Section 12A Commercial Courts: Pre-Institution Mediation Explained

Section 12A Commercial Courts: Pre-Institution Mediation Explained

If you are about to file a commercial suit in Hyderabad or anywhere in India, Section 12A of the Commercial Courts Act, 2015 is usually the first filter. In most money-recovery, supply, construction, franchise and shareholder disputes of specified value, you cannot walk straight into the Commercial Court. You must first attempt pre-institution mediation through the Legal Services Authority.

This is not a courtesy letter or a private negotiation. It is a statutory precondition. The Supreme Court has held that non-compliance can lead to rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908, unless the suit genuinely contemplates urgent interim relief.

This guide explains when Section 12A applies, how the mediation process works, what documents and fees are needed, how limitation is protected, what the urgent-relief exception really means, and the mistakes that regularly get commercial suits thrown out at the threshold.

What is Section 12A of the Commercial Courts Act?

Section 12A was inserted by the 2018 amendment (with effect from 3 May 2018). It sits in Chapter IIIA, titled Pre-Institution Mediation and Settlement.

In simple terms: if your case is a commercial dispute of specified value and you are not asking for urgent interim protection, you must first apply for mediation. Only after that process ends — by settlement, refusal, or a non-starter report — can you institute the suit.

The object was two-fold. Parliament wanted faster commercial justice and a lighter court docket. It also wanted businesses to try a structured settlement before spending years in a commercial court.

The procedure is laid down in the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 (PIMS Rules). The Central Government has authorised State and District Legal Services Authorities under the Legal Services Authorities Act, 1987 to run this process. After the Mediation Act, 2023, notified mediation service providers may also be authorised — the current list for Telangana should be verified with TSLSA or the concerned DLSA before filing.

When does Section 12A apply?

Section 12A applies only when all of the following are present:

• The dispute is a “commercial dispute” under Section 2(1)(c) of the Act.
• The specified value is at least Rs 3 lakh (Section 2(1)(i) read with Section 12), unless a higher Central Government notification applies — none is in force as of this writing, but confirm before filing.
• You propose to institute a suit under the Commercial Courts Act.
• The suit does not contemplate urgent interim relief.

Typical commercial disputes include ordinary transactions of merchants and traders, export-import, construction and infrastructure contracts, franchise and distribution, partnership and joint-venture issues, shareholder agreements, intellectual property, and certain immovable-property disputes used exclusively in trade or commerce. The list in Section 2(1)(c) is specific. Labelling a suit “commercial” does not make it so, and omitting the label does not take it out if the facts fit.

In Telangana, the High Court has treated the Rs 3 lakh specified-value threshold as a pan-India statutory floor from 3 May 2018. Specified value (whether the dispute is “commercial” at all) is different from the State-notified pecuniary limits that decide which Commercial Court hears the case. Both must be checked on the facts.

When Section 12A does not apply

• The claim is below specified value, or is not a commercial dispute at all — ordinary civil suit procedure then applies.
• The suit contemplates genuine urgent interim relief (injunction against disposal of assets, passing off, continuing IP infringement, or similar immediate peril).
• The proceeding is not a “suit” under the Act (for example, some execution or independent arbitration applications — classify the proceeding carefully; do not assume an exemption).
• Suits instituted before 20 August 2022 without mediation are not automatically rejected; the Supreme Court has directed a different treatment for that older stock of cases.

Is pre-institution mediation mandatory?

Yes, for suits that do not contemplate urgent interim relief. In Patil Automation Private Limited v. Rakheja Engineers Private Limited, (2022) 10 SCC 1 (17 August 2022), the Supreme Court held that Section 12A is mandatory. A suit filed in breach is liable to be rejected under Order VII Rule 11. The court can even act on its own motion.

The Court also held that Section 12A is not a mere procedural nicety. Exhausting the mediation attempt is a condition to institute the suit.

To avoid chaos in pending matters, the declaration that non-compliant plaints must be rejected was made prospective from 20 August 2022.

In Dhanbad Fuels Private Limited v. Union of India, 2025 INSC 696 (15 May 2025), the Supreme Court restated that position. For pre-20 August 2022 suits that skipped mediation, the court should ordinarily keep the suit in abeyance and send the parties to time-bound mediation if the defendant objects under Order VII Rule 11 or a party wants to mediate — not reject the plaint as a first reflex. For suits filed on or after 20 August 2022 without compliance, rejection remains the ordinary consequence.

The urgent interim relief exception

Section 12A itself carves out suits that “contemplate” urgent interim relief. You do not need a separate statutory waiver application. The test is in the plaint, the documents and the oral submissions.

In Yamini Manohar v. T.K.D. Keerthi, (2024) 5 SCC 815, the Supreme Court held:

• Pre-institution mediation is necessary unless the suit contemplates urgent interim relief.
• The prayer must not be a disguise to wriggle out of Section 12A.
• The court looks at the plaint and documents as a whole, from the plaintiff’s standpoint at the time of filing.
• The court is not deciding, at the Section 12A stage, whether the interim injunction will ultimately be granted on merits.

