Pre-Litigation Mediation in India: Is It Mandatory Before a Commercial Suit?

If your business dispute is headed to court, the law may require you to try mediation first. Skipping that step can get your case thrown out. This complete guide explains the rule in plain language, so you know exactly what to do before you file.
 

Short answer: Yes, for most commercial suits. Under Section 12A of the Commercial Courts Act, 2015, you must complete pre-institution mediation before filing, unless your suit genuinely needs urgent interim relief.
 

A business owner in Madurai supplies goods worth several lakhs. The buyer stops paying. After months of phone calls and reminders, the owner decides it is time to file a case. His lawyer then asks a question he did not expect: "Have we tried mediation?"
 

This is no small formality. For most commercial disputes in India, trying mediation before going to court is a legal requirement, and the courts have been strict about it. In this guide you will learn what the rule says, who it applies to, when you can skip it, how the process works, what documents to keep ready, and what to do if mediation fails.

What is pre-litigation mediation?
 

Pre-litigation mediation, also called pre-institution mediation, is a structured attempt to settle a dispute with the help of a neutral person, the mediator, before any case is filed in court.

The mediator does not decide who is right. Their job is to help both sides talk openly, understand each other's position, and find a solution they can both accept. Nothing is imposed. If the parties agree, the settlement is written down and signed. If they do not, either side remains free to go to court or arbitration.

Think of it as a guided business conversation, held in private, with a trained neutral person making sure the discussion stays productive. Many disputes that look impossible to settle on the phone become solvable once both sides sit across the table and see the full picture.

MACC offers this through its Pre Litigation Mediation service, where parties can try to settle their dispute in a confidential and time-bound way.
 

Is pre-litigation mediation mandatory in India?
 

For commercial disputes, yes. Section 12A of the Commercial Courts Act, 2015 says that a suit which does not contemplate any urgent interim relief cannot be filed unless the plaintiff has first exhausted the remedy of pre-institution mediation, as per the rules made under the Act.

In Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022), the Supreme Court held that this requirement is mandatory. A commercial suit filed without it is liable to be rejected at the threshold. The Court applied this prospectively, to suits filed on or after 20 August 2022.

Why this matters to you: A rejected plaint costs time and court fees, and you may have to start again. Doing mediation properly first protects your case.
 

Which disputes are covered?
 

The rule applies to “commercial disputes” as defined in the Commercial Courts Act, where the value is at or above the specified value (currently Rs 3 lakh). Common examples include:

• Supply, sale and service contract disputes between businesses
• Non-payment and recovery disputes between companies or traders
• Partnership, joint venture and shareholder disagreements
• Agency, distribution and franchise disputes
• Construction, infrastructure and real-estate commercial agreements
• Banking, finance, insurance and logistics disputes
• Disputes over IT, outsourcing and technology service contracts

Not every dispute is "commercial" in the legal sense. Ordinary family, personal or consumer matters are generally outside this rule. If you are unsure which side of the line your dispute falls on, get a quick legal opinion before you file.

Wondering what usually triggers business conflicts in our city? Read our guide on commercial disputes in Madurai and their causes.
 

When can you skip pre-litigation mediation?
 

Section 12A does not apply where the suit contemplates urgent interim relief. For example, if you need an injunction to stop a party from selling a disputed asset, or to prevent immediate and irreparable harm, you can approach the court directly.

There is a catch. Courts look at whether the urgency is real. Adding a request for interim relief just to bypass mediation is not accepted, and the Supreme Court has made clear that the court can examine the nature of the case to decide this. If your urgency is genuine and documented, you are on safe ground. If it is only a tactic, expect the suit to be returned.

A simple test: ask yourself, "If I wait three months, will I suffer harm that money cannot fix later?" If the honest answer is yes, urgent relief may be justified. If the answer is no, mediation first is the safer path.
 

How does pre-institution mediation work?
 

Under the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018, the process is conducted through the Legal Services Authorities (the District or State Legal Services Authority) and follows these broad steps:

1. Apply for mediation: File an application with the authority, stating the dispute and the relief you want.
2. Notice to the other side: The other party is called to attend.
3. Mediation sessions: A neutral mediator guides the talks. Sessions may be held more than once.
4. Outcome recorded: Either a signed settlement, or a failure / non-starter report.
5. Decide the next step: Enforce the settlement, or file a suit or go to arbitration.

Good to know: Section 12A mediation is run through the statutory Legal Services Authorities. Parties can also agree to try a voluntary private mediation at an institution such as MACC, either before or alongside this step. Ask your advocate which route fits your case.

How long does pre-litigation mediation take?
 

The law sets a time limit so that mediation does not become a way to delay. The process must be completed within three months from the date of the application, and it can be extended by up to two more months if both parties agree. The time spent in mediation is excluded when calculating the limitation period for filing your suit, so you do not lose your right to sue while you try to settle.

Compare that with a commercial suit, which can take years from filing to final judgment.

What documents should you keep ready?
 

• Signed contract, purchase order or agreement
• Invoices, delivery challans and payment records
• Emails, WhatsApp messages and letters related to the dispute
• Legal notice sent or received
• Short written summary of the dispute with important dates
• Clear list of what you want — payment, performance, revised agreement or other relief

 Also decide in advance who will attend. The person at the table should have the authority to agree to a settlement. If the representative has to "check with the boss" at every step, the process slows down.
 

