INTRODUCTION
India’s commercial justice system is experiencing a notable structural transformation, shifting from a purely adversarial litigation approach to a more expedited and settlement-focused dispute resolution process. A key aspect of this transformation is the introduction of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015[1], which mandates that parties consider mediation prior to initiating certain commercial lawsuits. Following the renewed emphasis from Parliament and policymakers evident in 2026, this requirement has gained increased significance for litigants, businesses, and legal professionals involved in commercial disputes. Pre-institution mediation has evolved beyond a mere procedural formality. It has become a critical compliance issue that can influence the viability of a lawsuit, particularly after the Supreme Court’s clarification that Section 12A is obligatory when the plaint does not request urgent interim relief. Concurrently, this mechanism embodies a broader legal philosophy: many commercial disputes are more effectively resolved through structured negotiation rather than through lengthy and costly court proceedings.
THE STATUTORY FRAMEWORK OF SECTION 12A
Section 12A of the Commercial Courts Act stipulates that a commercial suit not seeking urgent interim relief cannot be filed unless the plaintiff has first pursued pre-institution mediation. The wording of this provision is both intentional and mandatory. By stating “shall not be instituted,” Parliament has established mediation as a prerequisite for filing certain commercial suits, rather than merely an optional step. This provision was introduced via the Commercial Courts (Amendment) Act, 2018[2], as part of a broader initiative to enhance commercial dispute resolution and alleviate the burden on the judiciary. The Central Government is authorized to designate entities under the Legal Services Authorities Act[3] to facilitate the mediation process, which has been effectively managed through Legal Services Institutions nationwide. The procedural framework is outlined in the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018[4], which govern the initiation and execution of the mediation process. These rules address the submission of mediation applications, notification to the opposing party, conduct of mediation sessions, drafting of settlement agreements, and the conclusion of proceedings when a settlement cannot be reached. Thus, the rules transform the general statutory requirement in Section 12A into a practical institutional procedure. Another significant aspect is the timeline for mediation. As per the legal services framework established by NALSA, mediation must be concluded within three months from the application date, with a potential extension of two additional months if both parties agree[5]. This constrained timeline underscores the legislative goal of ensuring that mediation is efficient and effective, rather than a source of further delays[6].
PURPOSE AND POLICY RATIONALE
The reasoning behind pre-institution mediation is clear. Commercial disputes frequently involve invoices, supply contracts, service agreements, franchising, licensing, construction, shareholder expectations, or ongoing contractual relationships, and not every dispute necessitates extensive adversarial litigation. An early settlement can help reduce legal expenses, maintain business relationships, prevent public animosity, and lessen uncertainty for both parties. Additionally, this mechanism serves an institutional function. Commercial courts were established to resolve business disputes more effectively, but even specialized courts can become overwhelmed if every disagreement is immediately escalated to litigation.[7]. By requiring parties to first seek a settlement, Section 12A aims to minimize unnecessary litigation and allocate judicial resources to cases that truly need adjudication. This reasoning aligns well with India’s broader contemporary ADR policy. The discourse surrounding mediation in 2025 and 2026 increasingly positions it as a fundamental component of commercial justice rather than merely a secondary option. This broader policy context is one of the reasons why the 2026 update is significant, extending beyond a narrow procedural interpretation of Section 12A[8].
WHY THE 2026 PARLIAMENT UPDATE MATTERS
The significance of the 2026 Parliament update is rooted in the broader legislative and institutional focus on alleviating court congestion and establishing mediation as a legitimate pre-litigation process. This update has rekindled interest in reforming commercial dispute resolution at a moment when businesses are seeking quicker enforcement, reduced transaction costs, and more reliable legal avenues.[9]. In practical terms, the emphasis of 2026 reinforces three key propositions. Firstly, adherence to Section 12A must be prioritized from the outset of any dispute strategy. Secondly, commercial lawyers can no longer treat mediation as a mere formality, as neglecting the statutory requirement could impact the lawsuit itself. Lastly, mediation is becoming increasingly embedded within a wider statutory framework influenced by recent advancements in Indian mediation law. Thus, this update is significant not merely because it reiterates Section 12A, which was already in place, but because it enhances its practical importance. For litigants, this means that the primary legal question in many commercial disputes is no longer solely “What is the cause of action?” but also “Is pre-institution mediation necessary before filing this suit?”
