Holding

Section 12A of the Commercial Courts Act is mandatory and any suit instituted without complying with it must be rejected under Order VII Rule 11, a power the court may exercise suo motu.

Summary

The plaintiff, RAKHEJA ENGINEERS, filed a commercial suit for recovery of money without seeking urgent interim relief. The defendant, M/S. PATIL AUTOMATION, moved to reject the plaint under Order VII Rule 11 of the CPC, arguing that the suit violated Section 12A of the Commercial Courts Act, 2015, which mandates pre‑institution mediation. The trial court and the High Court refused to reject the plaint, treating Section 12A as merely procedural. The Supreme Court examined the language of Section 12A, the legislative intent reflected in the 2018 amendment, and compared it with other mandatory statutory provisions such as Section 80 CPC and Section 69 of the Partnership Act. It held that Section 12A is a mandatory requirement for suits not seeking urgent interim relief and that courts may suo motu reject a plaint under Order VII Rule 11 for non‑compliance. The Court declared the rule mandatory with prospective effect from 20‑08‑2022, ordered the rejection of the plaints, and disposed of the appeals.

Issues considered

Whether Section 12A of the Commercial Courts Act, 2015 imposes a mandatory pre‑institution mediation requirement.
Whether a court can suo motu reject a plaint under Order VII Rule 11 of the CPC for failure to comply with Section 12A.
Whether non‑compliance with Section 12A renders a suit barred in the same manner as Section 80 CPC or Section 69 of the Partnership Act.
Whether the declaration of mandatory compliance should have prospective effect only.

Legislation cited

Arbitration and Conciliation Act, 1996s. 30(4)
Code of Civil Procedure, 1908s. Order IV Rule 1, s. Order VII Rule 11, s. Order VII Rule 12, s. Order VII Rule 13, s. Order V Rule 1
Commercial Courts Act, 2015s. 12A
Commercial Courts (Pre‑Institution Mediation and Settlement) Rules, 2018s. Rule 11, s. Rule 3, s. Rule 5, s. Rule 6, s. Rule 7, s. Rule 9
Indian Partnership Act, 1932s. 69
Limitation Act, 1963

Subjects

pre‑institution mediationCommercial Courts Actmandatory statutory provisionOrder VII Rule 11civil suit rejectionstatutory interpretationease of doing businessdocket explosionalternative dispute resolution

Judgment

808 [2022]REPORTS
SUPREME COURT 11 S.C.R. 808 [2022] 11 S.C.R.

A M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS.
v.
RAKHEJA ENGINEERS PRIVATE LIMITED
(Civil Appeal No. 5333 of 2022)
B AUGUST 17, 2022
[K. M. JOSEPH AND HRISHIKESH ROY, JJ.]
Commercial Courts Act, 2015 – s.12A – Statutory pre-institution
mediation contemplated u/s.12A – Held: Is mandatory – Exhausting
pre-institution mediation by the plaintiff, with all the benefits that
C
may accrue to the parties and, more importantly, the justice delivery
system as a whole, would make s.12A not a mere procedural
provision – The design and scope of the Act, as amended in 2018,
by which s.12A was inserted, would make it clear that Parliament
intended to give it a mandatory flavour – Any other interpretation
D would not only be in the teeth of the express language used but,
more importantly, result in frustration of the object of the Act and
the Rules – Any suit instituted violating the mandate of s.12A must
be visited with rejection of the plaint under Or. VII r. 11 CPC – This
power can be exercised even suo moto by the court – This
declaration effective from 20.08.2022 – Code of Civil Procedure,
E
1908 – Order VII r.11.
Mediation – Role of the Bar – Held: Mediation offers a
completely new approach to attaining the goal of justice – A win-
win situation resulting from assigning a greater role to the parties
themselves, with no doubt, a spirit of accommodation represents a
F
better and what is more in the era of docket explosion, the only
meaningful choice – The role of the Bar is vital in taking mediation
forward – It is important that the courts also adapt to the changing
times.
Interpretation of Statutes – Golden rule of interpretation –
G Held: The decisive element in the search for the answer, in the
interpretation of a Statute, must be to ascertain the intention of the
Legislature – The first principle must be the golden rule of
interpretation, which means, the interpretation in conformity with
the plain language, which is used.
H
808
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 809
RAKHEJA ENGINEERS PRIVATE LIMITED

Mediation – Statutory pre-institution mediation contemplated A
u/s.12A of the Commercial Courts Act, 2015 – Held: Is provided
only in suits, which do not contemplate any urgent interim relief –
Therefore, pre-institution mediation has been mandated only in a
class of suits – This is for the reason that in suits which contemplate
urgent interim relief, the Law-giver has carefully vouchsafed
B
immediate access to justice as contemplated ordinarily through the
courts – The carving out of a class of suits and selecting them for
compulsory mediation, harmonises with the attainment of the object
of the law – Commercial Courts Act, 2015 – s.12A.
Code of Civil Procedure,1908 – Or.VII, r.11– No absolute right
to file civil suit – A civil suit can be barred by a law, either expressly C
or by necessary implication – The jurisdiction of a civil court can
be ousted – There is no fundamental right with anyone to contend
that he has a right to file a civil suit, which cannot be taken away –
Presence of Order VII Rule 11(d) which mandates rejection of a
plaint where a suit is barred is a reminder of the principle that there D
is no absolute right to file a civil suit.
Code of Civil Procedure,1908 – Order VII, r.11(d) – Stage at
which power to reject plaint can be exercised – Whether the power
under the rule can be exercised only on application filed by
defendant – Held: Or.VII r.11 does not provide that the court is to E
discharge its duty of rejecting the plaint only on an application –
Power u/Or. VII r.11 is available to the court to be exercised suo
motu – In a clear case, where on allegations in the suit, it is found
that the suit is barred by any law, the plaint should be rejected
without issuing summons.
F
Disposing of the appeals, the Court
HELD: 1. Section 12A of the Commercial Courts Act, 2015
cannot be described as a mere procedural law. Exhausting pre-
institution mediation by the plaintiff, with all the benefits that may
accrue to the parties and, more importantly, the justice delivery G
system as a whole, would make Section 12A not a mere procedural
provision. The design and scope of the Act, as amended in 2018,
by which Section 12A was inserted, would make it clear that
Parliament intended to give it a mandatory flavour. Any other
interpretation would not only be in the teeth of the express
language used but, more importantly, result in frustration of the H
810 SUPREME COURT REPORTS [2022] 11 S.C.R.

A object of the Act and the Rules. If the object of the law is defeated
by non-compliance with the provision, then, it would be regarded
as mandatory. The right to institute the Suit in a plaintiff who
does not contemplate urgent interim relief in a commercial matter
under the Act, is clearly conditioned by the fulfilment of certain
conditions as provided in Section 12A. This cannot be likened to
B
allowing a party to file his written statement. Bearing in mind the
object also, the conclusion is inevitable that the right of suit itself
will fructify only when the conditions in Section 12A are fulfilled.
Treating the provision as procedural, also, the result cannot be
different. Any other view would remove the basis for treating
C Section 80(1) of the CPC as mandatory. [Para 43][838-E-H; 839-
A-B]
2. On a conspectus of the Act, as from its birth till the Law-
giver stepped- in with the amendment in 2018, the Act read with
the Rules represent an economic experiment as much as it deals
D more directly with a vital aspect of administration of justice.
Commercial disputes have been clearly identified. The value has
been fixed. Courts, at different stages, have been contemplated.
Timelines are contemplated. The whole object of the law is clear
as day light. Disputes of a commercial hue, must be extinguished
with the highest level of expedition. The dispute resolution would
E witness a termination of the lis between the feuding parties. More
importantly, it would prepare the ground for the country becoming
a destination attracting capital by enhancing the ease of doing
business. It does not require much debate to conclude that there
is a direct relationship between ease of doing business and an
F early and expeditious termination of disputes, which may arise in
commercial matters. The speed with which the justice delivery
system in any country responds to the problem of docket
explosion, particularly in the realm of commercial disputes can
be regarded as a very safe index of the ease of doing business in
that country. The Act, therefore, is, in the said sense, a unique
G experiment to push the pace of disposal of commercial disputes.
It is in this background that the Court must approach the issue
of whether Section 12A has been perceived as being a mandatory
provision. This is for the reason that the decisive element in the
search for the answer, in the interpretation of such a Statute, must
H be to ascertain the intention of the Legislature. The first principle,
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 811
RAKHEJA ENGINEERS PRIVATE LIMITED

of course, must be the golden rule of interpretation, which means, A
the interpretation in conformity with the plain language, which is
used. There cannot even be a shadow of a doubt that the language
used in Section 12A is plainly imperative in nature. However,
this Court will not be led by the mere use of the word ‘shall’.
Even going by the sublime object of the Act, this Court is fully
B
reinforced in its’ opinion that the pre-institution mediation is
intended to produce results, which has a direct bearing on the
fulfilment of the noble goals of the Law-giver. It is apparent that
the Legislature has manifested a value judgement. [Para 53][847-
C-H; 848-A-B]
3. Section 9 of the CPC is not the law, which creates a right C
to file a civil suit. It would require a law, to invade, absolutely or
conditionally, the vital civil right of a person to take his grievance
to a civil court. A civil suit can be barred by a law, either expressly
or by necessary implication. The jurisdiction of a civil court can
be ousted. In other words, there is no Fundamental Right with D
anyone to contend that he has a right to file a civil suit, which
cannot be taken away. It is another matter that the courts will not
lightly infer the ouster of a jurisdiction of a civil court. The very
presence of Order VII Rule 11(d), which mandates rejection of a
plaint, where a suit is barred, is a reminder of the principle that
there is no absolute right to file a civil suit. [Para 55][848-G-H; E
849-A]
4. On a consideration of the scheme of the Orders IV, V
and VII of the CPC, the Court arrives at the following conclusions:
(A) A suit is commenced by presentation of a plaint.The F
date of the presentation in terms of Section 3(2) of the Limitation
Act is the date of presentation for the purpose of the said Act. By
virtue of Order IV Rule 1 (3), institution of the plaint, however,
is complete only when the plaint is in conformity with the
requirement of Order VI and Order VII.
G
(B) When the court decides the question as to issue of
summons under Order V Rule 1, what the court must consider is
whether a suit has been duly instituted.
(C) Order VII Rule 11 does not provide that the court is to
discharge its duty of rejecting the plaint only on an application.
H
812 SUPREME COURT REPORTS [2022] 11 S.C.R.

A Order VII Rule 11 is, in fact, silent about any such requirement.
Since summon is to be issued in a duly instituted suit, in a case
where the plaint is barred under Order VII Rule 11(d), the stage
begins at that time when the court can reject the plaint under
Order VII Rule 11. No doubt it would take a clear case where the
court is satisfied. The Court has to hear the plaintiff before it
B
invokes its power besides giving reasons under Order VII Rule
12. In a clear case, where on allegations in the suit, it is found
that the suit is barred by any law, as would be the case, where the
plaintiff in a suit under the Act does not plead circumstances to
take his case out of the requirement of Section 12A, the plaint
C should be rejected without issuing summons. Undoubtedly, on
issuing summons it will be always open to the defendant to make
an application as well under Order VII Rule 11. In other words,
the power under Order VII Rule 11 is available to the court to be
exercised suo motu. [Para 68][858-E-H; 859-A-C]
D 5. The Act did not originally contain Section 12A. It is by
amendment in the year 2018 that Section 12A was inserted. The
Statement of Objects and Reasons are explicit that Section 12A
was contemplated as compulsory. The object of the Act and the
Amending Act of 2018, unerringly point to at least partly foisting
E compulsory mediation on a plaintiff who does not contemplate
urgent interim relief. The provision has been contemplated only
with reference to plaintiffs who do not contemplate urgent interim
relief. The Legislature has taken care to expressly exclude the
period undergone during mediation for reckoning limitation under
the Limitation Act, 1963. The object is clear. It is an undeniable
F reality that Courts in India are reeling under an extraordinary
docket explosion. Mediation, as an Alternative Dispute
Mechanism, has been identified as a workable solution in
commercial matters. In other words, the cases under the Act
lend themselves to be resolved through mediation. Nobody has
G an absolute right to file a civil suit. A civil suit can be barred
absolutely or the bar may operate unless certain conditions are
fulfilled. Cases in point, which amply illustrate this principle, are
Section 80 of the CPC and Section 69 of the Indian Partnership
Act. The language used in Section 12A,which includes the word
H
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 813
RAKHEJA ENGINEERS PRIVATE LIMITED

‘shall’, certainly, go a long way to assist the Court to hold that A
the provision is mandatory. The entire procedure for carrying
out the mediation, has been spelt out in the Rules. The parties
are free to engage Counsel during mediation. The expenses, as
far as the fee payable to the Mediator, is concerned, is limited to
a one-time fee, which appears to be reasonable, particularly,
B
having regard to the fact that it is to be shared equally. A trained
Mediator can work wonders. Mediation must be perceived as a
new mechanism of access to justice. Any reluctance on the part
of the Court to give Section 12A, a mandatory interpretation,
would result in defeating the object and intention of the
Parliament. The fact that the mediation can become a non-starter, C
cannot be a reason to hold the provision not mandatory.
Apparently, the value judgement of the Law-giver is to give the
provision, a modicum of voluntariness for the defendant, whereas,
the plaintiff, who approaches the Court, must, necessarily, resort
to it. Section 12A elevates the settlement under the Act and the
D
Rules to an award within the meaning of Section 30(4) of the
Arbitration Act, giving it meaningful enforceability. The period
spent in mediation is excluded for the purpose of limitation. The
Act confers power to order costs based on conduct of the parties.
[Para 72][861-D-H; 862-A-D]
6. Section 12A of the Act is mandatory and any suit instituted E
violating the mandate of Section 12A must be visited with
rejection of the plaint under Order VII Rule 11. This power can
be exercised even suo moto by the court as explained earlier in
the judgment. This declaration is made effective from 20.08.2022
so that concerned stakeholders become sufficiently informed. F
However, it is directed that in case plaints have been already
rejected and no steps have been taken within the period of
limitation, the matter cannot be reopened on the basis of this
declaration. Still further, if the order of rejection of the plaint has
been acted upon by filing a fresh suit, the declaration of prospective
effect will not avail the plaintiff. Finally, if the plaint is filed violating G
Section 12A after the jurisdictional High Court has declared
Section 12A mandatory also, the plaintiff will not be entitled to
the relief. [Para 84][868-A-D]

H
814 SUPREME COURT REPORTS [2022] 11 S.C.R.

