Pre-institution mediation and settlement (PIMS) under Section 12A of the Commercial Courts Act, 2015 requires that a suit which does not contemplate urgent interim relief be filed only after the plaintiff has exhausted mediation conducted by the authorities notified under the Legal Services Authorities Act. The process must be completed within three months, extendable by two months with consent, and the time spent is excluded from limitation. A settlement reached has the status of an arbitral award on agreed terms.
How pre-institution mediation works in India
- Plaintiff files Form 1 with the Legal Services Authority, with the prescribed fee and a brief of the claim.
- The Authority issues notice to the opposite party to appear and give consent within 10 days.
- If the opposite party does not appear or refuses, a non-starter report is issued and the plaintiff can sue.
- If both consent, a mediator is appointed; sessions are confidential; the process runs up to 3 months (plus 2 by consent).
- Outcome: a signed settlement (enforceable as an award) or a non-settlement report that is annexed to the plaint.
Why it matters for getting paid
Buyers who ignore notices often turn up when a Legal Services Authority summons them, and the mediator's neutral framing produces payment plans that direct negotiation did not. A settlement here is enforceable without a trial. If the buyer stays away, the non-starter report arrives quickly and the suit proceeds with the buyer's refusal on record. A suit filed without this step, where no urgent relief is sought, is liable to be rejected. See mediation and the Commercial Courts Act.
How FundRaksha uses it
FundRaksha's advocates treat Section 12A as the second settlement window after the legal notice. They file promptly, attend with a clear statement of account and interest computation, and convert any agreement into a signed settlement with post-dated cheques. Where urgent attachment is warranted, they seek interim relief instead and file directly. The company's 60% pre-court settlement rate includes outcomes at this stage. Fee: 30% of recovery.
Worked example (hypothetical)
A Surat embroidery unit (not Udyam-registered) is owed ₹9,00,000, due 1 February 2024. It applies for pre-institution mediation on 1 December 2026, two months before limitation expires on 1 February 2027. The buyer consents; sessions run until 20 February 2027, when a non-settlement report is issued. The 81 days of mediation are excluded, so the limitation deadline moves to about 23 April 2027 and the suit filed on 1 March 2027 is in time. Had the buyer agreed to pay ₹9,00,000 in four instalments, the signed settlement would have been enforceable as an arbitral award on agreed terms.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.