Later cases, including Dhanbad Fuels and subsequent High Court decisions, have sharpened the same test. A proforma or anticipatory prayer for “urgent relief” used only to skip mediation can be ignored. Genuine continuing injury — for example ongoing trademark infringement — may still support urgency even if there was some delay in filing.

The Telangana High Court has also cautioned that Section 12A cannot be used to “cold-storage” urgent commercial claims or to arm-twist a plaintiff who needs immediate protection (revision arising from a Commercial Court exemption order, February 2026). That is useful local guidance, but each case turns on its pleadings.

Practical drafting point: if you rely on the exception, plead facts of immediacy — risk of asset dissipation, perishable subject-matter, continuing infringement, or a relief that will become useless after three to five months of mediation. Attach supporting documents. Do not add a stock injunction prayer to a plain money-recovery suit and expect the court to treat it as urgent.

Forums in Hyderabad and Telangana

Pre-institution mediation is not filed in the Commercial Court. It is filed before the authorised Legal Services Authority that has territorial and pecuniary connection with the dispute.

• Telangana State Legal Services Authority (TSLSA) and the concerned District Legal Services Authority (DLSA).
• For Hyderabad city disputes: DLSA / Mediation Centre at the District Court complex, Purani Haveli.
• For many Ranga Reddy / Cyberabad / L.B. Nagar disputes: DLSA, Ranga Reddy at L.B. Nagar.
• Confirm the correct DLSA from the cause of action, defendant’s address and the court that would later hear the suit. Filing in the wrong Authority wastes the 10-day notice cycle.

If mediation fails or is a non-starter, the commercial suit is filed in the Commercial Court having territorial and pecuniary jurisdiction — typically a designated Commercial Court at the District Judge level or the commercial bench of the City Civil Court, Hyderabad, depending on value and notification. Appeals from decrees and certain appealable orders lie under Section 13 of the Act. Section 8 bars civil revision against interlocutory orders of a Commercial Court. A writ to the Telangana High Court is exceptional and fact-specific.

Current pecuniary allocation among Hyderabad Commercial Courts and any e-filing SOP of TSLSA / DLSA should be verified before the application is lodged.

Step-by-step procedure under the PIMS Rules

1. Identify that the dispute is commercial and of specified value, and that you do not need genuine urgent interim relief.
2. Prepare Form-1 (Schedule I of the PIMS Rules) with full particulars of both sides, nature of dispute, specified value and relief claimed.
3. File Form-1 with the jurisdictional Authority — by hand, post, or online if that DLSA accepts e-filing — together with the application fee of Rs 1,000 (demand draft or online, as the Authority directs).
4. Give correct postal address and working email / mobile of the opposite party. Wrong particulars are the most common reason a notice never lands.
5. The Authority issues Form-2 notice by registered/speed post and electronic means, calling the opposite party to appear and give consent, on a date not beyond 10 days from issue of notice.
6. If there is no response, a final notice follows. If the opposite party seeks time, one further date (not later than 10 days from the request) may be given.
7. If the opposite party does not appear or refuses consent, the Authority treats the process as a non-starter and issues a Form-3 report to both sides. That report is your ticket to institute the suit.
8. If both sides consent, a mediator is assigned. Before sittings begin, parties pay the one-time mediation fee in Schedule II, shared equally.
9. Mediation must ordinarily finish within three months from the date of the application. It can be extended by two more months only with consent of both parties.
10. If settlement is reached, it is reduced to writing and signed by the parties and the mediator. If it fails, take the closure / failure report and file the commercial suit with the report annexed.

Timelines and limitation

Stage	Outer time
Form-2 first notice to opposite party	Appear within 10 days of issue
Further time, if requested	Alternate date within 10 days of request
Statutory mediation window	3 months from the application date
Extension, only by consent	Further 2 months (total up to 5 months)
Limitation clock	Time spent in pre-institution mediation is excluded under the second proviso to Section 12A(3)

The limitation pause is valuable, but it is not a reason to file Form-1 on the last day of limitation without a complete address and fee. If the Authority returns the application as defective, you may lose the exclusion argument. File early, keep the acknowledgment, and diary the three-month end date.

A commercial suit after a failed mediation still has to meet the Limitation Act, 1963 on its own cause of action. Mediation does not create a fresh cause of action.

Fees under Schedule II (PIMS Rules)

Apart from the Rs 1,000 application fee paid by the applicant, a one-time mediation fee is payable if both sides consent and mediation actually commences. It is shared equally:

Claim value	One-time mediation fee (total)
Rs 3 lakh up to Rs 10 lakh	Rs 15,000
Above Rs 10 lakh up to Rs 50 lakh	Rs 30,000
Above Rs 50 lakh up to Rs 1 crore	Rs 40,000
Above Rs 1 crore up to Rs 3 crore	Rs 50,000
Above Rs 3 crore	Rs 75,000

Confirm the current Schedule and the DLSA account details on the date of filing. Authorities sometimes issue local SOPs for online payment.

What if the parties settle?

A signed settlement under Section 12A(4) has the same status and effect as an arbitral award on agreed terms under Section 30(4) of the Arbitration and Conciliation Act, 1996. That is a powerful result. It is not a private compromise deed that you must sue upon again.