A Kailash v. Nanhku and others (2005) 4 SCC 480 :
[2005] 3 SCR 289 – distinguished.
Madiraju Venkata Ramana Raju v. Peddireddigari
Ramachandra Reddy and Others (2018) 14 SCC 1 :
[2018] 9 SCR 164; Sharif-ud-Din v. Abdul Gani Lone
B (1980) 1 SCC 403 : [1980] 1 SCR 1177 and Vikram
Bakshi and Others v. Sonia Khosla (Dead) by Legal
Representatives (2014) 15 SCC 80 : [2014] 6 SCR 762
– relied on.
State of U.P. and others v. Babu Ram Upadhya AIR
C 1961 SC 751 : [1961] 2 SCR 679; Bhikraj Jaipuria v.
Union of India AIR 1962 SC 113 : [1962] 2 SCR 880;
Lachmi Narain and others v. Union of India and others
AIR 1976 SC 714 : [1976] 2 SCR 785; Bihari
Chowdhary & Anr. v. State of Bihar & Ors. (1984) 2
SCC 627 : [1984] 3 SCR 309; Gangappa Gurupadappa
D Gugwad, Gulbarga v. Rachawwa, Widow of
LochanappaGugwad and others (1970) 3 SCC 716 :
[1971] 2 SCR 691; Seth LoonkaranSethia and others
v. Ivan E. John and others AIR 1977 SC 336 : [1977] 1
SCR 853; Salem Advocate Bar Association, T.N. v.
E Union of India (2005) 6 SCC 344 : [2005] 1 Suppl.
SCR 929; Prem Lala Nahata v. Chandi Prasad Sikaria
(2007) 2 SCC 551 : [2007] 2 SCR 261; State of A.P.
and others v. Pioneer Builders, A.P. (2006) 12 SCC
119 : [2006] 6 Suppl. SCR 571; Afcons Infrastructure
Limited and Another v. Cherian Varkey Construction
F Company Private Limited and Others (2010) 8 SCC 24
: [2010] 8 SCR 1053; Raghunath Das v. Union of
India& Another AIR 1969 SC 674 : [1969] 1 SCR 450;
Olympic Cards Limited v. Standard Chartered Bank
(2013) 1 CTC 38; Jarnail Singh and Others v.
G LachhmiNarain Gupta and Others 2022 SCC Online
SC 96; L.C. Golak Nath and Others v. State of Punjab
and Another AIR 1967 SC 1643 : [1967] 2 SCR 762;
Taherakhatoon (D) By Lrs. v. Salambin Mohammad
(1999) 2 SCC 635 : [1999] 1 SCR 901; M/s. Somaiya
Organics (India) Ltd. v. State of Uttar Pradesh AIR 2001
H
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 815
RAKHEJA ENGINEERS PRIVATE LIMITED

SC 1723 : [2001] 3 SCR 33; P.V. George & Ors. v. State A
of Kerala & Ors. AIR 2007 SC 1034 : [2007] 1
SCR 1198; Patasibai and Others v. Ratanlal (1990) 2
SCC 42 : [1990] 1 SCR 172 and Harsh Dhingra v.
State of Haryana and others (2001) 9 SCC 550 : [2001]
3 Suppl. SCR 446 – referred to.
B
Ganga Taro Vazirani v. Deepak Raheja 2021 SCC
Online Bombay 195; Dhanbad Fuels Ltd. v. Union of
India and Others 2021 SCC Online Calcutta 429; Laxmi
Polyfab Pvt. Ltd. v. Eden Realty Ventures Pvt. Ltd. and
Another AIR 2021 Calcutta 190; Awasthi Motors v.
C
Managing Director M/s. Energy Electricals Vehicle and
Another AIR 2021 Allahabad 143; Deepak Raheja v.
Ganga Taro Vazirani (2021) SCC OnLine Bom 3124;
Dredging and Desiltation Company Pvt. Ltd. v.
Mackintosh Burn and Northern Consortium and Others
2021 SCC Online Calcutta 1458 and Curewin D
Pharmaceuticals Pvt. Ltd. v. Curewin Hylico Pharma
Pvt. Ltd AIR 2021 MP 154 – referred to.
Bhagchand Dagadusa Gujrathi and Ors. v. Secretary
of State for India AIR 1927 PC 176; AL. AR. Vellayan
Chettiar (Decd.) & Others v. Government of the Province E
of Madras Through the Collector of Ramnad at Madura
& Another AIR 1947 PC 197 – referred to.
Regina vs. Sekhon (2003) 1 WLR 1655 and National
Westminster Bank Plc. v. Spectrum Plus Ltd. & Ors.
(2005) UK HL 41– referred to. F
Case Law Reference
[2018] 9 SCR 164 relied on Para 19
[1961] 2 SCR 679 referred to Para 29
G
[1962] 2 SCR 880 referred to Para 30
[1976] 2 SCR 785 referred to Para 31
[1984] 3 SCR 309 referred to Para 34
[1971] 2 SCR 691 referred to Para 37
H
816 SUPREME COURT REPORTS [2022] 11 S.C.R.

A [1977] 1 SCR 853 referred to Para 39
[1980] 1 SCR 1177 relied on Para 40
[2005] 3 SCR 289 distinguished Para 41
[2005] 1 Suppl. SCR 929 referred to Para 44
B [2007] 2 SCR 261 referred to Para 45
[2006] 6 Suppl. SCR 571 referred to Para 46
[2010] 8 SCR 1053 referred to Para 51
[2014] 6 SCR 762 relied on Para 56
C [1969] 1 SCR 450 referred to Para 64
[1990] 1 SCR 172 referred to Para 67
[1967] 2 SCR 762 referred to Para 78
[1999] 1 SCR 901 referred to Para 79
D [2001] 3 SCR 33 referred to Para 80
[2007] 1 SCR 1198 referred to Para 81
[2001] 3 Suppl. SCR 446 referred to Para 82
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5333
E of 2022.
From the Judgment and Order dated 09.09.2021 of the High Court
of Punjab and Haryana at Chandigarh in Civil Revision Bearing No.CR-
1853-2021(O&M).
With
F Civil Appeal No. 5334 of 2022.
With
Special Leave Petition (C) Diary No. 29458 of 2021.
Sanjeev Anand, Sr. Adv., Ms. Sonam Anand, Santosh Krishnan,
G Ayush Negi, Ms. Vishakha Upadhyaya, Himanshu Tyagi, Chaitanya
Nikte, Varnita Ojha, Arup Banerjee, Advs. for the Appellants.
Saket Sikri, Ms. Ekta Kalra Sikri, Ajaypal Singh Kullar, Vikalp
Mudgal, Hetu Arora Sethi, Ms. Saumya Tondon, Anirudha Bhat, Rahul
Jain, Joy Thattil Ittup, Bijish B. Tom, Bhunu Thilak, Mrs. Prabha Swami,
H Nikhil Swami, Ms. Divya Swami, Advs. for the Respondent.
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 817
RAKHEJA ENGINEERS PRIVATE LIMITED

The Judgment of the Court was delivered by A
K. M. JOSEPH, J.
1. Leave granted.
2. The seminal question which arises for consideration is whether
the statutory pre-litigation mediation contemplated under Section 12A of B
the Commercial Courts Act, 2015 (hereinafter referred to as ‘Act’) as
amended by the Amendment Act of 2018 is mandatory and whether the
Courts below have erred in not allowing the applications filed under
Order VII Rule 11 of the Code of Civil Procedure, 1908 (hereinafter
referred to as ‘CPC’), to reject the plaints filed by the respondents in
these appeals without complying with the procedure under Section 12A C
of the Act.
3. In Civil Appeal arising from SLP (C)No. 14697 of 2021, the
respondent filed a commercial suit under Order XXXVII of the CPC
before the Additional District Judge, District Court, Faridabad, praying
for recovery of Rs. 1,00,40,291/- along with 12 per cent interest on a D
certain sum which detail need not detain us. The suit was laid on
12.10.2020.
4. The appellant is the defendant in the said suit. It filed an
application on 05.02.2021 under Order VII Rules 10 and 11 read with
Sections 9 and 20 of the CPC, inter alia contending that the suit was E
filed without adhering to Section 12A of the Act. The respondent filed its
reply on 23.03.2021. It contested the matter contending that the suit was
not barred for non-compliance of Section 12A of the Act.
5. A written statement came to be filed on 23.03.2021. On
16.08.2021, the trial Court rejected the contention of the appellant inter F
alia holding as follows:
“20. From the bare perusal of Section 12A, it is crystal clear that
the procedure provided is mandatory in nature and if by applying
the said principles, the suit of the plaintiff is rejected, then it would
have a catastrophe effect. The court is of the view that the G
legislature has no such intention to frame such stringent provision
the said rules. The aim and object of Section 12A is to ensure that
before a commercial dispute is filed before the court, the alternative
means of dissolution are adopted so that the genuine cases come
before the Court. Further,it also appears to the court that the said H
818 SUPREME COURT REPORTS [2022] 11 S.C.R.

A procedure has been introduced to de-congest the regular courts.
It is pertinent that the Hon’ble Bombay High Court in case Ganga
Tara Vazirani (supra), held that the procedure provided under
Section 12A of the Commercial Courts Act is not a penal enactment
for punishment and there is no embargo in filing the suit without
exhausting the remedy of mediation specially when an attempt is
B
clear to show that the intention of the applicant has already been
made and failed. The fact is clear that before filing the suit, the
respondent/plaintiff has sent e-mail and legal notice and despite
that the applicant/defendant failed to make the payment of the
dues. Moreover, it is well settled that the procedure and law are
C for advancement of justice and not to thwart on technical grounds.
Thus, in the larger interest of justice, the court deems it appropriate
that the civil suit can be kept in abeyance and both the parties are
directed to appear before the Secretary, District Legal Services
Authority, Faridabad on 26.08.2021 for the purpose of mediation
as per the provisions of Section 12A of the Commercial Courts
D
Act and the Rules framed thereunder. With these directions, the
application is disposed of.”
(Emphasis supplied)
6. The appellant filed a Civil Revision Petition. The High Court of
Punjab and Haryana, however, confirmed the finding in paragraph 20
E and further held that the Courts are meant to deliver substantial justice.
The rules of procedure are handmaid of justice and are meant to advance
the ends of justice and they are not to be bogged down by the technicalities
of procedure so as to lose sight of its main duty which is to dispense
justice. It was further found that the purpose of referring the dispute to
F mediation centre is to explore settlement. If the suit is filed without taking
recourse to the procedure, it is further found, it should not entail rejection
of the plaint. This could not have been the intention of the legislature. It
is further observed that an enactment is to be interpreted in a manner
that it does not result in delivery of ‘perverse justice’. It was noted that
the trial Court had directed that the civil suit be kept in abeyance and the
G parties were to appear before the Secretary of the District Legal Services
Authority for the purpose of mediation. Reliance was placed on the
judgment of the High Court of Bombay in Ganga Taro Vaziraniv.
Deepak Raheja 1.

H 1
2021 SCC OnLine Bom 195
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 819
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

7. In the other appeal arising out of SLP (C) No. 5737 of 2022, A
the impugned Order has been passed by the High Court of Madras,
rejecting a similar application filed by the appellant-defendant in a
commercial suit instituted without having resorted to pre-litigation
mediation under Section 12A of the Act.
8. There is yet another special leave petition which was filed,viz., B
SLP Diary No. 29458 of 2021. This is filed with an application for
permission to file special leave petition. In this special leave petition, the
order which is impugned is the same order which is impugned in SLP
(C)No. 5737 of 2022.
9. The Special Leave Petition is supported with an application for C
permission to file SLP. The applicant is not a party in the suit in question.
However, it is his case that a suit is pending in which similar question
arises. Though, we have not issued notice in the said matter, we allowed
Shri Sharath Chandran, learned Counsel for the petitioner, to address
the Court on what appeared to us to be purely a legal issue, viz., the
effect of non-compliance with Section 12A of the Act. In other words, D
we have permitted intervention, though in the application for permission
to file SLP, which application shall stand, accordingly, disposed of. So
also the SLP.
SUBMISSION OF THE APPELLANTS
10. Shri Sanjeev Anand, learned Senior Counsel, appearing for E
the appellant in civil appeal arising out of SLP (C)No. 5737 of 2022,
would submit that the Court, in the impugned Order, held,inter alia, as
follows.
“23. The Central Government by notification dated 03.07.2018,
has framed rule and the rule 3(1) and 3(7) of the Commercial F
Courts Act, 2015 (Pre-Institution Mediation and Settlement) Rules,
2018, reads as under:
3.Initiation of mediation process. –
(1) A party to a commercial dispute may make an application to
the Authority as per Form-1 specified in Schedule-I, either online G
or by post or by hand, for initiation of mediation process under
the Act along with a fee of one thousand rupees payable to the
Authority either by way of demand draft or through online;
……
…… H
820 SUPREME COURT REPORTS [2022] 11 S.C.R.

A (7) Where both the parties to the commercial dispute appear
before the Authority and give consent to participate in the
mediation process, the Authority shall assign the commercial
dispute to a Mediator and fix a date for their appearance before
the said Mediator.
B 24. Though the word ‘shall’ in Section 12A of the Act, sounds
Prelitigation mediation is mandatory on the part of the plaintiff to
explore Settlement before filing suit under Commercial Court Act,
the Rule framed used the word ‘shall’ and makes it an optional.
Also even if one party go for pre-litigation mediation the other
party may conveniently abstain from participating in the mediation
C and make it a non-starter. Even otherwise, mediator can proceed
only if the both the parties appear and give consent to participate
in the mediation process. Thus, it is very clear that on combined
reading of the Commercial Courts Act and the Rules framed
thereunder, pre-litigation mediation is subject to urgency for any
D interim relief and the consent of the sparing parties.
25. In such circumstances, the Harmonious Interpretation takes
us to the irresistible conclusion that Section 12-A of the Commercial
Courts Act, is not a mandatory provision. The right to access
justice which is a Constitutional Right cannot be denied or deprived
for not resorting to mediation. The Court is not substitute to
E
Alternative Dispute Redressal, it is otherwise. The litigant cannot
be denied the doors of justice for directly approaching the Court
without exploring the possibility of mediation. There can be no
prejudice to the defendant, if the defendant is ready for mediation,
even after Institution of the suit. Also there is no impediment either
F for the party or for the Courtto refer the pending matter to be
resolved through mediation or any other Alternative Dispute
Redressal mechanism. This provision is meant for the parties to
work out an amicably settlement without involving in the adversary
system of litigation. The intention of this Section is not to prevent
access to justice or to aid anyone who refuse to subject himself to
G the judicial process. The intention is to avoid the procedural rigor
and to arrive an amicable win-win settlement. Any other interpretation
to Section 12-A of the Act contrary to the intention will amount to
miscarriage of Justice. Therefore, this Court holds that there is no
ground to entertain this Application seeking rejection of plaint.
H Hence, Application is dismissed with costs of Rs.10,000/-.”
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 821
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

11. He would submit that the High Court has clearly erred in the A
view it has taken. He would submit that the Act came into force in the
year 2015. It is by the amendment in the year 2018 that Section 12A
came to be incorporated.
12. He took us through the Statement of Objects and Reasons.
He would commend for the Court’s acceptance the view that the B
legislation was put in place with a definite object of enhancing the ease
of doing business in India and de-clogging of Commercial Courts which
were assigned with an important task of quickly disposing of commercial
matters and thatmust be uppermost in the mind of the Court.
13. He would submit that if the application under Order VII Rule C
11 is allowed and the plaint is rejected for non-compliance with Section
12A, in view of Order VII Rule 13 of the CPC, there is no prejudice
caused as on the same cause of action, the plaintiff can bring a fresh suit
after complying with the mandate of Section 12A of the Act.
14. He would point out that most pertinently the law giver has D
used the word ‘shall’ in Section 12A. The word ‘shall’ in the context of
the object of the legislation must be construed as mandatory. He would
complain that the High Court has not properly appreciated the meaning
of the words used in the subordinate legislation,viz., Commercial Courts
(Pre-Institution Mediation and Settlement) Rules, 2018(hereinafter
referred to as the “Rules”) with regard to the use of the word ‘may’ in E
Rule 3. He would submit that it only refers to the discretion with the
plaintiff in regard to the particular mode to be chosen as contemplated
therein. Bearing in mind the use of mandatory words conveying an
imperative sense in the parent legislation,the High Court erred in finding
that the provision in the parent enactment must be treated as only F
directory. He would submit that the sublime object of the legislation is
clearly to de-clog the court particularly having regard to the reduction of
the monetary value from Rs.1 crore to Rs.3 lakhs. In other words, by
virtue of the amendment, the Legislature was conscious of the fact that
there would be a phenomenal increase in the cases which would be
treated as commercial cases. Bearing in mind also, the larger object of G
promoting India as a desired destination for economic activity which in
large measure would depend upon the ease of doing business, the purpose
is clear as daylight. The High Court has clearly erred in the matter.
15. Shri Ayush Negi, learned Counsel for the appellant in other
appeal, would also address arguments on similar lines. In his case, he H
822 SUPREME COURT REPORTS [2022] 11 S.C.R.

