Section 12A Commercial Courts Act: Why Your Recovery Suit Can Be Rejected Without Pre-Institution Mediation

Your customer owes you ₹12 lakh on invoices that are eight months old. The legal notice went unanswered, and you want to file a money recovery suit in Delhi and move on.

File that suit straight away and the court will most likely reject it. Under Section 12A of the Commercial Courts Act, 2015, a commercial suit cannot be filed until the plaintiff has first gone through pre-institution mediation. The only exception is a suit that genuinely needs urgent interim relief. Since August 2022 the Supreme Court has treated this step as mandatory, and commercial courts in Delhi reject plaints that skip it.

Below we explain when Section 12A applies to a recovery suit, what happens if you ignore it, and how the mediation works in Delhi.

What Section 12A of the Commercial Courts Act Requires

Section 12A was added to the Act in 2018. It says a suit that does not contemplate urgent interim relief shall not be instituted until the plaintiff exhausts pre-institution mediation. The procedure sits in the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.

Your recovery claim falls under Section 12A when both of these are true:

• It is a commercial dispute. Section 2(1)(c) covers ordinary transactions of merchants, bankers, financiers and traders, along with sale of goods, supply of services, partnership agreements and a long list of business contracts. Unpaid invoices between two businesses usually qualify.
• The specified value is ₹3 lakh or more. In a money suit, Section 12(1)(a) counts the amount claimed plus interest calculated up to the date of filing.

The rule covers a regular suit for recovery of money under CPC and, as Delhi courts have applied it, a summary suit under Order XXXVII too. Claims below ₹3 lakh, and non-commercial matters such as most property title suits, follow the ordinary civil route without this step.

Is Section 12A Mandatory? What the Supreme Court has Said

For a few years after 2018, High Courts disagreed on whether skipping mediation was fatal. The Supreme Court settled it in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1. It held that Section 12A is mandatory and that a suit filed in breach of it must be rejected under Order VII Rule 11 CPC. The court can reject the plaint on its own, even if the defendant never raises the point. The ruling applies to suits filed on or after 20 August 2022.

In May 2025, Dhanbad Fuels Pvt. Ltd. v. Union of India reaffirmed that view. It also dealt with older cases: a suit filed before 20 August 2022 without mediation may be kept in abeyance while the parties try time-bound mediation, rather than being thrown out.

For a suit filed today, the position is plain. A commercial recovery suit with no mediation attempt and no real urgency will be rejected.

Rejection does not end your claim. Order VII Rule 13 lets you file a fresh plaint on the same cause of action once you have gone through mediation. What you lose is time:

• Months in court. The defendant’s Order VII Rule 11 application can take several hearings to decide, and only then do you begin the mediation you should have started first.
• Limitation. Most money claims must be filed within three years. Section 12A(3) excludes the time spent in mediation, but the months lost on a rejected suit are not automatically protected. A claim already close to the deadline can run out.

The Urgent Interim Relief Exception Under Section 12A

Section 12A applies only to a suit that does not contemplate urgent interim relief. If you need the court to act fast, for instance to stop a debtor from selling property before you get a decree, you can file the suit directly.

Some plaintiffs tried to use this as a shortcut by adding a token prayer for an injunction. In Yamini Manohar v. T.K.D. Keerthi (2023), the Supreme Court said a prayer for urgent interim relief “should not be a disguise or mask” to get around Section 12A. The commercial court will look at the plaint, the documents and the facts to decide whether the urgency is real. You do not need a separate application seeking exemption, but the plaint itself must show why the matter cannot wait for mediation.

The Court also said that a refusal of ad-interim relief at the first hearing does not, by itself, mean the plaint should be rejected.

In a pure money claim, urgency is hard to prove. Courts look for specific facts, for example:

• the debtor is selling or mortgaging property to defeat a future decree, which also supports a prayer for attachment before judgment under Order XXXVIII Rule 5 CPC;
• the debtor company is shutting operations or moving assets out of the court’s reach.

An overdue invoice on its own is not urgency. If that is all you have, start with mediation.

How Pre-institution Mediation Works in Delhi

The mediation is run by the legal services authority for the area where the suit would be filed, which for most recovery claims is the District Legal Services Authority (DLSA) of that district. A typical sequence:

1. Send a legal notice. Section 12A does not require one, but a notice fixes the amount due and shows the court you gave the debtor a chance to pay.
2. File the mediation application in Form 1 with the authority, along with the prescribed fee and the details of the claim and the opposite party.
3. The authority issues notice to the other side, asking it to appear and take part.
4. If the other side ignores the notice or refuses, the authority records that mediation could not begin. This is often called a non-starter report, and you can file your suit on the strength of it.
5. If both sides appear, a mediator is assigned. Section 12A(3) gives three months from the date of the application to finish, extendable by two months if both parties agree. This period does not count towards limitation.
6. Settlement or failure report. A settlement is put in writing and signed by the parties and the mediator. Under Section 12A(5) it has the status of an arbitral award on agreed terms, so it can be enforced without a fresh suit. If talks fail, you get a failure report.

Attach the non-starter or failure report to the plaint and state in the plaint that Section 12A has been complied with. In Delhi, a commercial suit with a specified value up to ₹2 crore goes to the district commercial court. Above ₹2 crore, it is filed in the Commercial Division of the Delhi High Court.

Treat mediation as a real chance to get paid. A debtor who ignored your legal notice may respond differently to a notice from a statutory authority, and a signed settlement can be enforced like a decree.

Talk to a Commercial Suit Lawyer in Delhi

Raizada Law Associates acts for businesses across Delhi NCR in money recovery suits, commercial summary suits under Order XXXVII and pre-institution mediation. We check whether Section 12A applies to your claim, prepare and file the mediation application, represent you in the sessions, and file the suit if the debtor does not settle.

Raizada Law Associates acts for businesses across Delhi NCR in money recovery suits, commercial summary suits under Order XXXVII and pre-institution mediation. We check whether Section 12A applies to your claim, prepare and file the mediation application, represent you in the sessions, and file the suit if the debtor does not settle.