Procedure to File a Commercial Dispute before the Commercial Court for Real Estate Development Collaboration under the Commercial Courts Act, 2015

 

Abstract : The Commercial Courts Act, 2015  governing the speedy and efficient disposal of commercial matters was enacted based on the 253rd Law Commission Report. These courts highly facilitate the business process indirectly contributing to the economic growth and international investment attraction. Commercial disputes, as defined under Section 2(b)(vii) of the Act, 2015, include any dispute arising out of agreements relating to immovable property used exclusively in trade and commerce. Growth in investments, large and small enterprises entering into the trade arena have led to rise in disputes related to immovable property. The necessity of specialized resolution for these matters is required in cases where conflicts between developers and residents may cause significant financial hardships. Under Section 12A of the Act, 2015, introduced under the 2018 Amendment, restructured the landscape of business dispute resolution in India. It shifted the legal strategy from immediate litigation to mandatory alternative dispute resolution.In the landmark case Patil Automation Private Limited v. Rakheja Engineers Private Limited, the Supreme Court declared this provision mandatory, ruling that non-compliance leads to the rejection of a plaint under Order VII Rule 11 of the Civil Procedure Code (CPC). This article mainly deals with explaining the procedural measures relating to the filing of commercial disputes before the Commercial Courts for Real Estate Development Collaboration. It also explains the importance of Section 12A which explicitly debars a suit from being instituted unless it is urgent or the plaintiff has exhausted all means of pre-institution mediation in accordance with any procedures given by the Central Government.

 

1. Introduction :

 

In contemporary times, the commercial world continues to witness growth of business operation, joint development and collaboration agreements across large and small enterprises. This increase is the primary reason for the requirement of litigation in real estate transactional disputes. Section 2(b)(vii) of the Commercial Courts Act, 2015[1] primarily deals with the such properties and the complex matters corresponding to the commercial interaction of the same. It states that a “commercial dispute” means a dispute arising out of agreements relating to immovable property used exclusively in trade or commerce. As seen in the case of Lakhani Reality LLP v. Kalina Vihar Darshan Co-operative Housing Society[2], the court addressed an issue where the developer was dealing with financial issues corresponding to recurring rent costs due to a few residents holding out on a redevelopment project.

 

Speedy resolution of commercial disputes is important in the real estate sector because delays often lead to financial losses for both developers and landowners. Long-pending disputes can also delay projects, increase costs, and affect business relationships. An efficient dispute resolution system strengthens investor confidence and improves the ease of doing business by ensuring that commercial conflicts are resolved without unnecessary delay.

 

The Commercial Courts Act, 2015 was enacted following the recommendations of the 253rd Law Commission Report[3] to ensure the speedy disposal of commercial disputes. The Act aims to provide a specialised mechanism for resolving complex commercial matters within a shorter time. It also seeks to reduce the backlog of commercial cases and promote a more efficient justice delivery system, thereby creating a favourable environment for trade and investment.

 

Section 12A[4] was introduced through the Commercial Courts (Amendment) Act, 2018 to make pre-institution mediation mandatory before filing certain commercial suits[5]. It applies to disputes where no urgent interim relief is sought. The provision clearly states that a commercial suit cannot be instituted unless the plaintiff first exhausts the remedy of pre-institution mediation. By making mediation a compulsory first step, Section 12A encourages early settlement of disputes and helps reduce the burden on commercial courts.

 

2. Legal framework governing Commercial Disputes in Real Estates

2.1 Definition of Commercial Dispute

Section 2(1)(c) of the Commercial Courts Act, 2015 defines a commercial dispute by listing various categories of commercial transactions. Among these, Section 2(1)(c)(vii) specifically includes disputes arising from agreements relating to immovable property used exclusively for trade or commerce. The Explanation to the section further clarifies that a dispute remains commercial even if it involves the recovery of immovable property or the recovery of money secured by such property.

2.2 Specified Value 

Section 2(1)(i) introduces the concept of Specified Value, which determines whether a dispute falls within the jurisdiction of a Commercial Court. Initially, the minimum value required was ₹1 crore. However, the Commercial Courts (Amendment) Act, 2018 reduced this threshold to ₹3 lakh. This amendment widened the scope of the Act by allowing a larger number of commercial disputes to be adjudicated by Commercial Courts.

