The Bombay High Court has delivered a nuanced judgment on the scope of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, balancing the need for evidence preservation against the risk of rendering arbitration proceedings ineffective. While rejecting blanket injunctions, the Court directed preservation of specific records, underscoring that delay alone does not defeat interim protection when critical evidence is at stake.
Background & Facts
The Dispute
The petitioner, The Packshot (India) Private Limited, a company providing specialised photography, creative content, and e-commerce solutions, filed an arbitration petition under Section 9 seeking interim protection pending arbitration. The dispute arose from its contractual relationship with the respondent, Trent Limited, a Tata Group company managing retail stores. The petitioner alleged that the respondent breached contractual obligations by engaging Yoshi Agency Private Limited, a company linked to the petitioner’s former Managing Director, Ms. Sapna Sisodia, during the subsistence of their service agreement and the agreed non-solicitation period.
Key Facts
- Master Agreement: Executed on 24 August 2015, governing the initial service relationship.
- Service Agreement (Trent Agreement): Executed on 21 May 2021, containing clauses on confidentiality, intellectual property, non-solicitation of employees, and survival of obligations post-termination. The agreement remained in force until 31 March 2023.
- Non-Solicitation Clause (Clause 15.16): Restricted both parties from directly or indirectly engaging the other’s employees during the contract period and for 12 months thereafter.
- Confidentiality and Survival Clause (Clause 15.18): Obligations regarding confidentiality and intellectual property continued even after expiry or termination of the agreement.
- Employment Agreement with Ms. Sapna Sisodia: Dated 14 April 2021, prohibited her from accepting directorship or employment in another company without prior written permission from the petitioner’s Board of Directors.
- Termination of Ms. Sisodia: Her services were terminated on 18 May 2022 for alleged breach of employment terms, including acting as an Executive Director of another company.
- Incorporation of Yoshi Agency: Incorporated on 4 March 2022, with Ms. Sisodia becoming its Director on 14 December 2022.
- Engagement of Yoshi Agency by Respondent: The respondent executed a Service Agreement with Yoshi on 15 June 2022, during the subsistence of the Trent Agreement. The respondent later executed another agreement with Yoshi in December 2024.
- Trade Receivables: Yoshi’s audited financial statements showed trade receivables from the respondent as on 31 March 2023.
- Ethics Complaints: The petitioner raised grievances with the respondent’s Ethics Office in December 2022, January 2023, and April 2023, alleging diversion of business and violation of contractual clauses.
- Legal Notices: Exchanged between the parties, culminating in the invocation of arbitration and the filing of the present petition in 2026.
Procedural History
- 2021-2023: Service Agreement between the parties remained in force until 31 March 2023.
- 18 May 2022: Petitioner terminated Ms. Sisodia’s employment.
- 15 June 2022: Respondent executed the first Service Agreement with Yoshi Agency.
- December 2022: Ms. Sisodia became Director of Yoshi Agency.
- December 2022 - April 2023: Petitioner raised ethics complaints with the respondent.
- March 2024: Petitioner issued an invoice notice for recovery of outstanding dues.
- 2026: Present arbitration petition filed under Section 9.
Relief Sought
The petitioner sought the following interim reliefs:
- (a): Injunction restraining the respondent from using, disclosing, or dealing with the petitioner’s confidential information, proprietary workflows, or business know-how.
- (b)-(e): Directions for preservation and controlled disclosure of documents, including invoices, purchase orders, work orders, payment records, emails, and electronic communications relating to the engagement with Yoshi Agency and the petitioner’s former employees.
- (f): Maintenance of separate accounts for transactions related to the disputed business stream.
The Parties' Positions
For the Petitioner
- Preservation of Evidence: Argued that preservation of records is necessary to ensure the Arbitral Tribunal has access to relevant evidence, which may otherwise be lost, deleted, or rendered unavailable.
- Inconsistencies in Respondent’s Pleadings: Highlighted that the respondent admitted executing an agreement with Yoshi on 15 June 2022, during the subsistence of the Trent Agreement, while simultaneously claiming that Yoshi was engaged only after the contractual period.
- Trade Receivables: Pointed to Yoshi’s audited financial statements showing trade receivables from the respondent as on 31 March 2023, suggesting commercial dealings during the restricted period.
- Scope of Clause 15.16: Contended that the clause covers not only direct employment but also engagement through agents, contractors, or other modes, including companies like Yoshi.
- Survival of Obligations: Relied on Clause 15.18, which provided that confidentiality and intellectual property obligations survive termination of the agreement.
For the Respondent
- Delay: Argued that the alleged breach occurred in June 2022, while the petition was filed only in 2026, showing lack of urgency.
- Non-Exclusive Agreement: Relied on Clause 2.2 of the Trent Agreement, which permitted the respondent to engage additional consultants or service providers on a non-exclusive basis.
- Limited Scope of Clause 15.16: Contended that the clause applied only to existing employees of the petitioner and not to former employees or separate legal entities like Yoshi.
- Commercial Decision: Submitted that engagement of Yoshi was a commercial decision based on competitive rates and had no connection with the petitioner’s allegations.
- Separate Legal Entity: Argued that Yoshi is an independent legal entity, and disputes between the petitioner and its former employees are internal matters unrelated to the respondent.
The Legal Issue
The central question was whether Section 9 of the Arbitration and Conciliation Act, 1996 empowers the Court to grant interim relief for preservation of evidence, even in cases of delay, where the arbitration proceedings might otherwise be rendered ineffective due to unavailability of critical records.
The Court's Analysis
The Court undertook a detailed examination of the rival submissions, the clauses of the agreement, and the reliefs sought:
"The question is whether any interim protection is required so that, if arbitration starts, the proceedings remain effective."
