How Advocate B.K. Singh Approaches Section 12A Mediation for Business Clients

How Advocate B.K. Singh looks at Section 12A mediation

He treats it as the first hearing of your case. That's the short answer. Section 12A of the Commercial Courts Act, 2015 says a commercial suit that doesn't contemplate urgent interim relief can't be filed until the plaintiff has exhausted pre-institution mediation. A lot of businesses deal with that by filing a bare application, waiting for the other side not to show up, collecting a report and moving on. On paper, fine. In practice it throws away the only stage of a commercial dispute where both sides sit in one room with a neutral person and no judge looking at the clock.

So we prepare the file as if we were drafting the suit. In a sense we are. The claim is reconciled. The documents are in order. We've thought through the defence they're likely to run, and you've decided before the session what figure and what payment terms you can live with. If the other side turns up and wants to talk, the mediation can end in a settlement that has the status of an arbitral award and can be enforced like a court decree. If they don't engage, you walk out with a clean report and a much clearer picture of what their defence will look like.

Neither outcome is a failure. Whatever happens in those three months, the dispute should be further along at the end of it. Below we go through what we check first, how we get ready for the sessions, what a settlement worth signing looks like, and what we tell a business that has received a Section 12A notice rather than sent one.

Does Section 12A even apply to your dispute?

We always check this first. Quite often the honest answer is no. Two things must both be true. The suit has to come out of a commercial dispute, and it has to be of specified value. For the first, look at the long list in Section 2(1)(c). It covers dealings between merchants, traders, bankers and financiers, imports and exports, carriage of goods, construction and infrastructure work, franchise and distribution deals, partnership and shareholder agreements, IP, insurance, and leases of property used exclusively in trade or commerce, among others. For the second, the bar is Rs 3 lakh and above, calculated under Section 12. Interest you claim up to the filing date goes into that figure.

Take a claim of Rs 2.6 lakh in principal plus Rs 60,000 in interest. That's a commercial suit of specified value, so mediation applies. A residential tenancy isn't a commercial dispute, however high the rent. If the claim is headed for arbitration under a valid arbitration clause, it isn't a suit, and Section 12A has nothing to say about arbitration. Execution petitions, appeals and petitions under the Arbitration and Conciliation Act, 1996 aren't suits either.

For the law in detail, read our guide on whether you must mediate before a commercial suit. It walks through Patil Automation v. Rakheja Engineers (2022), where the Supreme Court held the requirement mandatory for any suit filed from 20 August 2022. One habit of ours is old-fashioned. We write the answer to this first check on the file cover, in one line, with the reason. The same question comes back when the plaint is filed and the court asks why the suit is properly before it.

Is the urgency real, or should you mediate first?

Clients often ask if an injunction prayer lets them skip mediation. Advocate B.K. Singh always answers with a question of his own. What exactly will you lose in the next few weeks if nothing is done, and which document shows it? A former distributor selling fakes under your trademark. A buyer emptying a godown that holds your unpaid goods. A counterparty about to wrongly encash a bank guarantee. Those can justify going straight to court. A debtor who owes you money and is still trading normally usually can't.

The Supreme Court dealt with this in Yamini Manohar v. T.K.D. Keerthi (2023). A judge will read the plaint and the papers and ask whether the urgency is real, or whether it's been dressed up to dodge mediation. Tack an attachment prayer onto an ordinary recovery claim, with nothing showing assets are being moved, and the plaint is likely to be rejected under Order VII Rule 11. You can refile after mediation. But the court fee and the months are gone, and limitation hasn't stopped.

Where the urgency is genuine, we file the suit with the interim application and mediation isn't needed. Where it's doubtful, we'd mediate first. Three months in mediation costs far less than a lost year. Our guide on getting an injunction without mediation goes into how courts test urgency.

How much time is left on your claim?

Section 12A(3) says the time the parties spend in pre-institution mediation isn't counted for limitation. That protects a claim that's still alive when you apply. It does nothing for one that had already expired. And it won't bring a dead claim back.

So the first thing we work out, before anything goes out, is the last date for filing. Most business claims have three years under the Limitation Act, 1963. The clock starts from delivery, from the due date if there was a credit period, or from the last acknowledgment or part payment under Sections 18 and 19. If a file reaches us with two months left, the mediation application goes in that same week. We draft the plaint while mediation runs, so it can be filed the day the report comes out. Our guide on the time limit for recovering unpaid dues shows how the dates are counted.

Keep proof of the date the Authority received your application. An email acknowledgment works, or the receiving stamp on your copy. Keep the report that closes the mediation, too. Those two dates mark out the excluded period, and your plaint should state both.

Who applies, against whom, and where?

You apply in Form 1. That form comes from the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, and it's filed with whichever Legal Services Authority covers the court where your suit would eventually be filed. For a Delhi district court suit, think Saket or Tis Hazari or Karkardooma, it's the DLSA of that judicial district. If the claim is big enough for the Commercial Division of the Delhi High Court, you go to the High Court Legal Services Committee instead. Across the border in Noida, Ghaziabad, Gurugram and Faridabad, the DLSA sits inside the district court complex. Each of these places runs things a little differently, and our page on how the Legal Services Authorities run Section 12A mediation goes through them.

