Delhi High Court
Austin Hyundai (Austin Distributors … vs Axalta Coating Systems India Pvt Ltd on 18 April, 2026
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 09.04.2026
Judgment pronounced on: 18.04.2026
Judgment uploaded on: 18.04.2026
+ FAO (COMM) 98/2026
AUSTIN HYUNDAI (AUSTIN DISTRIBUTORS PVT LTD)
.....Appellant
Through: Mr. Samrat Nigam, Sr. Adv.
with Ms. Archana Sonthalia,
Ms. Prachi Pratap, Dr. Prashant
Pratap, Mr. Amjid Maqbool,
Ms. Anupriya Dixit, and Ms.
Pallavi Pratap, Advs.
versus
AXALTA COATING SYSTEMS INDIA PVT LTD
.....Respondent
Through: Mr. Piyush Sharma and Mr.
Armaan Verma, Advs.
CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE AMIT MAHAJAN
JUDGMENT
ANIL KSHETARPAL, J.:
1. Through the present Appeal preferred under Section 37 of the
Arbitration and Conciliation Act, 19961 [hereinafter referred to as the
„A&C Act‟], the Appellant assails the order dated 18.03.2026
[hereinafter referred to as the „Impugned Order‟] passed by the
learned District Judge whereby the petition filed by the Appellant
under Section 34 of the A&C Act2 [hereinafter referred to as „Section
34 Petition‟] seeking setting aside of the arbitral award dated
13.09.2024 [hereinafter referred to as the „Award‟] came to be1
Section 37
2
Section 34
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dismissed.
2. By virtue of the Impugned Order, the learned District Judge
declined to interfere with the findings returned by the learned Sole
Arbitrator, who had allowed the claims of the Respondent arising out
of a Supply Agreement dated 19.07.2019 [hereinafter referred to as
„Supply Agreement‟] and held the Appellant liable towards repayment
of the amount treated as upfront investment support along with allied
claims.
3. The principal question which therefore arises for consideration
before this Court is whether the learned District Judge, while
exercising jurisdiction under Section 34, committed any jurisdictional
error or patent illegality in refusing to set aside the arbitral award,
warranting interference by this Court in exercise of its limited
appellate jurisdiction under Section 37.
FACTUAL MATRIX:
4. Before adverting to the rival submissions advanced on behalf of
the parties, it would be apposite to briefly notice the factual
background leading to the present Appeal.
5. The Appellant, Austin Hyundai (Austin Distributors Pvt. Ltd.),
entered into a dealership agreement dated 30.04.2011 [hereinafter
referred to as „Dealership Agreement‟] with Hyundai Motors India
Ltd. for operating a non-exclusive automobile dealership at Kolkata.
The said dealership arrangement was subsequently renewed in the
years 2014 and 2017.
6.
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under the Dealership Agreement, the Appellant entered into the
Supply Agreement with the Respondent, Axalta Coating Systems
India Pvt. Ltd., for procurement of refinish paints, tints, thinner and
allied paint ancillaries required for authorised workshop operations.
7. The Supply Agreement contemplated that supplies could be
effected either directly by the Respondent or through its authorised
distributors/business associates, with payments to be made in
accordance with invoices issued from time to time. The relevant
portion is reproduced below:
“Axalta Coating Systems shall supply the Products itself or through
Axalta Coating Systems’s Authorised Distributors/Stockist
(hereinafter referred as Business Associates) to Austin Hyundai
(Austin Distributors Pvt. Ltd.) at the prices mentioned in Axalta
Coating Systems’s MRP list which shall be provided to Austin
Hyundai (Austin Distributors Pvt. Ltd.) annually. The payment shall
be made by Austin Hyndai (Austin Distributors Pvt. Ltd.) to Business
Associates on the terms as mentioned in the invoice(s) issued from
time to time.”
8. Pursuant thereto, the Respondent extended an amount of
Rs.39,60,000/- to the Appellant, described as „upfront investment
support‟. Subsequently, the dealership agreement between the
Appellant and Hyundai Motors India Ltd. stood terminated on
11.08.2020, as a consequence whereof the Appellant ceased to operate
authorised Hyundai workshops and was unable to fulfil the minimum
purchase commitment envisaged under the Supply Agreement.
