Introduction

Modern commerce runs on an unbroken chain of supply—raw material, manufacturing, warehousing, transport, and delivery, each link governed by contracts between businesses. When any link snaps, whether through non-delivery, short-supply, delayed dispatch, quality failure, or wrongful termination of a supply agreement, the resulting supply chain interruption can halt production lines, trigger penalty clauses with downstream customers, and cause significant financial loss.

Where the parties are unable to resolve such a dispute amicably, Indian law provides a specialized forum—the Commercial Court—for the speedy adjudication of high-value commercial disputes, including those arising from supply chain interruptions. This article explains the step-by-step procedure to file a commercial dispute before the Commercial Court, with particular emphasis on the mandatory pre-institution mediation requirement under Section 12A of the Commercial Courts Act, 2015.

 

What Constitutes a Supply Chain Interruption Dispute

A supply chain interruption dispute typically arises when a supplier, vendor, logistics provider, or manufacturer fails to perform its contractual obligations, resulting in disruption to the aggrieved party’s business operations. Common triggers include:

• Non-supply or short supply of raw materials, components, or finished goods.
• Delayed dispatch or delivery beyond the agreed lead time.
• Supply of goods that do not conform to agreed specifications or quality standards.
• Wrongful or abrupt termination of a supply, distribution, or logistics agreement.
• Failure of a transporter or warehousing agency to perform agreed services, causing loss of or damage to goods in transit or storage.

Such disputes ordinarily arise from a breach of an underlying commercial contract and are actionable under the Indian Contract Act, 1872, read with the specialized procedural framework created by the Commercial Courts Act, 2015.

 

Is It a “Commercial Dispute” Under the Act

The Commercial Courts Act, 2015, applies only to disputes that fall within the statutory definition of a “commercial dispute” under Section 2(1)(c) and where the “Specified Value” of the claim meets the prescribed threshold. Disputes relating to the supply of goods and services, ordinary transactions of merchants, agreements relating to the carriage of goods, and agreements relating to the export or import of merchandise are expressly recognized as commercial disputes, which brings most supply chain interruption claims squarely within the Act.

Key Threshold to Note: A commercial suit can be filed before the Commercial Court only where the specified value of the subject matter is Rs. 300,000 (rupees three lakh) or more, unless a higher threshold has been separately notified for a particular state’s Commercial Courts.

Governing Legal Framework

The procedure for filing and adjudicating a supply chain commercial dispute is primarily governed by:

The Commercial Courts Act, 2015, establishes Commercial Courts and Commercial Divisions of High Courts, prescribes the Specified Value threshold, mandates pre-institution mediation under Section 12A, and modifies the Code of Civil Procedure, 1908, in its application to commercial suits (through the Schedule to the Act, e.g., Order VI Rule 3, Order XI on disclosure, and Order XV-A on case management hearings).

The Indian Contract Act, 1872—Section 73 entitles the aggrieved party to compensation for loss naturally arising from the breach of the supply contract, while Section 74 governs liquidated damages or penalty clauses commonly found in vendor and supply agreements.

The Code of Civil Procedure, 1908—continues to govern institution of suits, pleadings, evidence, judgment and execution, subject to the special procedure prescribed for commercial suits.

The Mediation Act, 2023, now provides the consolidated statutory framework for the pre-institution mediation contemplated under Section 12A.

 

Step-by-Step Procedure to File a Commercial Dispute

Filing a commercial suit for a supply chain interruption follows a structured procedure. The flow below summarizes the key stages, each of which is explained in detail thereafter.

1. Review the supply/vendor contract.

Begin by carefully examining the underlying agreement to identify each party’s obligations, delivery and payment timelines, force majeure clauses, penalty or liquidated damages clauses, the governing law, and any notice or dispute resolution requirements (including any arbitration clause, which would take the dispute outside the Commercial Court’s jurisdiction).

2. Gather Supporting Evidence

Collect all documents that establish the contractual relationship and the interruption in supply, such as purchase orders, invoices, delivery challans, transport documents, quality inspection or rejection reports, and correspondence recording the default and its impact on business operations.

3. Issue a Legal Notice

A legal notice calling upon the defaulting supplier or vendor to cure the breach, resume supply, or make payment within a stipulated period is generally issued. While not mandatory in every case, it demonstrates bona fide intent, may prompt an amicable resolution, and is often relied upon during the subsequent mediation process.

4. Undertake Pre-Institution Mediation (Section 12A)

Before instituting the commercial suit, the plaintiff must ordinarily exhaust the remedy of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015. This step is discussed in detail in the next section, as it is central to the filing process and its non-compliance can be fatal to the suit.

