The Bombay High Court has affirmed that contractual rights to audit and inspect confidential data systems survive the termination of service agreements, particularly where data breaches trigger urgent investigative needs. This ruling establishes a critical precedent for entities outsourcing sensitive operations, reinforcing that audit rights are not extinguished by contractual suspension or termination when public and contractual interests demand preservation of evidence.
Background & Facts
The Dispute
The dispute arose after a large-scale data theft incident in February 2025, wherein employees of the Respondent, Teleperformance Business Services India Private Limited, allegedly facilitated unauthorized access to sensitive customer data of SBI Cards and Payment Services Ltd. The fraud, involving Rs. 2.60 crores, came to light through media reports in August 2025. The Petitioner, CPP Assistance Services Private Limited, which outsourced customer service operations to the Respondent, immediately suspended services and demanded access to internal records, audit trails, and forensic data to assess liability and comply with regulatory obligations from SBI Cards and the Delhi Police Cyber Crime Unit.
Procedural History
- 15 April 2008: Service Agreement executed between Petitioner and Respondent, granting audit rights under Clause 11.
- 2 November 2020 & 12 February 2024: Two addenda executed, strengthening data security obligations and explicitly preserving audit rights post-termination (Clause 3.4).
- 17 August 2025: Petitioner suspended services after learning of the breach; requested audit access.
- 20 August 2025: Respondent refused audit, citing suspension of contract and lack of advance notice.
- 31 August 2025: Respondent terminated agreement citing non-payment.
- 6 December 2025: Petitioner issued legal notice demanding audit access and data handover.
- 3 February 2026: Petition under Section 9 of the Arbitration and Conciliation Act, 1996, heard and decided.
Relief Sought
The Petitioner sought: (a) permission to conduct forensic audit at Respondent’s premises; (b) appointment of a local commissioner if access is denied; (c) preservation of all data; (d) handover of confidential data; and (e) disclosure of internal investigation findings.
The Legal Issue
The central question was whether Section 9 of the Arbitration and Conciliation Act, 1996 permits interim measures to enforce contractual audit rights after termination of the underlying agreement, and whether such rights survive termination under the express terms of the contract.
Arguments Presented
For the Petitioner
The Petitioner relied on Clause 11 of the 2008 Service Agreement, Clause 1.8 of the 2020 Addendum, and Clauses 3.2, 3.4, and 4 of the 2024 Addendum, which explicitly granted the right to inspect records, conduct audits, and obtain audit trails. It emphasized that Clause 3.4 expressly stated that audit rights survive termination. The Petitioner cited Deoraj v. State of Maharashtra, Hammad Ahmed v. Abdul Majeed, and Vishal Gupta v. L&T Finance Limited to argue that mandatory interim relief is permissible where withholding it would cause irreparable harm and defeat the purpose of arbitration.
For the Respondent
The Respondent contended that audit rights were suspended upon termination of the agreement and that the Petitioner’s demand for a forensic audit exceeded the scope of contractual inspection rights. It argued that the police investigation rendered the audit redundant and that the Petitioner’s delay in filing the petition undermined urgency. It relied on Dorab Cawasji Warden v. Coomi Sorab Warden to assert that mandatory injunctions cannot be granted to establish a new status quo, only to restore the last uncontested status.
The Court's Analysis
The Court undertook a rigorous textual analysis of the contractual provisions, finding that the 2024 Addendum’s Clause 3.4 unambiguously preserved audit rights even after termination. The Court rejected the Respondent’s claim that suspension of services extinguished audit rights, noting that the Respondent itself acknowledged the Petitioner’s right to audit in its 4 November 2025 letter, stating it was "willing to cooperate in this regard."
"The Respondent’s subsequent refusal to permit audit after agreeing to the audit plan demonstrates bad faith and an attempt to obstruct evidence preservation."
The Court distinguished Dorab Cawasji by emphasizing that the relief sought was not to establish a new status quo but to preserve the existing state of data pending arbitration. The Court held that the Petitioner’s request was not for final relief but for interim measures to safeguard the subject matter of the anticipated arbitration. The Court further noted that the Respondent’s employees were already arrested for data theft, making the preservation of digital evidence imperative.
The Court also dismissed the Respondent’s argument that the police investigation negated the need for audit, observing that the police’s role in criminal investigation does not preclude civil parties from exercising their contractual rights to investigate liability. The Court found the Petitioner’s audit plan narrowly tailored to the contractual scope and rejected claims of overreach or exposure of third-party data as speculative.
The Verdict
The Petitioner won. The Court held that contractual audit rights survive termination under Section 9 of the Arbitration and Conciliation Act, 1996, and that interim measures to enforce such rights are permissible where irreparable harm and preservation of evidence are at stake. The Court directed the Respondent to permit audit, preserve all data, and share internal investigation findings.
What This Means For Similar Cases
Contractual Audit Rights Are Not Extinguished by Termination
- Practitioners must review service agreements for survival clauses like Clause 3.4 in this case - these are enforceable even post-termination.
- Where data security obligations are contractually defined, termination does not absolve a party of its duty to preserve evidence for audit or arbitration.
- Legal notices demanding audit access must be treated as binding obligations, not negotiable requests.
Interim Relief Under Section 9 Is Available for Data Preservation
- Section 9 can be invoked to secure forensic access to digital systems even before arbitration commences, provided contractual rights exist.
- Courts will prioritize preservation of digital evidence when public interest, regulatory compliance, and contractual obligations converge.
- Delay in filing is not fatal if the respondent’s conduct (e.g., shifting positions, delaying cooperation) creates a genuine urgency.
Forensic Audits Are Legally Recognized as Necessary Remedies
- Courts will not defer to criminal investigations as a substitute for civil audit rights.
- Petitioners must clearly define audit scope in writing; vague demands will be rejected, but specific, contract-aligned plans are enforceable.
- The burden shifts to the respondent to prove that the audit would cause disproportionate harm - mere confidentiality concerns are insufficient.
