The Commercial Courts Act, 2015, was enacted to ensure the speedy disposal of high-value

commercial disputes, thereby improving India’s ranking in the World Bank’s "Ease of Doing
Business" index and attracting Foreign Direct Investment (FDI). A pivotal feature of this Act
is the mandatory Pre-Institution Mediation (PIM) framework introduced via Section 12A
in the 2018 Amendment.

1. Statutory Mandate: Section 12A

Section 12A creates a mandatory "bar" on the institution of suits unless a specific procedural
remedy is exhausted.

 The Prohibitive Clause: It states that a suit which does not contemplate any urgent
interim relief shall not be instituted unless the plaintiff exhausts the remedy of pre-
institution mediation.
 Specified Value: This mandate applies to all commercial disputes where the
"Specified Value" is INR 3 Lakhs or more (reduced from the original 1 Crore in
2018).
 The Exception (Urgent Interim Relief): If a plaintiff requires immediate judicial
intervention (e.g., a temporary injunction in patent infringement), they can bypass
mediation and file the suit directly.

2. Procedural Framework: The 2018 Rules

The Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, govern
the process:

 Nodal Agency: The plaintiff must apply to the State or District Legal Services
Authority constituted under the LSA Act, 1987.
 Notice and Appearance: The Authority issues a notice to the defendant to appear
within 10 days. If the defendant fails to respond, a final notice is issued. If they still
fail to appear or refuse to participate, the process is treated as a "Non-starter".
 Timeline: The process must be completed within three months, extendable by two
months with the mutual consent of both parties.
 Confidentiality: Rules prohibit stenographic, audio, or video recording of the
proceedings to protect business strategies.

3. Legal Efficacy of the Settlement

A settlement reached through this process is not a mere contract; it has significant legal teeth:

 Status of Award: Under Section 12A(5), a settlement agreement reached in PIM has
the same status and effect as an arbitral award on agreed terms under Section 30 of
the Arbitration and Conciliation Act, 1996.
 Enforceability: This means the settlement can be executed directly as a decree of a
civil court.

4. Landmark Judicial Pronouncements

A. Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022)

  The Ruling: The Court held that Section 12A is mandatory.
 Consequence of Breach: Any suit filed without exhausting PIM (and not seeking
urgent relief) is liable to be rejected suo moto by the court under Order VII Rule 11
of the CPC.

B. State of UP v. Babu Ram Upadhya (1961)

Though an older case, it was cited to interpret the word "shall" in Section 12A. The court
looks at the statute’s object and purpose; in the context of the CCA, "shall" is construed as a
mandatory obligation to prevent the clogging of the judicial system.

C. Kapil Goel v. Ram Dulare Yadav (Delhi HC)

The Court clarified that if a defendant refuses to participate in PIM after notice, the plaintiff’s
consent to continue mediation becomes irrelevant, and the suit can proceed as a "non-starter".

D. Kashinath Sansthan case

This established the criteria for "Urgent Interim Relief." To bypass Section 12A, the
plaintiff must demonstrate a prima facie case, balance of convenience, and that they would
suffer irreparable loss without the injunction.

5. Critical Analysis and Current Challenges

While Section 12A aims to reduce litigation, empirical evidence from commercial hubs like
Mumbai suggests a high failure rate:

 The "Non-starter" Problem: Data from 2020-2023 shows that 97-99% of PIM
applications in Mumbai end as "non-starters" because defendants simply refuse to
participate.
 The Loophole: Many litigants use the "urgent interim relief" clause as a pretext to
bypass mediation, leading to "farcical" situations where urgency is claimed merely to
avoid the 3-5 month delay of PIM.
 Divergence from General Law: Interestingly, the Mediation Act, 2023, recently
made pre-litigation mediation voluntary for general civil cases, but the Commercial
Courts Act continues to keep it mandatory for commercial disputes.