Wrong addresses cause more delay than anything else. Once your application is accepted, the Authority issues a Form 2 notice by post and by email, and the other side gets a date to appear that can't be more than ten days after the notice. If you've given an old registered office or a branch that shut last year, the notice bounces, a final notice goes out, and weeks disappear. Our team pulls the defendant's current registered office from the MCA portal, its principal place of business from the GST portal, and the email addresses it has actually written to you from. All of them go into the application.

It has to name the right entity, too. Say the purchase orders came from a private limited company but the brand is owned by a proprietorship. You mediate with whoever will be the defendant in the suit. A report against the wrong party won't help when the plaint names the right one.

What we prepare before the sessions

Nothing in the Rules asks for a written brief, and most Authorities won't ask for one. We prepare one anyway, for you and for use in the room. It's short, usually three or four pages. A few paragraphs on the relationship. A table reconciling the claim against invoices, payments, TDS and credit notes. The documents that prove each part. And the defence the other side is likely to raise, with our honest view of how strong it is.

The second part of the note stays private to you. It records the figure you hope for, the figure you'll accept, the payment period you can live with, and the non-money terms that matter. That might be the return of moulds, a no-dues certificate, continued supply on new terms, or withdrawal of a cheque bounce complaint once the money's paid. Decide these in the office a week before. Not in a corridor while the other side waits.

The third part is a draft settlement. If the other side is willing, the mediator will want terms on paper, and whoever walks in with a clean draft usually shapes the deal. It's one of the quieter things a Section 12A mediation lawyer in Delhi can do for you. Make sure the document that ends the dispute is yours.

Who from your business should be there?

Rule 6 of the 2018 Rules lets a party appear in person or through a duly authorised representative or counsel. Counsel can go alone. But a mediation where nobody on either side can say yes to a number rarely settles. We ask for the person who actually decides (the proprietor, a partner, a director or a senior finance officer) to attend at least the session where terms come up.

For a company, that person should carry a board resolution or letter of authority letting him or her settle within a stated range and sign the settlement agreement. Without it, the other side may refuse to sign. Or the mediator adjourns so authority can be fetched, and the mood in the room changes. Keep your accountant on the phone as well. The other side's first counter is nearly always an argument about the figure.

Delhi has held sessions both online and at the mediation centres in the court complexes, and practice keeps shifting, so check with the Authority. Online suits directors who travel. It makes side conversations harder, though, so we agree in advance how you and your counsel will confer privately during the session.

What a settlement worth signing looks like

Under Section 12A(5), a settlement reached in this mediation has the same status and effect as an arbitral award on agreed terms under Section 30(4) of the Arbitration and Conciliation Act, 1996. Section 36 of that Act says such an award is enforced like a court decree. That's a real advantage. If the debtor defaults, you go to execution, not to a fresh suit. It's also why every word matters.

When we draft a money settlement, the total is fixed. Each instalment has its own date and amount. The receiving bank account is written in. And there's a default clause: miss a payment and the entire balance falls due at once, carrying interest at a named rate from the day of default. If TDS, GST or credit notes are part of the picture, the agreement spells out who adjusts which, because otherwise the debtor will say the number was gross and you'll say it was net. Anything that depends on you, like withdrawing a cheque bounce complaint or returning goods, is tied to a specific payment. Usually the last one.

Vague terms will hurt you. 'The parties shall settle accounts' can't be executed. Neither can 'payment as per mutual convenience'. Our guide on drafting a payment settlement that's easy to enforce covers the clauses, and if the debtor defaults later, the route is executing the settlement as a decree in the court that would have heard the suit.

What if the other side doesn't turn up?

If the opposite party ignores the notice and the final notice, refuses to take part, or doesn't appear on the date fixed, the Authority issues a non-starter report in Form 3. If both sides take part but don't settle within the time limit, or the mediator decides settlement isn't possible, the mediator gives a failure report in Form 5. Either report satisfies Section 12A. You can file the suit straight away with the report annexed.

We don't treat a no-show as a win. It does show you tried, which helps when costs are argued later. It also tells you the defendant probably won't settle early. It says nothing on the merits, though, and the plaint shouldn't lean on it.

If the defendant did attend and raised a specific defence, the report won't record it. Mediation is confidential, and the mediator can't allow the sittings to be recorded. Your lawyers can still use what they heard while preparing the plaint, for instance by annexing the document that answers that defence.

You've received a Section 12A notice. What now?

Go. A notice from the Legal Services Authority isn't a summons, and there's no penalty for staying away. But attending costs very little, and it's the cheapest look at the claimant's case you'll ever get. Businesses that ignore the notice usually meet the claim next as a commercial suit, with a 120-day deadline for the written statement that can't be extended. That's a far worse place to start.