A would submit that the trial Court has proceeded on the footing that the
commercial suit as such cannot be thrown out for non-compliance of
Section 12A and the trial Court has erroneously considered post institution
mediation as tantamounting to compliance with pre litigation mediation
contemplated under Section 12A.
B 16. He would submit that the plain language and the object of the
legislation has been overlooked by the Court in the impugned order as is
clear by the observations in the impugned order.
17. Both the counsels for the appellants would draw a parallel
between the language used in Section 80 CPC and the case law generated
C by the said provision to contend that Section 12A is mandatory. Equally,
support is sought to be drawn from judgments rendered under Section
69 of the Indian Partnership Act, 1932.
18. Shri Sharath Chandran, learned counsel who appears in SLP
(C)Diary No. 29458 of 2021 would point out that the procedure
D contemplated under Section 12A is mandatory.
19. It is the further submission of Shri Sharath Chandran that
decision of the learned Single Judge of the Bombay High Court in Ganga
Taro(supra) has been reversed by the Division Bench in Deepak Raheja
v. Ganga Taro Vazirani2. He has brought to the notice of this Court the
E different views expressed by the other High courts. It is his contention
that on a reference to the Statement of Objects and Reasons, the speech
made by the Law Minister and the plain language used coupled with the
intention of theLawgiver makes it clear that Section 12A is mandatory.
He, however, drew a distinction between the presentation of the plaint
and the institution of the suit. He also submits that this Court has taken
F notice of pre-litigation mediation in matrimonial disputes and disputes
under Motor Vehicles Act. He would further contend that the Court can
suo motu reject the plaint without any application. He relies on the
judgment of this Court in Madiraju Venkata Ramana Raju v.
Peddireddigari Ramachandra Reddy and Others 3. He however,
G contends that the embargo against institution of the suit may not
necessarily affect inherent jurisdiction of the Court. He has further
submitted in regard to the interpretation to be placed in cases where
urgent interim relief is contemplated and the appropriate procedure
2
(2021) SCC OnLine Bom 3124
3
H (2018) 14 SCC 1
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 823
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

provided therein. He would in this regard place reliance upon the judgment A
in Regina vs. Sekhon4 to contend that if a plea under Section 12A is not
pointed out at an earlier point of time, non-compliance cannot result in
the proceeding becoming a nullity. He would submit that nullifying
proceedings on account of non-compliance at a belated stage would in
effect be throwing the baby out with the bathwater. He would also point
B
out that the High Court was in error in not finding that mediation is one
of the best forms of conflict resolution. Further, error in understanding
of Rule 3 of the Rules is pointed out.
20. Per contra, Shri Saket Sikri, learned counsel who appears in
civil appeal arising from SLP (C)No. 14697 of 2021, would contend that
Section 12A is actually to be understood as directory. He submits that in C
order that the word ‘shall’ in a statutory provision be considered as
mandatory, one of the cardinal tests employed by the Courts is to ask the
question whether the provision contemplated penal consequences for
disobedience of the provision. He would point out that no penal
consequence is spelt out in Section 12A for instituting a suit without D
complying with Section 12A.
21. Next, he would point out that instituting a suit without complying
with the provisions of Section 12A does not affect any legal right of the
defendant. It is only a procedure intended to bring about a settlement
between the parties. E
He further contends that the course adopted by the Court in his
case has addressed the concerns of the defendant as well. This is for
the reason that the Court has kept proceedings in the suit in abeyance
and referred the parties for mediation. In this context, he highlights the
fact that the appellant which swears by mediation has made it a non- F
starter by not taking part in the mediation procedure.
22. He would submit that having regard to the purport of Section
12A, the interest of justice would be subserved if the procedure which is
adopted by the Court in his case is accepted. In other words, if the Court
after the institution of the suit immediately refers the parties to the G
mediation, the appellants may not be justified in insisting on pre institution
mediation. In this regard, he would emphasisethat pre litigation mediation
contemplated in Section 12A does not pertain to inherent jurisdiction of a
Court. While mediation is to be encouraged, the Court may not lose sight
4
(2003) 1 WLR 1655 H
824 SUPREME COURT REPORTS [2022] 11 S.C.R.

A of the fact that ahalf-way house between the two extremes has been
attempted by the Court in the case, which suffices, having regard to the
fact also that no penal consequences are provided and no right of the
defendant is imperilled.
23. He next draws our attention to the aspect of court fees. He
B would submit that the plaintiff is bound to pay the whole court fee under
the law in question. When the plaint gets rejected under Order VII Rule
11, the plaintiff suffers a loss of the entire court fee. This is one of the
consequences which this Court should not lose sight of, it is contended.
Here again, the procedure which has been adopted in the case is
C commended for our acceptance as substantial compliance with Section
12A which at the same time, will not reach such disastrous consequences
for the litigants.
He also touches upon the possible consequence of a plea of
limitation overwhelming a fresh suit of the plaintiff after rejection of the
first suit.
D
ANALYSIS
24. Section 12A of the Act reads as follows:
12A. Pre-Institution Mediation and Settlement— (1) A suit, which
does not contemplate any urgent interim relief under this Act,
E shall not be instituted unless the plaintiff exhausts the remedy of
pre-institution mediation in accordance with such manner and
procedure as may be prescribed by rules made by the Central
Government.
(2) The Central Government may, by notification, authorise the
F Authorities constituted under the Legal Services Authorities Act,
1987 (39 of 1987), for the purposes of pre-institution mediation.
(3) Notwithstanding anything contained in the Legal Services
Authorities Act, 1987 (39 of 1987), the Authority authorised by
the Central Government under sub-section (2) shall complete the
G process of mediation within a period of three months from the
date of application made by the plaintiff under sub-section (1):
Provided that the period of mediation may be extended for
a further period of two months with the consent of the parties:
Provided further that, the period during which the parties
H remained occupied with the pre-institution mediation, such period
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 825
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

shall not be computed for the purpose of limitation under the A
Limitation Act, 1963 (36 of 1963).
(4) If the parties to the commercial dispute arrive at a settlement,
the same shall be reduced into writing and shall be signed by the
parties to the dispute and the mediator.
(5) The settlement arrived at under this section shall have the B
same status and effect as if it is an arbitral award on agreed
terms under sub-section (4) of section 30 of the Arbitration and
Conciliation Act, 1996 (26 of 1996).”
25. The Act was enacted in the year 2015. At the time, the monetary
limit for a suit liable to be tried by the Commercial Court was fixed at C
Rs.1 crore.
26. In the course of three years, noticing certain features,
Parliament has decided to amend the Act. Therefore, in the year 2018,
the Act came to be amended by the Commercial Courts, Commercial
Division and Commercial Appellate Division of High Courts (Amendment) D
Act, 2018 (Act 28 of 2018)(hereinafter referred to as the “Amending
Act”).
27. It is apposite that we notice the statement of objects of the
Amending Act:
E
“STATEMENT OF OBJECTS AND REASONS
The Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015 was enacted for the
constitution of Commercial Courts, Commercial Division and
Commercial Appellate Division in the High Courts for adjudicating
F
commercial disputes of specified value and for matters connected
therewith or incidental thereto.
2. The global economic environment has since become increasingly
competitive and to attract business at international level, India
needs to further improve its ranking in the World Bank ‘Doing
Business Report’ which, inter alia, considers the dispute resolution G
environment in the country as one of the parameters for doing
business. Further, the tremendous economic development has
ushered in enormous commercial activities in the country including
foreign direct investments, public private partnership, etc., which
has prompted initiating legislative measures for speedy settlement H
826 SUPREME COURT REPORTS [2022] 11 S.C.R.

A of commercial disputes, widen the scope of the courts to deal
with commercial disputes and facilitate ease of doing business.
Needless to say that early resolution of commercial disputes of
even lesser value creates a positive image amongst the investors
about the strong and responsive Indian legal system. It is, therefore,
proposed to amend the Commercial Courts, Commercial Division
B
and Commercial Appellate Division of High Courts Act, 2015.
3. As Parliament was not in session and immediate action was
required to be taken to make necessary amendments in the
Commercial Courts, Commercial Division and Commercial
Appellate Division of High Courts Act, 2015, to further improve
C India’s ranking in the ‘Doing Business Report’, the President
promulgated the Commercial Courts, Commercial Division and
Commercial Appellate Division of High Courts (Amendment)
Ordinance, 2018 on 3rd May, 2018.
4. It is proposed to introduce the Commercial Courts, Commercial
D Division and Commercial Appellate Division of High Courts
(Amendment) Bill, 2018 to replace the Commercial Courts,
Commercial Division and Commercial Appellate Division of High
Courts (Amendment) Ordinance, 2018, which inter alia, provides
for the following namely:—
E (i) to reduce the specified value of commercial disputes from
the existing one crore rupees to three lakh rupees, and to
enable the parties to approach the lowest level of subordinate
courts for speedy resolution of commercial disputes;
(ii) to enable the State Governments, with respect to the High
F Courts having ordinary original civil jurisdiction, to constitute
commercial courts at District Judge level and to specify
such pecuniary value of commercial disputes which shall
not be less than three lakh rupees and not more than the
pecuniary jurisdiction of the district courts;
G (iii) to enable the State Governments, except the territories
over which the High Courts have ordinary original civil
jurisdiction, to designate such number of Commercial
Appellate Courts at district judge level to exercise the
appellate jurisdiction over the commercial courts below
the district judge level;
H
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 827
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

(iv) to enable the State Governments to specify such pecuniary A
value of a commercial dispute which shall not be less than
three lakh rupees or such higher value, for the whole or
part of the State; and
(v) to provide for compulsory mediation before institution of a
suit, where no urgent interim relief is contemplated and for B
this purpose, to introduce the Pre-Institution Mediation and
Settlement Mechanism and to enable the Central
Government to authorise the authorities constituted under
the Legal Services Authorities Act, 1987 for this purpose.
5. The Bill seeks to achieve the above objectives.” C
28. It is, accordingly, by the Amending Act that Section 12A came
to be inserted. We may notice the Rules which came to be published in
the Gazette and thereby came into force on 03.07.2018. Rule 3 reads as
follows:
“3. Initiation of mediation process. – D
(1) A party to a commercial dispute may make an application to
the Authority as per Form-1 specified in Schedule-I, either online
or by post or by hand, for initiation of mediation process under the
Act along with a fee of one thousand rupees payable to the
Authority either by way of demand draft or through online;
E
(2) The Authority shall, having regard to the territorial and
pecuniary jurisdiction and the nature of commercial dispute, issue
a notice, as per Form-2 specified in Schedule-I through a registered
or speed post and electronic means including e-mail and the like
to the opposite party to appear and give consent to participate in
the mediation process on such date not beyond a period of ten F
days from the date of issue of the said notice.
(3) Where no response is received from the opposite party either
by post or by e-mail, the Authority shall issue a final notice to it in
the manner as specified in sub-rule (2).
G
(4) Where the notice issued under sub-rule (3) remains
unacknowledged or where the opposite party refuses to participate
in the mediation process, the Authority shall treat the mediation
process to be a non-starter and make a report as per Form 3
specified in the Schedule-I and endorse the same to the applicant
and the opposite party. H
828 SUPREME COURT REPORTS [2022] 11 S.C.R.

A (5) Where the opposite party, after receiving the notice under
sub-rule (2) or (3) seeks further time for his appearance, the
Authority may, if it thinks fit, fix an alternate date not later than
ten days from the date of receipt of such request from the opposite
party.
B (6) Where the opposite party fails to appear on the date fixed
under sub-rule (5), the Authority shall treat the mediation process
to be a non-starter and make a report in this behalf as per Form 3
specified in Schedule-I and endorse the same to the applicant and
the opposite party.
C (7) Where both the parties to the commercial dispute appear before
the Authority and give consent to participate in the mediation
process, the Authority shall assign the commercial dispute to a
Mediator and fix a date for their appearance before the said
Mediator.

D (8) The Authority shall ensure that the mediation process is
completed within a period of three months from the date of receipt
of application for pre-institution mediation unless the period is
extended for further two months with the consent of the applicant
and the opposite party.”

E We shall advert to the effect of this Rule and also advert to the
other rules later on.
DOWN THE MEMORY LANE
29. A Bench of five learned Judges in the Judgment reported
in State of U.P. and others v. Babu Ram Upadhya5, considered the
F question as to whether paragraph-486 of the Police Regulations framed
under Section 7 of the Police Act, was mandatory or not. In substance,
the said paragraph purported to taboo the magisterial inquiry under the
Code of Criminal Procedure, 1973, when the offence alleged against the
Police Officer was only one under Section 7 of the Police Act. In the
opinion written for the majority, Justice K. Subba Rao proceeded to
G
sum-up the relevant Rules relating to interpretation, when the Statute
uses the word ‘shall’:
“29. The relevant rules of interpretation may be briefly stated thus:
When a statute uses the word “shall”, prima facie, it is mandatory,
H 5
AIR 1961 SC 751
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 829
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

but the Court may ascertain the real intention of the legislature by A
carefully attending to the whole scope of the statute. For
ascertaining the real intention of the Legislature the Court may
consider, inter alia, the nature and the design of the statute, and
the consequences which would follow from construing it the one
way or the other, the impact of other provisions whereby the
B
necessity of complying with the provisions in question is avoided,
the circumstance, namely, that the statute provides for a
contingency of the non-compliance with the provisions, the fact
that the non-compliance with the provisions is or is not visited by
some penalty, the serious or trivial consequences that flow
therefrom, and, above all, whether the object of the legislation will C
be defeated or furthered.
30. In Bhikraj Jaipuria v. Union of India 6, a Bench of five
learned Judges dealt with the question arising out of Section 175(3) of
the Government of India Act, 1935. The Court, inter alia, had to deal
with the question, whether enactment should be considered directory or D
obligatory:
“17. The question still remains whether the purchase orders
executed by the Divisional Superintendent but which were not
expressed to be made by the Governor-General and were not
executed on behalf of the Governor-General, were binding on the E
Government of India. Section 175(3) plainly requires that contracts
on behalf of the Government of India shall be executed in the
form prescribed thereby; the section however does not set out
the consequences of non-compliance. Where a statute requires
that a thing shall be done in the prescribed manner or form but
does not set out the consequences of non-compliance, the question F
whether the provision was mandatory or directory has to be
adjudged in the light of the intention of the legislature as disclosed
by the object, purpose and scope of the statute. If the statute is
mandatory, the thing done not in the manner or form prescribed
can have no effect or validity : if it is directory, penalty may be G
incurred for non-compliance, but the act or thing done is regarded
as good. As observed in Maxwell on Interpretation of Statutes,
10th Edn., p. 376:

