Supreme Court Clarifies Section 12A: Pre-Institution Mediation Mandatory, But Rejection of Suits Applies Prospectively

COURTKUTCHEHRY SPECIAL SC LANDMARK JUDGEMENT ON RELEVANCE OF SECTION 12A Of COMMERICIAL COURT

Supreme Court Clarifies Section 12A: Pre-Institution Mediation Mandatory, But Rejection of Suits Applies Prospectively

Patil Automation Ruling Shapes Commercial Litigation Landscape

Dhanbad Fuels Case Balances Law and Practical Realities

By Our Legal Reporter

New Delhi: January 14, 2026:

In a landmark judgment delivered on 15 May 2025, the Supreme Court of India in M/s Dhanbad Fuels Private Limited v. Union of India & Anr. addressed a critical procedural issue under the Commercial Courts Act, 2015. The Court clarified the mandatory nature of Section 12A, which requires pre-institution mediation before filing commercial suits that do not seek urgent interim relief. However, the Court also ruled that the consequence of rejecting plaints for non-compliance applies only prospectively from 20 August 2022, following the precedent set in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd..

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This ruling has far-reaching implications for commercial litigation in India, balancing legislative intent with practical realities such as the absence of mediation infrastructure before 2022.

For Full Judgement, Read Here: https://www.courtkutchehry.com/judgements/1219968/ms-dhanbad-fuels-private-limited-vs-union-of-india-anr/?category=judgements&court_type=all&start_date=&end_date=&search_type=all&q=&at=&acts=&citation=&party_1=M%2Fs+Dhanbad+Fuels+Private+Limited&party_2=&judge=&advocate=&bareacts_search_type=all&bareacts_q=&bareacts_at=&#_Toc198289040

Background of the Case

• Case Title: M/s Dhanbad Fuels Pvt. Ltd. v. Union of India & Anr.
• Court: Supreme Court of India
• Date of Judgment: 15 May 2025
• Coram: Justice J.B. Pardiwala and Justice R. Mahadevan
• Citation: (2025) 05 SC CK; 2025 INSC 696

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The Union of India had filed a money suit in 2019 seeking recovery of ₹8.73 crore. The defendant argued that the suit was not maintainable due to non-compliance with Section 12A. The Commercial Court dismissed the application for rejection of plaint and instead directed post-institution mediation. The High Court upheld this approach, leading to the appeal before the Supreme Court.

Key Law Points Involved

1. Mandatory Nature of Section 12A:
   • Section 12A requires parties to undergo pre-institution mediation before filing commercial suits, unless urgent interim relief is sought.
   • The Court reaffirmed that this requirement is mandatory, not optional.
2. Prospective Overruling in Patil Automation (2022):
   • In Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., the Supreme Court held that rejection of plaints for non-compliance with Section 12A would apply prospectively from 20 August 2022.
   • This protected suit filed earlier from outright dismissal.
3. Urgent Interim Relief:
   • The Court cautioned that claims of urgent interim relief must not be used as a loophole to bypass mediation.
   • Only genuine urgency qualifies for exemption.
4. Lex Non Cogit Ad Impossibilia (Law Does Not Compel Impossibility):
   • The Court applied this maxim, noting that before 2022, mediation infrastructure was not fully operational.
   • Hence, parties could not be penalized for failing to comply with Section 12A.

Relevance of Section 12A Order

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The ruling underscores the importance of Section 12A in promoting alternative dispute resolution (ADR) and reducing the burden on courts. By mandating mediation, the law encourages parties to resolve disputes amicably. However, the Supreme Court’s nuanced approach ensures that justice is not sacrificed for procedure, especially in cases filed before mediation mechanisms were in place.

Impact on Commercial Litigation

• For suits filed before 20 August 2022: Courts may keep them in abeyance and direct mediation, rather than dismissing them.
• For suits filed after 20 August 2022: Non-compliance with Section 12A will lead to rejection of plaint under Order VII Rule 11 CPC.
• For urgent cases: Plaintiffs must demonstrate genuine urgency to bypass mediation.

This dual approach balances statutory mandate with practical fairness.

Broader Implications

• Judicial Efficiency: Encourages settlement outside courts, reducing backlog.
• Business Confidence: Provides clarity for companies engaging in commercial litigation.
• Legal Certainty: Establishes a clear timeline for applicability of Section 12A consequences.

Conclusion

The Supreme Court’s decision in Dhanbad Fuels Pvt. Ltd. is a watershed moment in commercial litigation. By affirming the mandatory nature of Section 12A while applying its consequences prospectively, the Court has struck a balance between law and justice. This ensures that businesses are not unfairly penalized for procedural lapses in a period when mediation infrastructure was lacking, while also reinforcing the importance of ADR in India’s legal system.

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