Jharkhand High Court

Union Of India vs M/S Sidhi Vinayak Metcom Limited on 26 September, 2025

Author: Rajesh Shankar

Bench: Rajesh Shankar

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IN THE HIGH COURT OF JHARKHAND AT RANCHI
        Commercial Appeal No. 02 of 2025
                          ---
1. Union of India, Ministry of Railways, through the
Secretary, Railway Board, New Delhi
2. The General Manager, South Eastern Railway, 11, Garden
Reach Road, Kolkata, West Bengal State and represented
locally by the Senior Divisional Commercial Manager, South
Eastern Railway, posted at Divisional Office, Chakradharpur
Division, District- West Singhbhum
                                  ...    ...      Appellants
                             Versus
1. M/s Sidhi Vinayak Metcom Limited, a Company incorporated
   with the Registrar of Companies, Bihar & Jharkhand, under
   Corporate Identification No. U27100JH2004PLC010925 dated
   30.08.2004 and having its registered and principal office at
   House No. C-2, 2nd Floor, Basant Jamini Bhawan, Road No. 2,
   Contractors Area, Bistupur, P.O. & P.S.- Bistupur, Jamshedpur,
   District- East Singhbhum
2. Shri Vijay Kumar Mittal, son of Shri Ramavtar Agarwal,
   Director of M/s Sidhi Vinayak Metcom Limited having its
   registered office at House No. C-2, 2nd Floor, Basant Jamini
   Bhawan, Road No. 2, Contractors Area, Bistupur, P.O. & P.S.-
   Bistupur, Jamshedpur, District- East Singhbhum and resident
   of Purulia Road, P.O. & P.S.-Chas, District- Bokaro
3. Shri Shivjee Singh, son of Shri Ram Bahadur Singh, Director
   of M/s Sidhi Vinayak Metcom Limited having its registered
   office at House No. C-2, 2nd Floor, Basant Jamini Bhawan,
   Road No. 2, Contractors Area, Bistupur, P.O. & P.S.- Bistupur,
   Jamshedpur, District- East Singhbhum and resident of
   Goushala Nala Road, Jugsalai, Jamshedpur
4. Shri Shankar Lal Agarwal, son of Shri Narayan Agarwal,
   Director of M/s Sidhi Vinayak Metcom Limited having its
   registered office at House No. C-2, 2nd Floor, Basant Jamini
   Bhawan, Road No. 2, Contractors Area, Bistupur, P.O. & P.S.-
   Bistupur, Jamshedpur, District- East Singhbhum and resident
   of 157, New Baradwari, Sakchi, Jamshedpur
5. Smt. Prity Mittal, Director of M/s Sidhi Vinayak Metcom
   Limited having its registered office at House No. C-2, 2nd
   Floor, Basant Jamini Bhawan, Road No. 2, Contractors Area,
   Bistupur, P.O. & P.S.- Bistupur, Jamshedpur, District- East
   Singhbhum
                                      ....   ...    Respondents
CORAM:          HON'BLE THE CHIEF JUSTICE
            HON'BLE MR. JUSTICE RAJESH SHANKAR
                         ---
For the Appellants         : Mr. Prashant Pallav, D.S.G.I.
                             Mr. Ayush, A.C. to D.S.G.I.
For the Respondents        : Mr. Shresth Gautam, Advocate



                          1
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                                  ---
Reserved on 17.09.2025            Pronounced on 26.09.2025
Per : Rajesh Shankar, J. :

The present interlocutory application has been filed on

behalf of the appellants for condonation of delay of 14 days in

filing the present appeal.

2. Having heard learned counsel for the parties and on being

satisfied with the reasons stated in the present interlocutory

application, the said delay in filing the present appeal is hereby

condoned.

3. I.A No. 8004 of 2024 is accordingly disposed of.

Commercial Appeal No. 02 of 2025

4. The present appeal is directed against the order dated

08.05.2024 passed by the District Judge-III-cum-Presiding Officer,

Commercial Court, East Singhbhum, Jamshedpur in Original Suit

No. 06 of 2022 whereby the plaint filed by the

plaintiffs/appellants has been rejected holding that the said suit

was filed without compliance of the mandatory provisions as

contained in Section 12-A of the Commercial Courts Act, 2015

(hereinafter to be referred as the "Act, 2015").

