Since the Commercial Courts (Amendment) Act 2018, every commercial dispute that doesn't require urgent interim relief must first pass through pre-institution mediation under Section 12A before a suit can be filed. Most plaintiffs treat it as a formality. The defendants who understand it use it as a weapon.
Before instituting a commercial suit of specified value (≥ ₹3 Lakhs), the plaintiff must engage in mandatory pre-institution mediation through the notified authority — typically the Legal Services Authority at state level. If mediation fails or no settlement is reached within 3 months (extendable to 5 by mutual consent), the plaintiff obtains a non-settlement report and files the suit with that report attached. Bypassing 12A makes the suit liable to dismissal at threshold.
The only carve-out: if the plaintiff genuinely needs urgent interim relief — injunction, attachment, asset freeze — they can file directly. But courts scrutinise this carefully. Patel Engineering and subsequent cases have repeatedly held that contrived urgency leads to suits being referred back to mediation, and the months are lost anyway.
- Force the plaintiff to disclose case theory and documents informally, before discovery.
- Stretch the 3-5 month window with procedural delays and adjournment requests.
- Make low-ball settlement offers that the plaintiff can later be accused of unreasonably rejecting.
- Identify weaknesses in the plaintiff's evidence before the formal trial process begins.
Inexperienced plaintiffs walk into mediation with the same documents they'd file with the plaint — and hand the defendant a free preview of the case.
12A mediation outcomes — prepared vs unprepared plaintiffs
Unprepared plaintiff
Strategic plaintiff
Funded-matter observation 2023-2026. 'Unprepared' = walked in with full plaint documents and disclosed case theory. 'Strategic' = treated mediation adversarially with measured disclosure.
- 1Treat it as adversarial, not collaborative.
- 2Disclose only what is strictly necessary to substantiate the claim — not internal correspondence, working notes, or strategy material.
- 3Document every offer and counter-offer in writing. These become admissible if you later argue the defendant was unreasonable.
- 4Don't make admissions about case weaknesses, settlement bottoms, or alternative theories.
- 5If the defendant stalls, document the stalling and seek expedited closure.
- 6Bring counsel into mediation sessions, not just a procedural representative.
Pre-institution mediation does occasionally produce real settlements — typically when the counterparty acknowledges the debt in principle, a modest concession from the plaintiff (5-15%) unlocks immediate payment, the continued business relationship matters, and the counterparty is solvent and rational. In those cases settling at 12A stage is the highest-leverage option in the entire commercial recovery toolkit — it avoids 2-4 years of litigation cost and time.
A settlement reached in 12A mediation is binding and enforceable as if it were a court order under Section 73 of the Mediation Act 2023 and Order 23 Rule 3 CPC. There is no 'we'll honour this in spirit' — it's decree-equivalent. Drafting matters: include payment timelines and default consequences, a step-up interest clause if instalments are missed, the jurisdiction for enforcement, and signatures of authorized signatories on both sides.
If you've decided the case must go to trial, your goal in mediation is to generate a clean non-settlement certificate quickly, avoid disclosing case theory, and document the defendant's unreasonableness for use in cost arguments later. Section 35A CPC allows courts to award costs against parties who unreasonably refuse settlement — including in 12A mediation. Document everything.
Plaintiffs who recover quickly are the ones who use mediation either to actually settle, or to set up the trial — never the ones who walk in unprepared and walk out with the same papers and three months lost.