The case of Exclusive Capital Ltd. v. Silver and C.Z. International is a significant commercial dispute adjudicated by the High Court of Delhi, addressing the mandatory requirement of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015. The appellant, Exclusive Capital Ltd., challenged the dismissal of its suit by the Commercial Court for failing to comply with the pre-litigation mediation mandate, alongside its application for waiver of this requirement. The suit sought recovery of an outstanding loan amount from the respondent, Silver and C.Z. International, under a loan agreement.

The High Court's judgment, delivered on May 2, 2025, by Justices Navin Chawla and Renu Bhatnagar, upheld the Commercial Court's decision, reinforcing the mandatory nature of Section 12A and clarifying the limited scope for bypassing mediation through claims of urgent interim relief. This case underscores the judiciary's commitment to promoting alternative dispute resolution in commercial matters and sets a precedent for evaluating the genuineness of urgent relief claims to avoid circumventing statutory mandates.

Detailed Factual Background
Exclusive Capital Ltd., the appellant, extended a loan facility of ₹2 crore to the respondent, Silver and C.Z. International, under a Term Loan Facility Agreement dated April 29, 2022. The loan, spanning four years from April 2022 to May 2026, required repayment in equal monthly installments of ₹5,07,252. The agreement stipulated an interest rate of 10% per annum, with a default interest of 2% per month and an additional penal charge of 2% per month in case of non-payment. The respondent provided an undertaking on the same date, acknowledging compliance with the loan terms.

The appellant alleged that the respondent defaulted on multiple installments from July 1, 2022, to January 22, 2023, breaching the agreement. The respondent made partial payments of ₹1 crore on January 23 and 24, 2023, but failed to clear the outstanding balance, including principal, interest, default interest, and penal charges. Citing a long-standing relationship, the appellant granted additional time for repayment, but the respondent did not comply. On June 1, 2024, the appellant issued a demand notice for ₹17,22,372, claimed due as of March 31, 2024. By January 31, 2025, the appellant claimed an outstanding amount of ₹42,00,434.09, including penal charges, as of December 31, 2022.

Detailed Procedural Background
The appellant filed a suit, CS (COMM) No. 113/2025, before the District Judge (Commercial-01), South District, New Delhi, seeking a decree for ₹42,00,434.09 and pendente lite and future interest at 10% per annum, plus default interest and penal charges from February 1, 2025, until realization. Alongside the suit, the appellant filed two applications: one under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 (CPC), seeking the respondent's deposit of the claimed amount as security and an injunction against alienating assets, and another under Section 12A of the Commercial Courts Act, requesting exemption from pre-institution mediation.

The Commercial Court, in its judgment dated March 5, 2025, dismissed the Section 12A application, finding no genuine urgency for interim relief, and consequently rejected the plaint under Order VII Rule 11 CPC for non-compliance with the mandatory mediation requirement. Aggrieved, the appellant filed an appeal, RFA (COMM) 257/2025, before the Delhi High Court, represented by Senior Advocate Siddharth Yadav and others. The respondent did not appear, and the High Court heard the appeal ex parte, delivering its judgment on May 2, 2025.

Issues Involved in the Case
The primary issue was whether the Commercial Court erred in dismissing the appellant's suit for non-compliance with Section 12A's pre-institution mediation requirement, given the appellant's claim for urgent interim relief. Subsidiary issues included whether the Commercial Court could reject the plaint outright rather than directing mediation, whether the appellant's application for interim relief under Order XXXVIII Rule 5 CPC genuinely contemplated urgent relief to bypass mediation, and whether external factors, such as the suspension of the appellant's board, justified non-compliance with Section 12A?

Detailed Submission of Parties
The appellant argued that the Commercial Court's rejection of the plaint was legally flawed. They contended that even if the court found no maintainable urgent relief, it should have dismissed the Section 12A application and referred the matter for mediation, not rejected the plaint. The appellant relied on Chandra Kishore Chaurasia v. R.A. Perfumery Works Pvt. Ltd., 2022 SCC OnLine Del 3529, where the Delhi High Court held that the plaintiff's desire for urgent relief determines the need for mediation, and the court's refusal to grant such relief does not warrant plaint rejection.

