Section 12A of the Commercial Courts Act, 2015 mandates pre-institution mediation for commercial disputes (₹3 lakh+) that do not contemplate any urgent interim relief. For MSMEs in particular, this provision is a strategic asset — mediation often resolves recovery and contract disputes faster and cheaper than litigation.
The procedure is straightforward: the plaintiff applies to the District Legal Services Authority (DLSA), which appoints a mediator and conducts mediation within 3 months (extendable by 2 months). Both parties' presence is mandatory. Failed mediation produces a non-settlement report; successful mediation produces an enforceable settlement deed.
MSMEs benefit because mediation costs (₹1,000 – ₹5,000 typically) are a fraction of court fees, lawyer engagement is minimal, and the timeline is compressed. Many high-volume B2B disputes (vendor non-payment, distribution disagreements, service-level disputes) are well-suited for mediation.
We see successful mediation resolutions where the parties have a continuing commercial relationship, where the dispute amount is below ₹50 lakh, or where the principal issue is timing/quantum rather than legal interpretation. For complex legal questions, civil suit may still be appropriate.
Practical tip: prepare the mediation brief like a litigation brief. Documentary record, chronology, claim quantum, and reasonable settlement parameters should be in writing before the first session. Mediators move quickly when both sides arrive prepared. We've closed MSME disputes worth ₹15-50 lakh in 4-8 weeks of mediation, against 2-3 year court timelines.