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M/S Dhanbad Fuels Private Limited v. Union of India and Another

Civil Appeal · 2025 INSC 696Decided 15 May 2025
Civil Appeal No. 6846 of 2025 (arising out of SLP (Civil) No. 4980 of 2021)
Justice J.B. Pardiwala · Justice R. Mahadevan

Background

The Union of India filed a commercial money suit against Dhanbad Fuels Private Limited in 2019 without first attempting the pre-institution mediation required under Section 12A of the Commercial Courts Act, 2015 for commercial suits that do not seek urgent interim relief. Dhanbad Fuels sought to have the suit thrown out at the threshold for this non-compliance. Instead of dismissing the suit outright, the Calcutta High Court kept it in abeyance and directed the parties to go through mediation. Dhanbad Fuels appealed, arguing the suit should have been rejected altogether rather than merely paused.

Decision Breakdown

The Supreme Court undertook a detailed analysis of Section 12A's mandatory nature and clarified how courts should treat suits filed without the required pre-institution mediation, distinguishing between suits filed after the Court's 2022 decision in Patil Automation (which had made Section 12A's compliance mandatory going forward) and those filed before it. It held that a suit filed on or after 20 August 2022 without complying with Section 12A must be rejected under Order VII Rule 11 CPC, but a suit filed before that date, like the Union of India's 2019 suit, need not be dismissed; instead, courts can keep such a suit in abeyance and direct the parties to attempt mediation, applying the equitable principle that the law does not compel the impossible (since Section 12A's mandatory character had not yet been judicially settled when the suit was filed). Finding the Calcutta High Court's approach of pausing the suit for mediation, rather than dismissing it, struck the right balance, the Supreme Court dismissed Dhanbad Fuels' appeal and directed that the judgment be circulated to all High Courts for guidance.

Lesson Learnt

Before filing a commercial lawsuit that doesn't need urgent court intervention, parties should first attempt mediation as required by law, but if a suit was filed before this requirement was judicially clarified as mandatory, courts will give parties a chance to mediate rather than throwing the case out entirely, applying the same rule prospectively and fairly to older cases.

Official source (sci.gov.in)View Judgment (PDF)

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