2.3 Jurisdiction of Commercial Courts

The Commercial Courts Act provides for the establishment of Commercial Courts at the District level under Section 3 and Commercial Divisions in High Courts having ordinary original civil jurisdiction under Section 4. According to Section 6, these courts have jurisdiction to hear commercial disputes of the prescribed specified value, provided the dispute falls within their territorial jurisdiction as determined by Sections 16 to 20 of the Code of Civil Procedure, 1908.

2.4 Real Estate Development Collaboration

Real estate projects are commonly undertaken through Collaboration Agreements and Joint Development Agreements (JDAs), where landowners and developers work together for the commercial development of property. These agreements usually involve the transfer of development rights and define the rights and obligations of both parties. Since such arrangements involve commercial transactions and significant financial interests, disputes arising from them often require specialised legal resolution[6].

2.5 Role of the Real Estate (Regulation and Development) Act, 2016

The Real Estate (Regulation and Development) Act, 2016 (RERA)[7] was enacted to regulate the real estate sector and protect the interests of homebuyers. It also provides a mechanism for the speedy resolution of disputes. For instance, Section 13 prohibits a promoter from accepting more than ten per cent of the property’s cost without executing a registered agreement for sale. Further, Section 18 entitles an allottee to claim a refund and compensation where the promoter fails to hand over possession in accordance with the agreed terms.

2.6 Application of the Commercial Courts Act to Real Estate Disputes

Disputes arising from real estate collaboration agreements generally fall within the scope of the Commercial Courts Act because they relate to agreements concerning immovable property used for trade or commercial purposes under Section 2(1)(c)(vii). Consequently, disputes involving developers, landowners, and development rights can be adjudicated before Commercial Courts, provided they satisfy the prescribed specified value. This specialised framework ensures that complex commercial disputes in the real estate sector are resolved through a faster and more efficient judicial process.

3. Section 12A: Mandatory Pre-Institution Mediation

3.1. Statutory Framework of Section 12A

3.1.1 Legislative Background

Section 12A was inserted through the Commercial Courts (Amendment) Act, 2018 to introduce the mechanism of Pre-Institution Mediation and Settlement (PIMS). The provision was enacted to encourage the early resolution of commercial disputes without immediately resorting to litigation[8]. It also aimed to strengthen India’s commercial dispute resolution framework and improve the country’s ease of doing business by promoting a faster and more efficient justice delivery system.

3.1.2 Objective of Section 12A

One of the primary objectives of Section 12A is to reduce the burden on Commercial Courts by encouraging parties to resolve disputes through mediation before filing a suit. This became particularly important after the 2018 Amendment lowered the minimum specified value for commercial disputes from ₹1 crore to ₹3 lakh, resulting in a significant increase in the number of commercial cases before the courts.

3.1.3 Statutory Scheme

Section 12A(1) provides that a commercial suit which does not seek any urgent interim relief cannot be instituted unless the plaintiff has first exhausted the remedy of pre-institution mediation. The mediation process is conducted by the Legal Services Authorities in accordance with the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.

3.1.4 Time Limit and Limitation Period

The mediation process must ordinarily be completed within three months from the date of the application. This period may be extended by two additional months with the consent of both parties. Importantly, the time spent in mediation is excluded while calculating the limitation period, ensuring that parties do not lose their legal remedy because they participated in mediation.

3.1.5 Legal Effect of Settlement

Where the parties successfully settle the dispute, the settlement agreement must be recorded in writing and signed by both parties as well as the mediator. Under Section 12A(5), such a settlement has the same legal status as an arbitral award passed under Section 30(4) of the Arbitration and Conciliation Act, 1996, making it legally binding and enforceable.

3.1.6 Exception: Urgent Interim Relief

Section 12A does not apply where the plaintiff seeks urgent interim relief. In such cases, the plaintiff may directly approach the Commercial Court without first undergoing mediation. However, the Supreme Court has clarified that this exception cannot be used merely to avoid the mandatory mediation requirement. The request for urgent interim relief must be genuine and based on the facts of the case.

3.2 . Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022)[9]

3.2.1 Facts of the Case

The dispute arose from commercial suits that were filed without first undergoing the mandatory pre-institution mediation process under Section 12A. The defendants challenged the maintainability of the suits and sought rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, arguing that the suits were barred by law.

3.2.2 Issues Before the Court

The Supreme Court examined two key questions:

• Whether pre-institution mediation under Section 12A is mandatory.
• Whether failure to comply with Section 12A results in rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure.