Summary for Examination

Feature Provision/Rule
Mandate Section 12A: Mediation is a prerequisite for filing a suit.
Monetary Threshold Specified Value $\geq$ INR 3 Lakhs.
Timeline 3 Months + 2 Months (extension).
Settlement Status Deemed Arbitral Award (Section 30, 1996 Act).
Leading Case Patil Automation: Failure to comply = Rejection of Plaint.
Key Exception Urgent Interim Relief (e.g., Injunctions).
 MEDIATION AND ALTERNATIVE DISPUTE RESOLUTION (ADR) IN INDIA
Historical Development of ADR and Mediation in India and Globally

 ADR and mediation originated from ancient community-based dispute resolution systems
where village elders and panchayats resolved disputes through compromise and
reconciliation.
 Modern ADR developed globally during the twentieth century as an alternative to
expensive and time-consuming litigation, with major contributions from the United
Nations Commission on International Trade Law through the UNCITRAL Model Law
and the Singapore Convention on Mediation.
 In India, ADR received statutory recognition through the Legal Services Authorities Act,
1987, the Arbitration and Conciliation Act, 1996, and Section 89 of the Code of Civil
Procedure, 1908, which empowered courts to refer disputes to ADR mechanisms.
 Landmark judgments such as Salem Advocate Bar Association v. Union of India and
Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. Pvt. Ltd. strengthened
mediation in India, culminating in the enactment of the Mediation Act, 2023.

Meaning of Mediation

Mediation is a voluntary, confidential, and non-adversarial method of dispute resolution in

which a neutral third party called a mediator assists disputing parties in communicating,
negotiating, and reaching a mutually acceptable settlement. Unlike a judge or arbitrator, the
mediator does not impose a decision but facilitates dialogue and helps parties identify
solutions based on cooperation, party autonomy, and consensus.

Importance of Mediation

 Reduces judicial backlog and delays.

 Saves litigation costs and procedural expenses.
 Maintains confidentiality and privacy.
 Preserves family, commercial, and social relationships.
 Encourages mutually beneficial “win-win” outcomes.
 Provides flexible and customized settlement solutions.
 Reduces emotional stress associated with adversarial litigation.

What, Why, How and Where of Mediation

What?

Mediation is a structured negotiation process facilitated by a neutral mediator to help parties

settle disputes amicably without court adjudication.

Why?

Mediation is preferred because it promotes speedy, confidential, relationship-oriented, and

cost-effective dispute resolution while reducing court congestion.
How?

The mediator facilitates communication, identifies issues, narrows misunderstandings, and

assists parties in exploring settlement options. The process is voluntary, confidential, and
based upon mutual consent.

Where?

Mediation is commonly used in:

 matrimonial and family disputes,

 commercial and contractual disputes,
 labour and industrial disputes,
 consumer disputes,
 banking and insurance matters,
 property and partition disputes,
 community disputes,
 and international commercial conflicts.

Why Prefer Mediation over Litigation?

1. Speedy Resolution

Litigation may continue for years due to procedural delays and appeals, whereas mediation
resolves disputes comparatively faster.

2. Cost-Effective Process

Mediation reduces legal expenses, court fees, and repeated procedural costs associated with
litigation.

3. Confidentiality

Mediation proceedings remain private, protecting personal reputation, business interests, and
sensitive information.

4. Preservation of Relationships

Unlike adversarial litigation, mediation promotes cooperation and helps preserve personal,
family, and business relationships.

5. Flexibility and Party Autonomy

Parties control the procedure and settlement terms, allowing customized and practical
solutions.
6. Reduction of Judicial Burden

Mediation decreases the workload of courts and supports efficient administration of justice.

7. Mutually Acceptable Outcomes

Mediation encourages balanced “win-win” settlements instead of producing winners and

losers.

Statutory Framework Governing Mediation in India

1. Section 89 of the Code of Civil Procedure, 1908

Section 89 CPC empowers courts to refer disputes to:

 mediation,
 arbitration,
 conciliation,
 or Lok Adalat settlement.

This provision institutionalized ADR in Indian civil justice.

2. Order XXIII Rule 3 CPC

Order XXIII Rule 3 recognizes lawful compromises and settlements reached between parties.
A mediated settlement may be recorded by the court and enforced as a compromise decree.

3. Order XXIII Rule 3A CPC

This provision bars separate suits challenging compromise decrees. Challenges must be made
before the same court.

4. Family Courts Act, 1984

Section 9 of the Family Courts Act, 1984 imposes a duty upon Family Courts to attempt
reconciliation and settlement before adjudication.

5. Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 governs conciliation and institutional ADR
mechanisms in India.

