Court Can Suo Motu Reject A Plaint Under Order VII Rule 11 CPC : Supreme Court

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2022 (Arising out of SLP (C)No. 14697 of 2021)

M/S. PATIL AUTOMATION PRIVATE LIMITED AND ORS                                                . … APPELLANT(S)

VERSUS

RAKHEJA ENGINEERS PRIVATE LIMITED                                                                          … RESPONDENT(s)

WITH CIVIL APPEAL NO. OF 2022 (Arising out of SLP (C)No. 5737 of 2022) ALONG WITH SPECIAL LEAVE PETITION (C) Diary No.29458 of 2021

J U D G M E N T

K. M. JOSEPH, J.

1. Leave granted.

2. The seminal question which arises for consideration is whether the statutory pre-litigation mediation contemplated under Section 12A of the Commercial Courts Act, 2015 2 (hereinafter referred to as ‘Act’) as amended by the Amendment Act of 2018 is mandatory and whether the Courts below have erred in not allowing the applications filed under Order VII Rule 11 of the Code of Civil Procedure, 1908 (hereinafter referred to as ‘CPC’), to reject the plaints filed by the respondents in these appeals without complying with the procedure under Section 12A of the Act.

3. In Civil Appeal arising from SLP (C) No. 14697 of 2021, the respondent filed a commercial suit under Order XXXVII of the CPC before the Additional District Judge, District Court, Faridabad, praying for recovery of Rs. 1,00,40,291/- along with 12 per cent interest on a certain sum which detail need not detain us. The suit was laid on 12.10.2020.

4. The appellant is the defendant in the said suit. It filed an application on 05.02.2021 under Order VII Rules 10 and 11 read with Sections 9 and 20 of the CPC, inter alia contending that the suit was filed without adhering to Section 12A of the Act. The respondent filed its reply on 23.03.2021. It contested the matter contending that the suit was not barred for non-compliance of Section 12A of the Act.

5. A written statement came to be filed on 23.03.2021. On 16.08.2021, the trial Court rejected the contention of the appellant inter alia holding as follows: “20. From the bare perusal of Section 12A, it is crystal clear that the procedure provided is mandatory in nature and if by applying the said principles, the suit of the plaintiff is rejected, then it would have a catastrophe effect. The court is of the view that the legislature has no such intention to frame such stringent provision the said rules. The aim and object of Section 12A is to ensure that before a commercial dispute is filed before the court, the alternative means of dissolution are adopted so that the genuine cases come before the Court. Further, it also appears to the court that the said procedure has been introduced to de-congest the regular courts. It is pertinent that the Hon’ble Bombay High Court in case Ganga Tara Vazirani (supra), held that the procedure provided under Section 12A of the Commercial Courts Act is not a penal enactment for punishment and there is no embargo in filing the suit without exhausting the remedy of mediation specially when an attempt is clear to show that the intention of the applicant has already been made and failed. The fact is clear that before filing the suit, the respondent/plaintiff has sent e-mail and legal notice and despite that the applicant/defendant failed to make the payment of the dues. Moreover, it is well settled that the procedure and law are for advancement of justice and not to thwart on technical grounds. Thus, in the larger interest of justice, the court deems it appropriate that the civil suit can be kept in abeyance and both the parties are 4 directed to appear before the Secretary, District Legal Services Authority, Faridabad on 26.08.2021 for the purpose of mediation as per the provisions of Section 12A of the Commercial Courts Act and the Rules framed thereunder. With these directions, the application is disposed of.” (Emphasis supplied)

6. The appellant filed a Civil Revision Petition. The High Court of Punjab and Haryana, however, confirmed the finding in paragraph 20 and further held that the Courts are meant to deliver substantial justice. The rules of procedure are handmaid of justice and are meant to advance the ends of justice and they are not to be bogged down by the technicalities of procedure so as to lose sight of its main duty which is to dispense justice. It was further found that the purpose of referring the dispute to mediation centre is to explore settlement. If the suit is filed without taking recourse to the procedure, it is further found, it should not entail rejection of the plaint. This could not have been the intention of the legislature. It is further observed that an enactment is to be interpreted in a manner that it does not result in delivery of ‘perverse justice’. It was noted that the trial Court had directed 5 that the civil suit be kept in abeyance and the parties were to appear before the Secretary of the District Legal Services Authority for the purpose of mediation. Reliance was placed on the judgment of the High Court of Bombay in Ganga Taro Vazirani v. Deepak Raheja1.

7. In the other appeal arising out of SLP (C) No. 5737 of 2022, the impugned Order has been passed by the High Court of Madras, rejecting a similar application filed by the appellant-defendant in a commercial suit instituted without having resorted to pre-litigation mediation under Section 12A of the Act.

8. There is yet another special leave petition which was filed, viz., SLP Diary No. 29458 of 2021. This is filed with an application for permission to file special leave petition. In this special leave petition, the order which is impugned is the same order which is impugned in SLP (C)No. 5737 of 2022. 9. The Special Leave Petition is supported with an application for permission to file SLP. The applicant is not a party in the suit in question. However, it is his 1 2021 SCC OnLine Bom 195 6 case that a suit is pending in which similar question arises. Though, we have not issued notice in the said matter, we allowed Shri Sharath Chandran, learned Counsel for the petitioner, to address the Court on what appeared to us to be purely a legal issue, viz., the effect of noncompliance with Section 12A of the Act. In other words, we have permitted intervention, though in the application for permission to file SLP, which application shall stand, accordingly, disposed of. So also the SLP.

