CM APPL. 23378/2025 (Exemption)
1. Allowed, subject to all just exceptions.
CM APPL. 23379/2025 2.
This application has been filed seeking condonation of 45 days delay in re-filing of the appeal.
3. For the reasons stated in the application, the same is allowed and the delay is condoned.
RFA(COMM) 220/2025 & CM APPL. 23377/2025
4. This appeal has been filed by the appellant, challenging the Judgment and Decree dated 10.12.2024 passed by the learned District Judge, Commercial Court-011, Central District, Tis Hazari Court, Delhi (hereinafter referred to as ‘Trial Court’) in CS (COMM) 936/2024, titled Krishan Kumar Gupta v. Municipal Corporation of Delhi & Anr., whereby the Suit filed by the respondent herein was decreed for a sum of Rs.35,03,396/-, along with interest at the rate of 9% per annum with effect from 01.04.2022, and costs of Rs.25,000/-. The learned Trial Court has further imposed a cost of Rs.1,00,000/- on the appellant to be deposited with the Advocates’ Welfare Fund, Delhi Bar Association, for not participating in the mandatory pre-institution mediation process. It was, however, further directed that in case the Commissioner, MCD, issues a Circular on or before 31.01.2015 to all the concerned Departments and Gazetted Officers, directing and mandating that henceforth they shall participate in the pre-institution mediation process and make an endeavour to settle the disputes by carrying out sincere deliberation under the aegis of the Delhi Legal Services Authorities, the said cost may be waived. 5. As far as the Decree on merits is concerned, the learned counsel for the appellant has drawn our attention to the prayer made by the respondent in the Suit, which is to the following effect:-
“a) to pass a decree in favour of the Plaintiff and against the Defendants for a sum of Rs.17,73,317/- (Rupee Seventeen Lakh Seventy-Three Thousand Three Hundred & Seventy Only); b) to allow pendent elite and future interest @ 12% p.a. on the principal amount of Rs.15,42,015/- from the date of filing of the suit till its realization. c) to award the cost of the suit in favour of the Plaintiff and against the Defendants;”
6. He submits that the suit itself was for an amount of Rs.17,73,317/-, and the interest was claimed only from the date of filing of the Suit, which is around 28.08.2024. Therefore, the learned Trial Court has clearly erred in granting relief to the respondent much beyond what was prayed for.
7. As far as the cost of Rs.1,00,000/- is concerned, he submits that participating in pre-suit mediation is not mandatory and, therefore, merely for a party’s failure to participate in the same, costs cannot be imposed on such a party.
8. Issue notice, to be served on the respondent through all permissible modes, returnable on 8th October, 2025.
9. As far as the challenge to the Impugned Decree on merits is concerned, we find merit in the submissions made by the learned counsel for the appellant. As is evident from the prayer made in the Suit itself, the learned Trial Court has passed a Decree in favour of the respondent that goes much beyond what was prayed for by the respondent.
10. At the same time, we do not find any merit in the submission of the learned counsel for the appellant with respect to the cost of Rs.1,00,000/- that has been imposed on the appellant for not participating in the pre-institution mediation process. Section 12A of the Commercial Courts Act, 2015, has been inserted in the Commercial Courts Act with a specific object and intent of expediting the process of resolution of commercial disputes. The object and purpose of the Act is also explained by the Supreme Court in Patil Automation Private Limited v. Rakheja Engineers Private Limited, (2022) 10 SCC 1, observing as under:-
“70. Timelines are contemplated, both in the matter of pleadings 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 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 12-A 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 lawgiver stepped in with 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 the law is clear as daylight. 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.
71. It does not require much debate to conclude that there is a 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 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 12-A 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 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 12-A is plainly imperative in nature. However, we will not be led by the mere use of the word “shall”.
72. Even going by the sublime object of the Act, as we have unravelled, we are fully reinforced in our opinion that the preinstitution mediation is intended to produce results, which has a direct bearing on the fulfilment of the noble goals of the lawgiver. It is apparent that the legislature has manifested a value judgment. We are not called upon to decide the constitutionality of the provision. Parliament is presumed to be aware of the felt necessities of the times. It best knows the manner in which the problems on the ground are redressed. Section 89 CPC, does contemplate mediation ordered by a Court. However, it must be noticed that Section 12-A contemplates mediation without any involvement of the Court as it is done prior to the institution of the suit.
73. The potential of Section 89 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 bear the brunt of docket explosion. 74. It is noteworthy that Section 12-A 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 lawgiver has, in Section 12-A, 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 class of suits. We say this for the reason that in suits which contemplate urgent interim relief, the lawgiver has carefully vouchsafed 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 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.
77. On the one hand, the staunchest criticism against mediation has been that it is opposed to the fundamental principle of access to 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 [Vikram Bakshi v. Sonia Khosla, (2014) 15 SCC 80] , 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 and what is more in the era of docket explosion, the only meaningful choice. 78. 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 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.
79. With increase in population and a skewed Judge-population ratio and a huge spiralling of litigation in the courts, it is logical, just and 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 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 Parliament by realising the true role of judiciary.
80. A perusal of the Act and the Rules reveal the existence of a complete Code. Mediation contemplated under Section 12-A and the Rules, 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 with the lowering of the monetary limit from Rupees one crore 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.
83. We may proceed on the basis that if the suit is brought without complying with Section 12-A, 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 were to exhaust mediation under Section 12-A, 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 12-A there is a ray of 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) CPC and Section 69 of the Partnership Act would not be mandatory. This is however not the case.
91.4. Spread over five sub-sections, this standalone section in Chapter III-A, 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 12-A cannot be perceived as merely intended to reach quicker justice, and what is more, on terms, which are mutually acceptable to the parties concerned. Even, 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 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.”
11. The appellant being a Public Authority constituted under the Delhi Municipal Corporation Act, 1957, cannot act as an ordinary litigant and defeat the object of the Act. In fact, it is charged with an even higher responsibility to ensure that the object of the Act is achieved; the burden on the Courts is reduced; and unnecessary litigation is scuttled at the initial stage itself. By not even responding to the notices for pre-institution mediation, the appellant clearly defeats the object of the Act and acts contrary to its public function and duties.
12. We, therefore, find no merit in the challenge of the appellant to the cost of Rs.1,00,000/- that has been imposed on the appellant by the learned Trial Court. In fact, the learned Trial Court by the Impugned Order, has been lenient by stating that in case the Commissioner, MCD issues necessary directions to its officers to participate in such pre-institution mediation process in the right spirit, the cost can be waived. The appellant cannot take a regressive approach and insist on continuing to defeat the object of the Act. We cannot countenance such an approach on the part of the appellant.
13. In view of the above, there shall be a stay on the operation of the Impugned Decree till further orders of this Court. However, the cost imposed on the appellant for not participating in the preinstitution mediation process, must be deposited by the appellant within a period of two weeks from today. We also expect the appellant to ensure that necessary instructions are issued in terms of what has been observed by the learned Trial Court in the Impugned Order with respect to pre-institutiopn mediation.
14. Let the learned Trial Court record, in digital form, be requisitioned for the next date of hearing.
NAVIN CHAWLA, J
RENU BHATNAGAR, J
MAY 13, 2025
