Faster Resolution of Commercial Disputes in India

The Indian legal system has long grappled with the challenge of delayed resolution of commercial disputes. To address this, the Commercial Courts, Commercial Division, Commercial Appellate Division of High Courts Act, 2015, was enacted, aiming to expedite the adjudication process.

A crucial component of this framework is the concept of Pre-Institution Mediation, governed by the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.  

While this period can be extended by a further two months with the consent of both parties, the Act importantly clarifies that the time spent in pre-institution mediation is excluded when calculating limitation periods under the Limitation Act, 1963. This provision ensures that engaging in mediation does not prejudice a party’s right to litigate

Pre-Institution Mediation (PIM) in commercial matters is a mechanism introduced under Section 12A of the Commercial Courts Act, 2015, aimed at facilitating the amicable settlement of commercial disputes before formal litigation is initiated. This process seeks to reduce the burden on courts and promote the efficient resolution of disputes.

Legal Provisions of Section 12A:

1. Mandatory Mediation: For commercial disputes valued at ₹3 lakhs or more, it is mandatory for the plaintiff to exhaust the remedy of pre-institution mediation before filing a suit, provided the suit does not contemplate any urgent interim relief. This mediation is to be conducted in accordance with the manner and procedure prescribed by rules made by the Central Government.
2. Authorized Authorities: The Central Government may authorize authorities constituted under the Legal Services Authorities Act, 1987, to conduct pre-institution mediation. These Legal Services Institutions are responsible for facilitating PIM across the country.
3. Time Frame: The mediation process is to be completed within three months from the date of application by the plaintiff. This period can be extended by an additional two months with the consent of the parties involved. Notably, the time spent in mediation is excluded from the computation of the limitation period under the Limitation Act, 1963.
4. Settlement Agreement: If the parties reach a settlement during mediation, it is reduced to writing and signed by both parties and the mediator. Such a settlement has the same status and effect as an arbitral award on agreed terms under Section 30(4) of the Arbitration and Conciliation Act, 1996.

Exceptions:

The mandatory requirement for pre-institution mediation does not apply if the plaintiff seeks urgent interim relief. In such cases, the suit can be instituted directly without undergoing the mediation process.

Objective and Benefits:

The primary objective of introducing PIM is to provide an efficacious and expeditious resolution of commercial disputes, thereby reducing the burden on courts and fostering a culture of amicable settlement. This process not only saves time and resources for the parties involved but also helps in maintaining business relationships by avoiding adversarial litigation.

In conclusion, Pre-Institution Mediation under Section 12A of the Commercial Courts Act, 2015, serves as a crucial tool in the landscape of commercial dispute resolution in India, promoting a more collaborative and less contentious approach to resolving conflicts.