SUBMISSION OF THE APPELLANTS

10. Shri Sanjeev Anand, learned Senior Counsel, appearing for the appellant in civil appeal arising out of SLP (C)No. 5737 of 2022, would submit that the Court, in the impugned Order, held, inter alia, as follows. “23.The Central Government by notification dated 03.07.2018, has framed rule and the rule 3(1) and 3(7) of the Commercial Courts Act, 2015 (Pre-Institution Mediation and Settlement) Rules, 2018, reads as under: 3. Initiation of mediation process. – (1) A party to a commercial dispute may make an application to the Authority as per Form-1 specified in Schedule-I, either online or by post or by hand, for initiation of 7 mediation process under the Act along with a fee of one thousand rupees payable to the Authority either by way of demand draft or through online; …… …… (7) Where both the parties to the commercial dispute appear before the Authority and give consent to participate in the mediation process, the Authority shall assign the commercial dispute to a Mediator and fix a date for their appearance before the said Mediator. 24. Though the word ‘shall’ in Section 12A of the Act, sounds Prelitigation mediation is mandatory on the part of the plaintiff to explore Settlement before filing suit under Commercial Court Act, the Rule framed used the word ‘shall’ and makes it an optional. Also even if one party go for pre-litigation mediation the other party may conveniently abstain from participating in the mediation and make it a non-starter. Even otherwise, mediator can proceed only if the both the parties appear and give consent to participate in the mediation process. Thus, it is very clear that on combined reading of the Commercial Courts Act and the Rules framed thereunder, prelitigation mediation is subject to urgency for any interim relief and the consent of the sparing parties. 25. In such circumstances, the Harmonious Interpretation takes us to the irresistible conclusion that Section 12-A of the Commercial Courts Act, is not a mandatory  provision. The right to access justice which is a Constitutional Right cannot be denied or deprived for not resorting to mediation. The Court is not substitute to Alternative Dispute Redressal, it is otherwise. The litigant cannot be denied the doors of justice for directly approaching the Court without exploring the possibility of mediation. There can be no prejudice to the defendant, if the defendant is ready for mediation, even after Institution of the suit. Also there is no impediment either for the party or for the Court to refer the pending matter to be resolved through mediation or any other Alternative Dispute Redressal mechanism. This provision is meant for the parties to work out an amicably settlement without involving in the adversary system of litigation. The intention of this Section is not to prevent access to justice or to aid anyone who refuse to subject himself to the judicial process. The intention is to avoid the procedural rigor and to arrive an amicable win-win settlement. Any other interpretation to Section 12-A of the Act contrary to the intention will amount to miscarriage of Justice. Therefore, this Court holds that there is no ground to entertain this Application seeking rejection of plaint. Hence, Application is dismissed with costs of Rs.10,000/-.”

11. He would submit that the High Court has clearly erred in the view it has taken. He would submit that the Act came into force in the year 2015. It is by the amendment in the year 2018 that Section 12A came to be incorporated.

12. He took us through the Statement of Objects and Reasons. He would commend for the Court’s acceptance the view that the legislation was put in place with a definite object of enhancing the ease of doing business in India and de-clogging of Commercial Courts which were assigned with an important task of quickly disposing of commercial matters and that must be uppermost in the mind of the Court. 13. He would submit that if the application under Order VII Rule 11 is allowed and the plaint is rejected for noncompliance with Section 12A, in view of Order VII Rule 13 of the CPC, there is no prejudice caused as on the same cause of action, the plaintiff can bring a fresh suit after complying with the mandate of Section 12A of the Act.

14. He would point out that most pertinently the law giver has used the word ‘shall’ in Section 12A. The word ‘shall’ in the context of the object of the legislation must be construed as mandatory. He would complain that the High Court has not properly appreciated the meaning of the words used in the subordinate legislation, viz., Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 (hereinafter referred to as the “Rules”) with regard to the use of the word ‘may’ in Rule 3. He would submit 10 that it only refers to the discretion with the plaintiff in regard to the particular mode to be chosen as contemplated therein. Bearing in mind the use of mandatory words conveying an imperative sense in the parent legislation, the High Court erred in finding that the provision in the parent enactment must be treated as only directory. He would submit that the sublime object of the legislation is clearly to de-clog the court particularly having regard to the reduction of the monetary value from Rs.1 crore to Rs.3 lakhs. In other words, by virtue of the amendment, the Legislature was conscious of the fact that there would be a phenomenal increase in the cases which would be treated as commercial cases. Bearing in mind also, the larger object of promoting India as a desired destination for economic activity which in large measure would depend upon the ease of doing business, the purpose is clear as daylight. The High Court has clearly erred in the matter.

15. Shri Ayush Negi, learned Counsel for the appellant in other appeal, would also address arguments on similar lines. In his case, he would submit that the trial Court has proceeded on the footing that the commercial suit as 11 such cannot be thrown out for non-compliance of Section 12A and the trial Court has erroneously considered post institution mediation as tantamounting to compliance with pre litigation mediation contemplated under Section 12A.

16. He would submit that the plain language and the object of the legislation has been overlooked by the Court in the impugned order as is clear by the observations in the impugned order.

17. Both the counsels for the appellants would draw a parallel between the language used in Section 80 CPC and the case law generated by the said provision to contend that Section 12A is mandatory. Equally, support is sought to be drawn from judgments rendered under Section 69 of the Indian Partnership Act, 1932.

18. Shri Sharath Chandran, learned counsel who appears in SLP (C) Diary No. 29458 of 2021 would point out that the procedure contemplated under Section 12A is mandatory.