5. Determine Jurisdiction

The suit must be filed before the Commercial Court (or Commercial Division of the High Court, where applicable) having:

• Territorial jurisdiction — where the cause of action wholly or partly arose, or where the defendant resides or carries on business.
• Pecuniary jurisdiction—based on the specified value of the claim, which must meet the statutory threshold under the Act.

6. Draft the Commercial Plaint

The plaint must set out the facts constituting the supply chain interruption, the cause of action, particulars of the loss claimed, and the relief sought. Commercial suits additionally require a Statement of Truth verifying the pleadings, disclosure of all documents in the party’s power, possession, or control relevant to the dispute, and compliance with the specific pleading format prescribed for commercial suits under the CPC as amended by the Act.

7. Pay Court Fees and Institute the Suit

Court fees are payable in accordance with the applicable Court Fees Act, calculated on the value of the claim. Upon scrutiny by the court registry, the plaint is registered, and summons are issued to the defendant to file a written statement, ordinarily within thirty days, extendable up to a maximum of one hundred and twenty days in appropriate cases.

8. Case Management Hearing and Trial

Commercial suits proceed through structured case management hearings for framing issues, recording admissions and denials of documents, and fixing timelines for evidence and arguments, with both parties presenting documentary and oral evidence before the court.

9. Judgment and Decree

After considering the pleadings, evidence, and submissions, the Commercial Court pronounces judgment and passes a decree, which may include compensation, interest, and costs.

10. Execution of the Decree

Where the defendant does not comply voluntarily, the decree-holder may initiate execution proceedings for recovery of the decretal amount, including attachment of bank accounts or movable and immovable property, under the Code of Civil Procedure, 1908.

 

Section 12A: Pre-Institution Mediation — A Closer Look

Section 12A of the Commercial Courts Act, 2015 (introduced by the 2018 amendment and later aligned with the Mediation Act, 2023) requires that a commercial suit that does not contemplate any urgent interim relief shall not be instituted unless the plaintiff has exhausted the remedy of pre-institution mediation. The provision applies to supply chain interruption claims in the same manner as any other commercial dispute, unless genuine urgent interim relief, such as an injunction to prevent imminent, irreparable harm, is sought.

How the Pre-Institution Mediation Process Works

1. The prospective plaintiff files an application (Form-1) before the Authority constituted under the Legal Services Authorities Act, 1987, or an authorized mediation service provider under the Mediation Act, 2023.
2. A mediator is appointed, and notice is issued to the opposite party to participate in the mediation.
3. The mediation process is to be completed within three months from the date of application, extendable by a further two months with the consent of the parties.
4. If the dispute is settled, the settlement is reduced to writing and signed by the parties and the mediator; it carries the same status and effect as an arbitral award on agreed terms under Section 30(4) of the Arbitration and Conciliation Act, 1996.
5. If mediation fails or a party does not participate, a non-starter report / failure report is issued, following which the plaintiff is free to institute the commercial suit.

 

The “Urgent Interim Relief” Exception

The only statutory exception to mandatory pre-institution mediation is where the suit contemplates urgent interim relief. Courts examine the plaint and its annexures—not the defendant’s anticipated defense—to assess whether the urgency pleaded is genuine or merely a device to bypass mediation. In a supply chain context, urgency may arise, for instance, where an injunction is urgently required to prevent diversion of contracted goods or to restrain a wrongful termination that would immediately and irreparably disrupt operations. A claim confined to recovery of money for past supply failures, without more, will generally not qualify for the exception.

Mandatory Nature — Judicial Position

The Supreme Court has authoritatively settled that Section 12A is mandatory and not merely directory in nature.

Case	Holding
Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1	Held Section 12A to be mandatory; non-compliance renders the plaint liable to rejection under Order VII Rule 11 CPC. The declaration was made prospective, effective 20 August 2022.
Yamini Manohar v. T.K.D. Keerthi (2023)	Laid down criteria to test whether a plaintiff genuinely contemplates urgent interim relief, examining the subject matter, cause of action, and the prayer for interim relief.
Dhanbad Fuels Pvt. Ltd. v. Union of India (2025)	Clarified that suits filed on or after 20 August 2022 without Section 12A compliance must be rejected; suits filed earlier may be kept in abeyance to permit mediation.
Novenco Building & Industry A/S v. Xero Energy Engineering Solutions (2025)	Held that in continuing-wrong cases (e.g., IP infringement), delay in filing does not automatically defeat a bona fide claim of urgency; urgency must be assessed pragmatically from the plaint.