9. Disputes thereafter arose between the parties regarding the
nature of the aforesaid payment. While the Respondent asserted that
the amount constituted a recoverable financial support/loan linked to
minimum purchase obligations, the Appellant contended that it was in
the nature of a commercial business investment incapable of recovery.
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Upon exchange of legal notices dated 02.03.2022 and denial of
liability by the Appellant, the Respondent invoked arbitration under
the Supply Agreement.
10. The learned Sole Arbitrator [hereinafter referred to as „the
Arbitrator‟] adjudicated the disputes and, by Award dated 13.09.2024,
held inter alia that the Appellant was a party to the Supply
Agreement, had received upfront investment support along with GST,
had obtained supplies at discounted value, and had breached the
minimum purchase commitment stipulated under the contract. The
relevant portions are reproduced as follows:
“Tribunal also makes a finding that Austin Distributors Pvt. Ltd. is a
party to supply Agreement and is the only Respondent in these
proceedings ( Issue A and B)
***
For reasons set out above, the Tribunal makes a finding that Claimant
did pay to Respondent i.e., Austin Distributors Pvt. Ltd. and
Respondent did receive from Claimant Upfront Investment Support of
INR 39,60,000 along with GST of INR 7,12,800. (Issue C)
***
For reasons set out above, the Tribunal makes a finding that Claimant
supplied Respondent with Products at a discounted value of INR
12,30,313.63. (Issue D)
***
For reasons set out above, the Tribunal makes a finding that
Respondent breached the Supply Agreement by failing to discharge
the obligation of making the Minimum Purchase Commitment for each
of the three Contract Years. (Issue E)
***
As a result, the Tribunal makes no finding with regard to Issue F.
(Issue F)”
11. Aggrieved thereby, the Appellant instituted proceedings under
Section 34 before the learned District Judge contending, inter alia,
that the Award suffered from perversity, patent illegality, and
misinterpretation of contractual and evidentiary material.
12. During the pendency of proceedings, the Appellant also
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invoked Section 33 of the A&C Act seeking correction of certain
aspects of the Award. The learned Arbitrator permitted limited clerical
corrections but rejected objections relating to alleged misappreciation
of evidence by order dated 09.11.2024.
13. The Appellant further filed applications before the learned
District Judge seeking production of additional evidence and
summoning of a third party, namely Dial Automobiles Pvt. Ltd. The
application seeking stay of the Award under Section 36(3) of the A&C
Act was dismissed as not pressed.
14. Ultimately, by order dated 18.03.2026, the learned District
Judge dismissed the Section 34 Petition. Aggrieved by the refusal to
set aside the Award, the Appellant has preferred the present Appeal.
CONTENTIONS OF THE PARTIES:
15. Heard learned counsel appearing for the parties and perused the
record with their assistance.
16. Learned Senior Counsel for the Appellant submits as under:
i. The Arbitrator erred in treating the invoice dated 05.09.2019 as
“upfront investment support”, despite the amount being accounted as
taxable service income attracting GST and income tax, thereby
permitting impermissible recovery of a sum already treated as
revenue.
ii. The Supply Agreement was intrinsically dependent upon
continuation of the Hyundai dealership. Upon its termination, the
substratum of the contract stood extinguished, rendering enforcement
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of minimum purchase obligations legally unsustainable.
iii. The Award impermissibly relies upon invoices issued by Dial
Automobiles Pvt. Ltd., a non-signatory and non-party to arbitration,
thereby fastening liability on the Appellant based on third-party
transactions beyond the Arbitrator‟s jurisdiction.
iv. The Arbitrator erroneously rejected the Appellant‟s application
under Section 23(3) of the A&C Act [hereinafter referred to as
„Section 23(3) Application‟] seeking amendment, counter-claim, and
impleadment of a necessary party without hearing and by attributing
motives, thereby violating principles of natural justice.