19. It is the further submission of Shri Sharath Chandran that decision of the learned Single Judge of the Bombay High Court in Ganga Taro(supra) has been reversed by the 12 Division Bench in Deepak Raheja v. Ganga Taro Vazirani2. He has brought to the notice of this Court the different views expressed by the other High courts. It is his contention that on a reference to the Statement of Objects and Reasons, the speech made by the Law Minister and the plain language used coupled with the intention of the Lawgiver makes it clear that Section 12A is mandatory. He, however, drew a distinction between the presentation of the plaint and the institution of the suit. He also submits that this Court has taken notice of pre-litigation mediation in matrimonial disputes and disputes under Motor Vehicles Act. He would further contend that the Court can suo motu reject the plaint without any application. He relies on the judgment of this Court in Madiraju Venkata Ramana Raju v. Peddireddigari Ramachandra Reddy and Others3. He however, contends that the embargo against institution of the suit may not necessarily affect inherent jurisdiction of the Court. He has further submitted in regard to the interpretation to be placed in cases where urgent interim relief is contemplated and the appropriate 2 (2021) SCC OnLine Bom 3124 3 (2018) 14 SCC 1 13 procedure provided therein. He would in this regard place reliance upon the judgment in Regina vs. Sekhon4 to contend that if a plea under Section 12A is not pointed out at an earlier point of time, non-compliance cannot result in the proceeding becoming a nullity. He would submit that nullifying proceedings on account of non-compliance at a belated stage would in effect be throwing the baby out with the bathwater. He would also point out that the High Court was in error in not finding that mediation is one of the best forms of conflict resolution. Further, error in understanding of Rule 3 of the Rules is pointed out.

20. Per contra, Shri Saket Sikri, learned counsel who appears in civil appeal arising from SLP (C)No. 14697 of 2021, would contend that Section 12A is actually to be understood as directory. He submits that in order that the word ‘shall’ in a statutory provision be considered as mandatory, one of the cardinal tests employed by the Courts is to ask the question whether the provision contemplated penal consequences for disobedience of the provision. He would point out that no penal consequence is spelt out in 4 (2003) 1 WLR 1655 14 Section 12A for instituting a suit without complying with Section 12A.

21. Next, he would point out that instituting a suit without complying with the provisions of Section 12A does not affect any legal right of the defendant. It is only a procedure intended to bring about a settlement between the parties. He further contends that the course adopted by the Court in his case has addressed the concerns of the defendant as well. This is for the reason that the Court has kept proceedings in the suit in abeyance and referred the parties for mediation. In this context, he highlights the fact that the appellant which swears by mediation has made it a non-starter by not taking part in the mediation procedure.

22. He would submit that having regard to the purport of Section 12A, the interest of justice would be subserved if the procedure which is adopted by the Court in his case is accepted. In other words, if the Court after the institution of the suit immediately refers the parties to the mediation, the appellants may not be justified in insisting on pre institution mediation. In this regard, he would emphasise  that pre litigation mediation contemplated in Section 12A does not pertain to inherent jurisdiction of a Court. While mediation is to be encouraged, the Court may not lose sight of the fact that a half-way house between the two extremes has been attempted by the Court in the case, which suffices, having regard to the fact also that no penal consequences are provided and no right of the defendant is imperilled.

23. He next draws our attention to the aspect of court fees. He would submit that the plaintiff is bound to pay the whole court fee under the law in question. When the plaint gets rejected under Order VII Rule 11, the plaintiff suffers a loss of the entire court fee. This is one of the consequences which this Court should not lose sight of, it is contended. Here again, the procedure which has been adopted in the case is commended for our acceptance as substantial compliance with Section 12A which at the same time, will not reach such disastrous consequences for the litigants. He also touches upon the possible consequence of a plea of limitation overwhelming a fresh suit of the plaintiff after rejection of the first suit.

ANALYSIS

24. Section 12A of the Act reads as follows: 12A. Pre-Institution Mediation and Settlement— (1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of preinstitution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government. (2) The Central Government may, by notification, authorise the Authorities constituted under the Legal Services Authorities Act, 1987 (39 of 1987), for the purposes of pre-institution mediation. (3) Notwithstanding anything contained in the Legal Services Authorities Act, 1987 (39 of 1987), the Authority authorised by the Central Government under sub-section (2) shall complete the process of mediation within a period of three months from the date of application made by the plaintiff under sub-section (1): Provided that the period of mediation may be extended for a further period of two months with the consent of the parties: Provided further that, the period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963 (36 of 1963). (4) If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator. (5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996 (26 of 1996).”

25. The Act was enacted in the year 2015. At the time, the monetary limit for a suit liable to be tried by the Commercial Court was fixed at Rs.1 crore.

26. In the course of three years, noticing certain features, Parliament has decided to amend the Act. Therefore, in the year 2018, the Act came to be amended by the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018 (Act 28 of 2018) (hereinafter referred to as the “Amending Act”).

