Delhi High Court Dismisses Petition Against Pre-Institution Mediation Requirement: “Legal Notice is Not a Substitute for Statutory Mediation Under Section 12A”

---

Court’s Decision

The Delhi High Court dismissed the writ petition challenging the procedural requirements under Section 12A of the Commercial Courts Act, 2015, holding that the petitioner’s issuance of a legal notice calling for mediation did not fulfill the statutory pre-institution mediation requirement.

The court ruled that:

• Mediation under Section 12A must be conducted strictly within the statutory framework—a self-initiated legal notice cannot substitute for the prescribed process.
• The insistence on obtaining a Non-Starter Report or a Certificate of Non-Settlement from an authorized mediation authority is not an undue burden but a necessary procedural safeguard.
• Adhering to the prescribed mediation mechanism is essential to ensure that the objectives of the Commercial Courts Act—such as expediting commercial dispute resolution and reducing litigation delays—are achieved.
• Since the petition was not maintainable, the court dismissed it without costs.

---

Facts of the Case

1. The petitioner, a proprietorship firm engaged in commercial transactions, had an agreement to supply goods to the respondent.
2. The petitioner delivered goods under two invoices, but the respondent failed to make payment, leaving an outstanding balance of ₹5,57,550 (including GST).
3. The petitioner sent a legal notice dated December 21, 2024, demanding payment, but received no response.
4. Seeking an amicable resolution, the petitioner sent a mediation request on December 24, 2024, but again received no response.
5. The petitioner filed a commercial suit against the respondent in the Commercial Court.
6. The Commercial Court Registry rejected the suit on January 14, 2025, stating that the petitioner had failed to:
   • Obtain a Non-Starter Report or a Certificate of Non-Settlement from an authorized mediation authority.
   • Comply with the procedural mandate of Section 12A, which makes pre-institution mediation mandatory.
7. The petitioner filed W.P.(C) 1473/2025 challenging this decision, but later withdrew the petition on February 6, 2025, with liberty to file a fresh petition with clearer prayers.
8. The present writ petition was subsequently filed, arguing that the petitioner had already made a genuine attempt at mediation, and further formalities were unnecessary.

---

Issues Before the Court

The case raised two critical legal questions:

1. Does issuing a legal notice requesting mediation and receiving no response fulfill the mandatory pre-institution mediation requirement under Section 12A of the Commercial Courts Act, 2015?
2. Does the requirement of obtaining a Non-Starter Report impose an unreasonable procedural burden on litigants, thereby violating the constitutional right to access justice under Articles 14 and 21 of the Indian Constitution?

---

Petitioner’s Arguments

The petitioner, through its counsel, made the following submissions:

1. Bona Fide Mediation Efforts: The petitioner had made genuine efforts to resolve the dispute through mediation by:
   • Sending a legal notice demanding payment.
   • Sending a mediation request calling upon the respondent to settle the dispute amicably.
   • The respondent’s non-response should be considered compliance with Section 12A.
2. Rigid Interpretation of Section 12A is Unfair:
   • Since the respondent did not respond to the mediation request, the mediation was effectively a “non-starter”.
   • Insisting on a formal Non-Starter Report imposes an unnecessary burden on the litigants, delaying justice.
   • The rigid procedural requirement contradicts the legislative intent of expediting commercial dispute resolution.
3. Access to Justice Under Articles 14 and 21:
   • The insistence on a Non-Starter Report violates the right to access justice by making litigants undergo repetitive formalities.
   • The process should be streamlined to allow parties to proceed with litigation once they have made a bona fide attempt at mediation.

---

Respondent’s Arguments

The respondents, represented by the State Counsel, opposed the petition, stating that:

1. Statutory Compliance is Mandatory:
   • Section 12A explicitly requires pre-institution mediation conducted through authorized authorities.
   • A self-initiated legal notice is not equivalent to mediation under the Act.
   • The petitioner had not followed the correct statutory process, making the suit non-maintainable.
2. Legal Notice ≠ Statutory Mediation:
   • A legal notice calling for mediation is not recognized under the Act.
   • Section 12A does not allow alternative mediation attempts—the process must be initiated through the designated mediation authorities.
3. No Procedural Burden:
   • The requirement of a Non-Starter Report is not arbitrary or excessive; it ensures that mediation is conducted in a structured manner.
   • The statutory mechanism is designed to filter out frivolous claims and ensure that commercial disputes are resolved efficiently.

---

Analysis of the Law

Interpretation of Section 12A of the Commercial Courts Act, 2015

• Section 12A mandates that all commercial disputes (without urgent interim relief) must undergo pre-institution mediation through an authorized mediation authority.
• The statute does not recognize informal mediation efforts (such as sending a legal notice).
• Only mediation conducted under the prescribed legal framework is valid.

Principle of Expressio Unius Est Exclusio Alterius

• The principle states that what is explicitly mentioned excludes all other possibilities.
• Since Section 12A does not mention legal notices as a form of pre-institution mediation, such a process cannot be deemed valid.

Precedents Cited

1. Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd. (2022) 10 SCC 1:
   • The Supreme Court upheld the mandatory nature of pre-institution mediation under Section 12A.
   • Failure to comply renders a suit non-maintainable.
2. State of U.P. v. Singhara Singh (1964) 4 SCR 485:
   • If a statute prescribes a specific method, it must be followed exclusively.
3. Taylor v. Taylor (1875) 1 Ch D 426 and Nazir Ahmed v. King Emperor (1936) 38 Bom LR 987:
   • If a law provides a specific procedure, it must be followed as written.

---

Court’s Reasoning

The High Court rejected the petitioner’s arguments and held:

1. Section 12A is Mandatory:
   • Pre-institution mediation must be conducted within the statutory framework.
   • A self-styled legal notice cannot replace the statutory process.
2. Non-Starter Report is Necessary:
   • Ensures that mediation efforts are properly recorded.
   • Prevents parties from bypassing the mediation process.
3. No Violation of Access to Justice:
   • Section 12A promotes efficient dispute resolution, not procedural burden.
   • The requirement of mediation before litigation is a legitimate legislative mandate.

---

Conclusion

• The petition was dismissed in limine (without a full hearing) as it lacked merit.
• The court reaffirmed that Section 12A must be strictly followed.
• The legal notice sent by the petitioner was not a valid substitute for statutory mediation.
• The requirement of a Non-Starter Report is legitimate and necessary.

---

Implications of the Judgment

• Parties must strictly adhere to Section 12A before filing a commercial suit.
• Legal notices do not count as mediation—parties must use authorized mediation authorities.
• This decision strengthens institutional mediation and prevents litigation delays.

This ruling reaffirms that pre-institution mediation under the Commercial Courts Act is mandatory and cannot be bypassed through informal means.

Also Read – Delhi High Court: “Judicial Activism Cannot Override Mandatory Legal Requirements”; Dismisses Probate Appeal for Will Lacking Two Attesting Witnesses