5. The factual background of the case as stated in the

present appeal is that the defendants/respondents had

transported 88,506.07 MT iron ore through rail at concessional

freight rate during the period from 01.04.2009 to 31.03.2010,

01.04.2011 to 31.03.2012 and 01.04.2013 to 31.03.2014 on

specific representation that the said iron ore would entirely be

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utilized for domestic consumption, however only 65,884.08 MT

iron ore was utilized in the domestic manufacturing units of the

respondents for manufacturing the permitted goods and

28,700.16 MT iron ore was used for the purposes other than

domestic consumption for which they were liable to pay the

charges against evaded freight charges and additional charges at

penal rate.

6. The appellants initiated a mediation process set out under

rule 3 of the Commercial Courts (Pre-Institution Mediation and

Settlement) Rules, 2018 (in short, "the Rules, 2018") by filing an

application before the District Legal Services Authority,

Jamshedpur in Form-1 specified in Schedule-I of the Rules, 2018.

7. The said application was registered as Pre-Institution

Mediation and Settlement (PIMS) Case No. 06 of 2019, however

the mediation process was treated as "Non-Starter" vide orders

dated 23.12.2021 and 20.01.2022 passed by the Secretary

(Incharge), DLSA, Jamshedpur on the ground that both the

parties did not submit the mediation fee. Further, the office was

directed to issue "Non-Starter" report which was issued to both

the parties in Form-3 of Schedule-I of the Rules, 2018.

8. The appellants filed a suit against the respondents before

the Additional District Judge-I, Commercial Court, East

Singhbhum, Jamshedpur for recovery of a sum of

Rs.26,73,77,920/- towards the principal amount of evaded freight

charges along with compensation of Rs.5,34,75,584/- for direct

loss suffered by them caused due to fundamental breach of

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contract as well as interest of Rs.33,43,36,737/- till 30.06.2019 (in

total Rs.65,51,90,241/-) and future interest "pendente lite" till

realization of the said amount.

9. The said suit was registered as Original Suit No. 06 of

2022 in which the respondents appeared and filed a petition

under order VII rule 11 read with Section 151 CPC and Section

12-A of the Act, 2015. After hearing the parties, the plaint filed by

the plaintiffs/appellants was rejected vide order dated 08.05.2024

holding that the said suit was instituted without complying the

mandatory provisions of Section 12-A of the Act, 2015. Hence, the

present appeal.

10. Learned counsel for the appellants submits that the

provisions of section 12-A of the Act, 2015 has duly been

complied by the appellants and hence it cannot be a ground for

rejection of the plaint filed by them.

11. It is further submitted that rule 3 of the Rules, 2018 lays

down the grounds for submitting "Non-Starter" report by the

mediating authority. A "Non-Starter" report can be issued either in

view of sub-rule (4) of rule 3 of the Rules, 2018 when the

opposite party refuses to participate in the mediation process or

in view of sub-rule (6) of rule 3, when the opposite party fails to

appear in the mediation process on the date fixed under sub-rule

(5) of rule 3 of the Rules, 2018. However, in the present case, the

opposite parties/respondents had appeared during mediation

process and as such, there was no ground for submitting the

"Non-Starter" report.

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12. It is also submitted that as per rule 11 of the Rules, 2018,

the mediation fee has to be paid in equal shares by the parties to

the commercial dispute and in the instant case, the share of

mediation fee was not paid by either of the parties. Moreover, the

said rule does not stipulate consequences for non-payment of

mediation fee and as such, the rejection of plaint of the

appellants on the ground of non-compliance of the mandatory

provisions of Section 12-A of the Act, 2015, is erroneous.

13. It is further argued that the appellants were obliged to

deposit their share of mediation fee only after appointment of

mediator and since the said stage had not come in the mediation

proceeding, there was no question of issuance of "non-starter"

report by the Secretary, DLSA, Jamshedpur on the ground of non-

deposit of the mediation fee.

