The Delhi High Court has held that pre-institution mediation under §12A of the Commercial Courts Act 2015 is mandatory for counterclaims, just as it is for an original suit. The Court said that for the purpose of pre-institution mediation, counterclaims and original suits have no distinction.
Background
The dispute arose on account of Aditya Birla seeking a refund of its security deposit for terminating a lease agreement during the Covid-19 pandemic from the defendant. Aditya Birla instituted a pre-institution mediation, but the mediation process failed because of the non-appearance of the defendant. Aditya Birla filed a commercial suit. A counterclaim was filed by the defendant for unpaid dues, but without the initiation of the pre-institution mediation under §12A.
An application under Order VII, Rule 11 of the Civil Procedure Code 1908 was filed by Aditya Birla for the rejection of the counterclaim because of non-compliance with the mandatory pre-institution mediation process. The Trial Court dismissed the application holding that the mandatory pre-institution process only applies to an original suit.
Decision
The Delhi High Court allowed the writ petition and held the following:
- A counterclaim must adhere to all the procedural requirements applicable to a commercial suit, as a counterclaim is not separate from a suit.
- The process of mandatory pre-institution mediation as per §12A of the Commercial Courts Act applies to counterclaims which are not seeking urgent interim relief.
- Participation in pre-institution mediation for the original suit does not negate the need for pre-institution mediation for the counterclaim.
- As a counterclaim may involve a different subject matter and reversed party roles, it requires independent compliance with §12A.
Conclusion
The Court clarified that pre-institution mediation under §12A of the Commercial Courts Act is a mandatory procedural requirement for both suits and counterclaims.
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