Delhi HC: Counter-Claims in Commercial Suits Must Independently Comply With Section 12A Mediation Requirement

Under the Commercial Courts Act, 2015, the Delhi High Court has ruled that a defendant filing a counter-claim in a pending commercial suit must mandatorily comply with the pre-institution mediation requirement under Section 12A, particularly when no prior mediation has taken place between the parties.

A Division Bench comprising Justice Anil Kshetarpal and Justice Amit Mahajan delivered this judgment while adjudicating an appeal that challenged the rejection of a counter-claim for non-compliance with the statutory mediation mandate. The Court navigated through conflicting single-judge decisions to establish a unified principle regarding the intersection of counter-claims and mandatory mediation.

The Mandatory Nature of Pre-Institution Mediation

The Court began by reaffirming the legal position established by the Supreme Court in Patil Automation (P) Ltd. v. Rakheja Engineers (P) Ltd., which held that Section 12A of the Commercial Courts Act, 2015 is mandatory for all commercial disputes that do not contemplate urgent interim relief. The Bench emphasized that the provision is not a mere procedural formality but a meaningful opportunity for amicable dispute resolution.

The Court, in its reasoning, observed: "The issue cannot be answered by adopting either of the two extreme positions canvassed before this Court. To hold that every Counter-claim must invariably be preceded by a separate mediation process, irrespective of the surrounding circumstances, would amount to reading Section 12A of the CC Act in an unduly rigid and formalistic manner. Equally, to hold that once mediation proceedings have been initiated between the parties, all future Counter-claims automatically stand exempted from Section 12A would substantially dilute the statutory object underlying the provision."

Criteria for Exemption from Fresh Mediation

Meaningful Disclosure and Resolution

The Bench clarified that the necessity of a second round of mediation depends on whether the disputes raised in the counter-claim were previously addressed. If a defendant had disclosed its claims during a prior mediation that culminated in a non-settlement report, a fresh round may not be necessary. The Court highlighted that the legislative emphasis is on providing a genuine opportunity to resolve identified disputes before approaching the Court.

Comparison with Precedents

The Court analyzed several decisions, including Sanjana Agarwal v. Namoshivai Apparels Private Limited, where a co-ordinate bench had observed that requiring a second round of mediation for the same subject matter would defeat the purpose of the Commercial Courts Act, 2015. However, the Court distinguished the current case, noting that since the original suit was filed without mediation due to urgent interim reliefs, the counter-claim represented the first instance where the parties could have explored mediation.

The Court further observed: "Where the proposed Counter-claim had never formed part of any mediation process, or where no mediation had been undertaken at all, independent compliance with Section 12A of the CC Act would ordinarily be required."

Counter-Claims as Independent Suits

The Court rejected the appellant's argument that a counter-claim does not fall within the ambit of the expression "suit" under Section 12A. It noted that the Code of Civil Procedure, 1908 recognizes a counter-claim as a cross-suit with the incidents of an independent action. Furthermore, the Court dismissed concerns regarding limitation periods, pointing out that the time spent in mediation is excluded for limitation purposes under Section 12A of the Commercial Courts Act, 2015.

Court Directions

Dismissing the appeal, the Court affirmed the District Judge's order. The Court has following directions:

"The Appeal is accordingly dismissed, albeit for reasons partly differing from those assigned in the Impugned Order."

Background:

The dispute arose after Respondents filed a commercial suit against the Appellant, obtaining urgent interim relief. During the proceedings, the Appellant filed a counter-claim based on inspections conducted by a Local Commissioner. The Respondents moved an application under Order VII Rule 11 of the Code of Civil Procedure, 1908, arguing that the counter-claim was barred because the Appellant failed to undergo pre-institution mediation as required by Section 12A of the Commercial Courts Act, 2015. The Commercial Court, relying on Aditya Birla Fashion and Retail Limited v. Mrs Saroj Tandon, rejected the counter-claim. On appeal, the High Court maintained the rejection, clarifying that because no mediation had ever taken place in the main suit, the Appellant could not bypass the statutory requirement for the counter-claim.

Case Details:
Case No.: FAO(COMM) 46/2025
Case Title: VIJAY v. HAVELLS INDIA LIMITED & ORS.
Appearances:
For the Petitioner(s): Mr. Abhijit Mishra, Ms. Payal Bahl, Mr. Himanshu Tomar, Mr. Vikhyat Gupta, Mr. Prashant Jaiswal and Mr. Ram Parvesh Kumar, Advs.
For the Respondent(s): Mr. Divyansh Jain and Mr. Vidhan Jain, Advs.

Source: 2026 CaseBase(DEL) 464