Pre-Institution Mediation Is Mandatory For Counter-Claim Involving 'Commercial Dispute' Which Does Not Contemplate Any Urgent Relief: Delhi HC

The Court was hearing a Petition under Article 227 of the Constitution after the plaintiff’s request to reject a counterclaim was dismissed.

The bench of Justice Manoj Jain observed, “process of pre-institution mediation is mandatory for every suit involving a commercial suit and no distinction can be drawn when it comes to a counter-claim involving a commercial dispute and not contemplating any urgent relief.”

Advocate Varun Sharma appeared for the Appellant and Advocate Aastha Dhawan appeared for the Respondent.

Brief Facts-

The Respondent leased a shop to the Plaintiff but due to the COVID-19 pandemic, the Plaintiff decided to close its business and issued a notice of lease termination demanding a refund of the security deposit. When the security was not returned, the plaintiff initiated a Commercial Suit after filing an application under Section 12-A of the Commercial Courts Act, 2015, for pre-institution mediation. The defendant ignored the mediation summons which led to the Suit. The defendant filed a counter-claim for rent without prior mediation. The Court dismissed the Plaintiff's request to reject the counter-claim which led to the filing of the present petition under Article 227 of the Constitution of India.

The Court perused relevant provisions of CPC and observed, “it is very apparent that a counter-claim is also a suit in its individual and distinct capacity, though it needs to be within the confines of order VIII Rule 6A CPC.”

The Court noted that any counter-claim pertaining to a commercial dispute has to, mandatorily, follow the rules and procedures prescribed for a commercial suit. “Merely because, it is a counter-claim, it cannot be assumed that it is relieved of adhering to any such legal obligation.”, the Court said.

To answer the question of whether it is mandatory to abide by the provisions of Section 12-A of the Commercial Courts Act, prior to the filing of the counter-claim the Court referred the decision in Patil Automation Private Limited v. Rakheja Engineers Private Limited: 2022 SCC OnLine SC 1028 and noted that the SC in no uncertain words laid down that the process is mandatory and its non-compliance would entail rejection of the plaint.

“…recourse to section 12-A of Commercial Courts Act is mandatory in nature.”, the Court said.

The Court observed, “It’s not difficult to imagine that in counter-claim, the nature of relief can be dissimilar and the subject matter may also be somewhat different. The approach of the original plaintiff in the main suit cannot be anticipated mechanically. Merely because the defendant, in the earlier round, did not show any interest in settling the matter would not ipso fact mean that either such defendant (counter claimant) is relieved of availing such mandate of law or that it would be an illusory exercise on the assumption that its adversary may also, in all likelihood, adopt similar approach or tactic and may not participate in such process. The state of mind of any such party cannot be decoded mechanically.”

The Court said that the counterclaim stands salvaged and protected and cannot be visited with an order of rejection.

Accordingly, the Court disposed of the Petition.