M/S. PARASHNATH PAPER UDYOG v. M/S. DEVIKA PACKAGING

1. The present appeal arises out of the order dated 30th March, 2022 passed by the learned District Judge, Karkardooma Court, Shahdara, New Delhi in CS (COMM) No. 194/2019. By way of the impugned order, plaint filed on behalf of appellant was rejected under Order VII Rule 11 (d) of Code of Civil Procedure, 1908 (CPC) by holding the same to be barred by law, on account of non-compliance of provision of Section 12A of the Commercial Courts Act, 2018 (hereinafter referred to as ‘the Act’).

2. Appellant filed a suit for recovery of an amount of Rs. 4,90,068/against respondent herein. The learned District Judge considered the matter as regards maintainability of the suit and came to a finding that appellant had not complied with the procedure of Pre-Institution Mediation before institution of the suit and had filed the application under Section 12A of the Act only as a formality. By the impugned order, it was held that moving an application before Delhi Legal Services Authority (DLSA) for namesake to meet out the requirements of law without genuine intention to join the mediation proceedings, is not sufficient and cannot be termed as proper compliance of law. Accordingly, suit filed by appellant was held as not maintainable and was rejected.

3. Learned counsel for appellant has canvassed before this Court that the Trial Court has erred in holding that appellant herein had not complied with provisions under Section 12A of the Act. It is submitted that appellant had filed an application seeking initiation of Pre-Institution Mediation between the parties and had also paid a fee of Rs. 1000/- for the same. Respondent appeared for the mediation proceedings on 03rd July, 2019, however, the mediation was closed and treated as non-starter in terms of Rule 3(4) of the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 (hereinafter called ‘the Rules’). Thus, it is contended that the appellant had duly complied with the procedure as laid down under Section 12A of the Act.

4. Learned counsel for appellant has also relied upon judgment in the case of Kapil Goel Vs. Ram Dulare Yadav @ Gandhi Bhai, 2022 SCC OnLine Del 3873.

5. We have heard learned counsel for appellant. None has appeared on behalf of respondent despite service. We are informed by learned counsel for appellant that none had appeared on behalf of respondent even before the Trial Court despite service. In view thereof, we proceed to decide the matter.

6. Reading of the documents and pleadings on record clearly manifest that appellant herein had duly complied with the provisions under Section 12A of the Act. An application seeking initiation of Pre-Institution Mediation between the parties was filed on behalf of appellant. Appellant appeared before DLSA on various dates. Respondent herein did not appear before DLSA despite service of notice, and appeared subsequently only on 03rd July, 2019, when the mediation was closed in terms of Rule 3(4) of the Rules and was treated as a non-starter. Order dated 03rd July, 2019 passed by DLSA clearly shows that both the parties, i.e., appellant and respondent herein, did not wish to participate in the process of mediation. The said order dated 03rd July, 2019 is reproduced hereunder: “File No. SHD/DLSA/Mediation/83 M/s Parash Nath Paper Udyog vs M/S Devika Packaging. 03.07.2019 Present: Ld. Counsel and Kamal Kumar Jain (Prop.) for the Applicant. Ashish Varshney for the Respondent. Both the parties do not want to participate in the process of Pre Institution Mediation. So, in terms of Rule 3 (4) of Commercial Courts (pre Institution Mediation and Settlement) Rules, 2018, the present mediation process be treated as non-starter and report as per Form 3 specified in Schedule (1) be prepared accordingly and given to Applicant as well as to the Respondent. (Akash Jain) Secretary, DLSA, Shahdara Karkardooma Courts, Delhi”

7. The Rules clearly provide that where despite attempt to amicably resolve the dispute, parties are not willing to go forward with the mediation, then said proceedings are treated as non-starter. Rule 3(4) of the Rules is reproduced herein under for ready reference:

8. Once the parties have attempted to amicably settle their disputes and failed to arrive at a settlement, the procedure as laid down under Section 12A of the Act stands duly complied with. The process of mediation starts by way of filing an application by a party seeking initiation of mediation process in terms of Rule 3(1) of the Rules. Merely on the premise that the parties are unable to arrive at any settlement and the mediation process has been declared as a non-starter on that account, it cannot be said that a party has not made a genuine effort and the same cannot be made a ground for rejection of plaint.

9. A Co-ordinate Bench of this Court in the case of Kapil Goel (supra) has held in categorical terms that if both the parties do not wish to pursue the mediation, and a non-starter report is generated subsequent to the same, then if the plaintiff files a suit, the same would not be barred by law. Thus, it has been held as follows:

10. In view of the aforesaid, it is clear that the learned District Judge has erred in rejecting the plaint filed on behalf of appellant herein. Accordingly, the present appeal is allowed.

11. The suit, CS (COMM) No. 194/2019, M/s Parashnath Paper Udyog Ltd. Vs. M/s Devika Packaging, is restored to its original number. MINI PUSHKARNA, J MANMOHAN, J AUGUST 1, 2023