6
AIR 1962 SC 113 H
830 SUPREME COURT REPORTS [2022] 11 S.C.R.

A “It has been said that no rule can be laid down for determining
whether the command is to be considered as a mere direction
or instruction involving no invalidating consequence in its
disregard, or as imperative, with an implied nullification for
disobedience, beyond the fundamental one that it depends on
the scope and object of the enactment. It may perhaps be found
B
generally correct to say that nullification is the natural and usual
consequence of disobedience, but the question is in the main
governed by considerations of convenience and justice, and
when that result would involve general inconvenience or
injustice to innocent persons, or advantage to those guilty of
C the neglect, without promoting the real aim and object of the
enactment, such an intention is not to be attributed to the
legislature. The whole scope and purpose of the statute under
consideration must be regarded.”
Lord Campbell in Liverpool Borough Bank v. Turner [(1861) 30
D LJ Ch 379] observed:
“No universal rule can be laid down as to whether mandatory
enactments shall be considered directory only or obligatory
with an implied nullification for disobedience. It is the duty of
courts of justice to try to get at the real intention of the legislature
E by carefully attending to the whole scope of the statute to be
construed.”
31. In Lachmi Narain and others v. Union of India and others7,
this Court, inter alia, held as follows:
“66. Section 6(2), as it stood immediately before the impugned
F notification, requires the State Government to give by notification
in the Official Gazette “not less than 3 months’ notice” of its intention
to add to or omit from or otherwise amend the Second Schedule.
The primary key to the problem whether a statutory provision is
mandatory or directory, is the intention of the law-maker as
G expressed in the law, itself. The reason behind the provision may
be a further aid to the ascertainment of that intention. If the
legislative intent is expressed clearly and strongly in imperative
words, such as the use of “must” instead of “shall”, that will itself
be sufficient to hold the provision to be mandatory, and it will not

H 7
AIR 1976 SC 714
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 831
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

be necessary to pursue the enquiry further. If the provision is A
couched in prohibitive or negative language, it can rarely be
directory, the use of peremptory language in a negative form is
per se indicative of the intent that the provision is to be mandatory.
(Crawford, The Construction of Statutes, pp. 523-24). Here the
language of sub-section (2) of Section 6 is emphatically prohibitive,
B
it commands the Government in unambiguous negative terms that
the period of the requisite notice must not be less than three
months.”
A distinction was, thus, perceived between the words ‘must’ and
‘shall’.
C
32. Learned Counsel for the appellants sought to draw support
from the Judgments rendered under Section 80 of the Code of Civil
Procedure, 1908 (for short, ‘the CPC’). After the amendment effected
by Act 104 of 1976, Section 80 reads as follows:
“(1) Save as otherwise provided in sub-section (2), no suits shall D
be instituted against the Government (including the Government
of the State of Jammu and Kashmir) or against a public officer in
respect of any act purporting to be done by such public officer in
his official capacity, until the expiration of two months next after
notice in writing has been delivered to, or left at the office of
E
(a) in the case of a suit against the Central Government, except
where it relates to a railway a Secretary to that Government;
(b) in the case of a suit against the Central Government where
it relates to railway, the General Manager of that railway;
bb) in the case of a suit against the Government of the State of F
Jammu and Kashmir, the Chief Secretary to that Government
or any other officer authorized by that Government in this
behalf;
(c) in the case of a suit against any other State Government, a
Secretary to that Government or the Collector of the district; G
and, in the case of a public officer, delivered to him or left at
his office, stating the cause of action, the name, description
and place of residence of the plaintiff and the relief which he
claims; and the plaint shall contain a statement that such notice
has been so delivered or left. H
832 SUPREME COURT REPORTS [2022] 11 S.C.R.

A (2) A suit to obtain an urgent or immediate relief against the
Government (including the Government of the State of Jammu
and Kashmir) or any public officer in respect of any act purporting
to be done by such public officer in his official capacity, may be
instituted, with the leave of the Court, without serving any notice
as required by sub-section (I); but the Court shall not grant relief
B
in the suit, whether interim or otherwise, except after giving to the
Government or public officer, as the case may be , a reasonable
opportunity of showing cause in respect of the relief prayed for in
the suit:
Provided that the Court shall, if it is satisfied, after hearing the
C parties, that no urgent or immediate relief need be granted in the
suit, return the plaint for presentation to it after complying with
the requirements of sub-section (1).
(3) No suit instituted against the Government or against a public
officer in respect of any act purporting to be done by such public
D officer in his official capacity shall be dismissed merely by reason
of any error or defect in the notice referred to in sub-section (I),
if in such notice
(a) the name, description and the residence of the plaintiff had
been so given as to enable the appropriate authority or the
E public officer to identify the person serving the notice and such
notice had been delivered or left at the office of the appropriate
authority specified in sub-section (1), and
(b) the cause of action and the relief claimed by the plaintiff
had been substantially indicated.”
F
33. In fact, Sub-sections (2) and (3) of Section 80 came to be
inserted by virtue of the amendment. In Section 80(1), in view of the
insertion of Sub-Section (2), the opening words “save as otherwise
provided in sub-Section (2)” came to be inserted. There were other
changes which were brought about in Section 80 as it stood, as can be
G discerned from Section 80(1) as substituted. The judgment of the Privy
Council, in the decision reported in Bhagchand Dagadusa Gujrathi
and Ors. v. Secretary of State for India8, set at rest the controversy
about the mandatory nature of the requirement of a previous notice to

8
H AIR 1927 PC 176
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 833
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

be given to comply with Section 80. We need only notice what this Court A
held in the Judgment in State of Madras v. C.P. Agencies and others9:
“1. … The very language of Section 80 makes it clear,— and it
has been so held by the Judicial Committee in BhagchandDagdusa
v. Secy. of State, 54 Ind App 338:(AIR 1927 PC 176) which
decision has been adopted by the same tribunal in many later B
cases—that Section 80 is express, explicit and mandatory and
admits of no implications or exceptions. …”
34. In Bihari Chowdhary&Anr. v. State of Bihar&Ors.10, while
on the effect of Section 80 of the CPC, this Court laid down as follows:
“3. ….. C
The effect of the section is clearly to impose a bar against the
institution of a suit against the Government or a public officer in
respect of any act purported to be done by him in his official
capacity until the expiration of two months after notice in writing
has been delivered to or left at the office of the Secretary to D
Government or Collector of the concerned district and in the case
of a public officer delivered to him or left at his office, stating the
particulars enumerated in the last part of sub-section (1) of the
section. When we examine the scheme of the section it becomes
obvious that the section has been enacted as a measure of public
policy with the object of ensuring that before a suit is instituted E
against the Government or a public officer, the Government or
the officer concerned is afforded an opportunity to scrutinise the
claim in respect of which the suit is proposed to be filed and if it
be found to be a just claim, to take immediate action and thereby
avoid unnecessary litigation and save public time and money by F
settling the claim without driving the person, who has issued the
notice, to institute the suit involving considerable expenditure and
delay. The Government, unlike private parties, is expected to
consider the matter covered by the notice in a most objective
manner, after obtaining such legal advice as they may think fit,
and take a decision in public interest within the period of two G
months allowed by the section as to whether the claim is just and
reasonable and the contemplated suit should, therefore, be avoided
by speedy negotiations and settlement or whether the claim should
9
AIR 1960 SC 1309
10
(1984) 2 SCC 627 H
834 SUPREME COURT REPORTS [2022] 11 S.C.R.

A be resisted by fighting out the suit if and when it is instituted.
There is clearly a public purpose underlying the mandatory provision
contained in the section insisting on the issuance of a notice setting
out the particulars of the proposed suit and giving two months’
time to Government or a public officer before a suit can be instituted
against them. The object of the section is the advancement of
B
justice and the securing of public good by avoidance of
unnecessary litigation.”
35. We may also notice, what this Court had said in Bihari
Chowdhary (supra) about the course of action to be taken, if a Suit is
filed without serving a notice:
C
“6. It must now be regarded as settled law that a suit against
the Government or a public officer, to which the requirement of a
prior notice under Section 80 CPC is attracted, cannot be validly
instituted until the expiration of the period of two months next
after the notice in writing has been delivered to the authorities
D concerned in the manner prescribed for in the section and if filed
before the expiry of the said period, the suit has to be dismissed
as not maintainable.”
36. We must finally also, for reasons, which will be clear, refer to
the view expressed by this Court in the following paragraph:
E
“7. On behalf of the appellants, strong reliance was placed on
the decision of a learned Single Judge of the High Court of Kerala
in Nani Amma Nannini Amma v. State of Kerala [AIR 1963 Ker
114 : 1962 Ker LJ 1267]. Therein the learned Judge has expressed
the view that Section 80 is not a provision of public policy and
F there is nothing in the section expressly affecting the jurisdiction
of the Court to try a suit instituted before the expiry of the period
prescribed therein. The reasons stated by the learned Judge in
justification of his taking the said view despite the clear
pronouncement of the Judicial Committee of the Privy Council
in Bhagchand case [AIR 1927 PC 176 : 54 IA 338, 357] do not
G
appeal to us as correct or sound. In the light of the conclusion
expressed by us in the foregoing paragraphs about the true scope
and effect of Section 80 CPC, the aforecited decision of the learned
Single Judge of the Kerala High Court cannot be accepted as
laying down good law.”
H (Emphasis supplied)
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 835
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

37. In this context, we may refer to the Judgment of this Court in A
Gangappa Gurupadappa Gugwad, Gulbarga v. Rachawwa, Widow
of Lochanappa Gugwad and others11:
“10. No doubt it would be open to a court not to decide all the
issues which may arise on the pleadings before it if it finds that
the plaint on the face of it is barred by any law. If for instance the B
plaintiff’s cause of action is against a Government and the plaint
does not show that notice under Section 80 of the Code of Civil
Procedure claiming relief was served in terms of the said section,
it would be the duty of the court to reject the plaint recording an
order to that effect with reasons for the order. …”
C
(Emphasis supplied)
38. Section 69 of the Indian Partnership Act, 1932, in sub-Section
(1) and (2), read as follows:
“69. Effect of non-registration.—
D
(1) No suit to enforce a right arising from a contract or conferred
by this Act shall be instituted in any court by or on behalf of any
person suing as a partner in a firm against the firm or any person
alleged to be or to have been a partner in the firm unless the firm
is registered and the person suing is or has been shown in the
Register of Firms as a partner in the firm. E
(2) No suit to enforce a right arising from a contract shall be
instituted in any Court by or on behalf of a firm against any third
party unless the firm is registered and the persons suing are or
have been shown in the Register of Firms as partners in the firm.
F
39. In the decision reported in Seth Loonkaran Sethia and others
v. Ivan E. John and others12, this Court held:
“21. A bare glance at the section is enough to show that it is
mandatory in character and its effect is to render a suit by a
plaintiff in respect of a right vested in him or acquired by him
under a contract which he entered into as a partner of an G
unregistered firm, whether existing or dissolved, void. In other
words, a partner of an erstwhile unregistered partnership firm

11
(1970) 3 SCC 716
12
AIR 1977 SC 336 H
836 SUPREME COURT REPORTS [2022] 11 S.C.R.

A cannot bring a suit to enforce a right arising out of a contract
falling within the ambit of Section 69 of the Partnership Act. …”
40. In Sharif-ud-Din v. Abdul Gani Lone13, relied upon by Shri
Saket Sikri, the matter arose under the Jammu and Kashmir
Representation of Peoples Act, 1957, the question arose whether the
B provision providing that copies of the election petition are to be attested
by the petitioner as true copies under his own signature, was mandatory.
We may notice the following paragraph:
“9. The difference between a mandatory rule and a directory rule
is that while the former must be strictly observed, in the case of
C the latter substantial compliance may be sufficient to achieve the
object regarding which the rule is enacted. Certain broad
propositions which can be deduced from several decisions of courts
regarding the rules of construction that should be followed in
determining whether a provision of law is directory or mandatory
may be summarised thus: The fact that the statute uses the word
D “shall” while laying down a duty is not conclusive on the question
whether it is a mandatory or directory provision. In order to find
out the true character of the legislation, the court has to ascertain
the object which the provision of law in question has to subserve
and its design and the context in which it is enacted. If the object
E of a law is to be defeated by non-compliance with it, it has to be
regarded as mandatory. But when a provision of law relates to
the performance of any public duty and the invalidation of any act
done in disregard of that provision causes serious prejudice to
those for whose benefit it is enacted and at the same time who
have no control over the performance of the duty, such provision
F should be treated as a directory one. Where, however, a provision
of law prescribes that a certain act has to be done in a particular
manner by a person in order to acquire a right and it is coupled
with another provision which confers an immunity on another when
such act is not done in that manner, the former has to be regarded
G as a mandatory one. A procedural rule ordinarily should not be
construed as mandatory if the defect in the act done in pursuance
of it can be cured by permitting appropriate rectification to be
carried out at a subsequent stage unless by according such
permission to rectify the error later on, another rule would be

H 13
(1980) 1 SCC 403
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 837
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

contravened. Whenever a statute prescribes that a particular act A
is to be done in a particular manner and also lays down that failure
to comply with the said requirement leads to a specific
consequence, it would be difficult to hold that the requirement is
not mandatory and the specified consequence should not follow.”
41. In Kailash v. Nanhku and others14, relied upon by Shri Saket B
Sikri, this Court was dealing with an election matter and one of the
questions was whether the time limit of ninety days, as prescribed by the
proviso to Order VIII Rule I of the CPC, is mandatory or not. The said
provision dealt with the power of the Court to extend time for filing the
written statement. The proviso fixes a period of ninety days from the
date of service of summons as the maximum period for filing the written C
statement. This Court took the view that the provision is to be construed
as directory and not mandatory.
42. In this context, we may notice paragraphs- 28 and 30 of Kailash
(supra):
D
“28. All the rules of procedure are the handmaid of justice.
The language employed by the draftsman of processual law may
be liberal or stringent, but the fact remains that the object of
prescribing procedure is to advance the cause of justice. In an
adversarial system, no party should ordinarily be denied the
opportunity of participating in the process of justice dispensation. E
Unless compelled by express and specific language of the statute,
the provisions of CPC or any other procedural enactment ought
not to be construed in a manner which would leave the court
helpless to meet extraordinary situations in the ends of justice.
The observations made by Krishna Iyer, J. in Sushil Kumar F
Sen v. State of Bihar [(1975) 1 SCC 774] are pertinent: (SCC p.
777, paras 5-6)
“The mortality of justice at the hands of law troubles a
judge’s conscience and points an angry interrogation at the
law reformer.
G
The processual law so dominates in certain systems as to
overpower substantive rights and substantial justice. The
humanist rule that procedure should be the handmaid, not the
mistress, of legal justice compels consideration of vesting a
14
(2005) 4 SCC 480 H
838 SUPREME COURT REPORTS [2022] 11 S.C.R.