3.2.3 Decision of the Supreme Court

The Supreme Court held that Section 12A is mandatory in nature. It ruled that where a commercial suit is instituted without first exhausting the remedy of pre-institution mediation, and the suit does not involve urgent interim relief, the plaint is liable to be rejected under Order VII Rule 11 of the Code of Civil Procedure. The Court further observed that this power may even be exercised by the court on its own motion.

3.2.4 Rejection of the Doctrine of Substantial Compliance

The Court rejected the argument that referring parties to mediation after the institution of the suit amounts to sufficient compliance with Section 12A. It observed that such an interpretation would defeat the legislative purpose of resolving disputes before judicial proceedings commence and would unnecessarily consume judicial time and resources.

3.2.5 Prospective Operation of the Judgment

Recognising that many commercial suits had already been instituted without mediation due to conflicting judicial opinions, the Supreme Court applied the doctrine of prospective overruling. Accordingly, the mandatory interpretation of Section 12A was made applicable prospectively from 20 August 2022.

3.3 Impact of the Judgment on Legislative Intent

The judgment in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. significantly strengthened the purpose of Section 12A by confirming that pre-institution mediation is a mandatory procedural requirement rather than a mere formality. It established mediation as the first stage of commercial dispute resolution for eligible disputes, thereby encouraging settlement before litigation.

The Supreme Court also recognised mediation as an effective method of dispute resolution that promotes cooperation, preserves commercial relationships, and reduces unnecessary litigation. By making mediation compulsory in appropriate cases, the Court reinforced the objective of the Commercial Courts Act to ensure speedy, efficient, and cost-effective resolution of commercial disputes while reducing the burden on the judiciary.

Finally, the judgment acknowledged that an efficient commercial justice system plays an important role in improving investor confidence and supporting economic growth. A predictable and time-bound dispute resolution framework encourages commercial certainty and strengthens India’s business environment.

4. Procedure for Filing a Commercial Dispute

Step 1: Identifying a Commercial Dispute

The first step is to determine whether the dispute qualifies as a commercial dispute under the Commercial Courts Act, 2015. Section 2(1)(c) provides an extensive list of commercial transactions covered by the Act. In the context of real estate, Section 2(1)(c)(vii) includes disputes arising from agreements relating to immovable property used exclusively for trade or commerce. The Explanation to this provision further clarifies that a dispute does not lose its commercial nature merely because it involves the recovery of immovable property or money secured against such property. Additionally, the dispute must satisfy the prescribed Specified Value of not less than ₹3 lakh under Section 2(1)(i) to fall within the jurisdiction of a Commercial Court.

Step 2: Determining the Applicability of Section 12A

After establishing that the dispute is commercial in nature, the next step is to examine whether Section 12A applies. Under Section 12A(1), a commercial suit cannot be instituted unless the plaintiff has first exhausted the remedy of pre-institution mediation, provided that no urgent interim relief is sought. In Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022), the Supreme Court held that compliance with this provision is mandatory and that failure to do so may result in rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure. Where a plaintiff seeks urgent interim relief, the court carefully examines whether such a claim is genuine and not merely a device to avoid the statutory mediation process.

Step 3: Initiating Pre-Institution Mediation

If Section 12A is applicable, the plaintiff must initiate pre-institution mediation before the appropriate Legal Services Authority constituted under the Legal Services Authorities Act, 1987. The mediation process begins with the submission of Form 1 along with the prescribed application fee[10]. Upon receiving the application, the Authority issues a notice to the opposite party, inviting them to participate in the mediation proceedings. If both parties agree to participate, the mediation process commences after payment of the prescribed mediation fee, which is shared equally between them in accordance with the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018[11].

Step 4: Outcome of the Mediation Process

The mediation proceedings may conclude in one of three ways. If the parties successfully resolve the dispute, the settlement agreement is reduced to writing and signed by the parties and the mediator. Such a settlement has the same legal effect as an arbitral award under the Arbitration and Conciliation Act, 1996. If no settlement is reached within the prescribed period, the mediator issues a Failure Report, enabling the plaintiff to institute a commercial suit. Where the opposite party refuses to participate or fails to respond to the mediation notice, the Authority issues a Non-Starter Report, after which the plaintiff may proceed directly before the Commercial Court.

Step 5: Institution of the Commercial Suit

Once the mediation process has been completed or appropriately dispensed with, the plaintiff may institute the commercial suit by filing a plaint before the competent Commercial Court. Every pleading must be accompanied by a Statement of Truth in the prescribed form, affirming the correctness of the facts stated. The court’s jurisdiction is determined by the specified value of the dispute and the applicable territorial jurisdiction under the Code of Civil Procedure, 1908[12]. The plaintiff is also required to disclose and file all relevant documents, including those that may not support their case, in accordance with Order XI of the Code of Civil Procedure. The prescribed court fees must also be paid at the time of institution.

