Delhi High Court Upholds ₹39.6 Lakh Award Against Austin Hyundai In Paint Supply Dispute With Axalta

The Delhi High Court on Saturday upheld an arbitral award directing Austin Hyundai (Austin Distributors Pvt Ltd) to repay Rs 39.6 lakh to Axalta Coating Systems India Pvt Ltd, holding that termination of its Hyundai dealership did not extinguish its obligations under a separate supply agreement.

A bench of Justice Anil Kshetarpal and Justice Amit Mahajan held that the supply agreement imposed independent minimum purchase obligations and was not contingent on the continuation of the dealership.

“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,” the court observed.

The dispute arose from a supply agreement dated July 19, 2019, under which Axalta supplied refinish paints and related materials and extended Rs 39.6 lakh as upfront investment support.

Austin Hyundai's dealership agreement with Hyundai Motors India Ltd, originally executed on April 30, 2011 and subsequently renewed, was terminated on August 11, 2020. It thereafter failed to meet the minimum purchase commitments under the supply agreement.

Disputes arose regarding the nature and recoverability of the upfront payment, following which arbitration was invoked under the agreement.

The arbitral tribunal held that Austin Hyundai had breached the supply agreement by failing to meet its minimum purchase commitments and directed repayment of the upfront investment support.

Before the High Court, Austin Hyundai said the supply agreement was tied to its Hyundai dealership and could not continue once the dealership ended. It also questioned the reliance on invoices issued by a third-party distributor.

The Court was not convinced. It pointed out that the agreement itself allowed supplies to be made through authorised distributors, and that the invoices in question carried Austin Hyundai's own acknowledgment.

It also made it clear that interpreting contract terms and weighing evidence is the arbitrator's job. Courts do not step in to re-examine those findings unless there is a clear illegality or something fundamentally flawed.

Seeing no such issue here, the Court dismissed the appeal and left the arbitral award untouched..

For Austin Hyundai (Austin Distributors Pvt Ltd): Advocates Samrat Nigam, Archana Sonthalia, Prachi Pratap, Dr. Prashant Pratap, Amjid Maqbool, Anupriya Dixit, and Pallavi Pratap.

For Axalta Coating Systems India Pvt Ltd: Advocates Piyush Sharma, Armaan Verma.