We sit with your books before the session and test their number against yours. Does it add up? Did you complain about quality, short supply or penalties, and has the claimant conveniently forgotten? Do you have a counter-claim? Is the claim even within limitation? A respondent who arrives with its own reconciliation can often settle for a much lower figure. At the least, it tells the claimant early that a summary suit will meet a real defence.

One caution. What's said inside the mediation is confidential. Letters and emails sent outside it aren't. If you write to the claimant during the mediation period admitting the debt or offering a payment plan, you may be handing them an acknowledgment under Section 18 of the Limitation Act. Keep offers inside the mediation and let the settlement agreement do the talking.

Section 12A mediation: time and costs

Our Section 12A routine, in order

This is the order our team follows when we act for a claimant. If you're the respondent, your file picks up from step 4.

1. Check that Section 12A applies

   Is the dispute commercial under Section 2(1)(c)? Is it worth Rs 3 lakh or more? We also confirm there's no binding arbitration clause and that the suit doesn't genuinely need urgent interim relief.

2. Fix the last date for filing

   Count limitation from delivery, due date, acknowledgment or part payment. If time's short, we apply this week and start the plaint alongside.

3. Get the parties and addresses right

   Confirm the other side's legal name, registered office, place of business and live email addresses from MCA, GST and your correspondence. Use exactly the names the plaint will use.

4. Reconcile the claim, test the defence

   Match the figure against ledgers, bank entries, TDS and credit notes. List every complaint they've made in writing and decide how much weight each one really carries.

5. Settle your range and terms

   Write down the hoped-for figure, the acceptable one, the payment period and any non-money terms. Get the board resolution or authority letter for whoever's attending.

6. File Form 1 with the right authority

   Apply to the District Legal Services Authority, or the Delhi High Court Legal Services Committee for High Court suits, with the Rs 1,000 fee. Keep proof it was received.

7. Walk in with a draft settlement

   Bring the short note and a draft with exact amounts, dates, bank details and a default clause. Step out and confer before you answer any offer.

8. Sign, or take the report

   If terms are agreed, sign the settlement in Form 4 and put every payment date in the diary. If not, collect the non-starter or failure report and file the suit without delay.

If the claim fits a summary suit, the same routine holds, and the pre-filing checks in our guide on what we check before filing a summary suit run alongside it.

Papers to keep ready

Mistakes we keep seeing

• Treating the application as paperwork. File Form 1, wait for the report, move on. That wastes the one stage where settling is cheap. Even if you don't expect a deal, the file should be ready to talk terms.
• Sending counsel alone, with no authority. If nobody in the room can agree a figure, why would the other side bother making an offer?
• Picking the wrong authority. The application goes to the Authority for the place where the suit will be filed. A report from the wrong district hands the defendant an argument later.
• Old addresses. One returned notice means a final notice, more weeks lost, and sometimes a later claim that the defendant never knew the mediation was happening.
• A settlement no court can execute. No dates, no default clause, no total. Award status only helps if the award says something a court can actually enforce.
• Admissions in emails. This cuts both ways. Emails sent during the mediation period can be used later, so keep the negotiating inside the sessions.
• Leaving it to the last month of limitation. Mediation only stops the clock if the claim is alive when you apply. A late file leaves no room for a single slip.

MSMEs, landlords, service firms and big companies

If you hold a Udyam certificate as a micro or small unit, there's a second door. Section 18 of the MSMED Act, 2006 lets you go to the MSME Facilitation Council. The Council tries conciliation, moves to arbitration if that fails, and can award interest at three times the bank rate notified by the RBI. Section 12A has no part in that route. Before we file any Form 1 for an MSME client, we put the two side by side. A caution on the law, too. The MSMED (Amendment) Act, 2026 had been published by late October 2026, yet we couldn't find its fresh Sections 18, 18A and 19 (90-day mediation and recovery) notified. Please check the current position.

Landlords and tenants of shops and offices come within Section 2(1)(c) only if the property is used exclusively in trade or commerce. A mixed-use building, with a shop downstairs and a family living upstairs, needs care at the first check. Service firms (consultants, IT vendors) usually end up arguing over whether the work was accepted. Their mediation note leans hard on sign-off emails and acceptance reports.

Large companies bring the opposite problem. The paperwork is clean, but the chain of authority is long, and a mediation can stall because the person attending can't go past a figure without head office signing off. We ask for that approval range before the first session. Startups suing bigger clients often worry that mediation will sour things. In our experience a neutral room protects the relationship better than a suit does. Our page on pre-institution mediation sets out the full service.

What to do this week

Work out how much limitation is left, using the delivery date or due date and any later acknowledgment or part payment. Pull the other side's current registered office and email addresses. Ask your accountant for a reconciled statement of account. Then sit down with whoever has authority in your business and fix two numbers, the lowest figure you'd take and the longest payment period you'd allow.

If you're the one who got a Section 12A notice, don't ignore it. Check the claim against your own books, list every complaint you raised at the time, and see whether you have a counter-claim. Then attend, with someone who can decide. Our page on Section 12A pre-institution mediation walks through the service and the stages.

If you'd like your claim, or the notice you've received, looked at before the first session, send the papers to Advocate B.K. Singh's team through our contact page.