While granting interim protection against both the franchisee and its sister concern, the Bombay High Court has held that where a franchise agreement prohibits competing activity ‘directly or indirectly through any associate/sister concern’, the prohibition cannot be defeated merely by routing the competing business through a connected group entity. Essentially, the Court held that the Udayak Franchise Agreement’s prohibition on competing activity ‘directly or indirectly through any associate/sister concern’ cannot be defeated by routing the rival water business through KL Beverages, and granted interim protection against both entities pending arbitration.
The Court reaffirmed that Section 9 jurisdiction is not confined to signatories to the arbitration agreement and can extend to non-signatories where the relief is necessary to protect the subject matter of the arbitration, particularly where the contract itself contemplates indirect conduct through connected concerns. The Court explained that common family ownership, common registered office, common email domain, shared functional mailboxes, common personnel, inter-entity adjustment of dues, and the description of one entity as an ‘Associate’ in the other’s audited financials collectively establish a prima facie case that the franchisee and its sister concern function as a single economic unit.
Further, where the franchisee has had long access to the franchisor’s technical know-how, quality systems, manufacturing processes, customer relationships and distribution networks, the Court held that damages cannot adequately compensate for the loss of exclusivity and the continuing competitive advantage gained through use of protected facilities and information.
A Single Judge Bench of Justice Amit Borkar observed that the Udayak Franchise Agreement contains wide non-compete covenants under Clauses 5 and 14(a), which expressly prohibit Udayak from carrying on competing activity ‘directly or indirectly through any associate/sister concern or in any other manner’ and extend the restriction to sister concerns, group companies, associates, and affiliates. The Court noted that the words ‘indirectly’ and ‘associate/sister concern’ cannot be treated as redundant and must be given their ordinary meaning.
The Court found prima facie material showing that Udayak and KL Beverages function as a single economic unit, common Agarwal family ownership and control, common registered office at 176, F.A. Road, Kumarpara Panchali, Guwahati, common KL Industries Estate compound, common email domain (kigrroup.com), shared functional mailboxes for purchase, accounts, logistics and digital filing, common personnel, and instances of inter-entity adjustment of dues. The audit report recorded a separate RO water system being established for the competing water activity at the KL Beverages premises, with changes in the finished goods warehouse and construction of a new shade for BAILLEY water.
The Court observed that the tax invoice dated 1 March 2026, the QR code on SURE bottles identifying KL Beverages as manufacturer, and the FSSAI licence covering packaged drinking water collectively indicated that the competing activity had commenced before the audit. The Court rejected the argument that Clause 39 (entire agreement clause) of the 2018 Agreement released Udayak from its 2014 obligations, observing that the two Agreements involve different contracting parties and govern different products. The Court further observed that the objection based on post-termination restraint under Section 27 of the Contract Act does not apply since the 2014 Agreement is subsisting and the restriction operates during the subsistence of this Agreement.
Briefly, Parle Agro Private Limited (PAPL), the proprietor of brands including ‘BAILLEY’, ‘BAILLEY ONE’, ‘Frooti’, ‘Appy’ and ‘Appy Fizz’, filed a Petition under Section 9 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court (Commercial Division) seeking urgent interim relief against two franchisees, i.e., Respondent No. 1, Udayak Agro Products Pvt Ltd. (bound by the Udayak Franchise Agreement dated 5 February 2014, valid till 31 March 2028) and Respondent No. 2, K.L. Beverages LLP (bound by the KL Franchise Agreement dated 16 July 2018). Both Respondents belong to the KL Group, controlled by the Agarwal family.
During a plant audit conducted on 18 and 19 March 2026 at the common KL Industries Estate compound in Guwahati, PAPL discovered that KL Beverages was manufacturing and storing ‘SURE’ packaged drinking water, a product directly competing with PAPL’s BAILLEY brand, using a separate RO water system set up within the same premises. Although the KL Franchise Agreement operations had stopped on 20 August 2025, no formal disassociation was executed, and the post-termination non-compete under Clause 15(d) was claimed to remain in force. PAPL alleged that the Respondents were in continuing breach of non-compete, exclusivity, and confidentiality obligations, causing a 32% decline in sales value and 24% decline in sales volume of BAILLEY products in FY 2025-26. PAPL sought an interim injunction restraining the Respondents from manufacturing competing packaged drinking water and from using its proprietary know-how, confidential information, and business networks.
