Calcutta High Court Upholds Rejection Of Suit For Skipping Mediation Under Commercial Courts Act

The Calcutta High Court on 5 May dismissed the appeal filed by Indian Explosives Pvt. Ltd., upholding the order rejecting its suit for non-compliance with Section 12A of the Commercial Courts Act, 2015.

A Division Bench of Justices Debangsu Basak and Md. Shabbar Rashidi held that courts cannot permit parties to bypass the mandatory pre-institution mediation requirement on vague or unsupported claims of urgency, and that a dispensation once granted can be revisited where the circumstances justify such scrutiny. It observed:

“Although the request of dispensation of mandatory pre-institution mediation as ordained by Section 12A of the Act of 2015 is to be considered on the anvil of the perception of the plaintiff of its requirement of urgent interim relief, nonetheless, such anvil must not be hoisted to defeat the mandatory provisions on ruse,”

Indian Explosives filed a suit against Ideal Detonators Pvt. Ltd. and others alleging that a former employee, bound by a confidentiality agreement, misappropriated proprietary drawings and trade secrets and supplied them to the rival company. It stated that the employee had joined in 2012, accessed confidential material during his employment, and continued the alleged unauthorised sharing from 2016 until his termination in 2022 on grounds of moral turpitude.

The company also claimed it discovered the alleged breach only in 2022, after which it initiated criminal proceedings and filed a civil suit in March 2023. It obtained leave under Section 12A to bypass mandatory mediation on grounds of urgency and secured an ex parte interim order.

Ideal Detonators moved the Single Judge seeking revocation of the Section 12A dispensation. The Single Judge allowed the application, held that the plaint did not disclose sufficient urgency to justify bypassing mediation, and rejected the plaint.

Indian Explosives then challenged the order before the Division Bench.It contended that once granted, the Section 12A dispensation could not be recalled.

The Division Bench rejected this submission and relied on its earlier ruling in Unique Entrepreneurs and Finance Limited v. Really Agritech Private Limited, where it held that courts retain the power to recall such leave in appropriate cases, including where a party obtains it through deception or misrepresentation.

The Bench reiterated that courts remain empowered to recall Section 12A dispensation orders where a party secures them by fraud or misleading disclosure, or where the opposing party demonstrates such infirmities.

Applying the principle to the present case, the judges found the claim of urgency unconvincing. It noted that Indian Explosives failed to specify when the alleged misappropriation began or when it discovered the breach in 2022. The Court also noted that the alleged conduct dated back to 2016, while the suit was instituted only in March 2023, after a delay of more than five years.

The Bench held that such delay undermined the plea of urgency and supported the conclusion that the suit did not warrant bypassing the mandatory mediation requirement. It agreed with the Single Judge that no urgent interim relief existed at the time of filing. It observed:

“Learned Single Judge was correct in holding that the appellant, as the plaintiff, waited for a period of more than 5 years since the alleged act of misappropriation of the infringing materials,”

Accordingly, the High Court dismissed the appeal. It did not impose any costs.