• Written by: admin
• October 29, 2026

For businesses, lenders and NBFCs filing recovery or contract suits, the Section 12A exemption is often the first battleground in a commercial case. If you get it wrong, the court can throw out your suit before it hears the merits, and you lose months. This guide explains when you can skip mandatory mediation, what courts look for, and how to draft an exemption application that survives scrutiny.

What Section 12A of the Commercial Courts Act Requires

Parliament added Section 12A through the 2018 amendment. It bars a plaintiff from filing a commercial suit that does not contemplate urgent interim relief until the plaintiff exhausts pre-institution mediation. The District or State Legal Services Authority conducts this mediation under the Pre-Institution Mediation and Settlement Rules, 2018.

• Timeline: The mediator must conclude the process within three months, and the parties can consent to a two-month extension.
• Limitation: The law excludes the mediation period when you compute limitation.
• Settlement: A settlement carries the same status and effect as an arbitral award on agreed terms.
• Threshold: The Act applies to commercial disputes with a specified value of ₹3 lakh or more.

The Section 12A Exemption Test: What “Urgent Interim Relief” Means

The only statutory route around mediation is a suit that contemplates urgent interim relief. Courts consistently treat pre-institution mediation as the rule and exemption as the exception. You do not strictly need a formal application, but the plaint must satisfy the court that the urgency is real.

Courts typically examine:

• Whether the interim relief is genuine or simply a device to bypass mediation;
• The nature of the harm, and whether it continues or happened once;
• Whether delay in filing undermines the claim of urgency;
• Documents that support the urgency, such as notices, evidence of asset dissipation or proof of an ongoing breach.

Key Supreme Court Rulings on Section 12A

Patil Automation v. Rakheja Engineers (2022): The Supreme Court declared Section 12A mandatory and directed courts to reject non-compliant plaints, applying this consequence prospectively from 20 August 2022.

Yamini Manohar v. T.K.D. Keerthi (2023): The Court ruled that a plaintiff cannot simply label a suit as urgent. The commercial court may examine the plaint and documents to check whether the prayer for interim relief disguises an attempt to avoid mediation.

Dhanbad Fuels v. Union of India (2025): In this ruling of 15 May 2025, the Court reaffirmed that Section 12A is mandatory and that courts must reject a non-compliant suit under Order VII Rule 11(d). It also reconciled the prospective application of Patil Automation for suits filed before 20 August 2022.

Novenco v. Xero Energy (2025): On 27 October 2025, the Court held that in suits alleging continuing infringement of intellectual property, urgency arises from the wrong itself, and mere delay in filing does not negate urgency.

Recent High Court Trends

The Delhi High Court has stressed that courts would defeat the purpose of mandatory mediation if they granted exemptions mechanically on the plaintiff’s request. A bare assertion of “urgent interim relief” in the plaint does not suffice. The Madras High Court, by contrast, treats the test as a fact-sensitive assessment of ongoing commercial disruption from the plaintiff’s standpoint. The direction is clear: plaintiffs must plead urgency with facts, not adjectives.

Practical Drafting Checklist for an Exemption Application

1. Plead specific facts that show imminent or continuing harm, such as asset transfers, encumbrance of security or an ongoing breach.
2. Explain any delay between the cause of action and filing.
3. Attach supporting documents: demand notices, correspondence, account statements and evidence of third-party dealings.
4. Frame proportionate interim prayers that you genuinely need, such as attachment before judgment or injunctions.
5. If your urgency case is weak, consider completing mediation. The law excludes that time from limitation, and you can enforce a settlement like an award.

Frequently Asked Questions

Is pre-institution mediation mandatory for all commercial suits?

Yes, for every commercial suit of specified value that does not contemplate urgent interim relief. Suits that genuinely seek urgent interim relief fall outside the requirement.

What happens if a plaintiff skips Section 12A mediation?

For suits filed after 20 August 2022, the court will reject the plaint under Order VII Rule 11 CPC. The plaintiff can then re-file after completing mediation.

Can a plaintiff seek exemption just by asking for an injunction?

No. Courts look behind the prayer. If the interim relief appears to be a device to bypass mediation, the court will refuse the exemption.

Does delay in filing defeat a claim of urgency?

Not always. In continuing wrongs, such as ongoing IP infringement, the Supreme Court has held that delay alone does not negate urgency.

Does mediation time count towards limitation?

No. The law excludes the time you spend in pre-institution mediation when you compute the limitation period.

Need Help with a Commercial Suit?

Lex Pleaders advises banks, NBFCs and businesses on commercial recovery suits, Section 12A compliance and urgent interim relief before commercial courts. Write to us at lexpleadersindia@gmail.com to discuss your matter.

Disclaimer: This article offers general information only and does not constitute legal advice.