The Delhi High Court has ruled that pre-litigation mediation is mandatory before filing counterclaims in commercial disputes under the Commercial Courts Act.
The court emphasized that this mediation process must be followed for all commercial disputes, including counterclaims, unless urgent relief is sought.
Justice Manoj Jain highlighted that pre-institution mediation is designed to potentially resolve issues before formal litigation begins, thus not hindering speedy trials but rather aiming to prevent new cases if the matter is settled through mediation. The court rejected the idea of treating this requirement as optional, reinforcing its mandatory nature.
The court’s decision clarified that any commercial suit or counterclaim filed without adhering to the pre-institution mediation requirement under Section 12-A of the Commercial Courts Act should be dismissed.
The case involved Aditya Birla Fashion and Retail Limited, which, after closing its business due to the COVID-19 pandemic and terminating its lease, sought a refund of its security deposit through a commercial suit. The petitioner had complied with the mediation requirement, but the respondent did not attend, leading to the suit’s filing.
When the respondent counterclaimed without following the mediation process, the petitioner sought to have the counterclaim rejected. The trial court’s dismissal of this application led the petitioner to appeal to the High Court. The High Court upheld that counterclaims in commercial disputes must also adhere to the mandatory mediation process, just like any other commercial suit.