27. It is apposite that we notice the statement of objects of the Amending Act:

“STATEMENT OF OBJECTS AND REASONS

The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 was enacted for the constitution of Commercial Courts, Commercial Division and Commercial Appellate Division in the High Courts for adjudicating commercial disputes of  specified value and for matters connected therewith or incidental thereto. 2. The global economic environment has since become increasingly competitive and to attract business at international level, India needs to further improve its ranking in the World Bank 'Doing Business Report' which, inter alia, considers the dispute resolution environment in the country as one of the parameters for doing business. Further, the tremendous economic development has ushered in enormous commercial activities in the country including foreign direct investments, public private partnership, etc., which has prompted initiating legislative measures for speedy settlement of commercial disputes, widen the scope of the courts to deal with commercial disputes and facilitate ease of doing business. Needless to say that early resolution of commercial disputes of even lesser value creates a positive image amongst the investors about the strong and responsive Indian legal system. It is, therefore, proposed to amend the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. 3. As Parliament was not in session and immediate action was required to be taken to make necessary amendments in the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, to further improve India's ranking in the 'Doing Business Report', the President promulgated the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018 on 3rd May, 2018. 4. It is proposed to introduce the Commercial Courts, Commercial Division and 19 Commercial Appellate Division of High Courts (Amendment) Bill, 2018 to replace the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Ordinance, 2018, which inter alia, provides for the following namely:— (i) to reduce the specified value of commercial disputes from the existing one crore rupees to three lakh rupees, and to enable the parties to approach the lowest level of subordinate courts for speedy resolution of commercial disputes; (ii) to enable the State Governments, with respect to the High Courts having ordinary original civil jurisdiction, to constitute commercial courts at District Judge level and to specify such pecuniary value of commercial disputes which shall not be less than three lakh rupees and not more than the pecuniary jurisdiction of the district courts; (iii) to enable the State Governments, except the territories over which the High Courts have ordinary original civil jurisdiction, to designate such number of Commercial Appellate Courts at district judge level to exercise the appellate jurisdiction over the commercial courts below the district judge level; (iv) to enable the State Governments to specify such pecuniary value of a commercial dispute which shall not be less than three lakh rupees or such higher value, for the whole or part of the State; and (v) to provide for compulsory mediation before institution of a suit, where no urgent interim relief is contemplated and for this purpose, to introduce the Pre-Institution 20 Mediation and Settlement Mechanism and to enable the Central Government to authorise the authorities constituted under the Legal Services Authorities Act, 1987 for this purpose. 5. The Bill seeks to achieve the above objectives.”

28. It is, accordingly, by the Amending Act that Section 12A came to be inserted. We may notice the Rules which came to be published in the Gazette and thereby came into force on 03.07.2018. Rule 3 reads as follows: “3. Initiation of mediation process. – (1) A party to a commercial dispute may make an application to the Authority as per Form1 specified in Schedule-I, either online or by post or by hand, for initiation of mediation process under the Act along with a fee of one thousand rupees payable to the Authority either by way of demand draft or through online; (2) The Authority shall, having regard to the territorial and pecuniary jurisdiction and the nature of commercial dispute, issue a notice, as per Form-2 specified in Schedule-I through a registered or speed post and electronic means including e-mail and the like to the opposite party to appear and give consent to participate in the mediation process on such date not beyond a period of ten days from the date of issue of the said notice. 21 (3) Where no response is received from the opposite party either by post or by e-mail, the Authority shall issue a final notice to it in the manner as specified in sub-rule (2). (4) Where the notice issued under sub-rule (3) remains unacknowledged or where the opposite party refuses to participate in the mediation process, the Authority shall treat the mediation process to be a non-starter and make a report as per Form 3 specified in the Schedule-I and endorse the same to the applicant and the opposite party. (5) Where the opposite party, after receiving the notice under sub-rule (2) or (3) seeks further time for his appearance, the Authority may, if it thinks fit, fix an alternate date not later than ten days from the date of receipt of such request from the opposite party. (6) Where the opposite party fails to appear on the date fixed under sub-rule (5), the Authority shall treat the mediation process to be a non-starter and make a report in this behalf as per Form 3 specified in Schedule-I and endorse the same to the applicant and the opposite party. (7) Where both the parties to the commercial dispute appear before the Authority and give consent to participate in the mediation process, the Authority shall assign the commercial dispute to a Mediator and fix a date for their appearance before the said Mediator. (8) The Authority shall ensure that the mediation process is completed within a period of three months from the date of receipt of application for pre-institution mediation unless the period is extended for 22 further two months with the consent of the applicant and the opposite party.” We shall advert to the effect of this Rule and also advert to the other rules later on.

DOWN THE MEMORY LANE

29. A Bench of five learned Judges in the Judgment reported in State of U.P. and others v. Babu Ram Upadhya5, considered the question as to whether paragraph-486 of the Police Regulations framed under Section 7 of the Police Act, was mandatory or not. In substance, the said paragraph purported to taboo the magisterial inquiry under the Code of Criminal Procedure, 1973, when the offence alleged against the Police Officer was only one under Section 7 of the Police Act. In the opinion written for the majority, Justice K. Subba Rao proceeded to sum-up the relevant Rules relating to interpretation, when the Statute uses the word ‘shall’: “29. The relevant rules of interpretation may be briefly stated thus: When a statute uses the word “shall”, prima facie, it is mandatory, but the Court may ascertain the 5 AIR 1961 SC 751 23 real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the Legislature the Court may consider, inter alia, the nature and the design of the statute, and the consequences which would follow from construing it the one way or the other, the impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non-compliance with the provisions, the fact that the non-compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered.

