Before You File That Commercial Suit, Try the Mediation Room

In August 2022, the Supreme Court of India decided Patil Automation Private Limited v. Rakheja Engineers Private Limited. The question in front of it sounded technical. Could a business skip the pre-institution mediation required by Section 12A of the Commercial Courts Act, 2015 and walk straight into court? The answer was no. The court held that the requirement is mandatory and that a plaint filed without it is liable to be rejected.

That ruling changed the first step of a commercial dispute for a lot of businesses. Yet many still treat mediation as a box to tick before the real fight begins. Is that the best use of the one stage where both sides still control the outcome?

What Section 12a Asks of You

Section 12A was added to the Commercial Courts Act in 2018. It says a commercial suit that does not seek urgent interim relief cannot be filed until the plaintiff has tried pre-institution mediation. The process is meant to finish within three months, and the parties can extend it by two more months if they agree. If a settlement is reached, it is reduced to writing and signed by the parties and the mediator. The Act gives that settlement the same status and effect as an arbitral award on agreed terms, which means it can be enforced.

So the stage is not a formality. A settlement here carries real legal weight.

Why Mediation Deserves a Proper Attempt

Mediation is different from arbitration and litigation in one basic way. Nobody hands down a decision. The mediator helps the parties talk, test their positions and look for terms both can live with, but cannot impose an outcome on either side. That sounds weak on paper. In practice it is the reason mediation can work where other routes stall, because the people who know the business best are the ones shaping the result.

There is also the relationship to think about. A supplier, a distributor or a long-term client is often worth more than the amount in dispute. Litigation rarely leaves that relationship intact. A mediated settlement at least gives it a chance.

And confidentiality matters. What is said in mediation is meant to stay there, which lets both sides speak more freely than they would in a courtroom.

The Shift to Online Mediation

The Mediation Act, 2023 gave online mediation formal recognition in Indian law. Section 30 of the Act says mediation, including pre-litigation mediation, can be conducted online with the written consent of the parties, using tools such as encrypted email, secure chat or video and audio conferencing. It also says the process must protect the integrity and confidentiality of the proceedings. The Act allows the government to bring different provisions into force on different dates, so it is worth checking which parts apply to your matter before you rely on them.

For businesses with counterparties in other cities, the practical case for going online is strong. Nobody has to book flights to sit in a room for one session, and sessions are easier to schedule around working hours. If you are weighing this option, look at how online mediation services in India handle consent, document sharing and confidentiality, since those are the three areas where a poorly run session can go wrong.

How to Prepare for the First Session

Go in knowing what you actually need, which is often different from what you are claiming. Bring the documents that support your position, and be ready to share the ones that matter. Send someone who has the authority to agree to terms on the spot, because a settlement that has to wait three weeks for board approval tends to lose momentum. Listen to the other side’s version even if you think you have heard it before.

Mediation will not settle every dispute. Some counterparties come to the table only to say they came, and some disputes turn on a point of law that one side wants a judge to decide. When that happens, the mediator issues a report noting that no settlement was reached and you can move on to court.

But if the dispute can be closed in a few sessions instead of a few years, that is time and money your business gets back to spend on things it would rather be doing.

About The Author

Aditya Aryan is a lawyer and mediator. He is currently building marketing at Sama, India’s leading online dispute resolution institution.