A residuary power in judges to act ex debito justitiae where the
tragic sequel otherwise would be wholly inequitable. … Justice
is the goal of jurisprudence — processual, as much as
substantive.”
xxx xxx xxx
B
30. It is also to be noted that though the power of the court under
the proviso appended to Rule 1 Order 8 is circumscribed by the
words “shall not be later than ninety days” but the consequences
flowing from non-extension of time are not specifically provided
for though they may be read in by necessary implication. Merely
C because a provision of law is couched in a negative language
implying mandatory character, the same is not without exceptions.
The courts, when called upon to interpret the nature of the provision,
may, keeping in view the entire context in which the provision
came to be enacted, hold the same to be directory though worded
in the negative form.”
D
43. As far as the views expressed in Kailash (supra), that is a
case which dealt with a purely procedural provision and the Court found
that the power of the Court to allow filing of a written statement beyond
the time, is not taken away. The absence of penal consequences was
invoked. The most important aspect is that the provisois in the domain
E of the procedural law. In contrast, Section 12A cannot be described as a
mere procedural law. Exhausting pre-institution mediation by the plaintiff,
with all the benefits that may accrue to the parties and, more importantly,
the justice delivery system as a whole, would make Section 12A not a
mere procedural provision. The design and scope of the Act, as amended
F in 2018, by which Section 12A was inserted, would make it clear that
Parliament intended to give it a mandatory flavour. Any other
interpretation would not only be in the teeth of the express language
used but, more importantly, result in frustration of the object of the Act
and the Rules. In this connection, in the Judgement reported in Sharif-
ud-Din(supra), it has been held that, if the object of the law is defeated
G by non-compliance with the provision, then, it would be regarded as
mandatory. The right to institute the Suit in a plaintiff who does not
contemplate urgent interim relief in a commercial matter under the Act,
is clearly conditioned by the fulfilment of certain conditions as provided
in Section 12A. This cannot be likened to allowing a party to file his
H written statement. Bearing in mind the object also, the conclusion is
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 839
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

inevitable that the right of suit itself will fructify only when the conditions A
in Section 12A are fulfilled. Treating the provision as procedural, also,
the result cannot be different. Any other view would remove the basis
for treating Section 80(1) of the CPC as mandatory.
44. In Salem Advocate Bar Association, T.N. v. Union of India15,
this Court, while dealing with the question, whether Section 89 of the B
CPC was mandatory or not, held as follows:
“55. As can be seen from Section 89, its first part uses the word
“shall” when it stipulates that the “court shall formulate terms of
settlement”. The use of the word “may” in later part of Section
89 only relates to the aspect of reformulating the terms of a C
possible settlement. The intention of the legislature behind enacting
Section 89 is that where it appears to the court that there exists
an element of a settlement which may be acceptable to the parties,
they, at the instance of the court, shall be made to apply their mind
so as to opt for one or the other of the four ADR methods
mentioned in the section and if the parties do not agree, the court D
shall refer them to one or the other of the said modes. Section 89
uses both the words “shall” and “may” whereas Order 10 Rule 1-
A uses the word “shall” but on harmonious reading of these
provisions it becomes clear that the use of the word “may” in
Section 89 only governs the aspect of reformulation of the terms E
of a possible settlement and its reference to one of ADR methods.
There is no conflict. It is evident that what is referred to one of
the ADR modes is the dispute which is summarised in the terms
of settlement formulated or reformulated in terms of Section 89.”
45. Lastly, we may notice that in Prem Lala Nahata v. Chandi F
Prasad Sikaria16, Justice P.K. Balasubramanyan, speaking on behalf
of Justice S.B. Sinha, also held as follows:
“16. Order 7 Rule 11(d) speaks of the suit being “barred by any
law”. According to Black’s Law Dictionary, bar means, a plea
arresting a law suit or legal claim. It means as a verb, to prevent G
by legal objection. According to Ramanatha Aiyar’s Law Lexicon,
“bar” is that which obstructs entry or egress; to exclude from
consideration. It is therefore necessary to see whether a suit bad

15
(2005) 6 SCC 344
16
(2007) 2 SCC 551 H
840 SUPREME COURT REPORTS [2022] 11 S.C.R.

A for misjoinder of parties or of causes of action is excluded from
consideration or is barred entry for adjudication. As pointed out
already, on the scheme of the Code, there is no such prohibition or
a prevention at the entry of a suit defective for misjoinder of parties
or of causes of action. The court is still competent to try and
decide the suit, though the court may also be competent to tell the
B
plaintiffs either to elect to proceed at the instance of one of the
plaintiffs or to proceed with one of the causes of action. On the
scheme of the Code of Civil Procedure, it cannot therefore be
held that a suit barred for misjoinder of parties or of causes of
action is barred by a law, here the Code. This may be contrasted
C with the failure to comply with Section 80 of the Code. In a case
not covered by sub-section (2) of Section 80, it is provided in sub-
section (1) of Section 80 that “no suit shall be instituted”. This is
therefore a bar to the institution of the suit and that is why courts
have taken the view that in a case where notice under Section 80
of the Code is mandatory, if the averments in the plaint indicate
D
the absence of a notice, the plaint is liable to be rejected. For, in
that case, the entertaining of the suit would be barred by Section
80 of the Code. The same would be the position when a suit hit by
Section 86 of the Code is filed without pleading the obtaining of
consent of the Central Government if the suit is not for rent from
E a tenant…..”
(Emphasis supplied)
VIEWS OF HIGH COURTS: DISCORDANT NOTES?
46. In Ganga Taro Vazirani v. Deepak Raheja17, the learned
Single Judge of the High Court of Bombay, took the view that Section
F 12A is a procedural provision. The learned Single Judge found further
that when urgent relief is applied for, the procedure under Section 12A
need not be undergone. It was further observed that it was not, as if, the
Court lacks inherent jurisdiction to entertain a Suit without complying
with Section 12A. Still further, he refers to Section 80 of the CPC. He
G refers to AL. AR. Vellayan Chettiar(Decd.) & Others v. Government
of the Province of Madras Through the Collector of Ramnad at
Madura & Another18, for the proposition that Notice thereunder is given
for the protection of the Authority concerned and he can lawfully waive

17
2021 SCC Online Bombay 195
H 18
AIR 1947 PC 197
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 841
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

his right to the Notice. Reliance was also placed on the Judgement in State A
of A.P. and others v. Pioneer Builders, A.P. 19, wherein this Court
declined to interfere with the finding that having participated in the
proceeding without raising objection about the maintainability of the Suit,
there would be waiver. Learned Single Judge also took the view that
even under Section 12A of the Act, in a given set of facts, the defendant
B
could be held to have waived his right to set up Section 12A. It is further
found that, if there is substantial compliance, the plaintiff cannot be non-
suited, i.e., if an attempt has been made for settling the dispute, which
has failed and, therefore, the plaintiff is constrained to approach the
Court. It is this Judgment, which has been relied upon in both the
impugned Judgments. C
47. However, as pointed out by Shri Sharath Chandran, a Division
Bench of the High Court of Bombay, in an appeal, has found that the
Single Judge, has erred in his view that Section 12A is not mandatory.
The Division Bench proclaimed that Section 12A of the Act is mandatory.
It was further observed that considering the object and purpose of Section D
12A, being rooted in public interest, there is no question of it being waived.
When it came to the Order to be passed in the appeal, we notice that the
plaintiff contended that the suit was allowed to be filed by the Registry
because of a confusion in the Registry in the initial period, when the
Amending Act came into force. There was oversight. The Division Bench
stayed the Suit and the impugned Order for three months and referred E
the parties for mediation. A learned Single Judge of the High Court of
Calcutta, in the decision reported in Dhanbad Fuels Ltd. v. Union of
India and Others20, took the view that mediation in India is still at a
nascent stage and requires more awareness. There was a need for
mandatory training of commercial disputes. It was further found that the F
party cannot be denied the right to participate in the justice dispensation
system. It was further noticed that there was no obligation on the part of
the defendant to respond to the initiative of the plaintiff. Rejecting the
plaint under Order VII Rule 11(d) in view of Order VII Rule 13, which
enables a fresh Suit to be filed upon rejection under Order VII Rule 11,
would show that the power under Order VII Rule 11 should not be G
invoked as it would not be in accordance with the objectives of the Act
and the Rules.

19
(2006) 12 SCC 119
20
2021 SCC Online Calcutta 429 H
842 SUPREME COURT REPORTS [2022] 11 S.C.R.

A 48. Another learned Single Judge of the High Court of Calcutta,
in a judgment reported in Dredging and Desiltation Company Pvt.
Ltd. v. Mackintosh Burn and Northern Consortium and Others21,
took the view that there is a distinction between filing of a Suit and
institution of a Suit under the CPC. It was further found that the bar
under Section 12A is absolute w.e.f. 12.12.2020, being the date
B
immediately subsequent to the date after the standard operating procedure
for undertaking pre-litigation procedure under Section 12A was made.
This is after finding that the standard operating procedure had been
made and Rules were published on 11.12.2020. The very same learned
Single Judge (Debangsu Basak, J.) in the judgment reported in Laxmi
C Polyfab Pvt. Ltd. v. Eden Realty Ventures Pvt. Ltd. and Another22,
elaborately considered the question as to whether Section 12A is
mandatory. He went on to hold that Section 12A was mandatory. The
Division Bench of the High Court of Madhya Pradesh, in Curewin
Pharmaceuticals Pvt. Ltd. v. Curewin Hylico Pharma Pvt. Ltd23,
followed the judgment of the learned Single Judge of High Court of
D
Bombay, which we have noticed in Ganga Taro(supra), and after finding
that a Suit, which does not contemplate an urgent interim relief, cannot
be instituted unless pre-litigation mediation isexhausted. A learned Single
Judge of the Allahabad High Court in the decision reported in Awasthi
Motors v. Managing Director M/s. Energy Electricals Vehicle and
E Another24, found that there is a clear purpose provided for pre-institution
mediation. He referred to the Statement of Objects and Reasons. He
concluded that the provision is mandatory.
A SURVEY OF THE ACT AND THE RULES
49. Section 2(c) defines ‘commercial dispute’ as encompassing
F various specified transactions, which are 21 in number. There is a
residuary provision, which brings up the rear and is contained in Section
2(c)(xxii). The said provision empowers the Central Government to notify
other commercial disputes as a commercial dispute. The explanation
amplifies/clarifies the scope of commercial dispute. Section 2(i) defines
the words ‘specified value’ as follows:
G
“2(i) “Specified Value”, in relation to a commercial dispute, shall
mean the value of the subject-matter in respect of a suit as
21
2021 SCC Online Calcutta 1458
22
AIR 2021 Calcutta 190
23
AIR 2021 MP 154
H 24
AIR 2021 Allahabad 143
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 843
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

determined in accordance with section 12 which shall not be less A
than three lakh rupees or such higher value, as may be notified by
the Central Government.”
[The amount was 1 crore when the Act was enacted in 2015 and
it was reduced by the Amendment in 2018.]
50. Under Chapter II, the Law-giver has contemplated, B
Commercial Courts at the District Level, a Commercial Appellate Court
at the District Judge Level, a Commercial Division in the High Court for
all High Courts having Ordinary Original Civil Jurisdiction (See Section
4) and a Commercial Appellate Division in the High Court. Section 8
bars revision application or petition against an interlocutory order. Section
12 deals with the determination of the Specified Value. Section 14 C
contemplates that the Commercial Appellate Court and the Commercial
Appellate Division shall endeavour to dispose of appeals before them,
within six months from the date of filing of such appeals. Under Section
15(2), all suits and applications, including under the Arbitration and
Conciliation Act, relating to a commercial dispute of a specified value, D
pending in any Civil Court, is to be transferred to the Commercial Court,
where such Court has been constituted. Under Section 16, the provisions
of the CPC, in respect of its application to any suit in respect of a
commercial dispute of a specified value, is to stand amended as provided
in the Schedule. Section 19 provides that the State shall provide the
necessary infrastructure to facilitate working of the Commercial Court E
or Commercial Division of a High Court. A Schedule relatable to Section
16, which provides for the amended version of the CPC, inter alia, provides
for a substituted version of Section 35 of the CPC dealing with costs. It
provides that the Court has the discretion in the matter of quantum of
costs. F
Section 35 of the CPC in the Schedule, inter alia, contemplates
that in making an Order for payment of costs, the Court shall have regard
to the conduct of the parties and whether any reasonable offer to settle,
is made by a party and unreasonably refused by the other party. Sections
35(3) and 35(4) read as follows:
G
“35(3) In making an order for the payment of costs, the Court
shall have regard to the following circumstances, including—
(a) the conduct of the parties;
(b) whether a party has succeeded on part of its case, even if that
party has not been wholly successful; H
844 SUPREME COURT REPORTS [2022] 11 S.C.R.

A (c) whether the party had made a frivolous counterclaim leading
to delay in the disposal of the case;
(d) whether any reasonable offer to settle is made by a party and
unreasonably refused by the other party; and
(e) whether the party had made a frivolous claim and instituted a
B vexatious proceeding wasting the time of the Court.”
“35(4) The orders which the Court may make under this provision
include an order that a party must pay-
(a) a proportion of another party’s costs;
C (b) a stated amount in respect of another party’s costs;
(c) costs from or until a certain date;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
D (f) costs relating to a distinct part of the proceedings; and
(g) interest on costs from or until a certain date.”
[Emphasis supplied]
51. Since, Section 12A also contemplated the making of Rules to
give effect to the scheme of pre-litigation mediation.The Rules were
E promptly made and published on 03.07.2018. Rule 3 elaborately provides
for the manner in which the mediation process is initiated. It contemplates
that a party, to a commercial dispute, may make an application to the
Authority. This Rule speaks about a party. Section 12A declares that the
plaintiff must exhaust the remedy of pre-litigation mediation. What,
F apparently is required is that the Suit cannot be filed except after the
remedy of pre-litigation mediation, contemplated under the Act and the
Rules, is attempted and exhausted. What Rule 3(1) provides is the form
in which the application is to be made, viz., Form-I, as specified in
Schedule-I. The making of the Form can be by online transmission or by
post or by hand. The view expressed by the High Court of Madras that
G the use of the word ‘may’, detracts from the mandatory flavour of Section
12A is clearly untenable. Section 12A is part of the parent enactment.
Rule 3, being a subordinate legislation, must be interpreted harmoniously,
in the first place, with the parent enactment. That apart, on a proper
understanding of Rule 3, there is really no conflict between Section 12A
H and Rule 3. Rule 3 only gives a discretion to the applicant, in regard to
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 845
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

the mode of making the application. So understood, we are of the clear A
view that, if Section 12A is otherwise mandatory, Rule 3(1) can only be
understood as providing three different modes for making the application,
contemplated in Section 12A(1).As to whether the application must be
made, must depend upon, among other things, upon the peremptory nature
of the language employed in section 12A(1). Rule 3 further contemplates
B
that the Authority, which again, has been clearly defined as the Authority
notified by the Central Government under Section 12A(2), has to issue a
notice to the opposite party to appear and to give his consent to participate
within the time as provided in Rule 3(2). Should there be no response, a
final notice is to be given again in the manner articulated in Rule 3(2).
Should there be again no response by the notice remaining C
unacknowledged or upon there being refusal to participate, the mediation
process becomes what is described, a non-starter. The Authority then
makes a report in Form-III, which is called a Non-Starter Report. The
copy of the Report is served on the applicant and the respondent. There
is a provision for accommodating the request of the opposite party
appearing and seeking time, subject to the date being not later than ten D
days from the date of request of the parties. If, in such a case, there is
failure to appear by the opposite party, again a non-starter report in
Form-III has to be made. If, on the other hand, where both parties appear,
gives consent, the Authority is to assign the matter to a Mediator and
also to assign a date. The period of mediation being three months and E
the possibility of an extension by two months, with the consent of both
sides, is the subject matter of Rule 3. The role of the Mediator is carved
out in Rule 5 to be one to facilitate the voluntary resolution of the dispute
and assist the parties in reaching a settlement. Rule 6 provides for authority
with the party to either appear personally or through his duly authorised
representative or counsel. The significance of being represented by F
counsel in pre-litigation mediation, cannot but be underlined. Apart from
the fact that the Legislature must be treated as aware, that, both, public
interest, as also the interest of the parties, lies in an expeditious disposal
of, what is described as, commercial litigation, with a sublime goal of
fostering the highest economic interests of the nation,allowing the Counsel
G
to appear before the Mediator is intended to facilitate in arriving at a
settlement, which is legally valid and otherwise just. We have noticed
that a settlement arrived at in pre-litigation mediation under Section 12A,
is to be treated as an award under Section 30(4) of the Arbitration and
Conciliation Act. Section 30(4) of the Arbitration and Conciliation Act,
1996, reads as follows: H
846 SUPREME COURT REPORTS [2022] 11 S.C.R.