14. Per contra, learned counsel for the respondents submits

that the relief sought by the appellants by filing the Original Suit

No. 6 of 2022 was not urgent in nature and as such, they were

bound to comply with the process of pre-institution mediation and

settlement as per the provisions of Section 12-A of the Act, 2015

read with Rules, 2018, however the appellants failed to comply

with the said mandatory provisions and as such, the plaint of the

appellants was rightly rejected by the Commercial Court,

Jamshedpur.

15. Heard learned counsel for the parties and perused the

materials available on record.

16. Before coming to the rival submissions canvassed by

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learned counsel for the parties, it would be appropriate to refer

the relevant provisions of law relating to the issue.

17. Section 12-A of the Act, 2015 has been introduced by the

Commercial Courts, Commercial Division and Commercial

Appellate Division of High Courts (Amendment) Act, 2018 and the

same is reproduced hereinbelow: -

"12-A. Pre-Institution Mediation and Settlement.--- (1) A

suit, which does not contemplate any urgent interim relief

under this Act, 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 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 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

remained occupied with the pre-institution mediation,

such period shall not be computed for the purpose of

limitation under the Limitation Act, 1963 (36 of 1963).

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(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 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)."

18. Thus, Section 12-A of the Act, 2015 clearly provides that if

no urgent relief is required in a suit, the plaintiff is bound to

exhaust the remedy of pre-institution mediation in accordance

with the manner and procedure as may be prescribed by the

Rules made by the Central Government. The time for completion

of mediation process by the Authority, authorized by the Central

Government under sub-section (2) of Section 12-A of the Act,

2015, has been fixed as three months from the date of

application made by the plaintiff and the said period is further

extendable for two months with the consent of the parties. It has

further been provided that the period during which the parties

remain occupied with the pre-institution mediation, shall not be

computed for the purpose of limitation under the Limitation Act,

1963. Moreover, the settlement arrived at between the parties

shall have the same status and effect as if it is an arbitral award

on the agreed terms under Section 30(4) of the Arbitration and

Conciliation Act, 1996.

19. The Rules, 2018 has been framed in exercise of the

powers conferred by sub-section (2) of section 21-A read with

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sub-section (1) of Section 12-A of the Act, 2015.

20. Rule 2(1)(e) of the said Rules defines the word

"mediation" which means a process undertaken by a Mediator to

resolve, reconcile and settle a commercial dispute between the

parties thereto.

21. Further, rule 3 of the Rules, 2018 deals with the procedure

for initiation of mediation process which is quoted hereinbelow: -

"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 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;

(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 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).

(4) Where the notice issued under sub-rule (3) remains

unacknowledged or where the opposite party refuses to

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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.

(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.

(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.

(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.

(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."

22. Thus, before filing a commercial suit, a party to a

commercial dispute is required to file an application before the

Authority notified by the Central Government under sub-section

(2) of Section 12-A of the Act, 2015 as per Form-1 specified in

Schedule I, for initiation of mediation process and thereafter a

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notice is to be issued by the Authority to the concerned opposite

party. If the notice remains unacknowledged or the opposite party

refuses to participate in the mediation process, the Authority is to

treat the mediation process to be a "Non-Starter" making a "Non-

Starter" report as per Form-3 specified in the Schedule-I as well as

endorsing the same to both the parties. Further, when after

receiving the notice, the opposite party seeks time for his

appearance, the Authority may fix an alternate date, however

when the opposite party fails to appear on the date fixed, then the

Authority is to treat the mediation process to be a "Non-Starter". It

has also been provided that the dispute is to be referred by the

Authority to a Mediator when both the parties to the commercial

dispute appear before the Authority and give consent to participate

in the mediation process.

23. Learned counsel for the appellants has given much

emphasis to the argument that since both the parties had not

deposited their shares of mediation fee, the plaint of the

appellants was not liable to be rejected by the Commercial Court,

Jamshedpur on the ground of non-compliance of the mandatory

provisions of Section 12-A of the Act, 2015.

