Commercial & contract

Contracts, commercial courts, arbitration and breach.

Questions advocates ask about Commercial & contract

A commercial suit cannot be filed without first trying pre-institution mediation, unless urgent interim relief is sought. A claim for breach of contract is time-barred three years after the breach, and an arbitral award can be challenged only within three months of receiving it.

When is a dispute a "commercial dispute", and which court hears it?

A dispute arising out of the ordinary transactions of merchants, bankers, financiers and traders is commercial, and so are disputes over the export or import of goods or services, carriage of goods, construction and infrastructure contracts, franchising, distribution and licensing agreements, joint ventures and agreements relating to immovable property used only for trade or commerce. A commercial dispute of a Specified Value of ₹3 lakh or more is heard by a Commercial Court at district level, or by the Commercial Division of a High Court that has original jurisdiction, depending on the pecuniary limit of that court.

Commercial Courts Act, 2015, ss. 2(1)(c), 2(1)(i), 6, 7

Is mediation compulsory before a commercial suit?

Yes, unless the suit contemplates urgent interim relief. Section 12A requires the plaintiff to exhaust pre-institution mediation under the rules made for it before filing, and a suit filed without doing so is liable to be rejected. The Supreme Court has held the requirement mandatory for suits instituted on or after 20 August 2022. Where a plaintiff claims urgent relief to avoid mediation, the court looks at whether the urgency is real.

Commercial Courts Act, 2015, s. 12A; Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd., (2022) 10 SCC 1

What is the time limit for suing for breach of contract?

Three years, running from when the contract is broken. Where there are successive breaches it runs from the breach sued on, and where the breach continues it runs from when the breach ceases. A written acknowledgment of liability signed before the period ends gives a fresh period of three years. A court must dismiss a suit filed out of time even if the defendant does not raise limitation.

Limitation Act, 1963, Article 55 and ss. 3, 18

Can a party claim the sum the contract names as damages?

Not automatically. Where a contract names a sum payable on breach, section 74 entitles the aggrieved party to reasonable compensation not exceeding that sum, whether or not it is called a penalty. The party must ordinarily show that the breach caused loss, unless the loss is of a kind that is impossible to prove. Forfeiture of earnest money is tested the same way, and only a reasonable amount can be kept.

Indian Contract Act, 1872, ss. 73, 74; Fateh Chand v. Balkishan Dass, AIR 1963 SC 1405; Kailash Nath Associates v. Delhi Development Authority, (2015) 4 SCC 136

How long do I have to challenge an arbitral award, and on what grounds?

An application to set aside an award under section 34 must be made within three months of receiving the award. The court may allow a further 30 days if sufficient cause is shown, and not beyond that. The Supreme Court has held that section 5 of the Limitation Act does not extend this period. The grounds are narrow: incapacity, an invalid agreement, lack of proper notice, matters beyond the scope of the reference, improper composition of the tribunal or procedure, a conflict with the public policy of India and, for a domestic award, patent illegality on its face. The court does not re-examine the merits.

Arbitration and Conciliation Act, 1996, s. 34(2), (2A), (3); Union of India v. Popular Construction Co., (2001) 8 SCC 470

Prepared by The EduLaw Editorial Team on 5 November 2026. It has not yet been reviewed by a named advocate. Educational content, not legal advice; check the current text of each provision before relying on it.

Judgments and analysis

Ready-to-file drafts

2,100+ editable Indian legal drafts across 40+ practice areas — applications, petitions, notices, replies and agreements. See the drafts bundle.

Notes and Playbooks

Bundles

Other practice areas