A “30(4) An arbitral award on agreed terms shall have the same
status and effect as any other arbitral award on the substance of
the dispute.”
A mediation settlement arrived at under Section 89 of the CPC
must be scrutinised by the court and only on its imprimaturbeing given it
B is effective [see paragraph 40 of Afcons Infrastructure Limited and
Another v. Cherian Varkey Construction Company Private Limited
and Others25]. Since a settlement under Section 12A of the Act is
accorded the status of an award under the Arbitration & Conciliation
Act, it unerringly points to the object of the legislature to make pre-
litigation mediation compulsory. We again underscore the vital role, the
C lawyers engaged can and must discharge in arriving at a just and valid
settlement translating into an effective award and therefore, a decree.
52. Rule 7 deals with the procedure to be adopted by the Mediator.
Rule 9 enshrines the principle of confidentiality of mediation. The
Mediator, the parties, their authorised representatives or Counsel are to
D maintain confidentiality about the mediation. Rule 9 further declares that
the Mediator is not to allow stenographic or audio or video recording of
the mediation sittings. Rule 11 provides for the mediation fee. There is to
be one-time mediation fee, which is to be shared equally, as per the quantum
of claim as specified in Schedule II. We may set out Schedule II.
E “SCHEDULE-II
Mediation Fee
[See rule 11]

F

G

”
25
H (2010) 8 SCC 24
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 847
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

53. Timelines are contemplated, both in the matter of pleadings A
and also other steps to be taken. They are geared to ensure an expeditious
culmination of the proceedings. Originally, the specified value within the
meaning of Section 2(i) was fixed as ‘which shall not be less than one
crore rupees’. Within three years of the birth of the Act, Parliament
found that it was necessary to reduce the specified value from the sum
B
of Rs.1 crore to Rs.3 lakhs, which is what is reflected in the present
avatar of the definition of the word ‘specified value’. It is simultaneously
with the reduction of the specified value and by the same amendment
that Section 12A came to be inserted. We have already noticed the
Statement of Objects and Reasons, which led to the amendment. On a
conspectus of the Act, as from its birth till the Law-giver stepped-in with C
the amendment in 2018, the Act read with the Rules represent an
economic experiment as much as it deals more directly with a vital aspect
of administration of justice. Commercial disputes have been clearly
identified. The value has been fixed. Courts, at different stages, have
been contemplated. Timelines are contemplated. The whole object of
D
the law is clear as day light. Disputes of a commercial hue, must be
extinguished with the highest level of expedition. The dispute resolution
would witness a termination of the lis between the feuding parties. But
even, more importantly, it would prepare the ground for the country
becoming a destination attracting capital by enhancing the ease of doing
business. It does not require much debate to conclude that there is a E
direct relationship between ease of doing business and an early and
expeditious termination of disputes, which may arise in commercial
matters. The speed with which the justice delivery system in any country
responds to the problem of docket explosion, particularly in the realm of
commercial disputes can be regarded as a very safe index of the ease of
F
doing business in that country. The Act, therefore, is, in the said sense, a
unique experiment to push the pace of disposal of commercial disputes.
It is in this background that the Court must approach the issue of whether
Section 12A has been perceived as being a mandatory provision. We
say this for the reason that the decisive element in the search for the
answer, in the interpretation of such a Statute, must be to ascertain the G
intention of the Legislature. The first principle, of course, must be the
golden rule of interpretation, which means, the interpretation in conformity
with the plain language, which is used. There cannot even be a shadow
of a doubt that the language used in Section 12A is plainly imperative in
nature. However, we will not be led by the mere use of the word ‘shall’.
H
848 SUPREME COURT REPORTS [2022] 11 S.C.R.

A Even going by the sublime object of the Act, as we have unravelled, we
are fully reinforced in our opinion that the pre-institution mediation is
intended to produce results, which has a direct bearing on the fulfilment
of the noble goals of the Law-giver. It is apparent that the Legislature
has manifested a value judgement. We are not called upon to decide the
constitutionality of the provision. Parliament is presumed to be aware of
B
the felt necessities of the times. It best knows the manner in which the
problems on the ground are redressed. Section 89 of the CPC, does
contemplate mediation ordered by a Court. However, it must be noticed
that Section 12A contemplates mediation without any involvement of
the Court as it is done prior to the institution of the suit.
C 54. The potential of Section 89 of the CPC for resolving disputes
has remained largely untapped on account of the fact that mediation has
become the product of volition of the parties. Courts, no doubt, have
begun to respond positively.However, there was a pressing need to
decongest the trial courts, in commercial matters in particular, as they
D bear the brunt of docket explosion. It is noteworthy that Section 12A
provides for a bypass and a fast-track route without for a moment taking
the precious time of a court. At this juncture, it must be immediately
noticed that the Law-giver has, in Section 12A, provided for pre-institution
mediation only in suits, which do not contemplate any urgent interim
relief. Therefore, pre-institution mediation has been mandated only in a
E class of suits. We say this for the reason that in suits which contemplate
urgent interim relief, the Law-giver has carefully vouch-safed immediate
access to justice as contemplated ordinarily through the courts. The
carving out of a class of suits and selecting them for compulsory
mediation, harmonises with the attainment of the object of the law. The
F load on the Judges is lightened. They can concentrate on matters where
urgent interim relief is contemplated and, on other matters, which already
crowd their dockets.
55. Section 9 of the CPC is not the law, which creates a right to
file a civil suit. It would, undoubtedly, require a law, however, to invade,
absolutely or conditionally, the vital civil right of a person to take his
G
grievance to a civil court. A civil suit can be barred by a law, either
expressly or by necessary implication. The jurisdiction of a civil court
can be ousted. In other words, there is no Fundamental Right with anyone
to contend that he has a right to file a civil suit, which cannot be taken
away. It is another matter that the courts will not lightly infer the ouster
H of a jurisdiction of a civil court. The very presence of Order VII Rule
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 849
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

11(d), which mandates rejection of a plaint, where a suit is barred, is a A
reminder of the principle that there is no absolute right to file a civil suit.
56. Under Section 12A, all that is provided is, a cooling period
wherein the parties are to be referred for mediation at the hands of
skilled Mediators. While on mediation, we may notice the following views
expressed by this Court in the judgment reported in Vikram Bakshi and B
Others v. Sonia Khosla (Dead) by Legal Representatives26:
“16. According to us it would have been more appropriate for
the parties to at least agree to resort to mediation as provided
under Section 89 CPC and make an endeavour to find amicable
solution of the dispute, agreeable to both the parties. One of the C
aims of mediation is to find an early resolution of the dispute. The
sooner the dispute is resolved the better for all the parties
concerned, in particular, and the society, in general. For parties,
dispute not only strains the relationship but also destroys it. And,
so far as society is concerned it affects its peace. So what is
required is resolution of dispute at the earliest possible opportunity D
and via such a mechanism where the relationship between
individual goes on in a healthy manner. Warren Burger, once said:
“The obligation of the legal profession is … to serve as
healers of human conflict … we should provide mechanisms
that can produce an acceptable result in shortest possible time, E
with the least possible expense and with a minimum of stress
on the participants. That is what justice is all about.”
MEDIATION is one such mechanism which has been statutorily
brought into place in our justice system. It is one of the methods
of alternative dispute resolution and resolves the dispute in a way F
that is private, fast and economical. It is a process in which a
neutral intervenor assists two or more negotiating parties to identify
matters of concern, develop a better understanding of their
situation, and based upon that improved understanding, develop
mutually acceptable proposals to resolve those concerns. It G
embraces the philosophy of democratic decision-making [Alfin,
et al., Mediation Theory & Practice (2nd Edn., 2006) Lexis
Nexis].
xxx xxx xxx
26
(2014) 15 SCC 80 H
850 SUPREME COURT REPORTS [2022] 11 S.C.R.

A 19. This Bench is of firm opinion that mediation is a new
dimension of access to justice. As it is one of the best forms, if not
the best, of conflict resolution. The concept of Justice in mediation
is advanced in the oeuvres of Professors Stulberg, Love, Hyman,
and Menkel-Meadow (Self-Determination Theorists). Their
definition of justice is drawn primarily from the exercise of party
B
self-determination. They are hopeful about the magic that can
occur when people open up honestly and empathetically about
their needs and fears in uninhibited private discussion. And, as
thinkers, these jurists are optimistic that the magnanimity of the
human spirit can conquer structural imbalances and resource
C constraints.
xxx xxx xxx
19.3. Professor Carrie Menkel-Meadow presents a related point
of view in making the case that settlement has a political and
ethical economy of its own and writes:
D
“Justice, it is often claimed, emerges only when lawyers
and their clients argue over its meaning, and, in turn, some
authoritative figure or body pronounces on its meaning, such
as in the canonical cases of the late twentieth century …
For many years now, I have suggested that there are other
E components to the achievement of justice. Most notably, I
refer to the process by which we seek justice (party
participation and empowerment, consensus rather than
compromise or command) and the particular types of
outcomes that might help to achieve it (not binary win-lose
F solutions, but creative, pie-expanding or even shared
solutions).”
[Emphasis supplied]
57. On the one hand, the staunchest criticism against mediation
has been that it is opposed to the fundamental principle of access to
G justice. It is in keeping with the traditional notions of the right of a person
to have a dispute adjudicated by an impartial and a trained Judge. On the
other hand, as noticed by this Court in Vikram Bakshi(supra), mediation
offers a completely new approach to attaining the goal of justice. A win-
win situation resulting from assigning a greater role to the parties
themselves, with no doubt, a spirit of accommodation represents a better
H
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 851
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

and what is more in the era of docket explosion, the only meaningful A
choice. The realisation has been growing over a period of time, that
formal court rooms, long drawn-out proceedings, procedural wrangles,
mounting and crippling costs, delay, which never wanes but only increases
with the day that at least, in certain categories of cases, mediation can
be the way out. It, undoubtedly, requires a complete change in the
B
mindset. The change in approach, undoubtedly, can be achieved only if
the litigants become aware of its benefits in comparison with the great
disadvantage in waiting in the serpentine queue for the day of reckoning
to arrive in a court of law. The role of the Bar is vital in taking mediation
forward. With increase in population and a skewed Judge-population
ratio and a huge spiralling of litigation in the courts, it is logical, just and C
imperative, to attempt and persevere in out of the box thinking.We can
no longer afford to remain in the past. A clean break with the past is
urgently needed. What was a mere writing on the wall as early as in the
last decades of the previous century has become the harsh reality. It is
important that the courts also adapt to the changing times. At least when D
the Parliament has decided to move ahead, it becomes the court’s duty
not to greet it with undue scepticism. It becomes necessary to fulfil the
intention of the Parliament by realising the true role of judiciary.
58. A perusal of the Act and the Rules reveal the existence of a
complete Code. Mediation contemplated under Section 12A and the Rules,
E
may not succeed in every case. To begin with, the figures may not be
reassuring but even if success does not elude the Mediator, in a few of
the cases, a good part of the object of the Legislature, would stand
achieved. Such is the condition of the docket explosion perceived
particularly in commercial disputes. It is not difficult to appreciate the
concern of the people through their elected representatives. Particularly F
with the lowering of the monetary limit from rupees one crores to rupees
three lakhs, there would be a stupendous load on the courts to achieve
the timeline and dispose of commercial matters by the conventional mode
of adjudication, even with the amended provisions of the CPC as
applicable under Section 16 of the Act. G
59. We are not impressed by the argument of Shri Saket Sikri that
Section 12A does not provide for any penalty and, therefore, the provision
is not mandatory. No doubt, he does admit that it is only one of the
aspects to be considered whether the word ‘shall’ is to be treated as
mandatory. If the argument of learned Counsel is accepted, neither
H
852 SUPREME COURT REPORTS [2022] 11 S.C.R.

A Section 80 of the CPC nor Section 69 of the Partnership Act, which do
not provide for any penalty for a suit brought in contravention of their
terms, would be mandatory. However, it is a settled law that a plaint
instituted transgressing the mandate of Section 80, that is, when there is
no notice at all and no urgent relief is contemplated and leave sought, the
plaint would have to be rejected, as the suit would not be maintainable.
B
The position is equally the same in regard to absence of registration
contemplated under Section 69 of the Indian Partnership Act. Therefore,
the principle canvassed by the learned Counsel would not apply.
60. Equally, we are unimpressed by the contention of the learned
Counsel Shri Saket Sikri that contravention of mandate of Section 12A
C does not affect any legal right of the defendant and therefore, the suit
filed without resorting to compulsory mediation must be countenanced.
It may be true that it may be relevant input to inquire as to whether, not
following a mandate of a statute, will violate the right of another person.
61. We may proceed on the basis that if the suit is brought without
D complying with Section 12A, where no urgent interim relief is sought,
may not in one sense, affect the legal right of the defendant. But this
argument overlooks the larger picture which is the real object of the law.
This object is not to be viewed narrowly with reference to the impact on
the parties alone. This is apart from also remembering that if the parties
E were to exhaust mediation under Section 12A, the opposite side may be,
if mediation is successful, saved from the ordeal of a proceeding in court,
which, undoubtedly, would entail costs, whereas, the mediation costs, as
we have noticed, is minimal, and what is more, a one-time affair, and still
further, to be shared equally between the parties. Each time the plaintiff
is compelled to go in for mediation under Section 12A there is a ray of
F hope that the matter may get settled. The chief advantage and highlight
of mediation is that it is a win-win for all sides, if the mediation is
successful. Therefore, it cannot, in one sense, be argued that no legal
right of the defendant is infracted.Further, on the same logic, Section
80(1) of the CPC and Section 69 of the Indian Partnership Act would
G not be mandatory. This is however not the case.
62. One of the arguments of Shri Saket Sikri is that, if a plaint is
rejected under Order VII Rule 11, the plaintiff would be saddled with
the deprivation of the court fee paid. He would contend that this aspect
may be considered, when the Court decides the question as to whether
H the provision is mandatory or not. Whenever a plaint is rejected on the
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 853
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

ground that the suit is barred under any law, this consequence is inevitable. A
[We may only, in this context, observe, that under Section 4A of the
Kerala Court Fee and Suit Valuation Act, 1959, the plaintiff needs to pay
only one-tenth of the total court fee at the time of institution of the suit.
The balance is to be paid not later than fifteen days from the date of
framing of issues, inter alia. Section 4A further provides that if the parties
B
further settle the dispute within the period specified or extended by the
Court for payment of the balance court fee, the plaintiff shall not be
called upon to pay the balance court fee.] If a plaint is rejected for
failure to give a notice, as contemplated in Section 80 of the CPC, the
court fee paid, may be lost. Equally, for violation of Section 69 of the
Indian Partnership Act, if the plaint is rejected, the plaintiff loses the C
court fee. While it may appear to be hard on the plaintiff, the effect of
the provision contained in Order VII Rule 11, cannot be diluted. Therefore,
we are not impressed by the argument, subject to what we will hold later
on.
63. One of the aspects which weighed with the learned single D
judge of the Bombay High Court in Ganga Taro (supra) is that in a case
where the suit is instituted under Section 80 of the CPC without issuing
any notice, if the defendant does not take up the plea of violation of
Section 80, there can be waiver. Thus, even if Section 12A in a given
case, where the defendant does not set up the case there can be waiver
and therefore, Section 12A is not mandatory. No doubt, the Division E
Bench of the Bombay High Court while reversing the learned single
judge proceeded to hold that there cannot be waiver as Section 12A is
based on public interest. The approach of the learned Single Judge does
not commend itself to us. The question as to whether Section 12A is
mandatory or not, must be decided with reference to language used, the F
object of the enactment and a host of other aspects. The fact that if a
defendant does not raise the plea about compliance of Section 12A, it
may result in a given case of waiver cannot result in Section 12A not
being mandatory. If it were so, then in a case where there is no notice
under Section 80, a plaint can never be rejected. It is legally untenable
and defies logic. Another argument raised by Shri Saket Sikri, learned G
counsel is that by the impugned order, the High Court has affirmed the
trial Court order that the suit be kept in suspended animation and referred
the parties for mediation. According to him, it is substantial compliance
of Section 12A of the Act. It is eminently just.He also points out the
conduct of the appellant in not even cooperating in the mediation process. H
854 SUPREME COURT REPORTS [2022] 11 S.C.R.

