In a significant ruling reinforcing the binding nature of Section 12A of the Commercial Courts Act, the Delhi High Court has upheld the imposition of ₹1,00,000 in costs on the Municipal Corporation of Delhi (MCD) for its failure to participate in mandatory Pre-Institution Mediation proceedings.

The Division Bench comprising Justices Navin Chawla and Renu Bhatnagar dismissed MCD’s appeal against the Trial Court's decision, asserting that statutory bodies cannot bypass legal mandates designed to decongest the judiciary and promote early resolution of disputes.

The case, Municipal Corporation of Delhi v. Krishan Kumar Gupta [RFA (Comm) 220/2025], arose from a commercial money suit filed by a contractor empanelled with the MCD. Before initiating the suit, the contractor duly approached the District Legal Services Authority (DLSA) at Tis Hazari Courts for Pre-Institution Mediation, as required under Section 12A of the Act.

Despite having been served notice, MCD officials failed to appear for the mediation, leading to its failure. Consequently, the contractor was forced to institute a commercial suit before the Commercial Court, Delhi.

While decreeing the suit, District Judge Surinder S. Rathi criticized MCD’s disregard for legal mandates:

“Despite the statutory promulgation and strict interpretation of the same by the Hon’ble Supreme Court, it is surprising to observe that defendant MCD and its officials appear to have scant regard for the law as promulgated by Parliament or the judgments passed by the Hon’ble Supreme Court, which are themselves binding under Article 141 of the Constitution of India.”

Finding no justification for MCD’s absence in the mediation process, the Court imposed a cost of ₹1,00,000, directing it to be deposited with the Advocates’ Welfare Fund, Delhi Bar Association.

The Court emphasized that Pre-Institution Mediation is not a procedural formality, but a mandatory legal requirement, as held in the Supreme Court’s judgment in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd..

It further cautioned that public institutions like MCD must set an example in adhering to statutory obligations, warning that such defiance tarnishes India's international reputation—particularly with respect to the Ease of Doing Business Index, where “Enforcement of Contracts” remains a crucial parameter.

In appeal, the High Court unequivocally rejected MCD’s argument that participation in pre-suit mediation was optional. Citing Patil Automation, the Bench held:

“There cannot even be a shadow of doubt that the language used in Section 12A is plainly imperative in nature... The whole object of the law is clear as daylight.”

The Court held that MCD, as a statutory body, is charged with greater responsibility to reduce litigation and comply with legal procedures, observing:

“The appellant cannot act as an ordinary litigant and defeat the object of the Act. By not responding to the notices of Pre-Institution Mediation, the appellant clearly defeats the object of the Act and acts contrary to its public function and duties.”

Accordingly, the Bench upheld the cost of ₹1,00,000 and directed MCD to deposit the same within two weeks. It also instructed the civic body to issue directions to its officers to participate in Pre-Institution Mediations in the right spirit moving forward.

This ruling reaffirms the legally binding nature of Section 12A, underscores the judiciary's intolerance for statutory non-compliance, and reiterates that public bodies must lead by example in honoring legal mandates, particularly in the realm of alternative dispute resolution.

Legal Representation

• For MCD (Appellant): Adv. Tushar Sannu, Priyankar Tiwary (AOR), and Pravin Bansal

• For Respondent: Nemo