If the other side later defaults, enforcement follows the award-enforcement route (as a deemed decree), not a fresh full-dress trial on the original contract — subject to the limited challenges available against a consent award. Draft the settlement with the same care you would give a consent decree: parties, amounts, dates, default interest, security, and jurisdiction.

What if the other side refuses to mediate?

Refusal or non-appearance ends the mandate. The Authority issues a non-starter report. You are then free to file the commercial suit. The law requires an attempt, not a successful settlement.

Do not skip the Authority and rely only on a lawyer’s legal notice or WhatsApp chats as “mediation”. Those may help on merits. They do not satisfy Section 12A.

Documents you should keep ready

• Form-1 application with specified value working.
• Identity and authorisation: board resolution / vakalat / GPA for companies and firms.
• Contract, invoices, statement of account, demand emails and legal notice.
• Correct address proof and email of the opposite party.
• Rs 1,000 fee proof.
• On assignment of a mediator: Schedule II fee proof.
• Form-3 non-starter report, or settlement / failure report, for annexure to the plaint.
• If claiming urgency instead of mediation: documents showing immediate peril (transfer deeds, listing of goods, continuing infringement captures, bank statements of dissipation).

How defendants challenge a suit filed without Section 12A

The standard tool is an application under Order VII Rule 11 of the CPC. The commercial court looks at the plaint and annexures. If the suit was filed on or after 20 August 2022, does not show genuine urgent interim relief, and has no mediation / non-starter report, rejection is the ordinary order.

A defendant should not treat every injunction prayer as fake. The Supreme Court has warned courts to read the plaint as a whole. Equally, a plaintiff should not assume that adding Order XXXIX Rules 1 and 2 language will save a stale book-debt claim.

If the plaint is rejected, court fee is generally lost. A fresh suit can be filed after complying with Section 12A, subject to limitation (Order VII Rule 13 CPC). That is an expensive way to learn the rule.

Common mistakes to avoid

• Filing the commercial suit first and offering to “mediate later”.
• Treating a legal notice as pre-institution mediation.
• Applying to the wrong DLSA.
• Giving a dead email or old registered office of the defendant, then complaining that notice failed.
• Using a stock urgent-relief prayer in a pure recovery suit.
• Missing the three-month window and assuming the Authority will keep the file open without a consent extension.
• Settling on a loose one-page note instead of a signed Section 12A settlement that can be enforced as an award.
• Ignoring specified-value calculation under Section 12 (interest, mesne profits and other heads can change the court and the Section 12A duty).

When to consult an advocate

• The limitation period is close and you are unsure whether time spent in DLSA mediation will be excluded on your facts.
• You need an injunction against disposal of property, invocation of a bank guarantee, or continuing IP / passing-off harm.
• The opposite party is a government entity or a multi-state group with several addresses.
• You are the defendant and have been served a commercial plaint with no Form-3 report.
• A settlement is on the table and you want it enforceable as an award, not as a vague memorandum.

Bullet-point checklist

• Confirm commercial dispute + specified value of Rs 3 lakh or more.
• Decide honestly: do you need urgent interim relief, or is this a recovery / damages suit?
• If no genuine urgency — file Form-1 with the correct DLSA and Rs 1,000 fee.
• Preserve proof of filing, notice, non-starter or failure report.
• Diary the 3-month (and possible +2-month) outer limit.
• If settlement is reached — sign a complete Section 12A settlement.
• If it fails — annex the Authority report to the commercial plaint.
• If you skip mediation — expect an Order VII Rule 11 attack.

Conclusion

Section 12A is now a gate, not a suggestion. For most commercial recoveries and contract claims of Rs 3 lakh and above, the path is Form-1 at the Legal Services Authority, a three-month mediation window, and only then a commercial plaint. The urgent-relief exception is real, but it is factual. It is not a drafting trick.

Businesses in Hyderabad and across Telangana should treat the DLSA filing as part of case-preparation, not as an afterthought after the vakalat is already signed for court. Done properly, the process can produce an enforceable settlement. Done casually, it can cost you the plaint, the court fee and months of limitation anxiety.

Disclaimer

This article is for general information. It is not legal advice and does not create an advocate-client relationship. Commercial Court notifications, DLSA payment SOPs, the interaction of the Mediation Act, 2023 with authorised service providers, and pecuniary allocation among Hyderabad benches change with practice directions. Have an advocate examine your contract, specified-value working, limitation and urgency before you file Form-1 or a plaint.

Related reading

• How to file a commercial suit in Hyderabad — jurisdiction, specified value and documents
• Temporary injunctions in commercial disputes — Order XXXIX strategy
• Enforcing a mediated settlement or consent award in Telangana
• Limitation Act basics for contract and recovery claims
• Arbitration vs commercial suit — which forum to choose

Planning a commercial recovery or defending a suit filed without mediation? Have the plaint, contract and limitation checked before the Commercial Court hears an Order VII Rule 11 application. Consult an advocate in Hyderabad for a Section 12A compliance review, Form-1 filing before the correct DLSA, or a focused urgent-relief pleading where an injunction is genuinely required.