30. In Bhikraj Jaipuria v. Union of India6, a Bench of five learned Judges dealt with the question arising out of Section 175(3) of the Government of India Act, 1935. The Court, inter alia, had to deal with the question, whether enactment should be considered directory or obligatory: “17. The question still remains whether the purchase orders executed by the Divisional Superintendent but which were not expressed to be made by the Governor-General and were not executed on behalf of the Governor-General, were binding on the Government of India. Section 175(3) plainly requires that contracts on behalf of the Government of India shall be executed in the form prescribed thereby; the section however does not set out the consequences of non6 AIR 1962 SC 113 24 compliance. Where a statute requires that a thing shall be done in the prescribed manner or form but does not set out the consequences of non-compliance, the question whether the provision was mandatory or directory has to be adjudged in the light of the intention of the legislature as disclosed by the object, purpose and scope of the statute. If the statute is mandatory, the thing done not in the manner or form prescribed can have no effect or validity : if it is directory, penalty may be incurred for non-compliance, but the act or thing done is regarded as good. As observed in Maxwell on Interpretation of Statutes, 10th Edn., p. 376: “It has been said that no rule can be laid down for determining whether the command is to be considered as a mere direction or instruction involving no invalidating consequence in its disregard, or as imperative, with an implied nullification for disobedience, beyond the fundamental one that it depends on the scope and object of the enactment. It may perhaps be found generally correct to say that nullification is the natural and usual consequence of disobedience, but the question is in the main governed by considerations of convenience and justice, and when that result would involve general inconvenience or injustice to innocent persons, or advantage to those guilty of the neglect, without promoting the real aim and object of the enactment, such an intention is not to be attributed to the legislature. The whole scope and purpose of the statute under consideration must be regarded.” 25 Lord Campbell in Liverpool Borough Bank v. Turner [(1861) 30 LJ Ch 379] observed: “No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of courts of justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be construed.”

31. In Lachmi Narain and others v. Union of India and others7, this Court, inter alia, held as follows: “66. Section 6(2), as it stood immediately before the impugned notification, requires the State Government to give by notification in the Official Gazette “not less than 3 months' notice” of its intention to add to or omit from or otherwise amend the Second Schedule. The primary key to the problem whether a statutory provision is mandatory or directory, is the intention of the law-maker as expressed in the law, itself. The reason behind the provision may be a further aid to the ascertainment of that intention. If the legislative intent is expressed clearly and strongly in imperative words, such as the use of “must” instead of “shall”, that will itself be sufficient to hold the provision to be mandatory, and it will not be necessary to pursue the enquiry further. If the provision is couched in prohibitive or negative language, it can rarely be directory, the use of peremptory language 7 AIR 1976 SC 714 26 in a negative form is per se indicative of the intent that the provision is to be mandatory. (Crawford, The Construction of Statutes, pp. 523-24). Here the language of sub-section (2) of Section 6 is emphatically prohibitive, it commands the Government in unambiguous negative terms that the period of the requisite notice must not be less than three months.” A distinction was, thus, perceived between the words ‘must’ and ‘shall’.

32. Learned Counsel for the appellants sought to draw support from the Judgments rendered under Section 80 of the Code of Civil Procedure, 1908 (for short, ‘the CPC’). After the amendment effected by Act 104 of 1976, Section 80 reads as follows: “(1) Save as otherwise provided in subsection (2), no suits shall be instituted against the Government (including the Government of the State of Jammu and Kashmir) or against a public officer in respect of any act purporting to be done by such public officer in his official capacity, until the expiration of two months next after notice in writing has been delivered to, or left at the office of (a) in the case of a suit against the Central Government, except where it relates to a railway a Secretary to that Government; (b) in the case of a suit against 27 the Central Government where it relates to railway, the General Manager of that railway; bb) in the case of a suit against the Government of the State of Jammu and Kashmir, the Chief Secretary to that Government or any other officer authorized by that Government in this behalf; (c) in the case of a suit against any other State Government, a Secretary to that Government or the Collector of the district; and, in the case of a public officer, delivered to him or left at his office, stating the cause of action, the name, description and place of residence of the plaintiff and the relief which he claims; and the plaint shall contain a statement that such notice has been so delivered or left. (2) A suit to obtain an urgent or immediate relief against the Government (including the Government of the State of Jammu and Kashmir) or any public officer in respect of any act purporting to be done by such public officer in his official capacity, may be instituted, with the leave of the Court, without serving any notice as required by sub-section (I); but the Court shall not grant relief in the suit, whether interim or otherwise, except after giving to the Government or public officer, as the case may be , a reasonable opportunity of showing cause in respect of the relief prayed for 28 in the suit: Provided that the Court shall, if it is satisfied, after hearing the parties, that no urgent or immediate relief need be granted in the suit, return the plaint for presentation to it after complying with the requirements of sub-section (1). (3) No suit instituted against the Government or against a public officer in respect of any act purporting to be done by such public officer in his official capacity shall be dismissed merely by reason of any error or defect in the notice referred to in sub-section (I), if in such notice (a) the name, description and the residence of the plaintiff had been so given as to enable the appropriate authority or the public officer to identify the person serving the notice and such notice had been delivered or left at the office of the appropriate authority specified in subsection (1), and (b) the cause of action and the relief claimed by the plaintiff had been substantially indicated.”

33. In fact, Sub-sections (2) and (3) of Section 80 came to be inserted by virtue of the amendment. In Section 80(1), in view of the insertion of Sub-Section (2), the opening 29 words “save as otherwise provided in sub-Section (2)” came to be inserted. There were other changes which were brought about in Section 80 as it stood, as can be discerned from Section 80(1) as substituted. The judgment of the Privy Council, in the decision reported in Bhagchand Dagadusa Gujrathi and Ors. v. Secretary of State for India8, set at rest the controversy about the mandatory nature of the requirement of a previous notice to be given to comply with Section 80. We need only notice what this Court held in the Judgment in State of Madras v. C.P. Agencies and others9: “1. … The very language of Section 80 makes it clear,-- and it has been so held by the Judicial Committee in Bhagchand Dagdusa v. Secy. of State, 54 Ind App 338:(AIR 1927 PC 176) which decision has been adopted by the same tribunal in many later cases--that Section 80 is express, explicit and mandatory and admits of no implications or exceptions. …”