17. Per contra, learned counsel for the Respondent submits as
under:
i. The Arbitrator correctly construed the payment as upfront
investment support based on contractual terms and contemporaneous
conduct of parties, which cannot be re-examined in Section 37
proceedings.
ii. Termination of the dealership did not discharge contractual
obligations voluntarily undertaken under the independent Supply
Agreement between the parties.
iii. Reliance on distributor invoices was contractually permissible
since supplies through authorised business associates formed part of
the agreed commercial arrangement.
iv. The Section 23(3) Application was belated and rightly rejected
to prevent derailment of arbitral proceedings, causing no procedural
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prejudice to the Appellant.
18. No other submissions have been urged on behalf of the parties.
ANALYSIS AND FINDINGS:
19. This Court has considered the submissions advanced by learned
Counsel for the parties.
20. Before examining the rival contentions, it is necessary to
delineate the scope of appellate interference under Section 37.
21. The contours of judicial scrutiny of arbitral awards stand
authoritatively settled by the Supreme Court. In McDermott
International Inc. v. Burn Standard Co. Ltd. & Ors.3, the Court has
emphasised that the A&C Act assigns courts only a supervisory role in
arbitral matters. Judicial intervention is limited to ensuring fairness of
the process on grounds such as fraud, bias, or violation of natural
justice, and courts are not empowered to correct errors of fact or law
committed by the arbitral tribunal. The Court further held that
interpretation of contractual terms and evaluation of the conduct of
parties lie primarily within the domain of the arbitrator, and once
arbitral jurisdiction is established, interference is warranted only
where a patent illegality or jurisdictional infirmity is apparent on the
face of the award.
22. The position has also been affirmed in MMTC Ltd. v. Vedanta
Ltd.4, which underscores that the appellate jurisdiction under Section
37 is inherently circumscribed and derivative in nature. The appellate
3
(2006) 11 SCC 181
4
(2019) 4 SCC 163
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court is concerned not with the correctness of the arbitral award per
se, but with the legality of the exercise undertaken by the court
exercising jurisdiction under Section 34. Interference is therefore
warranted only where the court below has either exceeded the
permissible contours of Section 34 or failed to exercise jurisdiction
vested in it, and not merely because another view on facts or
contractual interpretation may appear possible.
23. Similar observations have been made by the Supreme Court in
Punjab State Civil Supplies Corporation Ltd. v. Sanman Rice Mills5,
the Supreme Court reiterated that the appellate jurisdiction under
Section 37 remains confined within the limits prescribed under
Section 34. The Court clarified that an appellate court does not sit as a
regular court of appeal over arbitral awards and cannot undertake
reappraisal of evidence or reassessment of factual findings merely
because another view is possible. The power under Section 37 is
supervisory in character, akin to revisional jurisdiction, and
interference is justified only where the Section 34 court has either
exceeded its jurisdiction or failed to exercise it in accordance with
law.
24. Importantly, while dealing specifically with Section 37
jurisdiction, a three-judge Bench of the Supreme Court in UHL Power
Company Ltd. v. State of Himachal Pradesh6 held that an appellate
court under Section 37 exercises an even more restricted jurisdiction
than that under Section 34, and interference is justified only where the
Section 34 court itself has exceeded the permissible limits of review.
5
2024 SCC OnLine SC 2632
6
2024 SCC OnLine SC 2632
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25. Thus, the appellate scrutiny under Section 37 is supervisory in
nature. The Court is required to examine only whether the learned
District Judge, while exercising jurisdiction under Section 34, applied
the correct legal principles and remained within the statutorily
permissible bounds of interference.
26. Consequently, unless the Impugned Order discloses patent
illegality, jurisdictional error, or manifest perversity in the exercise of
Section 34 jurisdiction, this Court would be slow to interfere with the
decision under appeal.
27. Tested on the aforesaid settled principles governing appellate
interference under Section 37, the submissions advanced on behalf of
the Appellant are required to be examined only to ascertain whether
the learned District Judge committed any jurisdictional error while
declining to set aside the Award under Section 34, and not whether
this Court would have arrived at a different conclusion on merits.
