Facts of the Case

The appellant, JKR Partnership Firm, challenged the order dated 31.07.2025 passed by the Additional District Judge (Commercial Court), Jammu, whereby the trial court allowed the respondent’s application under Order VII Rule 11 CPC and rejected the appellant’s plaint for failure to comply with the mandatory requirement of pre-institution mediation under Section 12-A of the Commercial Courts Act, 2015.

The dispute arose from a Franchise Agreement dated 25.07.2020 between the appellant and the respondent. Under the agreement, the appellant was appointed as a non-exclusive franchisee for operating a single outlet at Detailing Devils, Jammu, Malik Market, Bye Pass Road, opposite Jamia Masjid.

The initial franchise term was three years. The agreement contained a renewal option for an additional two years, subject to payment of a non-refundable renewal fee of ₹50,000 and service of prior notice within the contractually prescribed period.

The judgment records that, based on the date of the Franchise Agreement, the agreement was to expire on 24.07.2023. Thereafter, the respondent issued a legal notice dated 29.08.2023, terminating the Franchise Agreement and requiring the appellant to desist from representing itself as the respondent’s franchisee.

The appellant replied on 12.09.2023, asserting entitlement to ₹50 lakh on account of its investment and also seeking renewal of the Franchise Agreement for another two years.

The appellant then instituted a civil suit on 28.10.2023, claiming:

  • recovery of ₹50,00,000 as compensation;
  • declaration that the termination notice dated 29.08.2023 was illegal, null, void and inoperative;
  • mandatory injunction directing the respondent to permit continued operation under the Franchise Agreement; and
  • permanent prohibitory injunction restraining the respondent from allotting the franchise to another person in Jammu Province.

The suit was accompanied by an application for temporary injunction seeking stay of the termination notice, restraint against allotment of the franchise to another person, and interim continuation of business under the Franchise Agreement.

The respondent filed an application under Order VII Rule 11 CPC, relying, inter alia, on the Supreme Court judgment in M/s Patil Automation Pvt. Ltd. & Ors. vs Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1, and contended that the commercial suit was liable to be rejected for failure to undertake mandatory pre-institution mediation.

The trial court accepted the respondent’s objection and rejected the plaint. The appellant therefore preferred the present Regular First Appeal.

Issues Involved

The principal issues before the High Court were:

  1. Whether pre-institution mediation under Section 12-A of the Commercial Courts Act, 2015 is mandatory for a commercial suit that does not genuinely contemplate urgent interim relief.
  2. Whether merely filing an application for temporary injunction automatically exempts a plaintiff from compliance with Section 12-A.
  3. Whether the appellant’s prayers for mandatory and prohibitory injunction disclosed a real and substantial urgency, or whether they constituted a device to bypass mandatory pre-institution mediation.
  4. Whether the Commercial Court was required to examine the plaint, cause of action, documents and surrounding circumstances holistically to determine the genuineness of the alleged urgency.
  5. Whether the appellant’s failure to exercise the contractual renewal option within the stipulated period undermined its subsequent claim of urgent interim relief.
  6. Whether rejection of the plaint under Order VII Rule 11 CPC for non-compliance with Section 12-A was legally sustainable.

Appellant’s Arguments

The appellant contended that the suit was maintainable without pre-institution mediation because it was accompanied by an application seeking urgent ad interim relief.

It argued that the termination of the franchise and the possibility of the franchise being allotted to another person created manifest urgency. According to the appellant, the requirement of pre-institution mediation under Section 12-A therefore stood dispensed with.

The appellant further submitted that the trial court had failed to appreciate the true nature of the interim relief sought and had not properly examined the pleadings as a whole.

The appellant relied upon several judicial authorities, including:

M/s Patil Automation Pvt. Ltd. & Ors. vs Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1 – relied upon in relation to the mandatory nature and scope of Section 12-A.

Ganga Taro Vazirani vs Deepak Raheja, 2020 SCC OnLine Bom 9015 – cited to contend that Section 12-A is procedural and that where urgent relief is sought, pre-litigation mediation need not be undertaken.

Novenco Building and Industry vs Xero Energy Engineering Solutions Pvt. Ltd. & Anr., 2025 SCC OnLine SC 2278 – relied upon to argue that the nature of urgent interim relief must be examined from the plaintiff’s standpoint and that the plaint and supporting materials must be assessed holistically.

The appellant maintained that the temporary injunction application itself demonstrated the urgent nature of the dispute and therefore the trial court ought not to have rejected the plaint under Section 12-A read with Order VII Rule 11 CPC.

Respondent’s Arguments

The respondent contended that a plain reading of the plaint disclosed only feigned or manufactured urgency, created solely to avoid mandatory pre-institution mediation.

The respondent argued that the appellant’s own conduct contradicted its plea of urgency because the appellant had remained inactive and had failed to exercise its contractual right of renewal in accordance with the Franchise Agreement.

