Preserving the Evidence Before Arbitration: Delhi High Court Orders Inspection of Franchise Records
An arbitration claim may depend on records held by the very party against whom it is brought. Where those records are at risk of removal, alteration or destruction, preserving them becomes an immediate concern: the eventual right to pursue a claim offers little practical protection if the evidence necessary to establish it is no longer available.
The Delhi High Court’s order dated 16 October 2026 in Aakash Educational Services Limited v. Vaibhav Gupta, Sole Proprietor of M/s Shivrekkha Corporations, O.M.P.(I) (COMM.) 491/2026, illustrates the role of Section 9 of the Arbitration and Conciliation Act, 1996 in addressing this problem. Representing the petitioner, our team secured the appointment of a Local Commissioner at the first hearing to inspect and preserve physical records and electronic data at an erstwhile franchise centre.
The significance of the order lies in its protection of the material necessary for the contemplated arbitration, including records required to verify the extent of the petitioner’s monetary claim.
The dispute and the need for immediate intervention
The dispute arose from a franchise arrangement for operating an educational coaching centre in Gangapur City, Rajasthan. Under the agreement, the franchisee was required to collect student fees on the petitioner’s behalf and deposit the collections into its designated bank account within 48 hours. The agreement also conferred rights to inspect and audit the centre’s accounts and records.
The petitioner alleged that student fees had not been fully remitted and that its attempt to conduct a contractual audit had been obstructed. According to the petitioner, registers and diaries were taken away, a laptop containing student information was removed, and access to relevant records was denied. The order also records that the respondent had disputed the petitioner’s account of the audit and its allegations concerning fee collections in correspondence.
Following termination of the franchise agreement, the petitioner approached the Court apprehending that relevant records might be destroyed, deleted, altered, concealed or removed. Although its own reconciliation indicated outstanding student fees of approximately ₹2.14 crore, verification required access to records maintained by the respondent.
The immediate issue was therefore evidentiary as well as financial: how could the petitioner effectively pursue its claim if the records needed to establish collections and remittances became unavailable?
Section 9 as a means of preserving evidence
Section 9(1)(ii)(c) expressly provides for the detention, preservation or inspection of property or things connected with the arbitral dispute, including measures necessary or expedient to obtain information or evidence. Its protective function can therefore extend to material needed for adjudication, alongside more familiar applications for injunctions or security.
The Court relied on the Division Bench decision in Prima Developers v. Lords Co-operative Group Housing Society Ltd., FAO(OS) 164/2009, decided on 8 May 2009. That decision concerned the appointment of a Local Commissioner to record measurements in a construction dispute and recognised that inspection for obtaining relevant information or evidence falls within Section 9.
Applying that reasoning, the Court considered the nature of the franchise records, their relevance to the dispute and the circumstances pleaded concerning the obstructed audit. Together, these warranted an independent inspection for the limited purpose of preserving material relevant to the contemplated arbitration.
Relief tailored to the way the business operated
The commission’s mandate addressed both conventional accounts and the electronic records through which student enrolments and payments could be traced.
It included identifying and inventorying student registers, admission forms, attendance records, fee receipts, cash diaries, bank deposit slips and accounts; inspecting business computers and storage devices and copying relevant data; recording QR codes, UPI IDs, bank account details and payment links used for collecting fees; and preserving specified CCTV recordings.
The Court also directed videography of the commission’s execution and documentation of obstruction or non-cooperation. Police assistance was provided for, together with directions governing seizure, sealing and custody of relevant devices and records in the event of non-cooperation.
These details matter. A preservation order must identify where the evidence is likely to exist and how it can be secured. In this case, the mandate recognised that the financial history of a coaching centre could be distributed across paper receipts, spreadsheets, payment applications and electronic devices.
The practical significance
The order illustrates the importance of connecting a request for preservation to identified records, a defined dispute and concrete circumstances indicating a risk to the evidence. The petitioner’s case linked contractual audit rights, an allegedly obstructed inspection and missing student-wise financial particulars to the specific material sought to be preserved.
The relief remained protective. The appointment of a Local Commissioner did not determine whether the respondent had committed the alleged breaches or establish the amount recoverable. It secured material against which the parties’ competing positions could subsequently be tested.
For businesses operating through franchisees or other arrangements involving locally maintained records, the lesson is immediate: dispute strategy must address the availability of evidence from the outset. Where the factual basis of a claim rests substantially with the opposing party, a carefully framed application under Section 9 can help preserve the conditions necessary for meaningful arbitration.
The petitioner was represented by Ms. Manasi Chatpalliwar, Mr. Pranav Proothi and Ms. Nimisha.
