Court Rules Defendants Cannot Seek Rejection of Suit for Non-Compliance with Mandatory Pre-Institution Mediation When They Themselves Decline Participation
In a significant judgment dated October 5, 2026, the Division Bench of the Delhi High Court, comprising Justices Vivek Chaudhary and Nisha Sahay Saxena, dismissed an appeal by Netsysnetwork Pvt Ltd and others against Shawntel Consultancy Services, thereby upholding the lower court's order refusing to reject a commercial suit for recovery of money. The judgment clarifies the application of Section 12A of the Commercial Courts Act, 2015 ("CC Act") concerning mandatory pre-institution mediation and the scope of pecuniary jurisdiction at the threshold in commercial suits.
The dispute arose from transactions involving supply of IT hardware and software by the plaintiff (Shawntel Consultancy Services) to the defendants (Netsysnetwork Pvt Ltd and its directors) amounting to over Rs. 2.29 crore, including contractual interest at 24% per annum on delayed payments. The defendants challenged the suit on two grounds: (i) non-compliance with the mandatory pre-litigation mediation under Section 12A of the CC Act, and (ii) lack of pecuniary jurisdiction of the Delhi High Court, contending that the actual disputed amount was below the jurisdictional threshold.
The plaintiff had filed an application seeking exemption from the pre-institution mediation on grounds of urgency due to admitted partial liability by the defendants. However, the trial court refused exemption and directed the parties to the Delhi High Court Mediation and Conciliation Centre. The defendants refused to participate in mediation, resulting in a Non-Starter Report. Subsequently, the defendants sought rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure (CPC) for alleged non-compliance with Section 12A and claimed the suit was not within the pecuniary jurisdiction of the High Court.
The Single Judge dismissed the defendants' application, and the defendants appealed. The Division Bench analyzed the issue extensively, relying on Supreme Court precedents, notably Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022) and Dhanbad Fuels Pvt. Ltd. v. Union of India (2025). These judgments hold that Section 12A is mandatory for suits instituted on or after August 20, 2022, and non-compliance ordinarily mandates rejection of the suit under Order VII Rule 11 CPC unless urgent interim relief is sought.
However, the Court emphasized that in the present case, the plaintiff did not circumvent the mandatory mediation but followed the court's directions to engage in mediation. The defendants' refusal to participate and subsequent withdrawal of their appeal against the mediation orders disentitles them from invoking non-compliance as a ground to reject the plaint. The Court held that a party cannot take advantage of its own wrong and that permitting rejection of the suit on such grounds would be futile since the plaintiff could institute the suit afresh.
Regarding pecuniary jurisdiction, the Court reiterated settled law that only the plaint's averments and documents are relevant at the threshold under Order VII Rule 11 CPC. The plaintiff's claim of Rs. 2.29 crore inclusive of interest falls within the High Court's jurisdiction. The defendants' contention based on their defence about the actual amount being lower cannot be entertained at this stage.
The Division Bench also raised doubts about the maintainability of the appeal against an order under Order VII Rule 11 CPC but proceeded to adjudicate on merits and found no infirmity in the trial court's order. The appeal was dismissed with clarification that the trial court would decide the suit on merits in accordance with law.
This judgment reinforces the mandatory nature of pre-institution mediation under the CC Act and clarifies that defendants who refuse mediation cannot later seek dismissal of the suit on that ground. It also confirms the threshold for pecuniary jurisdiction is determined solely on the claim as pleaded in the plaint without delving into disputed facts at the preliminary stage.
Bottom Line:
Commercial Courts Act, 2015, Section 12A - Where plaintiff sought exemption from pre-institution mediation, Court referred parties to mediation, but defendants themselves refused to participate and Non-Starter Report was issued - Defendants cannot thereafter seek rejection of plaint under Order VII Rule 11 CPC on ground of non-compliance with Section 12A - For pecuniary jurisdiction in money recovery commercial suit, claim including contractual interest up to date of filing has to be considered on basis of plaint averments alone.
Statutory provision(s):
Commercial Courts Act, 2015 Section 12A, Section 12(1)(a), Section 13(1A) proviso; Code of Civil Procedure, 1908 Order VII Rule 11, Section 151; Arbitration and Conciliation Act, 1996 Section 37
Netsysnetwork Pvt Ltd v. Shawntel Consultancy Services, (Delhi)(DB) : Law Finder Doc Id # 2997260
