“Laws are
effective when individuals abide by them or, alternatively, when they do not,
but have to face legal sanctions for their non-compliance.”
--- Judith Hahn
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The whole purpose of enforcing Commercial Courts Act, 2015 was to
improve the ease of doing business and the economy of the country. The concept
of pre-litigation mediation is another step in that direction. Section 12A of
the Commercial Courts Act, 2015 deals with the procedure of pre-litigation
mediation and reads as under:
“Section 12A: Pre-Institution Mediation and
Settlement. 12A. (1) A suit, which does not contemplate any urgent interim
relief under this Act, shall not be instituted unless the plaintiff exhausts
the remedy of pre-institution mediation in accordance with such manner and
procedure as may be prescribed by rules made by the Central Government.”
In practice, an application under Section 12-A of the Commercial
Courts Act, 2015 is filed before the Incharge, Mediation Center of the District
which has territorial jurisdiction over the subject –matter of the case and
Notice of Mediation proceedings is issued to the Opposite Party. Thereafter,
fate of the mediation proceedings depends entirely on the attitude of the
Opposite party.
Legal Fiction-I
A, a businessman has to recover a sum of Rs. XYZ/- from another
businessman B for a commercial transaction; and files an application under
Section 12-A of the Commercial Courts Act, 2015 before the Incharge, Mediation
Center concerned. Three times Notice is issued to B by the Incharge, Mediation
Centre. B receives all the three Notices and chooses not to respond to it or
appear before the Mediation Centre on the next date of hearing. What option
does A have?
A has no other option but to obtain a Non-starter report from the
Mediation Centre and file a Commercial Suit before the Principal Judge, Commercial
Courts. A files a Commercial Suit for Recovery of the dues against B. Court
issues summons to B. B receives the summons; but this time, he appears before
the court; because he is aware that in case of his non-appearance before the
court, Court may proceed ex-parte and eventually pass a decree against B.
Observation:
No businessman wants to take resort to litigation in the first
instance. It is only when he gives up on the opposite party and loses all hope
to recover the dues that he engages a lawyer to set the legal ball rolling. Before
enforcement of the Commercial Courts Act, 2015, like any other civil suit, A
would have filed a civil suit for Recovery in the court of Principal Judge of
the courts having pecuniary and territorial jurisdiction; Summons of the case would
have been served upon B and it is very unlikely of him to not appear before the
court of law to defend the civil suit for recovery; or chose to have the court
proceed ex-parte against him.
The process of issuance and serving of the Mediation Notices upon the
opposite party takes one month to three months’ time depending on the mode of
execution of service of notices and the rigidity of the Incharge, Mediation
center with respect to the satisfaction of the proof of service of the notices
of the Mediation Centre. The process of issuance and service of court summons
also takes similar time. There is no accountability for the time lost in the
futile exercise of service of notice of Mediation upon B before filing of the
commercial suit in the court of law. B chose not to join the mediation
proceedings because he knew that no adverse action can be taken against him for
non-appearance. Section 12-A of the Commercial Courts Act, 2015 is a toothless
piece of legislation; which in the above-mentioned scenario might prove to be a
waste of time, energy and money of the Claimant/Plaintiff and the court
machinery.
Legal Fiction-II
A, a businessman has to recover a sum of Rs. XYZ/- from another
businessman B for a commercial transaction; but his claim is hopelessly time
barred. Now, A having no option to take the legal recourse by way of filing a
civil suit; pays a prescribed nominal fee and files an application under
Section 12-A of the Commercial Courts Act, 2015 before the Incharge, Mediation
Center concerned. In a routine and mechanical manner, Three times Notice is
issued to B by the Incharge, Mediation Centre. B receives the Notice. What
option does B have?
Observation:
B will participate in the Mediation proceedings and will incur time,
money and energy in explaining to the Mediator, how A’s claim is time-barred;
to which the Mediator may or may not agree depending on his legal expertise.
The Mediator might persuade B to pay something to A just to bury the hatchet.
If B pays some amount to A, then A would recover an amount which legally he
could never recover from B.
Even if B does not join the mediation proceedings, A might obtain a
non-starter report from the Mediation Center and file a commercial suit for
recovery deriving a lame cause of action from the date of non-starter report.
Conclusion:
The law is still evolving. Problems in applying the law were
inevitable. Nevertheless, The courts are pro-actively taking note of such
difficulties such as the decision of Hon’ble Delhi High court in the case of Kapil Goel v. Ram Dulare Yadav @Gandhi Bhai (2022/DHC/004923). Mere
enactment will not serve the purpose; rather the procedure of implementation
should also serve the object of the Commercial Courts Act. There has to be
check and balance mechanism at the stage of filing of the Application under
Section 12-A of the Commercial Courts Act, 2015; so that no one can misuse the
Legal Machinery for his vested interests. On the other hand, a non-starter
report should also culminate into a presumption against the opposite party
during the trial; in case of non-appearance of the opposite party despite proof
of service of the Notice of the Mediation Centre.
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