Commercial Courts in India: Pre‑Institution Mediation & Specified Value 2026
Commercial courts in India now mandate pre‑institution mediation for disputes above a certain value, streamlining resolution and reducing backlog. This article explains the statutory framework, value thresholds, and practical steps for parties.
Statutory Framework Governing Pre‑Institution Mediation
The Commercial Courts, Commercial Division and Commercial Appellate Tribunals (Amendment) Act, 2022 (hereinafter “Commercial Courts Act”) introduced Section 21A, which obliges parties to attempt mediation before filing a suit in a commercial court. This provision aligns with the Mediation and Conciliation (Amendment) Act, 2021, specifically Section 2(1) defining “pre‑institution mediation” as a mandatory step prior to instituting any commercial proceeding. The Commercial Courts Act also references the Commercial Courts Rules, 2023, Rule 9, which sets out procedural timelines for filing mediation requests. For disputes involving contractual or commercial matters, the applicable law is the Indian Contract Act, 1872, while the Arbitration and Conciliation Act, 1996 (Amended 2019) remains relevant for parties preferring arbitration after mediation fails. In criminal contexts, the Bharatiya Nyaya Sanhita, 2024 (BNS) replaces the IPC; however, commercial disputes are civil in nature, so BNS does not apply directly. The statutory hierarchy ensures that pre‑institution mediation is not optional but a condition precedent, and non‑compliance may result in the court dismissing the plaint under Section 21A(4) of the Commercial Courts Act.
Key takeaway: Begin mediation within 30 days of dispute to avoid dismissal of your commercial suit.
Specified Monetary Value Thresholds for Mandatory Mediation
The Commercial Courts Rules, 2023, Rule 9(2) specify that pre‑institution mediation is mandatory for disputes where the value exceeds INR 1 crore (approximately USD 120,000) but does not exceed INR 500 crore. For claims below INR 1 crore, parties may voluntarily mediate, but the court does not enforce it. The threshold was raised from INR 50 lakh in the 2019 amendment to reflect inflation and the growing complexity of commercial transactions. The Rules also carve out exceptions: disputes involving intellectual property infringement, securities, and competition law are excluded because specialized tribunals handle them. When the claim exceeds INR 500 crore, parties must approach the National Company Law Tribunal (NCLT) where a separate mediation framework applies under Section 23 of the Companies Act, 2013. These thresholds are crucial for litigants to assess their procedural obligations and to plan litigation strategy accordingly.
Key takeaway: If your claim is over INR 1 crore, schedule mediation within the statutory window to comply with the law.
Step‑by‑Step Process for Initiating Pre‑Institution Mediation
- Notice of Intent: Under Rule 9(3), the plaintiff must serve a “Notice of Intent to Mediate” to the defendant at least 15 days before filing the plaint. The notice must cite the dispute value and reference Section 21A of the Commercial Courts Act. 2. Selection of Mediator: Parties may mutually agree on a mediator from the Mediation Centre approved by the Supreme Court under the Mediation and Conciliation Act, 2002. If no agreement is reached, the court appoints a mediator within 7 days of the notice. 3. Mediation Request Filing: A formal mediation request is filed in the designated Mediation Centre, accompanied by the notice, claim statement, and supporting documents. The request must be filed within 30 days of the notice, as per Rule 9(4). 4. Mediation Session: Sessions are confidential and may be conducted in person or virtually. The mediator issues a “Mediation Report” within 10 days of conclusion. 5. Outcome: If parties reach an agreement, they file a Settlement Deed under Section 2(1)(d) of the Indian Evidence Act, 1872, which is binding and enforceable as a decree. If mediation fails, the plaintiff files the plaint, attaching the mediation report, and the court proceeds under Section 21A(5). Non‑compliance at any step may lead to dismissal or cost penalties under Rule 12 of the Commercial Courts Rules. This structured approach ensures transparency and reduces litigation costs.
Key takeaway: Follow the five‑step mediation timeline to keep your case on track and avoid procedural dismissal.
Penalties for Non‑Compliance and Court’s Discretion
Section 21A(4) of the Commercial Courts Act empowers the court to dismiss a plaint if the plaintiff fails to comply with the mediation requirement without a valid excuse. Additionally, Rule 12 of the Commercial Courts Rules authorises the court to levy a cost penalty of up to 5% of the claim value for frivolous non‑compliance. In exceptional circumstances, the court may condone delay if the plaintiff demonstrates that the defendant obstructed the mediation process, as per Section 21A(6). The court also retains discretion to order interim relief under Section 9 of the Code of Civil Procedure, 1908, even if mediation is pending, ensuring that urgent commercial interests are protected. These penalties underscore the legislative intent to make mediation a genuine gateway rather than a procedural formality.
Key takeaway: Non‑compliance can cost you your claim and additional penalties; treat mediation as a legal prerequisite.
Practical Tips for Parties and Lawyers
• Early Assessment: Determine the claim value early to know if mediation is mandatory. Use LitigaForge’s valuation calculator for quick estimates. • Document Preparation: Compile all contracts, invoices, and correspondence before sending the notice; incomplete documents cause delays. • Mediator Selection: Choose a mediator with sector expertise; commercial courts favour mediators certified by the Indian Institute of Arbitration and Mediation. • Confidentiality Clause: Insert a confidentiality clause in the mediation agreement to protect trade secrets, referencing Section 2(1)(d) of the Indian Evidence Act. • Settlement Drafting: Engage a lawyer to draft a Settlement Deed that meets Section 2(1)(d) requirements, ensuring enforceability as a decree. • Post‑Mediation Strategy: If mediation fails, promptly file the plaint with the mediation report attached to avoid dismissal under Section 21A(5). • Technology Use: Leverage LitigaForge AI to generate mediation notices, track deadlines, and auto‑populate court forms, reducing manual errors. Implementing these steps not only ensures statutory compliance but also enhances the likelihood of a favourable settlement, saving time and resources.
Key takeaway: Use a checklist and AI tools to streamline mediation compliance and improve settlement odds.
Frequently Asked Questions
What is the exact monetary threshold for mandatory pre‑institution mediation?
Mandatory mediation applies to commercial disputes valued over INR 1 crore and up to INR 500 crore, as per Commercial Courts Rules 2023 Rule 9(2).
Can I waive pre‑institution mediation if I prefer arbitration?
No. Even if parties intend to arbitrate, they must first attempt mediation under Section 21A of the Commercial Courts Act; arbitration can follow only after mediation fails.
How long do I have to file a mediation request after sending the notice?
You must file the mediation request within 30 days of the Notice of Intent, per Rule 9(4) of the Commercial Courts Rules.
What happens if the defendant refuses to attend mediation?
The court can appoint a mediator and may impose cost penalties on the non‑cooperating party under Rule 12, while still allowing the plaintiff to proceed with the suit.
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