A We are unable to accept this argument. We will refer to Section 80 of
the CPC to assist us in justifying our conclusion. Under Section 80 (1) of
the CPC, a suit not covered by Section 80(2), which is filed in defiance
of the former provision, that is without serving any notice, is not
maintainable. The suit would be barred and liable to be rejected under
Order VII Rule 11. The only exception is what is provided in Section 80
B
(2).It contemplates a suit to obtain an urgent or interim relief. Such a suit
may be instituted with the leave of the court without serving any notice
as required under Section 80 (1). In a case where a plaintiff does not
seek urgent interim relief under Section 80(2), the suit would fall within
the four walls of Section 80(1). Section 80(1) is mandatory. In regard to
C such suit, there is no question of substantial compliance. The suit must
culminate in rejection of the plaint on invoking power under Order VII
Rule 11. We may immediately draw a parallel between Section 80(1) of
the CPC and 12A of the Act. In Section 12A also, the bar of institution
of the suit is applicable only in a case in which plaintiff does not
contemplate urgent interim relief. The situation is akin to what is
D
contemplated in Section 80(1) of the CPC. In other words, the suit under
the Act which does not contemplate urgent interim relief is like a suit
covered by Section 80(1) of the CPC which does not project the need
for any urgent or interim relief. In regard to a suit covered under Section
12A of the Act, namely, in a suit where interim relief is not contemplated,
E there can be no substantial compliance by way of post institution reference
to mediation. The argument of the plaintiff overlooks the object apart
from the language used besides the design and scheme of the law. It
will, if accepted, lead to courts also spending their invaluable time on
such matters which follow from adjournments, objections and hearings.
There is no need to adopt such a course.
F
64. Take a case where notice is given under Section 80(1). A
contention is taken that the notice is not effective as it does not comply
with what is required in Section 80(1). In such a case, it may be a
different matter that the Court may take a liberal view as to whether
there is compliance. In fact, Section 80(3) makes this position clear.
G Even before Section 80 was substituted by Act 104 of 1976 by which
80(3) was inserted, in Raghunath Das v. Union of India& Another27
while dealing with a case where a notice was given, this Court inter alia
held as follows:

H 27
AIR 1969 SC 674
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 855
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

“8. The object of the notice contemplated by that section is to A
give to the concerned Governments and public officers opportunity
to reconsider the legal position and to make amends or settle the
claim, if so advised, without litigation. The legislative intention
behind that section in our opinion is that public money and time
should not be wasted on unnecessary litigation and the Government
B
and the public officers should be given a reasonable opportunity
to examinethe claim made against them lest they should be drawn
into avoidable litigations. The purpose of law is advancement of
justice. The provisions in Section 80 of the CPC are not intended
to be used as boobytraps against ignorant and illiterate persons.
In this case we are concerned with a narrow question. Has the C
person mentioned in the notice as plaintiff brought the present suit
or is he someone else? This question has to be decided by reading
the notice as a whole in a reasonable manner.
9. In Dhian Singh Sobha Singh v. Union of India [(1958) SCR
781, 795] this Court observed that while the terms of Section 80 D
of the CPC must be strictly complied with that does not mean that
the terms of thesection should be construed in a pedantic manner
or in a manner completely divorced from common sense. The
relevant passage from that judgment is set out below:
“We are constrained to observe that the approach of the High E
Court to this question was not well founded. The Privy Council
no doubt laid down in Bhagchand Dagadua v. Secretary of
State that theterms of section should be strictly complied with.
That does not however mean that the terms of the notice should
bescrutinised in a pedantic manner or in a manner completely
divorced from commonsense. As was stated by Pollock C.B. F
in Jones v. Nicholls, “we must import a little common sense
into notices of this kind”. Beaumont, C.J. also observed
in Chandu Lal Vadilal v. Government of Bombay ”One
mustconstrue Section 80 with some regard to common sense
and to the object with which it appears to have been passed.” G
65. The period of mediation is three months. If parties warm-up
to the prospect of settlement through mediation, on their consent, it can
be extended for another two months. Thus, for payment of a one-time
fee, in the case, which is successfully mediated by a skilled Mediator
and with the assistance of Counsel, the very dispute gets settled. The H
856 SUPREME COURT REPORTS [2022] 11 S.C.R.

A pressure on the courts is taken off to the extent that the parties, without
reference of the court, are compelled to undergo mediation.
66. Section 12A of the Act provides for mediation. This is a
provision, which was inserted as per the Amending Act (Act 28 of 2018)
enacted in the year 2018 and it came into force w.e.f. 03.05.2018. By
B the said amendment, in fact, Chapter IIIA was inserted and Section 12A
is the sole Section in the said Chapter. A plain reading of Section 12A
makes the following position clear:
The Law-giver has declared that if a Suit under the Act does
not ‘contemplate’ any urgent interim relief, then, it cannot be
C instituted unless the plaintiff seeks pre-litigation mediation. The
pre-institution mediation is to be done in the manner, procedure,
which is to be prescribed by the Central Government. The pre-
litigation mediation is to be completed within a period of three
months from the date of the application made by the plaintiff under
Sub-Section (1) [See Section 12A sub-Section (3)]. The period of
D
three months can, however, be extended for a period of two months
provided there is consent to the same by the parties [See the first
proviso to Section 12A sub-Section (3)]. By the second proviso,
the Legislature has taken care to provide that the period, during
which the parties remained occupied with the pre-litigation
E mediation, is not to be reckoned for the purpose of computing the
period of limitation under the Limitation Act, 1963. As to what
would happen, if the parties arrive at the settlement, is provided
for in Section 12A sub-Section (4). The settlement is to be reduced
into writing and signed by the parties to the dispute and the
Mediator. The effectiveness of a settlement arrived at in the course
F
of the pre-institution mediation contemplated in Section 12A, has
been dealt with in Section 12A sub-Section (5). Parliament has
accorded the settlement, the same status and effect as if it is an
Arbitral Award, on agreed terms under sub-Section (4) of Section
30 of the Arbitration and Conciliation Act, 1996. Spread over five
G sub-Sections, this standalone Section in Chapter IIIA, no doubt,
supported by the Rules, in our view, substantially manifests a
definite scheme to effectively deal with the perceived urgent
problem of acute clogging of the justice delivery system, which
had to be de-congested. Section 12A cannot be perceived as merely
intended to reach quicker justice, and what is more, on terms,
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M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 857
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

which are mutually acceptable to the parties concerned. Even, A
more importantly, it was to produce a vital and significant effect
on the very interest of the nation. We have perused the Statement
of Objects and Reasons. To attract foreign capital by enhancing
its rather low standard in the ease of doing business, it was and is
still necessary to showcase an efficient and quick justice delivery
B
system in commercial matters. In fact, India, which was ranked
at 142 out of 189 countries, in the Ease of Doing Business Index,
in 2015, climbed-up to only 130 in the year 2016. By 2020, India
stood at the 63rd position.
THE REGIME UNDER ORDER VII RULE 11 OF THE
CPC C

67. Order VII Rule 11 declares that the plaint can be rejectedon 6
grounds. They include failure to disclose the cause of action, and where
the suit appears from the statement in the plaint to be barred. We are
concerned in these cases with the latter. Order VII Rule 12 provides
that when a plaint is rejected, an order to that effect with reasonsmust D
be recorded. Order VII Rule 13 provides that rejection of the plaint
mentioned in Order VII Rule 11 does not by itself preclude the plaintiff
from presenting a fresh plaint in respect of the same cause of action.
Order VII deals with various aspects about what is to be pleaded in a
plaint, the documents that should accompany and other details. Order E
IVRule 1 provides that a suit is instituted by presentation of the plaint to
the court or such officer as the court appoints. By virtue of Order IVRule
1(3), a plaint is to be deemed as duly instituted only when it complies
with the requirementsunder Order VIand OrderVII. Order V Rule 1
declares that when a suit has been duly instituted, a summon may be
issued to the defendant to answer the claim on a date specified therein. F
There are other details in the Order with which we are not to be detained.
We have referred to these rules to prepare the stage for considering the
question as to whether the power under Order VII Rule 11 is to be
exercised only on an application by the defendant and the stage at which
it can be exercised. In Patasibai and Others v. Ratanlal28, one of the G
specific contentions was that there was no specific objection for rejecting
of the plaint taken earlier. In the facts of the case, the Court observed as
under:

28
(1990) 2 SCC 42 H
858 SUPREME COURT REPORTS [2022] 11 S.C.R.

A “13. On the admitted facts appearing from the record itself, learned
counsel for the respondent, was unable to show that all or any of
these averments in the plaint disclose a cause of action giving rise
to a triable issue. In fact, Shri Salve was unable to dispute the
inevitable consequence that the plaint was liable to be rejected
under Order VII Rule 11, CPC on these averments. All that Shri
B
Salve contended was that the court did not in fact reject the plaint
under Order VII Rule 11, CPC and summons having been issued,
the trial must proceed. In our opinion, it makes no difference that
the trial court failed to perform its duty and proceeded to issue
summons without carefully reading the plaint and the High Court
C also overlooked this fatal defect. Since the plaint suffers from this
fatal defect, the mere issuance of summons by the trial court
does not require that the trial should proceed even when no triable
issue is shown to arise. Permitting the continuance of such a suit
is tantamount to licensing frivolous and vexatious litigation. This
cannot be done.”
D
(Emphasis supplied)
68. On a consideration of the scheme of the Orders IV, V and
VII of the CPC, we arrive at the following conclusions:
(A) A suit is commenced by presentation of a plaint. Thedate
E of the presentation in terms of Section 3(2) of the Limitation
Act is the date of presentation for the purpose of the said
Act. By virtue of Order IV Rule 1(3), institution of the plaint,
however, is complete only when the plaint is inconformity
with the requirement of Order VI and Order VII.
F (B) When the court decides the question as to issue of summons
under Order V Rule 1, what the court must consider is
whether a suit has been duly instituted.
(C) Order VII Rule 11 does not provide that the court is to
discharge its duty of rejecting the plaint only on an
G application. Order VII Rule 11 is, in fact, silent about any
such requirement. Since summon is to be issued in a duly
instituted suit, in a case where the plaint is barred under
Order VII Rule 11(d), the stage begins at that time when
the court can reject the plaint under Order VII Rule 11. No
doubt it would take a clear case where the court is satisfied.
H
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 859
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

The Court has to hear the plaintiff before it invokes its power A
besides giving reasons under Order VII Rule 12. In a clear
case, where on allegations in the suit, it is found that the
suit is barred by any law, as would be the case, where the
plaintiff in a suit under the Act does not plead circumstances
to take hiscaseout of the requirement of Section 12A,the
B
plaint should be rejected without issuing summons.
Undoubtedly, on issuing summons it will be always open to
the defendant to make an application as well under Order
VII Rule 11. In other words, the power under Order VII
Rule 11 is available to the court to be exercised suo
motu.(See in this regard, the judgement of this Court in C
Madiraju Venkata Ramana Raju (supra).
PRESENTATION OF PLAINT AND INSTITUTION OF
SUIT
69. Another area of debate has been about the distinction between
the presentation of a plaint and institution of a suit. Section 3(2) of the D
Limitation Act, 1963, provides that for the purpose of the Limitation Act,
a suit is instituted in the ordinary case, when the plaint is presented to the
proper Officer. In the case of a pauper, the suit is instituted when his
application to leave to sue as a pauper is made. Order IV Rule 1 of the
CPC reads as follows: E
“Order IV Rule 1. Suit to be commenced by plaint.—(1) Every
suit shall be instituted by presenting a plaint in duplicate to the
Court or such officer as it appoints in this behalf.
(2) Every plaint shall comply with the rules contained in Orders
VI and VII, so far as they are applicable. F
(3) The plaint shall not be deemed to be duly instituted unless it
complies with the requirements specified in sub-rules (1) and (2).”
70. Sub-Rule (3) of Order IV Rule 1 was inserted by Act 46 of
1999 w.e.f. 01.07.2002. Shri Sharath Chandran has drawn our
G
attention to the Judgment of the High Court of Madras reported
in Olympic Cards Limited v. Standard Chartered Bank 29. In
the said case, the question, which arose was, whether there was
an abandonment or withdrawal of suit within the meaning of Order
29
(2013) 1 CTC 38 H
860 SUPREME COURT REPORTS [2022] 11 S.C.R.

A XXIII Rule 1 of the CPC, which would operate as a bar to file a
fresh suit. In this context, we notice the following discussion:
“16. Rule (1) of Order 4 of C.P.C. provided for institution of Suits.
Rules 3 & 4 of Order 4 contains the statutory prescription that the
Plaint must comply with the essential requirements of a valid Plaint
B and then only the process of filing would culminate in the registration
of a Suit. Rule 21 of Civil Rules of Practice contains the basic
difference between presentation and institution. There is no dispute
that the date of filing the Plaint would be counted for the purpose
of limitation. However, that does not mean that the Suit was validly
instituted by filing the Plaint. The Plaint, which does not comply
C
with the Rules contained in Orders 4 & 7, is not a valid Plaint.
The Court will initially give a Diary Number indicating the
presentation of Suit. In case the Plaint is returned, it would remain
as a “returned Plaint” and not a “returned Suit”. The act of
numbering the Plaint and inclusion in the Register of Suits alone
D would constitute the institution of Suit. The stages prior to the
registration of Suit are all preliminary in nature. The return of
Plaint before registration is for the purpose of complying with
certain defects pointed out by the Court. The further procedure
after admitting of the Plaint is indicated in Rule 9 of Order 7. This
provision shows that the Court would issue summons to the parties
E
after admitting the Plaint and registering the Suit. Thereafter only
the Defendants are coming on record, exception being their
appearance by lodging caveat. Even after admitting the Plaint,
the Court can return the Plaint on the ground of jurisdiction under
Rule 10 of Order 7 of C.P.C. The fact that the Plaintiff/Petitioner
F served the Defendant/respondent the copies of Plaint/Petitions
before filing the Suit/Petition would not amount to institution of
Suit/filing Petition. It is only when the Court admits the Plaint,
register it and enter it in the Suit register, it can be said that the
Suit is validly instituted.
G 17. It is, therefore, clear that any abandonment before the
registration of Suit would not constitute withdrawal or
abandonment of Suit within the meaning of Order 23, Rule 1,
C.P.C., so as to operate as a legal bar for a subsequent Suit of the
very same nature. It is only the withdrawal or abandonment during
the currency of a Legal proceedings would preclude the Plaintiff
H
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 861
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

to file a fresh Suit at a later point of time on the basis of the very A
same cause of action.”
71. The contention appears to be that it may be a fair view to take
that there is no institution of the suit within the meaning of Section 12A,
until the Court admits the plaint and registers it in the suit register. In
other words, presentation of the plaint may not amount to institution of B
the suit for the purpose of Order IV Rule 1 of the CPC and Section 12A
of the Act. If this view is adopted, it is pointed out that before the plaint
is registered after presentation and there is non-compliance with Section
12A, the plaintiffs can, then and there, be told off the gates to first comply
with the mandate of Section 12A. This process would not involve the
Courts actually spending time on such matters. In the facts, this question C
does not arise and, it may not be necessary to explore this matter further.
72. We may sum-up our reasoning as follows:
The Act did not originally contain Section 12A. It is by
amendment in the year 2018 that Section 12A was inserted. The D
Statement of Objects and Reasons are explicit that Section 12A
was contemplated as compulsory. The object of the Act and the
Amending Act of 2018, unerringly point to at least partly foisting
compulsory mediation on a plaintiff who does not contemplate
urgent interim relief. The provision has been contemplated only
with reference to plaintiffs who do not contemplate urgent interim E
relief. The Legislature has taken care to expressly exclude the
period undergone during mediation for reckoning limitation under
the Limitation Act, 1963. The object is clear. It is an undeniable
reality that Courts in India are reeling under an extraordinary
docket explosion. Mediation, as an Alternative Dispute Mechanism, F
has been identified as a workable solution in commercial matters.
In other words, the cases under the Act lend themselves to be
resolved through mediation. Nobody has an absolute right to file a
civil suit. A civil suit can be barred absolutely or the bar may
operate unless certain conditions are fulfilled. Cases in point, which
amply illustrate this principle, are Section 80 of the CPC and G
Section 69 of the Indian Partnership Act. The language used in
Section 12A, which includes the word ‘shall’, certainly, go a long
way to assist the Court to hold that the provision is mandatory.
The entire procedure for carrying out the mediation, has been
spelt out in the Rules. The parties are free to engage Counsel H
862 SUPREME COURT REPORTS [2022] 11 S.C.R.

