The Delhi High Court has ruled that pre-litigation mediation is compulsory before filing counterclaims in commercial disputes under the Commercial Courts Act. This requirement is designed to foster settlements before escalating to courtroom battles.
Justice Manoj Jain, addressing the matter, emphasized that the objective of pre-institution mediation is to reduce the number of cases reaching the courts by encouraging parties to resolve disputes amicably. “The process of pre-institution mediation is not only benevolent but essential. It aims at avoiding litigation altogether, which far from obstructing, actually aids in the speedy resolution of disputes,” Jain explained.
The court rejected any lenient interpretation of this mandatory provision, stating that doing so would undermine the legislative intent and convert what is ‘mandatory’ into ‘optional’.
The judgment was in response to a case involving Aditya Birla Fashion and Retail Limited, which had rented a shop from the respondent in 2013. Following adverse impacts from the COVID-19 pandemic, Aditya Birla Fashion sought to terminate the lease and reclaim their security deposit, initiating a commercial suit after mediation attempts failed due to the respondent’s absence.
The respondent then filed a counter-claim for rental payments without undergoing the required mediation, leading to a legal challenge from Aditya Birla Fashion. The high court overturned the trial court’s decision to dismiss the plea for rejecting the counter-claim, reiterating that counter-claims in commercial disputes must adhere to the same legal requirements as initial claims, including mandatory mediation.
