Reindodegracia Consultant Pvt Ltd v. Diasys Diagnostics India Pvt Ltd

1. This Petition filed under Article 227 of the Constitution of India impugns the order dated 04.08.2023 passed by District Judge (Commercial)- 02, South West, Dwarka Courts, New Delhi (‘Commercial Court’) in CS (COMM) No. 26/2019 titled as Diasys Diagnostics India Pvt. Ltd. v. Reindodegracia Consulting Pvt. Ltd. & Anr, whereby the Commercial Court dismissed the application filed by the defendant no.1 under Section 12A of the Commercial Courts Act, 2015 (‘Act of 2015’) read with Section 151 of the Code of Civil Procedure, 1908 (‘CPC’) seeking return of plaint for want of pre-institution mediation.

1.1. The Petitioner is the defendant no.1 and Respondent No.1 is the plaintiff before the Commercial Court.

1.2. The suit has been filed by the plaintiff on 13.03.2019 for recovery of a sum of Rs. 1,97,49,334/- along with pendente lite and future interest at 18% per annum. The suit was filed along with an application under Order XXXVIII Rule 5 CPC seeking urgent directions to the defendant no.1 to deposit the suit amount with the Commercial Court on the plea that the plaintiff apprehends siphoning of the assets by the defendants.

1.3. The matter was fixed before the Commercial Court for framing of issues on 20.04.2023 (after 4 years), when the said Court noted that an application filed by the defendant no.1 under Section 12A of the Act of 2015 dated 23.03.2019 seeking return of the plaint for exhausting the mandate of pre-litigation mediation was pending (‘said application’). It was thereafter that the Commercial Court listed the matter for arguments on said application and also for reply of the plaintiff on the said application.

1.4. The Commercial Court dismissed the said application of the defendant no.1 vide order dated 04.08.2023.

2. The learned counsel for the Petitioner i.e., defendant no.1 states that Section 12A of the Act of 2015 makes it mandatory for the plaintiff to exhaust the remedy of pre-institution mediation in a suit which does not contemplate any urgent interim relief.

2.1. She states that the suit of Respondent No.1 i.e., plaintiff was filed without exhausting the remedy of pre-institution mediation and the perusal of the plaint does not contemplate any urgent relief and therefore the application of the defendant no.1 filed under Section 12-A of the Act of 2015, ought to have been allowed by the Commercial Court.

2.2. She states that mere filing of an application under Order XXXVIII Rule 5 CPC by the plaintiff with the suit seeking urgent relief does not fulfil the criteria of Section 12-A of the Act of 2015.

2.3. She states that as per the judgment of the Supreme Court in the case of Patil Automation Private Limited & Ors. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1, and also considering the fact that this High Court has in numerous cases held that Section 12A of the Act of 2015 is mandatory, the Trial Court was not justified in holding that the Section 12A of the Act of 2015 was mandatory only after 22.08.2022.

2.4. She, further, relies upon the subsequent judgment of the Supreme Court in Yamini Manohar v. TKD Keerthi, 2023 SCC OnLine SC 1382 and more specifically paragraph 10 therein to contend that since in the facts of the present case, no urgent interim relief has been granted to the plaintiff, it is apparent from the record that the said application under Order XXXVIII Rule 5 CPC was a camouflage adopted by the plaintiff to bypass the statutory mandate of pre-litigation mediation.

2.5. She states in the facts of this case, the Trial Court should have checked this mischief and returned the plaint in exercise of its jurisdiction under Order VII Rule 11, CPC with a direction to the plaintiff to comply with the statutory mandate of pre-litigation mediation as per the Act of 2015.

3. This Court has heard the learned counsel for the Petitioner and perused the record. The following facts are admitted on record: i. The Commercial Suit for recovery was instituted on 13.03.2019 ii. The defendant no.1 was served with summons of the said commercial suit on 18.03.2019. iii. The defendant no.1 filed an application seeking return of the plaint due to the non-compliance of the Section 12-A of the Commercial Courts Act, 2015 on 23.03.2019. Defendant no.1 filed its written statement on 21.05.2019. iv. The application of the defendant no.1 filed for return of plaint remained pending between 2019-2023 (for 4 years) and was not pressed for hearing by the said defendant. v. In the interregnum on 07.11.2022, the parties were referred to Mediation Centre, Dwarka to explore the possibility of an amicable settlement which did not yield any result. vi. Thereafter, on 20.04.2023, when the matter was listed for framing of issues before the Trial Court, it was the learned Trial Court which upon a perusal of record noted the pendency of the said application and called upon the plaintiff to file its reply; and it was in these circumstances that the said application was taken up by the Trial Court for hearing and disposal.

4. The Trial Court in the aforesaid circumstances dismissed the said application filed under Section 12-A of the Act of 2015 and held as under: “……… ………

5. Application under order 38 Rule 5 CPC moved alongwith the plaint was part of the suit filed by plaintiff on record contemplating the urgency in this respect Merely because there was no mention in the plaint itself because of application seeking urgent relief having been moved separately, it cannot be said that plaintiff did not ask for the urgent relief in the matter, which is the requirement for seeking exemption from pre-institution mediation proceedings. Court may or may not accede to the request for urgent interim relief or may or may not consider it as urgency, is the consideration later on. In the instant matter, application under though order 38 Rule 5 CPC had been moved alongwith the plaintiff. After the defendants put in appearance, application u/s 12-A r/w section 151 CPC had been moved on behalf of defendant no.1. Matter remained listed for arguments on behalf of defendant no.1 on the question whether pre-institution mediation proceedings could be resorted to, despite pendency of the application for attachment before judgment". This application was not argued by counsel for defendant no. 1 till 25.05.2019 despite repeated opportunities permitted, as is reflected from the record. Thereafter, counsel for defendants were changed and fresh vakalatnama was filed on record. Thereafter application u/s 12-A was not pressed for and matter reached to the stage of framing of issues when Ld. Predecessor of this court noted with regard to pendency application u/s 12-A CPC and put the application for reply and arguments.

6. In M/s Patil Automation Private Ltd. & Ors. Vs. Rakheja Engineers Private Limited, (supra), Hon’ble Apex Court had noted that the provision with regard to pre-litigative mediation i.e. section 12-A of the Act is mandatory and any suit violating the mandate of section 12 A must be visited with rejection of the plaint under order 7 Rule 11 CPC. As further noted, this power can be exercised even suo motto by the court but this declaration was held to be effective from 20.08.2022 so that concerned stakeholders become sufficiently informed.