Paragraph numbers below are the court’s original numbering, recovered from the source text.
44. Thus, it becomes clear from a perusal of the aforesaid decision that the test under Section 12A is not whether the prayer for the urgent interim relief actually comes to be allowed or not, but whether on an examination of the nature and the subject-matter of the suit and the cause of action, the prayer of urgent interim relief by the plaintiff could be said to be contemplable when the matter is seen from the standpoint of the plaintiff. Further, what is also to be kept in mind by the courts is that the urgent interim relief must not be merely an unfounded excuse by the plaintiff to bypass the mandatory requirement of Section 12A of the 2015 Act.
45. In the case at hand indisputably, no urgent interim relief was prayed for at the time of the institution of the suit by the Union. iv. The effect of according prospectivity to the declaration in Patil Automation (supra) on cases like the one at hand
46. In Patil Automation (supra), this Court held that the language of Section 12A is plainly imperative in nature, and any commercial suit instituted without adhering to this provision is liable to be rejected under Order VII Rule 11 of the CPC. However, recognising that the Amending Act containing Section 12A is a ‘toddler’, and that the “law necessarily would have teething problems at the nascent stage”, this Court declared the aforesaid declaration to operate prospectively, effective from 20.08.2022, so that the stakeholders may be sufficiently informed. In the instant case, as the money suit was filed by the respondents much prior to the decision in Patil Automation (supra), it is squarely protected by the prospective ruling of this Court.
47. This Court had further held that the protective umbrella of prospective overruling in Patil Automation (supra) would not apply to plaints which were rejected, and no steps had been taken within the period of limitation; or such rejection had been acted upon by filing a new suit; or if the plaint violating Section 12A had been filed after the jurisdictional High Court has declared the provision to be mandatory. Indisputably, the Union of India does not fall under any of the other aforementioned exceptions. Thus, we find it difficult to agree with the submission canvassed by the appellant that the bar of Section 12A of the 2015 Act would continue to apply to the money suit filed by the respondents despite there being a prospective declaration in Patil Automation (supra). 464
48. While it is correct that any declaration of the correct position of the law goes back to the day of the inception of the law itself, as the courts merely discover the correct position of law by applying settled legal principles and not legislate a new legal position, it is equally well recognised that the courts, while declaring an interpretation of the law, may declare it to be operative only prospectively so as to prevent chaos which may ensue as a result of the unsettling of the transactions which may have taken place before such declaration. Taking a clue from the decisions of this Court on the aspect of prospective overruling, it could be said that this Court has been endowed with the power to mould the relief to do complete justice in a given situation, and to avoid the possibility of chaos and confusion that may be caused in the society at large. v. The equitable maxim lex non cogit ad impossibilia
49. It is settled that law does not compel an impossible performance, and the same position has been followed by this Court in a catena of judgments. Espousing the aforesaid maxim in Raj Kumar Dey (supra) this Court has held as follows: “6. …. The other maxim is lex non cogit ad impossibilia (Broom’s Legal Maxims — page 162) — The law does not compel a man to do that which he cannot possibly perform. The law itself and the administration of it, said Sir W. Scott, with reference to an alleged infraction of the revenue laws, must yield to that to which everything must bend, to necessity; the law, in its most positive and peremptory injunctions, is understood to disclaim, as it does in its general aphorisms, all intention of compelling impossibilities, and the administration of laws must adopt that general exception in the consideration of all particular cases.”
50. The aforesaid maxim was recognised and reiterated by this Court in U.P. SRTC v. Imtiaz Hussain reported in (2006) 1 SCC 380.
51. The materials on record would indicate that after the establishment of the first Commercial Court at Alipore, the statutory framework and corresponding rules were progressively implemented until December 2020. Therefore, during this intervening period, referring the matter to pre-suit mediation under Section 12A was impossible due to a persisting vacuum created by lack of appointment of necessary authorities and delineation of the procedural framework. [2025] 6 S.C.R. M/s Dhanbad Fuels Private Limited v. Union of India & Anr.