PROCEDURE FOR PRE-INSTITUTION MEDIATION
The process typically initiates when the aggrieved party submits an application to the designated Legal Services Institution to commence pre-institution mediation. Subsequently, a notice is sent to the opposing party, requiring their appearance and participation in the process. Should the opposing party fail to appear or choose not to participate, the institution may document a non-starter report, allowing the plaintiff to proceed with filing the suit. In cases where both parties engage, mediation occurs with a neutral mediator in a confidential environment aimed at fostering communication and resolution. Unlike a judge, the mediator does not make decisions regarding the dispute. Instead, they help the parties identify key issues, reduce areas of disagreement, and explore potential terms for resolution. If mediation is successful, the settlement is documented in writing and signed by both parties. According to Section 12A, such a settlement holds the same status and effect as an arbitral award based on agreed terms under Section 30(4) of the Arbitration and Conciliation Act, 1996[10], thereby granting it legal force and enforceability. Conversely, if mediation does not succeed, the process concludes formally, and the plaintiff retains the right to file the commercial suit[11]. A significant procedural advantage is that the time spent in pre-institution mediation does not count towards the limitation period. This safeguard is vital as it alleviates a significant disincentive for attempting settlement. A party does not forfeit substantive rights simply by adhering to the statutory requirement of first attempting mediation.
THE SUPREME COURT DECISION IN PATIL AUTOMATION
The most significant case regarding Section 12A is Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd.[12], where the Supreme Court decisively ruled that pre-institution mediation is a mandatory requirement for suits that do not request urgent interim relief. This ruling has transformed Section 12A from a contentious procedural guideline into a stringent gatekeeping principle. The Court explained that the language of Section 12A, especially the phrase “shall not be instituted,” clearly signifies a mandatory legislative directive. It also determined that a plaint submitted in violation of this requirement is subject to dismissal under Order VII Rule 11 of the Code of Civil Procedure. By doing so, the Court effectively positioned compliance with pre-institution mediation as a matter of maintainability rather than a mere curable irregularity. The significance of Patil Automation is evident in both its doctrinal and practical implications. Doctrinally, it clarified the previous ambiguity regarding whether Section 12A was to be interpreted as directory or mandatory. Practically, it has altered litigation strategies throughout India, as plaintiffs must now address the mediation requirement prior to drafting and submitting the plaint, unless they can convincingly argue that their case falls under the urgent interim relief exception.
THE URGENT INTERIM RELIEF EXCEPTION
Section 12A does not function in the same manner when the lawsuit seeks urgent interim relief. This exception is in place because certain commercial disputes require immediate judicial action that cannot afford to wait for even a brief mediation process. Instances may include the threatened misuse of confidential information, the imminent transfer of assets, ongoing violations of restrictive covenants, or urgent breaches of intellectual property rights. However, this exception is not intended as a means to circumvent mediation. Courts have been diligent in differentiating between genuinely urgent situations and routine commercial claims that are merely presented as emergencies. A mere or contrived request for an injunction is unlikely to protect a plaintiff if the underlying circumstances do not demonstrate true urgency. This underscores the significance of legal drafting. A plaintiff aiming to avoid pre-institution mediation must clearly articulate in the pleadings and the surrounding context why immediate judicial intervention is essential. Thus, the issue of urgency is not only substantive but also procedural, as it influences whether the statutory mediation requirement is applicable at all.
RELATED LAWS SHAPING THE MEDIATION REGIME
While Section 12A serves as the fundamental provision, it does not function independently. The Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018[13] Establish the procedural framework for applications, notifications, mediator involvement, reports, and settlements. The Legal Services Authorities framework is also crucial, as Legal Services Institutions are the main entities facilitating these mediations in practice. Additionally, the Arbitration and Conciliation Act, 1996 provides significant support, as a settlement reached under Section 12A[14] Is regarded as an arbitral award based on agreed terms. This designation grants the mediated settlement a degree of enforceability that enhances trust in the process. The Code of Civil Procedure, 1908, is pertinent when a suit is initiated without adherence to these provisions, particularly through the rejection of the plaint mechanism under Order VII Rule 11[15], as acknowledged in Patil Automation. The Mediation Act, 2023[16] Further bolsters the framework within which Section 12A functions. Although it does not replace the Commercial Courts Act framework, it adds to a broader legislative environment that recognizes mediation as a valid, organized, and institutionally endorsed method of dispute resolution.
