Safiya Malik

The High Court of Delhi Single Bench of Justice Purushaindra Kumar Kaurav held that the plaintiff failed to establish any genuine, immediate, or compelling urgency justifying exemption from the mandatory requirement of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015. The court rejected the application seeking such exemption and dismissed the suit at the threshold, with liberty to institute fresh proceedings after complying with the statutory mediation process. It was further directed that any pending applications would also stand disposed of in view of the rejection of the suit. The court concluded that the plea of urgency was untenable, both factually and legally, and did not meet the statutory threshold for bypassing pre-institution mediation.

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The proceedings concerned a commercial suit instituted by a plaintiff, a Non-Banking Financial Company, against four defendants, seeking declaratory and injunctive reliefs. The plaintiff sought a decree declaring an Inter-Corporate Loan Agreement dated 14 December 2022, executed between itself and the first defendant, as well as an Assignment Deed dated 1 February 2024 between the first and second defendants, to be illegal, void ab initio, and non-est. The claim arose from a financial arrangement in which, under an Inter-Corporate Deposit Agreement dated 14 December 2022, the plaintiff received INR 60 crores from the first defendant to acquire a corporate loan owed by the fourth defendant to a bank. Subsequently, the plaintiff entered into an Assignment Deed with the bank for INR 98 crores, thereby acquiring the debt and creating a charge over the fourth defendant's assets.

The plaintiff alleged that in February 2024, the first defendant unlawfully assigned the loan to the second defendant based on a forged and fabricated Inter-Corporate Loan Agreement, purportedly signed by the third defendant without authority. A complaint was lodged with the Economic Offences Wing under provisions of the Indian Penal Code for theft, cheating, and forgery.

It was contended that the defendants acted in collusion to deprive the plaintiff of its secured rights over the debt. The plaintiff sought annulment of the disputed agreements and damages. The matter was first listed on 1 July 2025, when counsel for defendants one and two objected to the maintainability of the suit for non-compliance with Section 12A of the Commercial Courts Act, 2015. The plaintiff then sought to justify urgency to bypass pre-institution mediation.

The plaintiff argued that Section 12A applies only where urgent interim relief is not contemplated and that the present suit clearly involved such relief. Reliance was placed on Supreme Court judgments, including Patil Automation, Yamini Manohar, and Dhanbad Fuels, to contend that the nature of the urgent relief sought fell within the statutory exception. The plaintiff asserted that the wrongful discharge of the charge over the fourth defendant's assets by the Registrar of Companies on 17 April 2025 necessitated immediate judicial intervention.

Defendants one and two countered that the plaintiff had been aware of the impugned transactions since February 2024 but delayed filing the suit until January 2025, leaving defects unrectified for months. They argued that the absence of prompt action belied any urgency. They submitted that the transactions had concluded, and no further steps were pending, making mediation the appropriate course. Defendant four submitted that the debt was already discharged as of 1 January 2025 and that the plaintiff was manufacturing urgency.

The court examined Section 12A of the Commercial Courts Act, noting its mandatory nature for suits not contemplating urgent interim relief. "The legislative scheme of sub-section (1) of Section 12A is clear in its objective in fostering a culture of amicable settlement and reducing unnecessary litigation." It recorded that the exception for urgent interim relief is narrow and demands substantiated, bona fide urgency.

The court stated, "Such an existence of urgency must be proved, certainly beyond plain assertions... the phrase 'contemplate any urgent interim relief' demands an elevated level of scrutiny as it is not a box to be checked at the plaintiff's sole discretion." The assessment must show that delay caused by mediation would cause irreparable prejudice, and urgency must be immediate, not speculative.

The court cited Supreme Court precedents confirming that merely including a prayer for urgent interim relief cannot circumvent Section 12A. "Camouflage and guise to bypass the statutory mandate of pre-litigation mediation should be checked when deception and falsity is apparent or established." It also referred to its earlier Division Bench decision involving the same plaintiff, where a similar plea of urgency was rejected for being illusory.

Applying these principles, the court noted that the plaintiff knew of the disputed agreements in February 2024, filed a complaint later that month, but waited nearly a year to file suit. "The inaction is... attributable solely to the plaintiff's own conduct and undermines any plea of urgency." The defects in the plaint were cured only in April 2025, further indicating absence of genuine urgency.

The court found that the relief sought — injunction against use of the agreements — had become infructuous, as the debt was discharged and satisfaction recorded by the Registrar of Companies. "The ship has sailed for claiming any urgent relief... the element of urgency is not justified and appears to be missing."

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It concluded, "The plaintiff has failed to establish the existence of any genuine, immediate, or compelling urgency that would justify an exemption from the mandatory requirement of pre-institution mediation."

The court rejected the application under Section 12A seeking exemption from pre-institution mediation. It ordered, "In light of the above, this Court finds that no case is made out for exemption under Section 12A of the Act." The suit was rejected at the threshold for non-compliance with the statutory mandate. Liberty was granted to the plaintiff to file afresh after undertaking pre-institution mediation. The court stated, "Liberty is reserved... to file a suit for the instant cause of action afresh, if the need so arises, post-frustrating pre-institution mediation envisaged in Section 12A."

It further recorded, "Liberty is also reserved in favour of the applicant... to re-agitate the issues raised... if so necessitated." The date fixed before the Joint Registrar was cancelled, and all pending applications stood disposed of.

Advocates Representing the Parties:
For the Petitioners: Mr. Harish Malhotra, Senior Advocate; Mr. Dayan Krishnan, Senior Advocate; Mr. Apoorv Agarwal, Mr. Manav Goyal, Ms. Ritika Gusain, Mr. Sukrit Seth, Ms. Amrita Sony, Ms. Aastha Arora, Advocates

For the Respondents: Mr. Rajiv Nayar, Senior Advocate with Mr. Anirudh Sharma, Ms. Meghna Mishra, Mr. Tarun Sharma, Ms. Ujjwala Gupta, Advocates for Defendant No.1; Mr. Rajiv Nayar, Senior Advocate with Mr. Sanyam Khetarpal, Ms. Devika Mohan, Ms. Sonal Gupta, Ms. Lisa Sankrit, Advocates for Defendant No.2; Mr. Sidhant Kumar, Ms. Ekssha Kashyap, Ms. Shagun Chopra, Advocates for Defendant No.4; Mr. Jayant Mehta, Senior Advocate with Mr. Raghav Chadha, Mr. Mukund Rawat, Mr. Nishant Upadhyay, Mr. Akash Mahwani, Advocates for applicant in I.A. 14933/2025

Case Title: M/S Exclusive Capital Limited v. Clover Media Private Limited & Ors.

Neutral Citation: 2025: DHC:6513

Case Number: CS(COMM) 399/2025

Bench: Justice Purushaindra Kumar Kaurav