Step 6: Proceedings before the Commercial Court

After the suit is instituted, the Commercial Court follows an expedited procedure to ensure the timely disposal of commercial disputes. The defendant is required to file the written statement within the statutory period prescribed under the Code of Civil Procedure, failing which the right to file the written statement may be forfeited. The parties then complete the process of disclosure and inspection of documents, followed by a Case Management Hearing where the court frames the issues and fixes a schedule for trial. The trial is conducted on a day-to-day basis as far as practicable, and after hearing the arguments of both parties, the Commercial Court delivers its judgment within the time prescribed under the Commercial Courts Act and the Code of Civil Procedure.

Conclusion

The Commercial Courts Act, 2015 has significantly improved the framework for resolving commercial disputes in India by providing a specialised and time-bound mechanism. In the context of real estate development collaborations, where disputes often involve large investments, contractual obligations, and multiple stakeholders, a speedy resolution is essential to avoid unnecessary financial losses and project delays.

The introduction of Section 12A through the 2018 Amendment has further strengthened this framework by making pre-institution mediation a mandatory step before filing most commercial suits. This provision encourages parties to explore settlement before approaching the court, thereby reducing the burden on the judiciary and promoting quicker dispute resolution. The Supreme Court’s decision in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. has reinforced this objective by making it clear that compliance with Section 12A is not optional but a mandatory legal requirement.

Overall, the procedure for filing a commercial dispute under the Commercial Courts Act reflects a shift from traditional litigation towards a more efficient and settlement-oriented approach. While the system still faces practical challenges in implementation, the existing legal framework strikes a balance between protecting the rights of the parties and ensuring timely justice. As commercial transactions in the real estate sector continue to grow, effective implementation of these provisions will play an important role in strengthening commercial certainty, reducing litigation, and promoting a more business-friendly legal environment.

 

[1] Commercial Courts Act, 2015, § 2, No. 4, Acts of Parliament, 2015 (India).

[2] Lakhani Reality LLP v. Kalina Vihar Darshan Co-operative Housing Society, 2025 Supreme(Bom) 1761.

[3] Swastika Mukherjee, Analysis of Mandatory Pre-Institution Mediation in India with Respect to Turkey & Italy, Taxguru (3^rd July, 2026, 3:18 pm), https://taxguru.in/corporate-law/analysis-mandatory-pre-institution-mediation-india-respect-turkey-italy.html

[4] Commercial Courts Act, 2015, § 12A, No. 4, Acts of Parliament, 2015 (India).

[5] Ramana Deshmukh and Shelja Shah, The Mediation Mandate: A Jurisprudential Analysis Of Section 12A Of The Commercial Courts Act, 2015, Mondaq, (3^rd July, 2026, 3:29pm) https://www.mondaq.com/india/trials-appeals-compensation/1706982/the-mediation-mandate-a-jurisprudential-analysis-of-section-12a-of-the-commercial-courts-act-2015

[6] Shantanu Garg and Souvik Naik, Mandatory Pre-Litigation Mediation Under Section 12A From Legislative Intent To Judicial Finality, Mondaq (3^rd July 4:12 pm) https://www.mondaq.com/india/trials-appeals-compensation/1747732/mandatory-pre-litigation-mediation-under-section-12a-from-legislative-intent-to-judicial-finality

[7] Real Estate (Regulation and Development) Act, 2016, No. 16, Acts of Parliament, 2016 (India).

[8] M/S Patil Automation Private Limited vs Rakheja Engineers Private Limited on 17 August, 2022, 2022 SCC OnLine SC 1028

[9] M/S Patil Automation Private Limited vs Rakheja Engineers Private Limited on 17 August, 2022, 2022 SCC OnLine SC 1028

[10] M/S Patil Automation Private Limited vs Rakheja Engineers Private Limited on 17 August, 2022, 2022 SCC OnLine SC 1028

[11] M/S Patil Automation Private Limited vs Rakheja Engineers Private Limited on 17 August, 2022, 2022 SCC OnLine SC 1028

[12] M/S Patil Automation Private Limited vs Rakheja Engineers Private Limited on 17 August, 2022, 2022 SCC OnLine SC 1028