52. The learned ASG is right to some extent in her submission that awaiting the establishment of the requisite infrastructure would unduly impede the recovery process in a money suit involving public funds, thereby defeating the very purpose and legislative intent of the 2015 Act, which aims to ensure the expeditious resolution of commercial disputes.
53. The declaration of the mandatory nature of Section 12A of the 2015 Act was given prospective effect in Patil Automation (supra) keeping in mind the fact that Section 12A, being in its stages of infancy, had given rise to conflicting views by different High Courts and consequently an overall lack of clarity on the nature of the provision. Thus, the Court was of the view that in the absence of prospective effect being given to the declaration, all such suits which had been filed without complying with the provision, owing to the lack of clarity on the mandatory nature of the provision, would be susceptible to being rejected and the court fees submitted at the time of their institution being written off. The Court further expressed apprehensions as regards the applicability of Section 14 of the Limitation Act to fresh suits filed after the rejection of plaint for non-compliance with Section 12A and thus held that it would be in the best interest of justice that the declaration of mandatory compliance with Section 12A be given prospectivity to avoid the aforesaid complexities from cropping up.
54. While giving prospectivity to its finding on the mandatory nature of Section 12A and the consequence of rejection of plaint in cases of non-compliance, the Court also observed that the prospective declaration would not save the situation in certain categories of cases which we have discussed in paragraph 47 above. However, it is not the case of the appellant that the case at hand falls within the ambit of any of the exceptions laid down in Patil Automation (supra).
55. It is interesting to note that the decision impugned before us was referred to by this Court in paragraph 54 of Patil Automation (supra) while it was discussing the divergent views of different High Courts on the nature of Section 12A of the 2015 Act. Therein, this Court had observed thus: “54. A learned Single Judge of the High Court of Calcutta, in the decision reported in Dhanbad Fuels Ltd. v. Union of India and Others, 2021 SCC OnLine SC 429, took the view that mediation in India is still at a nascent stage and requires more awareness. There was a need for mandatory 466 training of commercial disputes. It was further found that the party cannot be denied the right to participate in the justice dispensation system. It wasfurther noticed that there was no obligation on the part of the defendant to respond to the initiative of the plaintiff. Rejecting the plaint under Order VII Rule 11(d) in view of Order VII Rule 13, which enables a fresh Suit to be filed upon rejection under Order VII Rule 11, would show that the power under Order VII Rule 11 should not be invoked as it would not be in accordance with the objectives of the Act and the Rules.”
56. After taking into consideration the view taken by the Calcutta High Court in the impugned decision as well as the view of several other High Courts, this Court, in Patil Automation (supra), arrived at the findings as we have discussed in detail in the preceding paragraphs. Thus, insofar as the interpretation of the nature of Section 12A of the 2015 Act in the impugned decision is concerned, the same must be seen in the context of the decision in Patil Automation (supra).
57. However, the pertinent question that falls for us is whether the approach adopted by the Trial Court and approved by the High Court in the present case, in keeping the suit in abeyance, and sending the parties to mediation as per the PIMS Rules and the 2020 SOP, was the correct approach. In other words, while the decision in Patil Automation (supra) is clear that any suit instituted after 20.08.2022 without complying with Section 12A of the 2015 Act must be visited with the rejection of the plaint under Order VII Rule 11, whether in suits filed prior to the said date, the courts must keep the suit in abeyance and refer the parties to mediation, and proceed with it only after the report of the mediator is received.
