Parle Agro wins interim restraint against ‘SURE’ water business over alleged indirect breach of franchise non-compete

Parle Agro Private Limited (“PAPL”) had a subsisting 2014 franchise agreement with Udayak Agro Products Pvt. Ltd. (“Udayak”) for packaged drinking water, containing restrictions on competing activity carried on directly or indirectly through associates or sister concerns.

A separate 2018 franchise agreement with KL Beverages LLP (“KL Beverages”) covered other beverages.

Following a March 2026 audit at the respondents’ shared industrial compound, PAPL alleged that KL Beverages was manufacturing competing packaged drinking water under the “SURE” brand while Udayak’s agreement remained in force.

PAPL relied on the contractual covenants, the entities’ alleged operational and management links, and audit and invoice material.

It sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, pending arbitration.

1. Whether the 2014 agreement’s restrictions on indirect competition could prima facie reach competing packaged-water activity carried on through KL Beverages, a separate entity and non-signatory to that agreement

2. Whether the Court could grant Section 9 interim protection affecting a non-signatory where the alleged activity was carried on through a concern connected with a party to the arbitration agreement

3. Whether the evidence and balance of convenience justified interim restraint and disclosure, notwithstanding the respondents’ objections concerning post-termination restraint, damages, and business hardship

Section 9 of the Arbitration and Conciliation Act, 1996 empowers the Court to grant interim measures to protect the subject matter and efficacy of arbitration; an order may affect a non-signatory where justified by the circumstances, but must not interfere with a third party’s independent rights.

The Court applied the ordinary interim-relief considerations of a prima facie case, balance of convenience, and irreparable prejudice.

In construing the contractual restrictions, it considered Clauses 5, 14(a), and 16 of the 2014 agreement, including their references to indirect activity through associates or sister concerns and to use of franchise facilities and know-how.

It relied on *Elster Instromet B.V. v. Mrunal Gandhi* for the principle that express words addressing indirect competition and affiliates should not be construed so as to make that protection ineffective, while distinguishing the case’s different facts.

The Court did not decide whether a post-termination non-compete restraint would be enforceable under Section 27 of the Contract Act, 1872; it proceeded on the subsisting obligation under the 2014 agreement.

The Court read the 2014 agreement as prohibiting not only Udayak’s direct competition but also specified competing activity carried on indirectly through connected entities.

It did not treat common ownership or group membership alone as sufficient to disregard separate legal identity.

Rather, it considered those links together with evidence of shared premises, personnel and business functions, the audit’s record of water-production arrangements at KL Beverages’ premises, and material indicating that the competing activity had begun.

That evidence was sufficient for interim purposes to connect the alleged activity to the restriction, without finally deciding that KL Beverages was a party to the 2014 agreement or that confidential information had been misused.

The Court found that continued competing activity could develop customer and market relationships and make restoration more difficult; it therefore favoured limited protection, while preserving the respondents’ ability to conduct independent lawful business outside the disputed field.

Pending adjudication before the Sole Arbitrator, the respondents and specified related entities were restrained from directly or indirectly manufacturing, packaging, distributing, marketing, selling, or otherwise dealing in “SURE” water or competing packaged drinking water in a manner contrary to the franchise obligations.

They were also restrained from using PAPL’s protected confidential information, know-how, processes, manuals, and business networks in connection with that activity.

The restraint does not prohibit KL Beverages from carrying on independent lawful business outside the competing packaged-water field.

The respondents were directed to disclose on affidavit, within four weeks, available particulars of competing packaged-water activity from 5 February 2014 onward.

All findings were expressly prima facie, with the agreements’ effect, the entities’ relationship, liability, misuse, and damages left to the Arbitrator; no order as to costs was made.