24. Before adverting to the said contention of the learned

counsel for the appellants, it would be apt to take note of the

judgment rendered by the Hon'ble Supreme Court in the case of

Dhanbad Fuels Private Limited vs. Union of India reported in

2025 SCC OnLine SC 1129, on which much reliance has been

placed by learned counsel for the respondents. In the said case,

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Their Lordships took note of another judgment rendered by the

Hon'ble Supreme Court in the case of Patil Automation (P) Ltd.

Vs. Rakheja Engineers (P) Ltd. reported in (2022) 10 SCC 1

and quoted relevant paragraph of the said judgment which reads

under: -

"35. The Court summed up its reasoning from paragraph

99 onwards as follows:

"99.1. The Act did not originally contain Section

12-A. It is by amendment in the year 2018 that

Section 12-A was inserted. The Statement of

Objects and Reasons are explicit that Section 12-

A 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

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.

99.2. It is an undeniable 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 an

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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 CPC and Section 69 of the Partnership Act.

99.3. The language used in Section 12-A, which

includes the word "shall", certainly, goes 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

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.

99.4. Mediation must be perceived as a new

mechanism of access to justice. We have already

highlighted its benefits. Any reluctance on the

part of the Court to give Section 12-A, a

mandatory interpretation, would result in

defeating the object and intention of Parliament.

The fact that the mediation can become a non-

starter, cannot be a reason to hold the provision

not mandatory. Apparently, the value judgment of

the lawgiver 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 12-A elevates the

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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 Act confers power to

order costs based on conduct of the parties."

25. In the aforesaid case, their Lordships finally answered the

issues involved inter alia in the following terms: -

"63. Thus, the answer to the question formulated by us

whether a suit filed without complying with Section 12-A

of the 2015 Act must be dismissed or be kept in abeyance

with a direction to the parties to explore mediation is as

follows:

a. If the suit is instituted on or after the date of

the decision in Patil Automation (supra), i.e.,

20.08.2022, without complying with Section 12-A

of the 2015 Act, then it must meet with rejection

under Order VII Rule 11, either on an application

by the defendant or suo motu by the court.

b. If the suit was instituted prior to 20.08.2022

without complying with Section 12-A of the 2015

Act, and the same does not fall within one of the

exceptional categories as explained in paragraph

47 of this judgment, then it would be open to the

court to keep the suit in abeyance and direct the

parties to explore the possibility of mediation in

accordance with the 2015 Act, the PIMS Rules

and the 2020 SOP."

26. It is now well settled that compliance of Section 12-A of

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the Act, 2015 read with Rules, 2018 is mandatory for the plaintiff

whereas the same is voluntary for the defendant. If the plaintiff

fails to invoke the procedure of pre-institution mediation and

settlement, the suit filed by the plaintiff is liable to be rejected

under Order VII rule 11 of CPC. On the other hand, if the

defendant refuses to participate in the mediation process, the

Authority has to treat the mediation process to be "Non-Starter"

preparing a "Non-Starter" report as well as endorsing the same to

both the parties. Thereafter in that case, the concerned plaintiff is

at liberty to file suit before the competent Commercial Court.

27. We have also perused the statement of objects and

reasons for introducing Section 12-A of the Act, 2015 which clearly

suggests that it was introduced for the reason that due to

competitive global economic environment, India had to improve its

ranking in the World Bank's "Doing Business Report" which, inter

alia, considered the dispute resolution mechanism in the country

as one of the parameters for doing business. Further, the

tremendous economic development had ushered in enormous

commercial activities in the country including foreign direct

investments, public private partnership, etc. which prompted the

Central Government to initiate legislative measures for speedy

settlement of commercial disputes by widening the scope of the

courts to deal with commercial disputes and facilitating ease of

doing business so as to create a positive image amongst the

investors about strong and responsive Indian legal system.

28. The legislature while enacting Section 12-A of the Act,

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2015 was aware of the fact that the Courts in India were under

tremendous pressure and as such an Alternative Dispute

Resolution (ADR) system was required for redressal of commercial

disputes in order to facilitate ease of doing business. If the

compliance of the provisions of Section 12-A of the Act, 2015 was

not taken as mandatory, the object behind its enactment would

have frustrated.