What happens after mediation?
 

If the parties settle

The settlement is put in writing and signed by the parties and the mediator. Under Section 12A(5), such a settlement has the same status and effect as an arbitral award on agreed terms, which means it can be enforced. You do not need to file a fresh suit to get what was agreed.

If the parties do not settle

The mediator records a failure report, or a non-starter report if the other side did not attend. You can then file your commercial suit with that report. If your contract has an arbitration clause, the dispute may instead go to arbitration as the agreement provides. Adding a clear arbitration clause to your contracts from the start makes this next step far smoother.
 

Common mistakes to avoid
 

1. Filing the suit first and thinking about mediation later. For covered disputes, this can lead to rejection of your plaint.
2. Claiming "urgent relief" without real urgency. Courts see through it.
3. Ignoring the mediation notice. Staying away can hurt your position later.
4. Sending someone without authority to settle. It wastes everyone's time.
5. Not documenting the settlement properly. Always get terms in writing, with clear amounts, dates and consequences of default.
6. Missing your limitation period. Keep track of dates, and get advice if your claim is old.
   
   

The Mediation Act, 2023: What changed?

• Allows parties to voluntarily refer disputes to mediation before going to court
• Sets standards for mediators and mediation service providers
• Keeps mediation communications confidential
• Makes a mediated settlement agreement enforceable like a court decree, subject to the Act’s requirements
• Recognises online mediation

The Act supports the wider move towards settling disputes outside the courtroom. Since rules and notifications are still evolving, check the current position with your advocate before relying on a specific provision.
 

Why businesses prefer mediation first
 

• Benefits of Mediation

• • Speed: A dispute can be settled in weeks or a few months, not years.
  • Lower Cost: Fewer hearings and fewer legal expenses.
  • Privacy: Unlike a public court case, discussions stay confidential.
  • Relationships: You can preserve relationships with customers, suppliers or business partners.
  • Control: You shape the outcome; a judge does not decide the settlement for you.
  • Flexibility: Solutions can include instalment payments, revised terms or continued business arrangements.
   

Mediation vs arbitration vs court: which fits your dispute?
 

Many businesses start with mediation and move to arbitration if talks fail. For a deeper comparison, read Mediation vs Arbitration in Madurai.

Can pre-litigation mediation be done online?
 

Yes. Online mediation is widely used, and it is especially helpful when the parties are in different cities or states. You save travel time and cost, and sessions can be scheduled quickly. MACC's Online Dispute Resolution (ODR) portal allows parties to resolve eligible disputes without being in the same room.
 

How MACC Madurai can help
 

The Madurai Arbitration and Conciliation Council (MACC) has been providing institutional arbitration, mediation and conciliation services since 2012. Our institution is ISO 9001:2015 and ISO 37001:2025 certified, and our Panel of Neutrals includes retired judges and senior advocates. Our approach is built on four principles: integrity, neutrality, transparency and excellence.

If you are facing a business dispute and are not sure what to do next, our team can explain your options. You can reach us anytime through our Help Desk.
 

Frequently Asked Questions
 

1. Is pre-litigation mediation compulsory in India?

For commercial suits where no urgent interim relief is sought, yes. Section 12A of the Commercial Courts Act, 2015 requires pre-institution mediation first, and the Supreme Court has held this step to be mandatory.
 

2. Can I file a commercial suit directly without mediation?

Only if your suit genuinely contemplates urgent interim relief, such as an injunction to prevent immediate harm. Otherwise, the plaint can be rejected. Courts examine whether the claimed urgency is real.
 

3. Is a mediation settlement legally binding?

Yes, once signed. A settlement reached in pre-institution mediation under Section 12A(5) has the same status and effect as an arbitral award on agreed terms, so it can be enforced.
 

4. What if the other party does not attend mediation?

The mediation is closed with a non-starter report. You can then file your commercial suit along with that report. Staying away from mediation can also affect how the court views that party later, including on costs.
 

5. Can pre-litigation mediation be done online?

Yes. Online mediation is widely used and recognised, and it is especially useful when the parties are in different cities or states. MACC also offers online dispute resolution through its ODR portal.
 

Conclusion
 

For most commercial disputes, pre-litigation mediation is a required first step, not an optional extra. Handled well, it can resolve your dispute in months, save legal costs and protect business relationships. And if it fails, you move on to court or arbitration with a clear record of having tried.

If you have a dispute and are unsure of your next step, do not wait until deadlines get close. Get the facts, keep your documents ready and speak to a professional early.
 

Contact Us
 

Facing a business dispute? Talk to the MACC team in confidence. We will help you understand your options and the right next step.

Phone: +91 93635 35526
Email: info@maccmadurai.org
Head Office: No.4/135, Kovil Street, Kurunji Nagar, Aathikulam, Madurai - 625014
Working Hours: Monday to Saturday, 10:00 AM to 7:00 PM

Contact the Help Desk  | Visit maccmadurai.org

Disclaimer: This article is for general information only and is not legal advice. Laws, rules and court decisions change. Please consult a qualified advocate for advice on your specific dispute.