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Delay as a Factor: The Court acknowledged that delay is a relevant consideration under Section 9, but it is not decisive. While the petitioner filed the petition in 2026 for an alleged breach in 2022, the Court noted that preservation of evidence may still be necessary if the subject matter remains available or if destruction of records could prejudice the arbitral process.
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Non-Exclusive Nature of the Agreement: The respondent relied on Clause 2.2, which permitted engagement of additional consultants. The Court observed that while this clause prima facie supports the respondent’s position, it does not fully address the petitioner’s grievance, which was not about exclusivity but about the use of another vendor to obtain services of protected employees or confidential information.
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Scope of Clause 15.16: The Court noted that the interpretation of Clause 15.16 - whether it extends to former employees or indirect engagement through another company - requires detailed examination by the Arbitral Tribunal. At the interim stage, no final opinion could be recorded.
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Survival Clause (Clause 15.18): The Court observed that Clause 15.18 prima facie keeps certain obligations alive even after expiry or termination of the agreement. Whether confidential information or proprietary material was used would require evidence, but the survival clause could not be overlooked.
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Inconsistencies in Respondent’s Pleadings: The Court noted the respondent’s admission of executing an agreement with Yoshi on 15 June 2022, during the subsistence of the Trent Agreement, while simultaneously claiming that Yoshi was engaged only after the contractual period. This inconsistency warranted preservation of records for proper adjudication.
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Trade Receivables: The Court observed that Yoshi’s audited financial statements showing trade receivables from the respondent as on 31 March 2023 could indicate transactions during the restricted period. However, these entries alone may not establish breach of confidentiality or solicitation of employees.
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Preservation vs. Disclosure: The Court distinguished between preservation of records and blanket disclosure. While preservation ensures that relevant evidence remains available for the Arbitral Tribunal, disclosure at this stage could amount to an unlimited enquiry unrelated to the issues under the agreement.
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Balance of Convenience: The Court emphasised that preservation of records causes minimal prejudice to the respondent, as it does not stop the respondent from carrying on its business. If the respondent’s case is correct, the preserved records would support its defence. Conversely, destruction of records could render adjudication before the Arbitral Tribunal difficult.
The Verdict
The Court partly allowed the petition, directing the respondent to preserve specific records while rejecting blanket injunctions:
- (i)-(iv): The respondent was directed to preserve and maintain all documents, records, and electronic data relating to its engagement with Yoshi Agency, including invoices, purchase orders, work orders, payment records, emails, and communications involving Ms. Sapna Sisodia, Mr. Sameer Padmanabha Prabhu, Mr. Umashankar Naidu, and Ms. Shalini Parthi, to the extent connected with the disputes. The respondent was further directed to ensure these records are not destroyed, deleted, altered, or rendered unavailable until further orders of the Arbitral Tribunal.
- (v): The prayer for a blanket injunction restraining the respondent from using or disclosing confidential information was rejected, leaving all rights and contentions open for consideration by the Arbitral Tribunal.
- (vi): The prayer for disclosure on affidavit and production of documents in a sealed cover was not granted. The petitioner was left at liberty to seek appropriate discovery and production before the Arbitral Tribunal.
- (vii): The respondent was directed to maintain ordinary business records but was not required to maintain separate accounts.
- (viii)-(x): The observations were confined to interim relief under Section 9, with no findings on the merits of the disputes. The petitioner was directed to commence arbitral proceedings within the prescribed period, and the petition was disposed of without costs.
What This Means For Similar Cases
Preservation of Evidence Trumps Delay
- Interim Relief Not Defeated by Delay: Practitioners can argue that delay alone does not defeat interim relief under Section 9 if preservation of evidence is necessary to prevent the arbitration proceedings from being rendered ineffective. The Court recognised that electronic records, emails, and metadata may not remain available indefinitely, justifying preservation even after significant delay.
- Focus on Specific Records: Courts are likely to grant preservation orders only for records directly relevant to the disputes, avoiding blanket disclosure. Parties should clearly identify the documents sought to be preserved and their relevance to the arbitral proceedings.
Survival Clauses and Post-Termination Obligations
- Continuing Obligations: Contracts containing survival clauses (e.g., confidentiality, intellectual property) may impose obligations even after termination. Parties should ensure that post-termination conduct complies with these clauses to avoid allegations of breach.
- Non-Solicitation Agreements: Clauses restricting solicitation of employees or use of confidential information may extend beyond direct employment. Indirect engagement through third parties (e.g., vendors, contractors) could still attract liability, depending on the agreement’s language.
Inconsistencies in Pleadings Can Strengthen Preservation Claims
- Admissions as Evidence: Inconsistencies or admissions in pleadings (e.g., admitting an agreement’s execution during the restricted period while denying breach) can strengthen a party’s claim for preservation of records. Courts may view such inconsistencies as grounds for ensuring evidence remains available for adjudication.
- Financial Records as Circumstantial Evidence: Audited financial statements showing transactions during the restricted period (e.g., trade receivables) may serve as circumstantial evidence of breach. Parties should be prepared to explain such entries if they contradict their pleadings.
Commercial Decisions vs. Contractual Breach
- Non-Exclusive Agreements: Even if an agreement permits engagement of additional vendors, parties must ensure that such engagement does not violate other clauses (e.g., non-solicitation, confidentiality). Commercial decisions cannot justify breach of contractual obligations.
- Arbitral Tribunal’s Role: Courts are reluctant to grant final relief at the interim stage. The Arbitral Tribunal will ultimately decide whether engagement of a vendor involved protected employees or confidential information, based on preserved records.