29. In the case in hand, mere filing of application by the

appellants for initiation of mediation process was not sufficient in

order to comply Section 12-A of the Act, 2015, rather both the

parties were bound to show bonafide and to perform their part

with the intention to settle the dispute. Since the appellants and

respondents had not deposited their shares of mediation fee, their

action could not be treated to be true compliance of Section 12-A

of the Act, 2015.

30. One of the arguments of learned counsel for the appellants

is that the consequence of not depositing the mediation fee is not

specifically mentioned in rule 11 of Rules, 2018. We do not find

any substance in the said argument in view of the fact that Section

12-A of the Act, 2015 itself mandates that the plaintiff will have to

exhaust the remedy of pre-institution mediation in accordance with

the manner and procedure prescribed by the Rules made by the

Central Government.

31. As such, the manner and procedure prescribed under the

Rules, 2018 are to be strictly complied by the plaintiff failing which

the suit is not entertainable by the commercial court. Since rule 11

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of the Rules, 2018 specifically provides for deposit of mediation

fee by the parties, non-deposit of the same by the appellant has to

be treated as non-compliance of Section 12-A of the Act, 2015.

Thus, the plaint filed by the appellants has rightly been rejected by

the Commercial Court under Order VII rule 11 of CPC.

32. If the appellants had deposited their share of mediation

fee, the same would have been treated as compliance of Section

12-A of the Act, 2015 and in that case, the suit filed by the

appellants was entertainable after issuance of "Non-Starter" report

by the DLSA, Jamshedpur on the ground of failure of the

respondents to deposit their share of mediation fee.

33. Next argument of learned counsel for the appellants is that

the appellants were required to deposit the mediation fee only

after appointment of the mediator.

34. To appreciate the said contention, we have gone through

rule 11 of the Rules, 2018 which provides that before

commencement of the mediation, the parties to the commercial

dispute have to pay to the Authority a one-time mediation fee, to

be shared equally, as per the quantum of claim as specified in

Schedule-II. The words "before the commencement of the

mediation" unambiguously speak that it is mandatory for the

parties to deposit their shares of mediation fee before the start of

mediation. Further, the words "shall pay to the Authority" in rule

11 of the Rules, 2018 clarify that the parties are bound to pay the

mediation fee to the Authority itself and not to the mediator. Thus,

we are of the view that the appellants were under misconception

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that they were required to pay the mediation fee after

appointment of mediator.

35. Learned counsel for the appellants has further contended

that the appellants were not given sufficient opportunity to deposit

their share of mediation fee. We do not find any substance in the

said contention also in view of the fact that on bare perusal of the

order dated 17.12.2021 passed by the DLSA, Jamshedpur, it

transpires that on the said date, the lawyers/representatives of

both the parties were present and they were directed to deposit

the mediation fee by the next date, however they did not comply

the said order by the next date and only thereafter, the office was

directed to issue a "Non-Starter" report. Moreover, the order of

DLSA, Jamshedpur was never put to challenge by the appellants

and as such, they cannot be allowed to raise question on the

legality of the said order.

36. Learned counsel for the appellants puts reliance on the

judgment rendered by the Division Bench of Delhi High Court in

the case of Kapil Goel Vs. Ram Dulare Yadav reported in 2022

SCC OnLine Del 3873. In the said case, Delhi Legal Services

Authority (DLSA) had submitted a "Non-Starter" report on the

ground that both the parties did not want to participate in the

process of pre-institution mediation. In the said case, the learned

Division Bench observed as under: -

"18. In the present case, both the plaintiff and the

defendant have refused to participate in the

mediation. It is not the case as if the defendant was

interested in proceeding ahead with the mediation

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and the plaintiff was not interested. This Court is of

the opinion that the defendant having refused to

participate in the pre-institution mediation will

suffice for the suit of the plaintiff to be allowed to

proceed without any encumbrance. The learned

District Judge Commercial Courts II has erred in

observing that the plaintiff had not followed the

mandate of Section 12-A of the Act, and, therefore,

this legal infirmity warrants the interference of this

Court."