28. The principal contention of the Appellant is that the Arbitrator
erroneously treated the invoice dated 05.09.2019 as “upfront
investment support”, despite the amount allegedly being reflected as
taxable income attracting GST and income tax, thereby rendering its
recovery impermissible.
29. A perusal of the Award, however, reveals that the Arbitrator
arrived at the said conclusion upon detailed appreciation of both
documentary and oral evidence. The Arbitrator noted the categorical
admission emerging from the cross-examination of RW-2,
acknowledging payment of upfront investment support along with
GST to the Appellant. The Arbitrator further relied upon Clause 6 of
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the Supply Agreement, wherein the Appellant expressly
acknowledged receipt of Rs.39,60,000/- as upfront investment support
and, as security thereof, executed a Demand Promissory Note pursuant
to Clause 15 of the Agreement, undertaking repayment upon demand.
The Arbitrator also examined contemporaneous correspondence,
including the Reply to the Termination Notice, wherein the Appellant
admitted receipt of the said amount though disputing its classification
as a loan.
30. On the basis of these contemporaneous contractual documents
and admissions attributable to the Appellant itself, the Arbitrator
recorded a clear finding that the Respondent had paid, and the
Appellant had received, upfront investment support of Rs.39,60,000/-
along with applicable GST. The Arbitrator further found the
Appellant‟s subsequent denial of receipt, as pleaded in its defence, to
be inconsistent with its earlier communications and contractual
acknowledgments.
31. The challenge raised before this Court essentially seeks re-
appreciation of evidence and reconsideration of the accounting
characterization of the transaction. The mere fact that the amount may
have been reflected as income for taxation purposes does not render
the arbitral interpretation impermissible once the contractual
framework and surrounding conduct demonstrated that the payment
was linked to minimum purchase obligations under the Supply
Agreement. Interpretation of contractual stipulations and evaluation of
evidentiary material fall squarely within the exclusive domain of the
Arbitrator.
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32. The Arbitrator having adopted a reasoned and plausible view
founded upon admissions, contractual clauses, and contemporaneous
records, the learned District Judge rightly declined to interfere. Such
findings, being neither perverse nor patently illegal, cannot be
reopened in appellate proceedings under Sections 34 or 37 merely
because an alternate interpretation is suggested by the Appellant.
33. The Appellant next contends that termination of the Hyundai
dealership extinguished the substratum of the Supply Agreement,
thereby rendering enforcement of minimum purchase commitments
legally untenable.
34. The Award, however, demonstrates that the Arbitrator
specifically examined this defence and found it to be unsupported by
any contractual stipulation or evidentiary material. The Arbitrator
recorded that although the Appellant asserted existence of an
understanding that supplies would continue only so long as the
Hyundai dealership subsisted, no evidence whatsoever was produced
to establish such an agreement. The Supply Agreement, on its plain
terms, imposed independent minimum purchase obligations upon the
Appellant for the stipulated contract period, and no clause provided
for automatic discharge upon termination of the dealership
arrangement.
35. The Arbitrator further noted that while reference was made in
the Statement of Defence to business losses allegedly arising from the
COVID-19 pandemic and consequent restrictions, no legally
cognisable defence, whether of force majeure, frustration, statutory
restriction, or governmental prohibition, was pleaded or substantiated.
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The pleadings contained no averment demonstrating how the
pandemic legally excused performance of contractual obligations.
Significantly, the Arbitrator found that the Appellant neither advanced
nor pursued any such defence during evidentiary hearings or final
arguments. In these circumstances, the Arbitrator concluded that
failure to meet the minimum purchase commitment constituted a
breach of the Supply Agreement.
36. The learned District Judge, while exercising jurisdiction under
Section 34, rightly declined to revisit these findings. The conclusions
drawn by the Arbitrator represent a plausible construction of the
contract and the pleadings before it.
