Section 9 permits interim restraint against connected non-signatories to preserve contractual non-compete obligations.

Parle Agro Private Limited (“PAPL”) had entered into a Franchise Agreement dated 5 February 2014 with Udayak Agro Products Pvt. Ltd. (“Udayak”) for manufacturing and distributing packaged drinking water under the “BAILLEY” and “BAILLEY ONE” brands.

The agreement continued to remain in force until 31 March 2028 and contained negative covenants restraining Udayak from carrying on competing business, directly or indirectly through an associate, sister concern, group company or affiliate.

During an audit conducted on 18–19 March 2026, PAPL allegedly discovered that KL Beverages was manufacturing and storing competing packaged drinking water under the brand “SURE” from premises situated in the same KL Industries Estate compound as Udayak.

PAPL therefore filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim restraint against the Respondents from manufacturing, marketing, distributing or dealing in competing packaged drinking water and from using PAPL’s confidential and proprietary information pending arbitration.

Whether the negative covenants in the 2014 Franchise Agreement prohibited Udayak from carrying on competing packaged drinking water business indirectly through KL Beverages or another connected entity.

Whether the material on record established a prima facie connection between Udayak, KL Beverages and the competing “SURE” packaged drinking water business sufficient to justify interim protection.

Whether the Court could grant interim relief under Section 9 against KL Beverages, although it was not a signatory to the 2014 Franchise Agreement.

Whether the Petitioner had established a prima facie case, balance of convenience and irreparable prejudice warranting interim injunction and disclosure directions.

The Court applied Section 9 of the Arbitration and Conciliation Act, 1996, which confers broad equitable power on the Court to grant interim measures necessary to protect the subject matter and rights involved in arbitration.

It applied the contractual principles governing negative covenants, holding that the words “directly or indirectly through any associate/sister concern” and the references to “sister concern, group company, associates [and] affiliates” must be given meaningful effect and cannot be interpreted so narrowly as to permit circumvention through a connected entity.

Clause 16 of the 2014 Agreement was treated as independently protecting PAPL’s facilities, know-how, procedures, Quality Manuals, machinery, distribution networks and other proprietary resources from use in competing business.

The Court relied on Elster Instromet B.V. v. Mrunal Gandhi , 2024 SCC OnLine Bom 350, for the principle that a non-compete clause referring to direct and indirect competition through affiliates must be construed so that its purpose is not defeated.

It also relied on Girish Mulchand Mehta v. Mahesh S. Mehta , 2009 SCC OnLine Bom 1986, for the proposition that Section 9 relief may affect a non-signatory where the relief is connected with the arbitral subject matter and the third party claims through or is connected with a party to the arbitration agreement, subject to protection of genuinely independent rights.

The Court distinguished between the separate legal identities of Udayak and KL Beverages and the contractual prohibition against indirect competition.

It held that the existence of separate entities or the fact that KL Beverages had entered into a separate 2018 Franchise Agreement did not, at the interim stage, eliminate Udayak’s continuing obligation under the 2014 Agreement.

The audit report, tax invoice, product material, common premises, common personnel, shared business functions, common management and corporate relationship collectively constituted prima facie evidence that the competing packaged drinking water activity was connected with the arrangement contemplated by the indirect non-compete clauses.

The Court did not conclude that Udayak and KL Beverages were the same entity, nor that KL Beverages was finally bound by every provision of the 2014 Agreement.

It held only that the alleged conduct was sufficiently connected to the subject matter of the arbitration to justify protective relief under Section 9.

Continued manufacture and sale of the competing product could create customers, distributors, goodwill and market relationships that might not be adequately remedied through damages, particularly given the alleged access to PAPL’s technical know-how, quality systems, facilities and distribution networks.

The Court therefore considered a limited restraint appropriate, while preserving independent and lawful businesses of the Respondents.

Pending adjudication by the learned Sole Arbitrator, the Respondents and entities claiming through or connected with them were restrained, directly or indirectly, from manufacturing, preparing, packaging, distributing, marketing, selling or otherwise dealing in “SURE” water or other competing packaged drinking water products in a manner contrary to the Franchise Agreements.

They were also restrained from using or exploiting PAPL’s confidential information, trade secrets, technical know-how, manufacturing processes, Quality Manuals, customer and vendor information, supply-chain information, pricing information, distribution networks and other proprietary material in connection with such competing activity.

The restraint did not prohibit KL Beverages from carrying on independent and lawful business outside the competing packaged drinking water field and not involving PAPL’s protected information or resources.

The Respondents were directed to disclose on affidavit, within four weeks, particulars available in their records concerning competing packaged drinking water products manufactured, packaged, distributed, marketed or sold by them or through connected entities from 5 February 2014 onwards, limited to the subject matter of the proceedings.

All findings were declared prima facie, with final questions regarding contractual interpretation, the status of KL Beverages, misuse of know-how, competing activity and damages left open for determination by the arbitral tribunal.