The respondent emphasized that the appellant had taken no timely steps under the relevant renewal clause before expiry of the franchise term.

Accordingly, the respondent submitted that the trial court had correctly rejected the plaint for non-compliance with Section 12-A of the Commercial Courts Act.

The respondent had also raised before the trial court issues concerning the appellant partnership firm’s registration, contractual jurisdiction in Delhi, and the commercial nature of the dispute. However, the central issue decided for present purposes concerned mandatory pre-institution mediation under Section 12-A.

Court Order / Findings

The High Court dismissed the appeal and upheld the trial court’s rejection of the plaint.

The Court held that the legal position emerging from binding Supreme Court precedents is that the mandate of pre-institution mediation under Section 12-A is absolute and compulsory where a commercial suit does not genuinely contemplate urgent interim relief.

The High Court clarified that where a plaintiff fails to comply with Section 12-A in a suit not involving genuine urgent interim relief, the plaint is liable to rejection under Order VII Rule 11 CPC.

At the same time, the Court held that determination of urgency requires a holistic judicial examination of:

  • the specific facts pleaded;
  • the documents appended to the plaint;
  • the nature and subject matter of the suit;
  • the cause of action; and
  • the actual need for immediate judicial intervention.

The Court emphasized that a mere prayer for urgent interim relief cannot be used through crafty drafting to bypass Section 12-A. The urgency must be real and substantial, not superfluous, cosmetic or artificial.

The High Court succinctly held that a prayer for interim relief must not be a camouflage to evade the statutory obligation of mediation.

Finding on the Franchise Renewal Clause

The Court closely examined Clause 3.2.1 of the Franchise Agreement.

Under this clause, the appellant was contractually required to notify the respondent of its election to renew the franchise within the stipulated period of not less than six months and not more than twelve months before expiry of the initial term.

The High Court found that:

  • no documentary evidence established service of such renewal notice;
  • the appellant had not timely exercised the contractual renewal option; and
  • learned counsel for the appellant fairly conceded that no requisite notice of election to renew had been served upon the respondent.

The Court held that if the appellant was genuinely interested in continuing the franchise business, it ought to have exercised the contractual option in time.

Instead, according to the High Court, only after receiving the termination notice did the appellant create a superficial urgency in the plaint through an application for interim relief.

Finding on ₹50 Lakh Monetary Claim

The High Court further noted that the plaint expressly sought recovery of ₹50 lakh as damages for alleged illegal termination.

The Court found that the appellant’s primary remedy ultimately resolved into a quantifiable monetary claim.

Consequently, the injunctive reliefs were held to be an afterthought intended to manufacture an illusion of urgency and bypass the statutory pre-institution mediation requirement.

Final Order

The High Court held that there was no error or illegality in the trial court’s order dated 31.07.2025.

Accordingly:

  • the appeal was held to be completely devoid of merit; and
  • the appeal was dismissed.

The judgment was approved for reporting.

Important Clarification

This judgment does not establish that every commercial suit containing an injunction prayer can be rejected for failure to undergo pre-institution mediation.

The correct legal position, as explained by the High Court on the basis of Supreme Court precedents, is that:

  • Section 12-A pre-institution mediation is mandatory;
  • a commercial suit genuinely contemplating urgent interim relief may be instituted without first undergoing mediation;
  • merely inserting an urgent relief prayer does not automatically create an exemption;
  • the court must examine the plaint, documents, cause of action and surrounding circumstances holistically;
  • urgency must be real, substantial and plausible from the plaintiff’s standpoint;
  • courts must prevent artificial, cosmetic or manufactured urgency from defeating Section 12-A; and
  • even where interim relief is ultimately refused on merits, the suit may still proceed without prior mediation if genuine urgency existed at the time of institution.

In the present case, the exemption failed because the High Court found the claimed urgency to be superficial, particularly in view of the appellant’s failure to timely exercise the contractual renewal option and the quantifiable ₹50 lakh damages claim.

Sections / Legal Provisions Involved

Section 12-A of the Commercial Courts Act, 2015 – Mandatory pre-institution mediation in commercial disputes where the suit does not contemplate urgent interim relief.

Order VII Rule 11 CPC, 1908 – Rejection of plaint, including where the suit is barred by law; applied in the context of non-compliance with mandatory Section 12-A requirements.

Order VII Rule 12 CPC, 1908 – Requirement concerning reasons when a plaint is rejected, discussed through the Supreme Court principles reproduced in the judgment.

Order IV Rule 1 CPC, 1908 – Relevant to due institution of suits, referred to within the Supreme Court precedent discussed by the High Court.

Order V Rule 1 CPC, 1908 – Relevant to issuance of summons in a duly instituted suit, as discussed in the cited precedent.

Section 3(2) of the Limitation Act, 1963 – Referred to within the principles extracted from Patil Automation concerning presentation and institution of plaint.

Link to download the order -

https://mytaxexpert.co.in/uploads/1783065722_372compressed.pdf 

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