58. The answer to the aforesaid question requires us to harmoniously construe the two observations made by this Court in Patil Automation (supra). The Court observed in paragraph 104 of the said decision that the declaration of the law by the Court would relate back to the date of the Amending Act. However, keeping in mind practical considerations, the Court in paragraph 113.1 observed that the consequence of rejection of plaint under Order VII Rule 11 for not complying with Section 12A of the 2015 Act would only be operative prospectively with effect from 20.08.2022. Thus, what is clear from a joint reading of both these observations is that while Section 12A is held to be mandatory from the date of the inception of the provision [2025] 6 S.C.R. M/s Dhanbad Fuels Private Limited v. Union of India & Anr. itself, the consequence of rejection for non-compliance is only made applicable prospectively.
59. Thus, although suits which were instituted before the date of the decision in Patil Automation (supra) may not be rejected under Order VII Rule 11 for not complying with Section 12A of the 2015 Act, unless they fall within the exceptional categories described in the said decision itself, yet this would not obviate the requirement of giving the parties a chance to attempt to resolve the disputes through mediation as envisaged under Section 12A of the 2015 Act. One of the ways by which this can be achieved is by keeping the suit in abeyance and referring the parties to a time-bound mediation and only proceeding with the suit once the report of the mediator is received. This approach would ensure that even if not pre-institution, the parties at the very least get an opportunity to resolve the disputes through mediation post the institution of the suit. This in no way means that Section 12A envisages post-institution mediation. Post- institution mediation, while keeping the suit in abeyance, is only envisaged for the limited category of cases which are not covered by the prospective declaration made in Patil Automation (supra) as the rejection of plaints under Order VII Rule 11 has been done away with in the interest of justice in such category of cases. This approach also received the tacit approval of this Court in Patil Automation (supra), wherein while disapproving the reasoning adopted in the order impugned therein, the Court refused to interfere with the impugned order which had referred the parties to mediation while keeping the suit in abeyance.
60. However, it is also important to clarify that in cases where a suit instituted prior to 20.08.2022 has been decided, it would not be of any avail to the parties to revisit the same on the ground of mandatory compliance with Section 12A of the 2015 Act. However, wherever such a suit is pending before the trial court and an objection is raised by the defendant for non-compliance with Section 12A of the 2015 Act, or any intent to settle the dispute by mediation is exhibited by the parties, then it would be permissible for the court to keep the suit in abeyance and refer the parties to time-bound mediation in accordance with the 2015 Act, the PIMS Rules and the 2020 SOP.
61. Before we part with the matter, we also deem it appropriate to address one of the main contentions of the appellant that having regard to the fact that the suit is still at the nascent stage of filing of written 468 statement and no substantial progress has been made therein, this Court must reject the plaint and direct the respondents to institute a fresh suit after complying with the mandatory requirement of Section 12A. However, we do not find any force in the aforesaid submission. We do not see how directing the respondents to institute a fresh suit would be of any benefit to the appellant. We have discussed in detail that this Court in Patil Automation (supra) made its decision prospectively applicable keeping in mind the predicament of suits like the one at hand wherein owing to a lack of clarity in law, Section 12A of the 2015 could not be complied with in certain cases. Directing the institution of a fresh suit would only result into the forfeiture of the court fees deposited by the respondents, which would only be an unnecessary burden on the public exchequer. The approach adopted by the Trial Court and the High Court in keeping the suit in abeyance and directing the parties to approach the competent authority for mediation commends more to us as it complies with a harmonious reading of the decision in Patil Automation (supra) and prevents unnecessary delays and burden on the public exchequer. Further, substantial progress in the suit was not the only reason why the Court in Patil Automation (supra) gave prospective effect to its decision. As we have discussed, factors like forfeiture of court fees, ambiguity over the applicability of Section 14 of the Limitation Act, unsettling of settled cases, etc. were a few other reasons which weighed with the Court in arriving at its decision of according prospectivity to the judgment. Thus, we find it difficult to accept the argument advanced by the appellant that the plaint must be rejected for the reason that the suit has not made substantial progress after its institution. CONCLUSION