 

Practical Takeaway Before drafting a plaint for a supply chain interruption claim, first assess whether genuine urgent interim relief is required. If not, initiate Section 12A pre-institution mediation at the earliest — skipping it, or pleading urgency merely as a device to avoid mediation, risks outright rejection of the suit.

 

 

Reliefs and Damages Available

The primary objective of contractual remedies in India is to place the aggrieved party, as far as possible, in the position it would have occupied had the supply contract been duly performed. Depending on the facts, a commercial court may award the following:

• Compensatory damages for actual financial loss directly resulting from the supply chain interruption.
• Liquidated damages, where the contract specifies a predetermined sum payable on breach, subject to Section 74 of the Indian Contract Act, 1872.
• Interest on the amount found due, where permissible under the contract or applicable law.
• Injunctive relief, in appropriate cases involving continuing or imminent harm.
• Costs of litigation, including court fees and other expenses, as awarded by the court.

The claimant is also expected to take reasonable steps to mitigate its loss; damages will not be awarded for losses that could reasonably have been avoided, such as by promptly sourcing an alternate supplier.

Essential Documents for Filing

No.	Document
1	Supply / vendor / distribution agreement and any amendments
2	Purchase orders and work orders
3	Tax invoices and GST invoices
4	Delivery challans and transport / logistics documents
5	Acknowledgement of receipt, inspection or rejection reports
6	Email and other correspondence evidencing the default
7	Bank statements and payment records
8	Legal notice and proof of service
9	Section 12A mediation application, notices and failure/non-starter report
10	Any other document evidencing the breach and resulting loss

Practical Challenges

• Delay in completion of the pre-institution mediation process where trained mediators or infrastructure under the PIMS Rules, 2018, are not readily available in a particular jurisdiction.
• Difficulty in precisely quantifying the loss caused by a supply chain interruption, particularly consequential or downstream losses.
• Disputes over whether a claim genuinely involves urgent interim relief, leading to satellite litigation on maintainability.
• Jurisdictional disputes, especially where supply chains span multiple states or involve cross-border vendors.
• Challenges in enforcing the decree where the defendant lacks sufficient assets or resists compliance.

Maintaining contemporaneous contractual and delivery records, and initiating the Section 12A process promptly, substantially reduces these difficulties.

Conclusion

Supply chain interruptions can have a cascading impact on a business’s operations, revenue, and downstream commitments. The Commercial Courts Act, 2015, offers a specialized and time-bound mechanism for resolving such disputes, but access to the Commercial Court is conditioned on first exhausting pre-institution mediation under Section 12A, except where genuine urgent interim relief is sought. A business that maintains clear contractual documentation, acts promptly on a default, and correctly navigates the Section 12A process stands in a considerably stronger position to enforce its rights and recover its losses in a timely manner.

 

 

Frequently Asked Questions (FAQs)

• Is pre-institution mediation compulsory before filing a supply chain dispute in the Commercial Court?

Yes. Section 12A of the Commercial Courts Act, 2015, makes pre-institution mediation mandatory for commercial suits that do not contemplate urgent interim relief. The Supreme Court has held that non-compliance renders the suit liable to rejection.

• What is the minimum claim value to approach a commercial court?

The subject matter of the commercial dispute must ordinarily meet a specified value of Rs. 300,000 or more, unless a higher threshold has been notified for a particular state.

• Can a party skip Section 12A mediation by claiming urgency?

Only where the plaint genuinely and demonstrably contemplates urgent interim relief. Courts scrutinise the plaint and annexures to prevent the exception from being used as a pretext to bypass mediation.

• What happens if the mediation is successful?

A settlement reached under Section 12A is reduced to writing and signed by the parties and mediator. It has the same status and effect as an arbitral award on agreed terms and is enforceable accordingly.

• What remedies can a Commercial Court grant for a supply chain interruption?

Depending on the facts, the court may award compensatory damages, liquidated damages, interest, injunctive relief in appropriate cases, and litigation costs.

References

• The Commercial Courts Act, 2015, including Section 12A (as amended by the Mediation Act, 2023).
• The Indian Contract Act, 1872, Sections 73 and 74.
• The Code of Civil Procedure, 1908, as applicable to commercial suits.
• The Mediation Act, 2023.
• Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1.
• Yamini Manohar v. T.K.D. Keerthi (2023).
• M/s Dhanbad Fuels Pvt. Ltd. v. Union of India & Anr. (2025).
• Novenco Building and Industry A/S v. Xero Energy Engineering Solutions Pvt. Ltd. & Anr. (2025).