favor of the petitioner.
- 01.11.2021: A Division Bench of the Sikkim High Court set aside the decree and transferred the suit to the Commercial Court under the Commercial Courts Act, 2015 (the Act).
- 29.03.2022: The Commercial Court disposed of the suit (Commercial Case No. 02 of 2022), holding that pre-institution mediation under Section 12A was mandatory as no urgent interim relief was sought.
- 31.07.2024: The Commercial Appellate Court set aside the order dated 29.03.2022 and restored the suit for trial.
- 13.12.2024: The Commercial Court registered the suit as Commercial Suit Case No. 01 of 2021 and issued notices to the parties.
- 08.07.2025: The Commercial Court passed the impugned order, directing compliance with Section 12A and disposing of the suit.
Procedural History
The litigation traversed multiple forums:
- Money Suit No. 03 of 2016: Filed on 18.08.2016; decreed on 30.07.2018.
- RFA No. 04 of 2018: Filed before the High Court; disposed of on 01.11.2021, transferring the suit to the Commercial Court.
- Commercial Case No. 02 of 2022: Disposed of on 29.03.2022 for non-compliance with Section 12A.
- Commercial Appeal No. 01 of 2023: Disposed of on 31.07.2024, restoring the suit.
- Commercial Suit Case No. 01 of 2021: Registered on 13.12.2024; impugned order passed on 08.07.2025.
Relief Sought
The petitioner challenged the impugned order dated 08.07.2025 under Article 227 of the Constitution of India, seeking:
- Quashing of the order directing compliance with Section 12A.
- Restoration of Commercial Suit Case No. 01 of 2021 for adjudication on merits.
The Legal Issue
The central question was whether Section 12A of the Commercial Courts Act, 2015, which mandates pre-institution mediation, applies retrospectively to commercial suits filed before the Supreme Court's ruling in M/s Patil Automation Private Limited v. Rakheja Engineers Private Limited (effective from 20.08.2022).
Arguments Presented
For the Petitioner
The petitioner contended that:
- The original money suit was filed on 18.08.2016, predating the insertion of Section 12A (effective from 03.05.2018) and the Supreme Court's ruling in M/s Patil Automation (effective from 20.08.2022).
- The suit was not a new filing but a continuation of Money Suit No. 03 of 2016, which had already been adjudicated and transferred to the Commercial Court.
- Imposing Section 12A retrospectively would prejudice the petitioner, who had already exhausted multiple rounds of litigation and mediation attempts.
For the Respondents
The respondents argued that:
- Section 12A is mandatory, and non-compliance renders the suit liable for rejection under Order VII Rule 11 of the Code of Civil Procedure, 1908.
- The Supreme Court's ruling in M/s Patil Automation applies uniformly, and exceptions are narrowly defined.
- The petitioner had not sought urgent interim relief, which is the sole exception to the mandatory mediation requirement.
The Court's Analysis
The High Court examined the prospective operation of Section 12A as interpreted by the Supreme Court in M/s Dhanbad Fuels Private Limited v. Union of India and Anr. The Court noted:
"46. In Patil Automation (supra), this Court held that the language of Section 12A is plainly imperative in nature, and any commercial suit instituted without adhering to this provision is liable to be rejected under Order 7 Rule 11 CPC. However, recognising that the amending Act containing Section 12A is a 'toddler', and that the 'law necessarily would have teething problems at the nascent stage', this Court declared the aforesaid declaration to operate prospectively, effective from 20-8-2022, so that the stakeholders may be sufficiently informed."
The Court further relied on paragraph 63(b) of M/s Dhanbad Fuels, which states:
"If the suit was instituted prior to 20-08-2022 without complying with Section 12A of the 2015 Act, and the same does not fall within one of the exceptional categories as explained in paragraph 47 of this judgment, then it would be open to the court to keep the suit in abeyance and direct the parties to explore the possibility of mediation in accordance with the 2015 Act, the PIMS Rules and the 2020 SOP."
Applying this ratio, the Court observed:
- The original money suit was filed on 18.08.2016, predating 20.08.2022.
- The Division Bench's order transferring the suit to the Commercial Court (01.11.2021) and the first disposal by the Commercial Court (29.03.2022) also predated 20.08.2022.
- The impugned order (08.07.2025) was passed without considering the prospective applicability of M/s Patil Automation.
The Court held that while Section 12A is mandatory, its retrospective application would violate the Supreme Court's ruling in M/s Dhanbad Fuels, which protects suits filed before 20.08.2022.
The Verdict
The High Court allowed the writ petition and:
- Set aside the impugned order dated 08.07.2025.
- Restored Commercial Suit Case No. 01 of 2021 to the files of the Commercial Court for disposal on merits.
- Directed the Commercial Court to keep the suit in abeyance and explore mediation under the Commercial Courts Act, 2015, the Post Institution Mediation Settlement Rules, and the Standard Operating Procedure, 2020, in the absence of urgent interim relief.
What This Means For Similar Cases
Prospective Application of Section 12A
- Suits filed before 20.08.2022 are protected from the mandatory pre-institution mediation requirement under Section 12A.
- Courts must apply the Supreme Court's ruling in M/s Dhanbad Fuels to avoid retrospective imposition of procedural hurdles.
Exceptions to Mandatory Mediation
- Urgent interim relief: If a suit seeks urgent interim relief, Section 12A does not apply.
- Rejected plaints: If a plaint was rejected and no steps were taken within the limitation period, the protection may not apply.
- New suits post-ruling: Suits filed after 20.08.2022 or after a High Court's declaration of Section 12A's mandatory nature must comply with pre-institution mediation.
Practical Implications for Litigants
- Pending suits: Litigants with suits filed before 20.08.2022 can argue against dismissal for non-compliance with Section 12A.
- Mediation as an option: Even if Section 12A does not apply, courts may still direct mediation under the Post Institution Mediation Settlement Rules.
- Strategic filing: Parties must assess whether to seek urgent interim relief to bypass Section 12A in new filings.