62. In light of the aforesaid discussion, we summarise our findings as under: a. The decision of this Court in Patil Automation (supra) lays down the correct position of law as regards Section 12A of the 2015 Act by holding it to be mandatory in nature. b. As held in paragraph 104 of the decision in Patil Automation (supra), the declaration of the mandatory nature of Section 12A of the 2015 Act relates back to the date of the Amending Act. c. As held in paragraph 113.1 of the decision in Patil Automation (supra), any suit which is instituted under the 2015 Act without [2025] 6 S.C.R. M/s Dhanbad Fuels Private Limited v. Union of India & Anr. complying with Section 12A is liable to be rejected under Order VII Rule 11. However, this declaration applies prospectively to suits instituted on or after 20.08.2022. d. A suit which contemplates an urgent interim relief may be filed under the 2015 Act without first resorting to mediation as prescribed under Section 12A of the 2015 Act. e. Unlike Section 80(2) of the CPC, leave of the court is not required to be obtained before filing a suit without complying with Section 12A of the 2015 Act. f. The test for “urgent interim relief” is if on an examination of the nature and the subject-matter of the suit and the cause of action, the prayer of urgent interim relief by the plaintiff could be said to be contemplable when the matter is seen from the standpoint of the plaintiff. g. Courts must also be wary of the fact that the urgent interim relief must not be merely an unfounded excuse by the plaintiff to bypass the mandatory requirement of Section 12A of the 2015 Act. h. Even if the urgent interim relief ultimately comes to be denied, the suit of the plaintiff may be proceeded with without compliance with Section 12A if the test for “urgent interim relief” is satisfied notwithstanding the actual outcome on merits. i. Suits instituted without complying with Section 12A of the 2015 Act prior to 20.08.2022 cannot be rejected under Order VII Rule 11 on the ground of non-compliance with Section 12A unless they fall within the exceptions stipulated in paragraph 113.2 and 113.3 of the decision in Patil Automation (supra). j. In suits instituted without complying with Section 12A of the 2015 Act prior to 20.08.2022 which are pending adjudication before the trial court, the court shall keep the suit in abeyance and refer the parties to time-bound mediation in accordance with Section 12A of the 2015 Act if an objection is raised by the defendant by filing an application under Order VII Rule 11, or in cases where any of the parties expresses an intent to resolve the dispute by mediation.
63. Thus, the answer to the question formulated by us whether a suit filed without complying with Section 12A of the 2015 Act must be 470 dismissed or be kept in abeyance with a direction to the parties to explore mediation is as follows: a. If the suit is instituted on or after the date of the decision in Patil Automation (supra), i.e., 20.08.2022, without complying with Section 12A of the 2015 Act, then it must meet with rejection under Order VII Rule 11, either on an application by the defendant or suo motu by the court. b. If the suit was instituted prior to 20.08.2022 without complying with Section 12A of the 2015 Act, and the same does not fall within one of the exceptional categories as explained in paragraph 47 of this judgment, then it would be open to the court to keep the suit in abeyance and direct the parties to explore the possibility of mediation in accordance with the 2015 Act, the PIMS Rules and the 2020 SOP.
64. Having answered the issues as aforesaid, we find it difficult to accept the contention of the appellant that the Trial Court as well as the High Court committed an error in refusing to reject the plaint under Order VII Rule 11. On the contrary, the approach adopted by the High Court in the impugned order in keeping the suit in abeyance and referring the parties to mediation, strikes a perfect balance between the mandatory nature of Section 12A of the 2015 Act as well as the prospective applicability of the consequence of non-compliance with Section 12A as held in Patil Automation (supra).
65. Needless to clarify that the mediation proceedings must be completed within the time frame stipulated by Section 12A of the 2015 Act and the PIMS Rules, that is, within a period of three months and extendable by two more months, if the need so arises.
66. In the result, the present appeal fails and is hereby dismissed.
67. Pending application(s), if any, shall also stand disposed of.
68. We direct the Registry to circulate a copy of this judgment to all High Courts. Result of the case: Appeal dismissed. †Headnotes prepared by: Nidhi Jain