Delhi High Court Mandates Pre-Litigation Mediation for Commercial Counterclaims

The Delhi High Court has ruled that pre-litigation mediation under Section 12-A of the Commercial Courts Act is mandatory for counterclaims in commercial disputes that do not seek urgent relief. The court emphasized that mediation aims to settle matters without litigation, thus preventing new lawsuits. Any commercial suit filed without adhering to this requirement will be rejected.

The Delhi High Court has issued a significant ruling, mandating pre-litigation mediation for counterclaims in commercial disputes before parties proceed to file suits. The decision underscores that Section 12-A of the Commercial Courts Act applies uniformly to all commercial disputes, regardless of whether they are initial claims or counterclaims.

Justice Manoj Jain highlighted that the process of pre-institution mediation aims to resolve disputes amicably and prevent the filing of fresh cases. He cautioned against interpreting this mandatory provision as optional, stating that doing so would undermine legislative intent.

The judgment stemmed from a case involving Aditya Birla Fashion and Retail Limited, which sought a refund of a security deposit after terminating a lease due to the COVID-19 pandemic's adverse effects. The respondent's failure to engage in the mediation process led the petitioner to seek the High Court's intervention, resulting in this landmark decision.

(With inputs from agencies.)