BUSINESS AND LITIGATION SIGNIFICANCE
For businesses, pre-institution mediation provides both practical benefits and procedural structure. On the benefits side, it allows for the confidential resolution of disputes, reduces reputational risks, and helps maintain valuable commercial relationships. In cases involving supply chains, franchises, infrastructure, and services, a negotiated resolution can often yield more refined outcomes than a court ruling that comes after prolonged litigation. On the procedural side, businesses are now required to plan their disputes more meticulously before initiating legal action. Legal teams must consider whether the claim genuinely necessitates urgent interim relief, whether the dispute is subject to the commercial courts framework, whether mediation should be attempted first, and how limitation periods will be impacted. This indicates that the strategy for dispute resolution begins prior to litigation and involves a realistic evaluation of settlement options. For lawyers, Section 12A has transformed the landscape of commercial practice. Advisory roles now encompass early issue identification, urgency assessment, mediation preparedness, and maintainability evaluations. In this context, pre-institution mediation is not merely a regulatory obstacle; it represents a significant shift towards a comprehensive dispute strategy that integrates negotiation, procedural considerations, and litigation risk assessment.
CONCLUSION
Pre-institution mediation, as outlined in Section 12A of the Commercial Courts Act, has emerged as a key element in India’s contemporary framework for resolving commercial disputes. Following the increased focus from parliament and institutions in 2026, its significance in planning for commercial litigation and strategies for accessing courts has grown even more crucial. The legal landscape is now fairly well-defined. A commercial lawsuit that does not request urgent interim relief typically cannot be filed without first undergoing pre-institution mediation, a requirement that the Supreme Court affirmed in the Patil Automation case. The accompanying regulations, the legal services framework, and the broader mediation policy context collectively indicate that India is progressing towards a model where settlement is regarded as a serious initial option in commercial disputes. In this context, pre-institution mediation transcends being just a procedural formality. It represents a conscious legislative effort to enhance the speed, efficiency, and business-friendliness of commercial justice, while ensuring that adjudication is reserved for disputes that cannot be settled through negotiation.
Author(s) Name: Vilashini TK (Presidency University)
References:
[1] Commercial Courts Act 2015, s 12A.
[2] Commercial Courts (Amendment) Act 2018.
[3] Legal Services Authorities Act 1987.
[4] Commercial Courts (Pre-Institution Mediation and Settlement) Rules 2018.
[5] National Legal Services Authority, ‘Mediation’< https://nalsa.gov.in/mediation/> accessed 26 June 2026.
[6] National Legal Services Authority, ‘Mediation’ < https://nalsa.gov.in/mediation/ > accessed 26 June 2026.
[7] Press Information Bureau, Government of India, ‘[ Commercial disputes settled through pre-institution mediation under the Commercial Courts Act, 2015
]‘ (Release ID 2220496) < https://www.pib.gov.in/PressReleasePage.aspx?PRID=2220496®=48&lang=2 > accessed 26 June 2026.
[8] Ministry of Law and Justice, Department of Legal Affairs, The Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 and the Commercial Courts (Statistical Data) Rules, 2018 <https://legalaffairs.gov.in/actsrulespolicies/commercial-courts-pre-institution-mediation-and-settlement-rules-2018-and> accessed 26 June 2026.
[9] Soumya Yadav, ‘LIDW26 | From the Mahabharata to the Mediation Act, 2023: India and England Compare Notes on Why Mediation Is Winning’ SCC Times (5 June 2026) < https://www.scconline.com/blog/post/2026/06/05/uk-and-indian-practitioners-debate-the-future-of-commercial-dispute-resolution-lidw26/ > accessed 26 June 2026.
[10] Arbitration and Conciliation Act 1996, s 30(4).
[11] National Legal Services Authority, ‘Mediation’ < https://nalsa.gov.in/mediation/ > accessed 26 June 2026.
[12] Patil Automation (P) Ltd v Rakheja Engineers (P) Ltd (2022) 10 SCC 1, para 42
[13] Commercial Courts (Pre-Institution Mediation and Settlement) Rules 2018
[14] Arbitration and Conciliation Act 1996, s 12A
[15] Code of Civil Procedure 1908, Order VII r 11.
[16] Mediation Act 2023.