They also cited Kaulchand H. Jogani v. Shree Vardhan Investment & Ors., 2022 SCC OnLine Bom 4752, from the Bombay High Court, and Yamini Manohar v. T.K.D. Keerthi, (2024) 5 SCC 815, to argue that plaint rejection was disproportionate. The appellant further submitted that the delay in filing the suit was due to the suspension of its board by the National Company Law Tribunal, lifted by the Supreme Court on February 24, 2025, justifying the urgency claimed.

The respondent, Silver and C.Z. International, did not appear or file submissions, leaving the appellant's claims and evidence uncontested. The High Court noted the respondent's absence, proceeding ex parte.

Detailed Discussion on Judgments Cited by Parties:

• Chandra Kishore Chaurasia v. R.A. Perfumery Works Pvt. Ltd., 2022 SCC OnLine Del 3529: The Delhi High Court held that the plaintiff's decision to seek urgent interim relief determines whether pre-institution mediation under Section 12A is required. The appellant used this to argue that its application for urgent relief under Order XXXVIII Rule 5 CPC should have exempted it from mediation.
• Kaulchand H. Jogani v. Shree Vardhan Investment & Ors., 2022 SCC OnLine Bom 4752: The Bombay High Court emphasized that non-compliance with Section 12A should not automatically lead to plaint rejection and that the Commercial Court could direct mediation instead. The appellant cited this to challenge the outright dismissal.
• Yamini Manohar v. T.K.D. Keerthi, (2024) 5 SCC 815: The Supreme Court agreed with Chandra Kishore Chaurasia in part but clarified that plaintiffs cannot bypass Section 12A merely by praying for urgent relief. Such prayers must genuinely contemplate urgency, and courts must scrutinize them.
• Patil Automation (P) Ltd. & Ors. v. Rakheja Engineers (P) Ltd., (2022) 10 SCC 1: The Supreme Court declared Section 12A mandatory, holding that non-compliance warrants plaint rejection under Order VII Rule 11 CPC. The Court emphasized that the provision applies unless urgent interim relief is genuinely contemplated.

Detailed Reasoning and Analysis of Judge:

• The court reaffirmed that Section 12A mandates pre-institution mediation unless urgent relief is genuinely sought.
• Addressing Chandra Kishore Chaurasia, the court referred to Yamini Manohar which emphasized scrutiny to prevent disguised claims of urgency.
• The interim relief sought under Order XXXVIII Rule 5 CPC was found vague and unsupported by evidence, amounting to a camouflage to bypass Section 12A.
• The delay caused by the NCLT's board suspension and the Supreme Court's stay order did not justify the bypassing of mediation as the urgency was unsubstantiated.

Final Decision:

• The High Court dismissed the appeal and the application, upholding the Commercial Court's decision dated March 5, 2025.
• The appellant was directed to pay ₹25,000 to the Delhi High Court Clerk's Association within two weeks.

Law Settled in This Case:

• Pre-institution mediation under Section 12A is mandatory.
• Non-compliance leads to plaint rejection under Order VII Rule 11 CPC, even suo motu.
• Interim relief claims must be genuine and scrutinized to prevent misuse.
• Vague or unsubstantiated urgency claims and external delays do not justify bypassing Section 12A.

Exclusive Capital Ltd. Vs. Silver and C.Z. International: May 2, 2025, RFA (COMM) 257/2025:2025:DHC:3212-DB, High Court of Delhi, Hon'ble Mr. Justice Navin Chawla, Hon'ble Ms. Justice Renu Bhatnagar

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Written By: Advocate Ajay Amitabh Suman, IP Adjutor - Patent and Trademark Attorney
Email: ajayamitabhsuman@gmail.com, Ph no: 9990389539