{"id":48734,"date":"2025-05-23T13:41:21","date_gmt":"2025-05-23T13:41:21","guid":{"rendered":"https:\/\/my.legal500.com\/developments\/?post_type=legal_developments&p=48734"},"modified":"2025-05-23T14:19:55","modified_gmt":"2025-05-23T14:19:55","slug":"arbitration-law-update-gag-order-under-section-9-of-the-arbitration-act-can-be-granted-for-protecting-reputation","status":"publish","type":"legal_developments","link":"https:\/\/my.legal500.com\/developments\/thought-leadership\/arbitration-law-update-gag-order-under-section-9-of-the-arbitration-act-can-be-granted-for-protecting-reputation\/","title":{"rendered":"ARBITRATION LAW UPDATE: GAG ORDER UNDER SECTION 9 OF THE ARBITRATION ACT CAN BE GRANTED FOR PROTECTING REPUTATION"},"content":{"rendered":"

Background: <\/em><\/strong><\/p>\n

The Hon\u2019ble High Court of Bombay in the matter Wonderchef Home Appliances Pvt. <\/u>\u00a0Ltd. v. Shree Swaminarayan Pty Ltd. <\/u>held that a gag order under Section 9 of the\u00a0 Arbitration and Conciliation Act, 1996 (\u201cthe Act\u201d) can be granted, pending resolution\u00a0 of disputes between the parties, if the contractual obligation between the parties\u00a0 stipulates to protect the party\u2019s reputation and not otherwise.<\/strong><\/p>\n

<\/p>\n

Facts: <\/em><\/strong><\/p>\n

The Respondent is a distributor of the Petitioner in Australia. The Respondent has been\u00a0 sending out e-mails to various parties, including other distributors of the Petitioner in\u00a0 other jurisdictions and various statutory addressees such as Government Officers and\u00a0 prospective financial investors, complaining about the Petitioner’s product having\u00a0 demonstrated defects, the poor treatment of the Respondent by the Petitioner, and\u00a0 the manner in which the relationship is being handled. Accordingly, in light of the\u00a0 Distribution Agreement dated 26 December 2017 (\u201cAgreement<\/strong>\u201d) executed between\u00a0 the Petitioner and Respondent, the Petitioner sought the present petition to injunct\u00a0 the Respondent from making disparaging statements or taking any actions that may\u00a0 harm or damage, malign or disparage the Petitioner’s reputation and its brand name\u00a0 \u201cWonderchef\u201d.<\/p>\n

Issue for consideration: <\/em><\/strong><\/p>\n

Whether a gag order to injunct commercial speech can be passed under the ambit of\u00a0 Section 9 of the Act.<\/p>\n

Held: <\/em><\/strong><\/p>\n

The Hon\u2019ble High Court of Bombay stated that the scope of powers of this Hon\u2019ble\u00a0 Court under Section 9 of the Act is essentially to make interim measures of protection\u00a0 with respect to the preservation of the subject matter of the agreement between the\u00a0 parties, which is subject to resolution by arbitration. To be able to seek a gag order, the\u00a0 Petitioner would need to show that the remarks of the Respondent are proscribed by\u00a0 the agreement that contains the arbitration agreement and that, pending resolution<\/p>\n

of disputes, such remarks cannot be made. The Hon\u2019ble Court, considered clause\u00a0 12.2(c) of the Agreement, which required the distributor to conduct business in a\u00a0 manner that reflected favorably on the Petitioner and its products. Given the\u00a0 contractual obligation and the potential harm alleged by the Petitioner, the Hon’ble Court granted an interim injunction against the Respondent for 90 days following\u00a0 clause 12.2(c) of the Agreement, restraining them from making statements that could\u00a0 harm the Petitioner\u2019s reputation and also stated that the Respondent shall not vitiate\u00a0 the atmosphere for the arbitration by sending out e-mails attacking the Petitioner\u2019s\u00a0 reputation.<\/p>\n

MHCO Comment: <\/em><\/strong><\/p>\n

The Hon\u2019ble High Court of Bombay clarified that a gag order under Section 9 of the Act\u00a0 can only be granted if there is a contractual obligation to protect a party\u2019s reputation.\u00a0 While the Hon\u2019ble Court rejected the Petitioner\u2019s claim of confidentiality breach, it\u00a0 recognized the contractual duty under clause 12.2(c) of the Agreement to maintain the\u00a0 Petitioner\u2019s reputation. We believe that this judgment is a welcome step by the Hon\u2019ble\u00a0 Court to protect a Petitioner\u2019s reputation, by injuncting the Respondent from\u00a0 spreading derogatory information about the Petitioner, pending arbitration\u00a0 proceedings.<\/p>\n

Authored by- Mr Bhushan Shah, Partner and Ms Alisha Dsouza, Associate.<\/p>\n

This article was released on 12 February 2025. <\/em><\/p>\n

The views expressed in this update are personal and should not be construed as any legal\u00a0 advice. Please contact us for any assistance.<\/em><\/p>\n

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