The Bombay High Court has held that a suit seeking to restrain continuing breach of an exclusivity covenant genuinely contemplates urgent interim relief under Section 12-A(1) of the Commercial Courts Act, and presence of monetary claims and delay in filing do not by themselves negate urgency. The Court emphasised that Section 12-A(1) of the Commercial Courts Act, 2015 mandatorily requires pre-institution mediation as a condition precedent to instituting a commercial suit, save where the suit genuinely contemplates urgent interim relief.
The Court went on to explain that statutory exception must be assessed through a jurisdictional enquiry, not a merits-based adjudication, and by holistically reading the plaint and annexed documents to determine whether the plaintiff has disclosed a bona fide factual foundation demonstrating that immediate judicial intervention was indispensable and could not reasonably await mediation. The Court at this stage must not examine whether the plaintiff is ultimately entitled to interim relief, whether a prima facie case is made out, or whether damages would be adequate.
The presence of consequential monetary reliefs alongside injunctive and equitable reliefs does not negate urgency. A continuing breach of an exclusivity covenant constitutes a continuing invasion of contractual rights capable of furnishing a bona fide foundation for urgent interim relief. A finding that the plea of urgency is a camouflage requires the urgency to be demonstrably artificial, colourable, or unsupported by the pleaded facts, added the Court.
Accordingly, the High Court concluded that the Trial Court erred by conflating the jurisdictional enquiry under Section 12-A(1) with the merits-based adjudication of the interim application, according determinative weight to considerations germane to the latter, and thereby travelling beyond the limited scope of examination envisaged under Order VII Rule 11(d) of the CPC.
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The Division Bench comprising Justice R.I. Chagla and Justice Farhan P. Dubash emphasised that Section 12-A(1) is a mandatory condition precedent; that the statutory exception for urgent interim relief must receive strict construction; that the Commercial Court is the ultimate arbiter of whether urgency is genuine or a device to evade mediation; that the enquiry is jurisdictional and not adjudicatory on merits; that the exercise must be objective and holistic, examining the plaint as a whole along with documents, nature of dispute, cause of action, reliefs claimed, and attendant circumstances; that urgency must be judged with reference to the date of institution of the suit.
The Court also clarified that the burden lies on the plaintiff to establish a bona fide factual foundation with specific facts, not bald assertions; that the Court must remain vigilant against camouflage; that the plaintiff’s conduct including chronology and promptness is a relevant indicator; that a continuing cause of action is a relevant circumstance though not by itself sufficient; that refusal of interim relief after institution does not retrospectively invalidate the suit if urgency was genuine at inception; and that the mandatory obligation presupposes an effective statutory mediation mechanism.
Applying these principles to the facts, the Court found itself unable to concur with the Trial Court’s conclusion that the Appellant had merely incorporated a routine prayer for interim relief. A meaningful reading of the plaint as a whole disclosed that the dispute arose from an exclusive distribution agreement under which the Appellant claimed exclusive rights in the North American market until June 2026, and that notwithstanding the subsistence of the agreement, the Respondent continued to supply the product directly to Glanbia in breach of the exclusivity covenant, purported to terminate the agreement, and persisted in denying its contractual obligations. The Court held that whether these allegations were ultimately established was a matter for trial, but for the limited purpose of the Section 12-A(1) enquiry, they undoubtedly constituted the factual foundation upon which the Appellant asserted the necessity for immediate protective relief.
The Court identified several fundamental errors in the Trial Court’s approach. First, the Trial Court travelled beyond the limited jurisdictional enquiry by examining whether the Appellant would ultimately be entitled to an injunction and whether damages would constitute an adequate remedy, considerations germane to adjudicating the interim application on merits, not to the threshold enquiry under Section 12-A(1). Second, the Trial Court erroneously held that the presence of monetary claims necessarily negated urgency, ignoring that the plaint also sought specific performance, declaration of illegal termination, perpetual injunction, and disclosure of sales, the existence of consequential monetary reliefs alongside equitable and injunctive reliefs does not justify the conclusion that the suit involves only compensable claims.
The Court found substance in the Appellant’s contention that the Trial Court failed to appreciate the nature of the contractual right asserted. The exclusivity covenant constituted the very substratum of the commercial arrangement, and every sale effected by the Respondent directly in the North American market constituted a continuing infraction that progressively eroded the exclusivity contracted for, this disclosed an allegation of continuing invasion of contractual rights, not merely a completed breach giving rise to a damages claim. On the issue of delay between the termination notice and institution of the suit, the Court held that while chronology is a relevant circumstance, it is only one of several factors and cannot be conclusive; the Appellant’s explanation regarding obtaining expert opinion on Colorado law, preparation and notarization of pleadings in the USA, and transmission to India constituted matters bearing upon the weight of the explanation but could not by themselves justify rejection of the plaint.
Briefly, High Point Supply Company LLC, a US-based delivery company, entered into an Exclusive Distribution Agreement (EDA) on 26th June 2023 with Agati Healthcare Pvt. Ltd., an Indian company engaged in manufacturing Colostrum powder. Under the EDA, High Point was appointed as the exclusive distributor of the product in the North American market for a three-year term ending June 2026, with the agreement governed by the laws of the State of Colorado, USA. The EDA contained an ‘Exclusivity Exception’ clause permitting Agati to continue supplying the product to its existing customer, Pantheryx, but expressly stipulated that in the event of a change of control at Pantheryx (defined as more than 50% change in ownership or voting control), the successor or any new owner/acquirer would be required to purchase the product directly through High Point and would no longer be entitled to the exception.
High Point placed a purchase order dated 24th August 2023 for 4,200 kilograms of the product, but Agati failed to supply within the stipulated delivery period of November-December 2023, and also failed to supply a modified variant thereafter. During the subsistence of the EDA, High Point discovered through one of its customers that Agati was contemporaneously supplying the product to Glanbia Nutritionals, which had allegedly acquired Pantheryx in or around November 2023, thereby breaching the exclusivity covenant. On 1st October 2024, High Point wrote to Glanbia informing it of the EDA provisions. Agati responded by issuing a legal notice dated 23rd October 2024 terminating the EDA with effect from 23rd November 2024, on the ground that High Point’s communication to Glanbia had damaged its reputation and caused loss of business.
Since the EDA was governed by Colorado law, High Point obtained an expert affidavit from Mr. Chad Williams, Esq., dated 20th January 2025, opining on entitlement to specific performance and damages. The plaint and interim application were executed and notarized in the USA on or about 1st March 2025, dispatched to India on 8th March 2025, and ultimately e-filed on or about 13th April 2025, with the suit registered on 18th April 2025. The plaint sought specific performance of the EDA, a declaration that the termination was void, injunction restraining Agati from breaching the EDA and from entering into arrangements with third parties for supply in North America, disclosure of sales effected in violation of the agreement, and damages. On 2nd July 2025, Agati filed an application under Order VII Rule 11(d) of the CPC seeking rejection of the plaint for non-compliance with Section 12-A(1) of the Commercial Courts Act, 2015, which mandates pre-institution mediation. The Trial Court allowed the application on 9th December 2025, holding that Section 12-A was mandatory, that the Appellant had failed to establish genuine urgency, that the pleadings on urgency were vague, and that the prayers for interim injunction were a camouflage to bypass the mediation requirement.