6. Legal Services Authorities Act, 1987

This Act institutionalized Lok Adalats and community-based dispute settlement systems.
7. Mediation Act, 2023

The Mediation Act, 2023 provides statutory recognition to mediation, enforceability of

mediated settlement agreements, institutional mediation, online mediation, and pre-litigation
mediation.

Stages of Mediation
1. Pre-Mediation Stage

At the pre-mediation stage, parties agree to submit their dispute to mediation and appoint a
mediator either privately or through a mediation institution. Under Section 5 of the Mediation
Act, 2023, parties may undertake pre-litigation mediation before filing suits in specified
disputes. During this stage, the mediator explains confidentiality, neutrality, voluntary
participation, and procedural rules.

2. Opening Session

The mediation formally begins with an opening session where the mediator introduces the
process, establishes ground rules, and explains the objectives of mediation. Parties are given
an opportunity to present their perspectives and identify the issues in dispute. Sections
relating to mediator conduct and confidentiality under the Mediation Act guide this process.

3. Joint Discussion and Issue Identification

The mediator facilitates communication between parties to identify core issues, clarify
misunderstandings, and narrow areas of disagreement. The focus is on interests and practical
solutions rather than strict legal claims. The Mediation Act emphasizes party autonomy and
consensual settlement throughout this stage.

4. Private Caucus Sessions

The mediator may conduct separate confidential meetings with each party to understand
underlying concerns, emotional issues, and settlement possibilities. Information shared in
caucus sessions remains confidential unless disclosure is authorized. Confidentiality
protections are recognized under the Mediation Act, 2023.

5. Negotiation and Settlement Discussions

During this stage, parties negotiate possible settlement terms with assistance from the
mediator. The mediator helps generate options, evaluate proposals, and bridge differences
between parties. The process remains voluntary and based upon mutual consent.
6. Settlement Agreement

If parties reach consensus, the settlement terms are reduced to writing and signed by the
parties and mediator. Under Section 27 of the Mediation Act, 2023, mediated settlement
agreements are final, binding, and enforceable as if they were court decrees.

7. Termination of Mediation

Mediation terminates either upon successful settlement, withdrawal by parties, expiration of

prescribed timelines, or when the mediator concludes that settlement is not possible. The
Mediation Act prescribes timelines for completion of mediation proceedings to ensure
efficiency and avoid unnecessary delay.

Important Judicial Decisions on Mediation

Salem Advocate Bar Association v. Union of India

The Supreme Court upheld Section 89 CPC and recognized mediation as an essential
mechanism for reducing judicial backlog and promoting consensual settlement.

Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. Pvt. Ltd.

The Court clarified categories of disputes suitable for mediation and strongly encouraged
mediation in family and commercial disputes.

K. Srinivas Rao v. D.A. Deepa

The Supreme Court emphasized mediation in matrimonial disputes and directed family courts
to actively utilize mediation mechanisms.

Pushpa Devi Bhagat v. Rajinder Singh

The Court held that compromise decrees based on settlements are binding and enforceable
unless set aside by the same court.

Challenges of Mediation in India

 Lack of public awareness regarding mediation mechanisms.

 Shortage of professionally trained mediators.
 Resistance from traditional litigation-oriented legal culture.
 Power imbalance between parties in certain disputes.
 Lack of institutional infrastructure in smaller cities and rural areas.
 Limited enforceability concerns in cross-border disputes.
 Delay caused by non-cooperative participation by parties.
 Need for stronger mediation education and professional standards.
INDIRA GANDHI’S PHILOSOPHICAL UNDERSTANDING OF OUTSIDE COURT
SETTLEMENT
Indira Gandhi’s statement, “You can’t shake hands with a clenched fist,” reflects a
profound philosophy of dialogue, reconciliation, and peaceful conflict resolution. Though
primarily expressed in the context of political and international relations, the statement has
deep relevance in the field of Alternative Dispute Resolution (ADR), particularly mediation
and outside court settlement. The quote symbolizes that conflicts cannot be resolved through
hostility, aggression, or rigid confrontation; instead, settlement becomes possible only when
parties are willing to communicate, compromise, and cooperate.