37. In the present case, the Arbitrator has specifically found that the
Supply Agreement constituted an independent commercial
arrangement containing express minimum purchase obligations for a
defined contractual period and that no contractual term made its
continuance contingent upon subsistence of the Hyundai Dealership
Agreement. The question whether the two agreements were
interdependent was thus examined on the basis of the contractual
terms and evidentiary record, and answered by the Arbitrator upon
appreciation of facts. No perversity, patent illegality, or jurisdictional
infirmity in this finding, duly affirmed by the Court exercising
jurisdiction under Section 34, has been demonstrated so as to warrant
interference in appellate jurisdiction under Section 37.
38. The Appellant further argues that the Award is vitiated as
reliance was placed upon invoices issued by Dial Automobiles Pvt.
Ltd., a non-signatory to the arbitration agreement, thereby allegedly
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fastening liability upon the Appellant on the basis of third-party
transactions.
39. The Award, however, demonstrates that the Arbitrator
examined this aspect in detail. The Arbitrator noted that Annexure C/5
was produced to establish supply of products during the subsistence of
the Supply Agreement and comprised a consolidated Credit Note
dated 22.07.2020 together with individual invoices reflecting supplies
made at a discounted value of Rs.12,30,313.63/-. Significantly, each
of the invoices forming part of the said annexure bore the stamp of the
Appellant and the signatures of its authorised signatory
acknowledging receipt of the products. The credit note itself carried
the authorised signatures and company stamps of both the distributor
and the Appellant.
40. The Arbitrator further recorded that although the Appellant
disputed receipt of products and alleged inferior quality as well as
excessive billing, no evidence whatsoever was adduced to substantiate
these assertions. In the absence of supporting material, the Arbitrator
rejected the defence for failure to prove the same and returned a
factual finding that supplies had indeed been effected at the
discounted value reflected in the documentary record.
41. It is also material that the Supply Agreement expressly
contemplated supplies being effected either directly by the
Respondent or through authorised distributors/business associates.
The reliance placed upon distributor invoices was therefore consistent
with the contractual framework and was undertaken only for
evidentiary purposes to establish performance of contractual
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obligations, and not for imposing liability upon a non-party to
arbitration.
42. The challenge raised by the Appellant thus essentially seeks re-
appreciation of documentary evidence and reassessment of factual
findings rendered by the Arbitrator. Such an exercise lies wholly
outside the permissible scope of scrutiny under Sections 34 and 37.
The learned District Judge rightly declined to interfere with these
findings.
43. The Appellant has also assailed rejection of its application
under Section 23(3) of the A&C Act seeking amendment, counter-
claim, and impleadment of a third party, alleging violation of
principles of natural justice.
44. The record reveals that the said application was moved at an
advanced stage of the arbitral proceedings. The Arbitrator exercised
procedural discretion in declining the request so as to avoid derailment
of the proceedings. The learned District Judge, upon examination,
found no procedural unfairness or denial of opportunity affecting the
validity of the arbitral process.
45. It is well settled that procedural management of arbitral
proceedings lies primarily within the discretion of the arbitral tribunal.
Unless prejudice of a fundamental nature or denial of equal
opportunity is demonstrated, such procedural orders do not furnish a
ground for setting aside an award. The Appellant has failed to
establish any such violation.
46. A cumulative reading of the Award and the Impugned Order
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indicates that the learned District Judge correctly confined himself to
the parameters of Section 34 review and refrained from reappreciating
evidence or substituting the findings of the Arbitrator. The
conclusions reached represent a plausible view emerging from the
contractual framework and material placed before the Arbitrator.
CONCLUSION:
47. In view of the foregoing discussion and for the reasons recorded
hereinabove, this Court is of the considered opinion that the learned
District Judge has exercised jurisdiction strictly within the confines of
Section 34 and has rightly declined to interfere with the Award.
48. The Appellant has failed to demonstrate any patent illegality,
jurisdictional error, perversity, or violation of principles of natural
justice either in the Award or in the Impugned Order dated 18.03.2026
so as to justify interference by this Court in exercise of its limited
appellate jurisdiction under Section 37.
49. The Appeal, being devoid of merit, is accordingly dismissed.
ANIL KSHETARPAL, J.
AMIT MAHAJAN, J.
APRIL 18, 2026
jai/shah
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