34. In Bihari Chowdhary & Anr. v. State of Bihar & Ors.10, while on the effect of Section 80 of the CPC, this Court laid down as follows: 8 AIR 1927 PC 176 9 AIR 1960 SC 1309 10 (1984) 2 SCC 627 30 “3. ….. The effect of the section is clearly to impose a bar against the institution of a suit against the Government or a public officer in respect of any act purported to be done by him in his official capacity until the expiration of two months after notice in writing has been delivered to or left at the office of the Secretary to Government or Collector of the concerned district and in the case of a public officer delivered to him or left at his office, stating the particulars enumerated in the last part of sub-section (1) of the section. When we examine the scheme of the section it becomes obvious that the section has been enacted as a measure of public policy with the object of ensuring that before a suit is instituted against the Government or a public officer, the Government or the officer concerned is afforded an opportunity to scrutinise the claim in respect of which the suit is proposed to be filed and if it be found to be a just claim, to take immediate action and thereby avoid unnecessary litigation and save public time and money by settling the claim without driving the person, who has issued the notice, to institute the suit involving considerable expenditure and delay. The Government, unlike private parties, is expected to consider the matter covered by the notice in a most objective manner, after obtaining such legal advice as they may think fit, and take a decision in public interest within the period of two months allowed by the section as to whether the claim is just and reasonable and the contemplated suit should, therefore, be avoided by speedy negotiations and settlement or whether the claim should be resisted by fighting out the suit if and when it is instituted. There is clearly a 31 public purpose underlying the mandatory provision contained in the section insisting on the issuance of a notice setting out the particulars of the proposed suit and giving two months' time to Government or a public officer before a suit can be instituted against them. The object of the section is the advancement of justice and the securing of public good by avoidance of unnecessary litigation.”

35. We may also notice, what this Court had said in Bihari Chowdhary(supra) about the course of action to be taken, if a Suit is filed without serving a notice: “6. It must now be regarded as settled law that a suit against the Government or a public officer, to which the requirement of a prior notice under Section 80 CPC is attracted, cannot be validly instituted until the expiration of the period of two months next after the notice in writing has been delivered to the authorities concerned in the manner prescribed for in the section and if filed before the expiry of the said period, the suit has to be dismissed as not maintainable.”

36. We must finally also, for reasons, which will be clear, refer to the view expressed by this Court in the following paragraph: “7. On behalf of the appellants, strong reliance was placed on the decision of a learned Single Judge of the High Court of Kerala in Nani Amma Nannini Amma v. State of Kerala [AIR 1963 Ker 114 : 1962 Ker LJ 32 1267]. Therein the learned Judge has expressed the view that Section 80 is not a provision of public policy and there is nothing in the section expressly affecting the jurisdiction of the Court to try a suit instituted before the expiry of the period prescribed therein. The reasons stated by the learned Judge in justification of his taking the said view despite the clear pronouncement of the Judicial Committee of the Privy Council in Bhagchand case [AIR 1927 PC 176 : 54 IA 338, 357] do not appeal to us as correct or sound. In the light of the conclusion expressed by us in the foregoing paragraphs about the true scope and effect of Section 80 CPC, the aforecited decision of the learned Single Judge of the Kerala High Court cannot be accepted as laying down good law.” (Emphasis supplied)

37. In this context, we may refer to the Judgment of this Court in Gangappa Gurupadappa Gugwad, Gulbarga v. Rachawwa, Widow of Lochanappa Gugwad and others11: “10. No doubt it would be open to a court not to decide all the issues which may arise on the pleadings before it if it finds that the plaint on the face of it is barred by any law. If for instance the plaintiff's cause of action is against a Government and the plaint does not show that notice under Section 80 of the Code of Civil Procedure claiming relief was served in terms of the said section, it would be the duty of the court to reject the plaint recording an order to that effect with reasons for the order. …” (Emphasis supplied) 11 (1970) 3 SCC 716  

38. Section 69 of the Indian Partnership Act, 1932, in subSection (1) and (2), read as follows: “69. Effect of non-registration.— (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.

39. In the decision reported in Seth Loonkaran Sethia and others v. Ivan E. John and others12, this Court held: “21. A bare glance at the section is enough to show that it is mandatory in character and its effect is to render a suit by a plaintiff in respect of a right vested in him or acquired by him under a contract which he entered into as a partner of an unregistered firm, whether existing or dissolved, void. In other words, a partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce a right arising out of a contract falling within the ambit of Section 69 of the Partnership Act. …” 12 AIR 1977 SC 336 34 40. In Sharif-ud-Din v. Abdul Gani Lone13, relied upon by Shri Saket Sikri, the matter arose under the Jammu and Kashmir Representation of Peoples Act, 1957, the question arose whether the provision providing that copies of the election petition are to be attested by the petitioner as true copies under his own signature, was mandatory. We may notice the following paragraph: “9. The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case of the latter substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Certain broad propositions which can be deduced from several decisions of courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be summarised thus: The fact that the statute uses the word “shall” while laying down a duty is not conclusive on the question whether it is a mandatory or directory provision. In order to find out the true character of the legislation, the court has to ascertain the object which the provision of law in question has to subserve and its design and the context in which it is enacted. If the object of a law is to be defeated by non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision 13 (1980) 1 SCC 403 35 causes serious prejudice to those for whose benefit it is enacted and at the same time who have no control over the performance of the duty, such provision should be treated as a directory one. Where, however, a provision of law prescribes that a certain act has to be done in a particular manner by a person in order to acquire a right and it is coupled with another provision which confers an immunity on another when such act is not done in that manner, the former has to be regarded as a mandatory one. A procedural rule ordinarily should not be construed as mandatory if the defect in the act done in pursuance of it can be cured by permitting appropriate rectification to be carried out at a subsequent stage unless by according such permission to rectify the error later on, another rule would be contravened. Whenever a statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to a specific consequence, it would be difficult to hold that the requirement is not mandatory and the specified consequence should not follow.”

