Under Section 9 of Arbitration and Conciliation Act, Court orders inspection of franchise centre amid allegations of fee misappropriation and audit obstruction
In a significant interim relief granted on October 16, 2026, the Delhi High Court, presided over by Mr. Vinod Kumar, J., directed the appointment of a Local Commissioner to inspect, identify, and preserve records and electronic data at the franchise centre of Aakash Educational Services Limited in Gangapur City, Rajasthan. The move comes amid allegations by Aakash Educational Services Limited ("Petitioner") that Vaibhav Gupta, the sole proprietor of M/s Shivrekkha Corporations ("Respondent") and erstwhile franchisee, collected student fees but failed to deposit them, thereby breaching the franchise agreement.
The Petitioner, engaged in coaching services for school board and entrance examinations under the Aakash brand, had entered into a franchise agreement with the Respondent in January 2025. According to the agreement, the Respondent was authorized to run a coaching centre and was obliged to deposit collected fees into the Petitioner's designated account within 48 hours. Furthermore, the agreement entitled the Petitioner to conduct audits and inspections of the franchisee's records.
From April 2026 onwards, the Petitioner contended that the Respondent ceased depositing student fees, issued unauthorized receipts, and withheld complete student-wise fee data. Despite attempts at audit in late September 2026, the Petitioner's audit team faced obstruction, including removal of registers, diaries, and a laptop containing critical student data. The Respondent disputed these claims but failed to provide the detailed records requested.
Following the termination of the franchise agreement in October 2026 due to these defaults and pending disputes, the Petitioner sought judicial intervention to safeguard evidence crucial for impending arbitration. The Court, relying on Section 9(1)(ii)(c) of the Arbitration and Conciliation Act, 1996, which empowers courts to grant interim measures including inspection and preservation of property or evidence relevant to arbitration disputes, found the Petitioner's apprehension of possible destruction or concealment of records to be reasonable.
The Court referenced the Division Bench judgment in Prima Developers v. Lords Co-operative Group Housing Society Ltd., which upheld the appointment of Local Commissioners for inspection and preservation of disputed property under Section 9, reinforcing the appropriateness of such interim relief.
Consequently, Mr. Sidharth Kuhar, Advocate, was appointed as Local Commissioner with a detailed mandate. He is tasked with recording the presence of persons at the premises, inventorying and securing all relevant physical and electronic records from April 1, 2026, including student registers, fee receipts, bank records, attendance logs, and CCTV footage. The Commissioner is authorized to access locked areas, seize and preserve devices and documents, and document any obstruction encountered during the process. Police assistance was also directed for ensuring smooth execution of the commission.
The Court further mandated that the Local Commissioner's fee and expenses be borne by the Petitioner, with the commission to be executed within two weeks followed by a report to the Court. The order aims to preserve crucial evidence for effective adjudication in the arbitration proceedings that the Petitioner undertakes to initiate.
This judgment underscores the judiciary's proactive role in protecting the integrity of evidence in arbitration disputes, particularly in commercial franchise relationships involving financial transactions and record-keeping obligations.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 9(1)(ii)(c) Court can appoint Local Commissioner for inspection, identification and preservation of documents and electronic data relevant to disputes proposed to be referred to arbitration - Where franchisee was alleged to have collected student fees and failed to deposit same, and audit was allegedly obstructed, appointment of Local Commissioner to inspect premises, preserve records, copy electronic data and secure evidence was justified.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 9(1)(ii)(c)
Aakash Educational Services Limited v. Vaibhav Gupta, (Delhi) : Law Finder Doc Id # 3001738