A during mediation. The expenses, as far as the fee payable to the
Mediator, is concerned, is limited to a one-time fee, which appears
to be reasonable, particularly, having regard to the fact that it is to
be shared equally. A trained Mediator can work wonders.
Mediation must be perceived as a new mechanism of access to
justice. We have already highlighted its benefits. Any reluctance
B
on the part of the Court to give Section 12A, a mandatory
interpretation, would result in defeating the object and intention of
the Parliament. The fact that the mediation can become a non-
starter, cannot be a reason to hold the provision not mandatory.
Apparently, the value judgement of the Law-giver is to give the
C provision, a modicum of voluntariness for the defendant, whereas,
the plaintiff, who approaches the Court, must, necessarily, resort
to it. Section 12A elevates the settlement under the Act and the
Rules to an award within the meaning of Section 30(4) of the
Arbitration Act, giving it meaningful enforceability. The period
spent in mediation is excluded for the purpose of limitation. The
D
Act confers power to order costs based on conduct of the parties.
73. In the cases before us, the suits do not contemplate urgent
interim relief. As to what should happen in suits which do contemplate
urgent interim relief or rather the meaning of the word ‘contemplate’ or
urgent interim relief, we need not dwell upon it. The other aspect raised
E about the word ‘contemplate’ is that there can be attempts to bypass the
statutory mediation under Section 12A by contending that the plaintiff is
contemplating urgent interim relief, which in reality, it is found to be
without any basis. Section 80(2) of the CPC permits the suit to be filed
where urgent interim relief is sought by seeking the leave of the court.
F The proviso to Section 80 (2) contemplates that the court shall, if, after
hearing the parties, is satisfied that no urgent or immediate relief need
be granted in the suit, return the plaint for presentation to the court after
compliance. Our attention is drawn to the fact that Section 12A does not
contemplate such a procedure. This is a matter which may engage
attention of the lawmaker. Again, we reiterate that these are not issues
G which arise for our consideration. In the fact of the cases admittedly
there is no urgent interim relief contemplated in the plaints in question.
SOME CONCERNS
74. Mediation can become a potent alternate dispute resolution
H device. There are, however, a few indispensable requirements. The first
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 863
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

requirement is the existence of adequate infrastructural facilities and, A
what is more important, availability of trained and skilled Mediators. The
role of the Mediator, as per Rule (5) of the Rules, is to facilitate the
voluntary resolution of a commercial dispute and assist the parties in this
regard. How can a Mediator, who is not properly trained, fulfil his
responsibility under Rule (5)? Another area of concern is the availability
B
in the number of Mediators in the country, particularly, in the light of
lowering of the monetary valuation from Rs. 1 crore to Rs. 3 lakhs. It is
all well to pass a law with sublime objects as in this case. However, the
goal will not be realised unless the State Governmentsand all other
relevant Authorities bestow their attention in the matter of providing
adequate facilities. Knowledge of the laws, which are the subject matter C
of the suits under the Act, is indispensable for a Mediator to effectively
discharge his duties. His role is supreme and it is largely shaped by his
own knowledge of the law that governs commercial cases. There must
be training by Experts, including at the State Judicial Academies. This
must be undertaken on a regular and urgent basis, particularly keeping in
mind when there is a dearth of trained mediators. There is a need to D
have a dedicated bar for mediation. The effective participation of the
bar which must be adequately remunerated for its service will assist in
mediation evolving. The concerned High Court may also undertake periodic
exercise to establish a panel of trained mediators in District and Taluka
levels as per need. E
75. In Civil Appeal arising out of SLP(C) No. 14697 of 2021, it is
brought to our notice that after the filing of the Special Leave Petition,
suit was proceeded with under Order XXXVII of the CPC, Shri Ayush
Negi, would contend that the respondent\plaintiff has pressed the summary
judgment and, in case, this Court does not grant relief to the appellant,
F
safeguard may be incorporated allowing the appellants written statement
to be treated as leave to defend.
THE RELIEF
76. On the findings we have entered, the impugned orders must
be set aside and the applications under Order VII Rule 11 allowed. This G
would mean that the plaints must be rejected. Necessarily, this would
involve the loss of the court fee paid by the plaintiffs in these cases.
They would have to bring a fresh suit, no doubt after complying with
Section 12A, as permitted under Order VII Rule 13. Moreover, the
declaration of law by this Court would relate back to the date of the
Amending Act of 2018. H
864 SUPREME COURT REPORTS [2022] 11 S.C.R.

A 77. There is a plea by Shri Saket Sikri, that if this Courtholds that
Section 12A is mandatory it may be donewith only prospective effect.
He drew support of the judgment of this Court in, Jarnail Singh and
Others v. LachhmiNarain Gupta and Others30.
“35. While interpreting the scope of Article 142 of the Constitution,
B this Court held that the law declared by the Supreme Court is the
law of the land and in so declaring, the operation of the law can
be restricted to the future, thereby saving past transactions.
36. The power of this Court under Article 142 of the Constitution
is a constituent power transcendental to statutory prohibition
C [(1997) 5 SCC 201].In Orissa Cement Ltd. v. State of Orissa
[(1991) Suppl.1 SCC 430], this Court observed that relief can be
granted, moulded or restricted in a manner most appropriate to
the situation before it in such a way as to advance the interests of
justice. The doctrine of prospective overruling is in essence a
recognition of the principle that the Court moulds the reliefs claimed
D to meet the justice of the case, as has been held in Somaiya
Organics (India) Ltd. v. State of U.P.[(2001 5 SCC 519]. It was
further clarified that while in Golak Nath (supra), ‘prospective
overruling’ implied an earlier judicial decision on the same issue
which was otherwise final, this Court had used the power even
E when deciding on an issue for the first time. There is no need to
refer to other judgments of this Court which have approved and
applied the principle of prospective overruling or prospective
operation of judgments. There cannot be any manner of doubt
that this Court can apply its decision prospectively, i.e., from the
date of its judgment to save past transactions.”
F 78. The Doctrine of prospective overruling began its innings with
the decision of this Court in L.C. Golak Nath and Others v. State of
Punjab and Another31. This Court in the said case relied upon Articles
32, 141 and 142 of the Constitution and extended this doctrine which
was in vogue in the United States. The principle involves giving effect to
G the law laid down by this Court, from a prospective date, ordinarily the
date of the judgment. There is no dispute that while initially the doctrine
was confined to matters arising under the Constitution, later on it has
been applied to other areas of law as well.
30
2022 SCC Online SC 96
H 31
AIR 1967 SC 1643
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 865
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

79. In Taherakhatoon (D) By Lrs. v. Salambin Mohammad32, A
this Court while dealing with its powers or rather limitation on its power
even after grant of special leave under Article 136 held as follows:
“20. In view of the above decisions, even though we are now
dealing with the appeal after grant of special leave, we are not
bound to go into merits and even if we do so and declare the law B
or point out the error — still we may not interfere if the justice of
the case on facts does not require interference or if we feel that
the relief could be moulded in a different fashion.…”
80. In M/s. Somaiya Organics (India) Ltd. v. State of Uttar
Pradesh33, the Court went on to hold as follows in regard to the doctrine C
of prospective overruling.
“25.The words “prospective overruling” implies an earlier judicial
decision on the same issue which was otherwise final. That is
how it was understood in Golak Nath [AIR 1967 SC 1643: (1967)
2 SCR 762]. However, this Court has used the power even when D
deciding on an issue for the first time. Thus, in India Cement
Ltd. v. State of T.N. [(1990) 1 SCC 12] when this Court held that
the cess sought to be levied under Section 115 of the Madras
Panchayats Act, 1958 as amended by Madras Act 18 of 1964,
was unconstitutional, not only did it restrain the State of Tamil E
Nadu from enforcing the same any further, it also directed that
the State would not be liable for any refund of cess already paid
or collected.
28. In the ultimate analysis, prospective overruling, despite the
terminology, is only a recognition of the principle that the court F
moulds the reliefs claimed to meet the justice of the case — justice
not in its logical but in its equitable sense. As far as this country is
concerned, the power has been expressly conferred by Article
142 of the Constitution which allows this Court to “pass such
decree or make such order as is necessary for doing complete
G
justice in any cause or matter pending before it”. In exercise of
this power, this Court has often denied the relief claimed despite
holding in the claimants’ favour in order to do ‘complete justice’.”

32
(1999) 2 SCC 635
33
AIR 2001 SC 1723 H
866 SUPREME COURT REPORTS [2022] 11 S.C.R.

A 81. We may next notice the judgment of this Court in, P.V. George
& Ors. v. State of Kerala & Ors.34 In the said case, the doctrine was
sought to be invoked in a service matter. The Full Bench of the High
Court overruled a Division Bench which had declared a rule
unconstitutional. On the strength of the Full Bench decision the employees
were sought to be reverted. This Court adverted to the decision of the
B
House of Lords reported in National Westminster Bank Plc. v. Spectrum
Plus Ltd. & Ors.35 wherein theCourt held:
“9. Prospective overruling takes several different forms. In its
simplest form prospective overruling involves a court giving a ruling
of the character sought by the bank in the present case. Overruling
C of this simple or ‘pure’ type has the effect that the court ruling
has an exclusively prospective effect. The ruling applies only to
transactions or happenings occurring after the date of the court
decision. All transactions entered into, or events occurring, before
that date continue to be governed by the law as it was conceived
D to be before the court gave its ruling.
10. Other forms of prospective overruling are more limited and
‘selective’ in their departure from the normal effect of court
decisions. The ruling in its operation may be prospective and,
additionally, retrospective in its effect as between the parties to
E the case in which the ruling is given. Or the ruling may be
prospective and, additionally, retrospective as between the parties
in the case in which the ruling was given and also as between the
parties in any other cases already pending before the courts. There
are other variations on the same theme.”

F (Emphasis supplied)
82. This is not a case where this Court is overruling its previous
decision, which was the case in the decision reported in 2005 8 SCC
618. This is also not a case where this Court is pronouncing a law under
which various transactions have been affected void. It may be true that
G the doctrine of prospective overruling may not be confined to either of
the above circumstances as such and its ambit is co-extensive with the
equity of a situationwhereunder on the law being pronounced it is likely
to intrude into or reopen settled transactions. This is not a matter where
34
AIR 2007 SC 1034
35
H (2005) UK HL 41
M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS. v. 867
RAKHEJA ENGINEERS PRIVATE LIMITED [K. M. JOSEPH, J.]

the court is overruling a decision of the High Court which has held the A
field for a long period. See in this regard, Harsh Dhingra v. State of
Haryana and others36. In the said judgment this Court held as follows:
“7.Prospective declaration of law is a device innovated by this
Court to avoid reopening of settled issues and to prevent multiplicity
of proceedings. It is also a device adopted to avoid uncertainty B
and avoidable litigation. By the very object of prospective
declaration of law it is deemed that all actions taken contrary to
the declaration of law, prior to the date of the declaration are
validated. This is done in larger public interest. Therefore, the
subordinate forums which are bound to apply law declared by this
Court are also duty-bound to apply such dictum to cases which C
would arise in future. Since it is indisputable that a court can
overrule a decision there is no valid reason why it should not be
restricted to the future and not to the past. Prospective overruling
is not only a part of constitutional policy but also an extended
facet of stare decisis and not judicial legislation. These principles D
are enunciated by this Court in Baburam v. C.C. Jacob [(1999)
3 SCC 362: 1999 SCC (L&S) 682: 1999 SCC (Cri) 433] and Ashok
Kumar Gupta v. State of U.P. [(1997) 5 SCC 201: 1997 SCC
(L&S) 1299]”
83. The statute which has generated the controversy is the E
Amending Act of year 2018. We have noticed that there is undoubtedly
a certain amount of cleavage of opinion among the High Courts. The
other feature which is to be noticed is that, this is a case where the law
in question, the Amending Act containing certain Section 12A is a toddler.
The law necessarily would have teething problems at the nascent stage.
The specified value has been lowered drastically from Rs.1 crore to F
Rs.3 lakhs. The imperative need to comply with the mandate of Section
12A which we have unravelled if it has not been shared by the parties on
the advice they received or on the view prevailing in the High Courts
would necessarily mean that unless we hold that the law, we declare is
prospective such suits must perish. The court fee paid would have to be G
written off. In a fresh suit which would be otherwise barred by limitation,
shelter can be taken only under Section 14 of the Limitation Act. The
availability of the power under Section 14 itself may have to be decided
by the court.
36
(2001) 9 SCC 550 H
868 SUPREME COURT REPORTS [2022] 11 S.C.R.

A 84. Having regard to all these circumstances, we would dispose
of the matters in the following manner. We declare that Section 12A of
the Act is mandatory and hold that any suit instituted violating the mandate
of Section 12A must be visited with rejection of the plaint under Order
VII Rule 11. This power can be exercised even suo moto by the court
as explained earlier in the judgment. We, however, make this declaration
B
effective from 20.08.2022 so that concerned stakeholders become
sufficiently informed. Still further, we however direct that in case plaints
have been already rejected and no steps have been taken within the
period of limitation, the matter cannot be reopened on the basis of this
declaration. Still further, if the order of rejection of the plaint has been
C acted upon by filing a fresh suit, the declaration of prospective effect
will not avail the plaintiff. Finally, if the plaint is filed violating Section
12A after the jurisdictional High Court has declared Section 12A
mandatory also, the plaintiff will not be entitled to the relief.
85. In Civil Appeal arising out of SLP (C) No. 14697 of 2021
D taking note of the fact that it is a case where the appellant would have
succeeded and the plaint rejected, it is also necessary to order the
following. The written statement filed by the appellant shall be treated
as the application for leave to defend filed within time within the meaning
of Order XXXVII and the matter considered on the said basis. While
we disapprove of the reasoning in the impugned orders we decline to
E otherwise interfere with the orders and the two appeals shall stand
disposed of accordingly. In Civil Appeal arising out of SLP (C)No.5737
of 2022, we set aside the order directing payment of costs of Rs.10,000/-.
The petition for permission to file SLP in SLP (C) Diary No. 29458 of
2021 and the said SLP shall stand disposed of as already indicated in the
F judgment.

Bibhuti Bhushan Bose Appeals disposed of.
(Assisted by : Neha Sharma, LCRA)

G

H