41. In Kailash v. Nanhku and others14, relied upon by Shri Saket Sikri, this Court was dealing with an election matter and one of the questions was whether the time limit of ninety days, as prescribed by the proviso to Order VIII Rule I of the CPC, is mandatory or not. The said provision dealt with the power of the Court to extend time for filing 14 (2005) 4 SCC 480 36 the written statement. The proviso fixes a period of ninety days from the date of service of summons as the maximum period for filing the written statement. This Court took the view that the provision is to be construed as directory and not mandatory.

42. In this context, we may notice paragraphs- 28 and 30 of Kailash (supra): “28. All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may be liberal or stringent, but the fact remains that the object of prescribing procedure is to advance the cause of justice. In an adversarial system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the statute, the provisions of CPC or any other procedural enactment ought not to be construed in a manner which would leave the court helpless to meet extraordinary situations in the ends of justice. The observations made by Krishna Iyer, J. in Sushil Kumar Sen v. State of Bihar [(1975) 1 SCC 774] are pertinent: (SCC p. 777, paras 5-6) “The mortality of justice at the hands of law troubles a judge's conscience and points an angry interrogation at the law reformer. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist rule that procedure should be the handmaid, not the mistress, of legal justice 37 compels consideration of vesting a residuary power in judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable. … Justice is the goal of jurisprudence — processual, as much as substantive.” xxx xxx xxx 30. It is also to be noted that though the power of the court under the proviso appended to Rule 1 Order 8 is circumscribed by the words “shall not be later than ninety days” but the consequences flowing from nonextension of time are not specifically provided for though they may be read in by necessary implication. Merely because a provision of law is couched in a negative language implying mandatory character, the same is not without exceptions. The courts, when called upon to interpret the nature of the provision, may, keeping in view the entire context in which the provision came to be enacted, hold the same to be directory though worded in the negative form.”

43. As far as the views expressed in Kailash (supra), that is a case which dealt with a purely procedural provision and the Court found that the power of the Court to allow filing of a written statement beyond the time, is not taken away. The absence of penal consequences was invoked. The most important aspect is that the proviso is in the domain of the procedural law. In contrast, Section 38 12A cannot be described as a mere procedural law. Exhausting pre-institution mediation by the plaintiff, with all the benefits that may accrue to the parties and, more importantly, the justice delivery system as a whole, would make Section 12A not a mere procedural provision. The design and scope of the Act, as amended in 2018, by which Section 12A was inserted, would make it clear that Parliament intended to give it a mandatory flavour. Any other interpretation would not only be in the teeth of the express language used but, more importantly, result in frustration of the object of the Act and the Rules. In this connection, in the Judgement reported in Sharif-ud-Din (supra), it has been held that, if the object of the law is defeated by non-compliance with the provision, then, it would be regarded as mandatory. The right to institute the Suit in a plaintiff who does not contemplate urgent interim relief in a commercial matter under the Act, is clearly conditioned by the fulfilment of certain conditions as provided in Section 12A. This cannot be likened to allowing a party to file his written statement. Bearing in mind the object also, the conclusion is inevitable that the right of suit itself will fructify only when the conditions in Section 12A are 39 fulfilled. Treating the provision as procedural, also, the result cannot be different. Any other view would remove the basis for treating Section 80(1) of the CPC as mandatory.

44. In Salem Advocate Bar Association, T.N. v. Union of India15, this Court, while dealing with the question, whether Section 89 of the CPC was mandatory or not, held as follows: “55. As can be seen from Section 89, its first part uses the word “shall” when it stipulates that the “court shall formulate terms of settlement”. The use of the word “may” in later part of Section 89 only relates to the aspect of reformulating the terms of a possible settlement. The intention of the legislature behind enacting Section 89 is that where it appears to the court that there exists an element of a settlement which may be acceptable to the parties, they, at the instance of the court, shall be made to apply their mind so as to opt for one or the other of the four ADR methods mentioned in the section and if the parties do not agree, the court shall refer them to one or the other of the said modes. Section 89 uses both the words “shall” and “may” whereas Order 10 Rule 1-A uses the word “shall” but on harmonious reading of these provisions it becomes clear that the use of the word “may” in Section 89 only governs the aspect of reformulation of the terms of a possible settlement and its reference to one of ADR methods. There is no 15 (2005) 6 SCC 344 conflict. It is evident that what is referred to one of the ADR modes is the dispute which is summarised in the terms of settlement formulated or reformulated in terms of Section 89.”