In the context of dispute resolution, Indira Gandhi’s philosophy emphasizes that justice
should not merely focus on adversarial victory but should also promote social harmony,
mutual understanding, and preservation of relationships. Litigation often creates bitterness
and prolonged hostility because it follows a winner-versus-loser model. Outside court
settlement mechanisms such as mediation, conciliation, and negotiation, on the other hand,
encourage constructive dialogue and collaborative problem-solving.

Philosophical Understanding of Outside Court Settlement

1. Importance of Dialogue and Communication

The expression “clenched fist” symbolizes rigidity, anger, and unwillingness to negotiate,
whereas “shaking hands” represents openness, trust, and cooperation. Indira Gandhi’s
philosophy suggests that disputes can only be resolved when parties abandon hostility and
engage in meaningful communication.

This principle forms the foundation of mediation, where parties voluntarily discuss their
grievances with the assistance of a neutral mediator to reach a mutually acceptable
settlement.

2. Preference for Reconciliation over Confrontation

Indira Gandhi believed that conflicts should be resolved through reconciliation rather than
destructive confrontation. Outside court settlement mechanisms embody this philosophy
because they focus on:

 compromise,
 consensus,
 and peaceful settlement
instead of aggressive adversarial litigation.

Mediation particularly reflects this approach because it seeks “win-win” outcomes rather than
imposing winners and losers.
3. Preservation of Human Relationships

A major limitation of litigation is that it often damages personal, family, social, and
commercial relationships permanently. Indira Gandhi’s philosophy emphasizes coexistence
and cooperation despite differences.

Mediation preserves relationships by:

 reducing hostility,
 encouraging empathy,
 and promoting long-term harmony.

This is especially important in:

 matrimonial disputes,
 family conflicts,
 labour disputes,
 and commercial partnerships.

4. Peace as the Foundation of Justice

Indira Gandhi’s statement reflects the idea that peace and dialogue are essential prerequisites
for justice. ADR mechanisms aim not only at legal settlement but also at restoring social
equilibrium and emotional healing.

Thus, outside court settlement aligns with restorative and therapeutic models of justice rather
than punitive adjudication.

Contemporary Relevance in Mediation and ADR

Indira Gandhi’s philosophy remains highly relevant in contemporary legal systems due to:

 increasing judicial backlog,

 expensive litigation,
 procedural delays,
 and the growing need for consensual dispute resolution.

Modern ADR systems increasingly prioritize:

 cooperation over confrontation,

 negotiation over hostility,
 and consensus over rigid adjudication.

The philosophy underlying mediation directly reflects her belief that disputes cannot be
resolved with a “clenched fist.”
Statutory Recognition in India

India has institutionalized outside court settlement through several statutory provisions.

1. Section 89 of the Code of Civil Procedure, 1908

Section 89 empowers courts to refer disputes to:

 mediation,
 conciliation,
 arbitration,
 and Lok Adalats.

This provision promotes amicable settlement before adversarial adjudication.

2. Mediation Act, 2023

The Mediation Act, 2023 provides statutory recognition to mediation and emphasizes:

 pre-litigation mediation,
 confidentiality,
 party autonomy,
 and enforceability of mediated settlement agreements.

The Act reflects the philosophy that peaceful dialogue should be preferred over prolonged
litigation.

3. Family Courts Act, 1984

Section 9 of the Family Courts Act imposes a duty upon Family Courts to attempt
reconciliation before adjudicating family disputes. This aligns with Indira Gandhi’s emphasis
on reconciliation and social harmony.

Judicial Support for Mediation

Indian courts have repeatedly emphasized amicable settlement and mediation.

Salem Advocate Bar Association v. Union of India

The Supreme Court upheld Section 89 CPC and recognized mediation as an effective
mechanism to reduce adversarial litigation.

Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. Pvt. Ltd.

The Court identified family, commercial, and partnership disputes as highly suitable for
mediation because preservation of relationships is often more important than strict legal
adjudication.
Critical Evaluation

Indira Gandhi’s philosophy remains significant in modern dispute resolution because

contemporary societies increasingly require cooperative and humane methods of justice
delivery. Mediation reflects democratic values of participation, dialogue, and consensus-
building.

However, mediation may not always be appropriate where:

 severe power imbalance exists,

 domestic violence is involved,
 or parties act in bad faith.

Therefore, while reconciliation is desirable, procedural safeguards and judicial supervision

remain essential.