45. Lastly, we may notice that in Prem Lala Nahata v. Chandi Prasad Sikaria16, Justice P.K. Balasubramanyan, speaking on behalf of Justice S.B. Sinha, also held as follows: “16. Order 7 Rule 11(d) speaks of the suit being “barred by any law”. According to Black's Law Dictionary, bar means, a plea arresting a law suit or legal claim. It means as a verb, to prevent by legal objection. According to Ramanatha Aiyar's Law Lexicon, “bar” is that which obstructs entry or egress; to exclude from consideration. It is therefore necessary to see whether a suit bad for misjoinder of parties or of causes of action is excluded from consideration or is barred entry for adjudication. As pointed out already, on the scheme of the Code, there is no such prohibition or a prevention at the entry of a suit defective for misjoinder of parties or of causes of action. The court is still competent to try and decide the suit, though the court may also be competent to tell the plaintiffs either to elect to proceed at the instance of one of the plaintiffs or to proceed with one of the causes of action. On the scheme of the Code of Civil Procedure, it cannot therefore be held that a suit barred for misjoinder of parties or of causes of action is barred by a law, here the Code. This may be contrasted with the failure to comply with Section 80 of the 16 (2007) 2 SCC 551 41 Code. In a case not covered by sub-section (2) of Section 80, it is provided in subsection (1) of Section 80 that “no suit shall be instituted”. This is therefore a bar to the institution of the suit and that is why courts have taken the view that in a case where notice under Section 80 of the Code is mandatory, if the averments in the plaint indicate the absence of a notice, the plaint is liable to be rejected. For, in that case, the entertaining of the suit would be barred by Section 80 of the Code. The same would be the position when a suit hit by Section 86 of the Code is filed without pleading the obtaining of consent of the Central Government if the suit is not for rent from a tenant…..” (Emphasis supplied)

VIEWS OF HIGH COURTS: DISCORDANT NOTES?

46. In Ganga Taro Vazirani v. Deepak Raheja17, the learned Single Judge of the High Court of Bombay, took the view that Section 12A is a procedural provision. The learned Single Judge found further that when urgent relief is applied for, the procedure under Section 12A need not be undergone. It was further observed that it was not, as if, the Court lacks inherent jurisdiction to entertain a Suit without complying with Section 12A. Still further, he refers to Section 80 of the CPC. He refers to AL. AR. 17 2021 SCC Online Bombay 195 42 Vellayan Chettiar (Decd.) & Others v. Government of the Province of Madras Through the Collector of Ramnad at Madura & Another18, for the proposition that Notice thereunder is given for the protection of the Authority concerned and he can lawfully waive his right to the Notice. Reliance was also placed on the Judgement in State of A.P. and others v. Pioneer Builders, A.P.19, wherein this Court declined to interfere with the finding that having participated in the proceeding without raising objection about the maintainability of the Suit, there would be waiver. Learned Single Judge also took the view that even under Section 12A of the Act, in a given set of facts, the defendant could be held to have waived his right to set up Section 12A. It is further found that, if there is substantial compliance, the plaintiff cannot be non-suited, i.e., if an attempt has been made for settling the dispute, which has failed and, therefore, the plaintiff is constrained to approach the Court. It is this Judgment, which has been relied upon in both the impugned Judgments. 18 AIR 1947 PC 197  (2006) 12 SCC 119  

47. However, as pointed out by Shri Sharath Chandran, a Division Bench of the High Court of Bombay, in an appeal, has found that the Single Judge, has erred in his view that Section 12A is not mandatory. The Division Bench proclaimed that Section 12A of the Act is mandatory. It was further observed that considering the object and purpose of Section 12A, being rooted in public interest, there is no question of it being waived. When it came to the Order to be passed in the appeal, we notice that the plaintiff contended that the suit was allowed to be filed by the Registry because of a confusion in the Registry in the initial period, when the Amending Act came into force. There was oversight. The Division Bench stayed the Suit and the impugned Order for three months and referred the parties for mediation. A learned Single Judge of the High Court of Calcutta, in the decision reported in Dhanbad Fuels Ltd. v. Union of India and Others20, took the view that mediation in India is still at a nascent stage and requires more awareness. There was a need for mandatory training of commercial disputes. It was further found that the party cannot be denied the right to participate in the justice dispensation system. It was 20 2021 SCC Online Calcutta 429 44 further noticed that there was no obligation on the part of the defendant to respond to the initiative of the plaintiff. Rejecting the plaint under Order VII Rule 11(d) in view of Order VII Rule 13, which enables a fresh Suit to be filed upon rejection under Order VII Rule 11, would show that the power under Order VII Rule 11 should not be invoked as it would not be in accordance with the objectives of the Act and the Rules.

48. Another learned Single Judge of the High Court of Calcutta, in a judgment reported in Dredging and Desiltation Company Pvt. Ltd. v. Mackintosh Burn and Northern Consortium and Others21, took the view that there is a distinction between filing of a Suit and institution of a Suit under the CPC. It was further found that the bar under Section 12A is absolute w.e.f. 12.12.2020, being the date immediately subsequent to the date after the standard operating procedure for undertaking pre-litigation procedure under Section 12A was made. This is after finding that the standard operating procedure had been made and Rules were published on 11.12.2020. The very same learned 21 2021 SCC Online Calcutta 1458 45 Single Judge (Debangsu Basak, J.) in the judgment reported in Laxmi Polyfab Pvt. Ltd. v. Eden Realty Ventures Pvt. Ltd. and Another22, elaborately considered the question as to whether Section 12A is mandatory. He went on to hold that Section 12A was mandatory. The Division Bench of the High Court of Madhya Pradesh, in Curewin Pharmaceuticals Pvt. Ltd. v. Curewin Hylico Pharma Pvt. Ltd23, followed the judgment of the learned Single Judge of High Court of Bombay, which we have noticed in Ganga Taro (supra), and after finding that a Suit, which does not contemplate an urgent interim relief, cannot be instituted unless prelitigation mediation is exhausted. A learned Single Judge of the Allahabad High Court in the decision reported in Awasthi Motors v. Managing Director M/s. Energy Electricals Vehicle and Another24, found that there is a clear purpose provided for pre-institution mediation. He referred to the Statement of Objects and Reasons. He concluded that