GODREJ AND BOYCE MFG CO LTD v. REMI SALES AND ENGINEERING LTD.
Section 42, Sale of Goods Act: Use of Goods Constitutes Acceptance; Arbitration Petition Dismissed.
Court: Bombay High Court
Citation: 2025:BHC-OS:26730
Decision Date: 24-12-2025
List of Laws
The Arbitration and Conciliation Act, 1996; The Sale of Goods Act, 1930; The Indian Companies Act, 1913
- Facts: Godrej And Boyce Manufacturing Company Limited (Petitioner) filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award. The dispute arose from a purchase order issued by the Petitioner to Remi Sales and Engineering Limited (Respondent) for the supply of stainless steel seamless tubes. The Petitioner rejected the tubes after delivery and insertion into heat exchangers, citing rusting and pitting. The Respondent invoked arbitration, and the Arbitral Tribunal awarded Rs. 4,25,44,680/- along with interest to the Respondent.
- Procedural Posture: The Petitioner, aggrieved by the arbitral award, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, before the High Court of Bombay, challenging the award on grounds of patent illegality and perversity. The High Court is now considering the petition.
- Issue: (1) Did the Arbitral Tribunal err in holding that the tubes supplied by the Respondent conformed to the specifications of the purchase order? (2) Did the Arbitral Tribunal err in holding that the Petitioner's rejection of the tubes after use was invalid under Section 42 of the Sale of Goods Act, 1930, despite a contractual clause (6(b)) that allegedly allowed for rejection after inspection? (3) Was the Arbitral Tribunal's interpretation of the contract perverse or patently illegal, warranting interference under Section 34 of the Arbitration and Conciliation Act, 1996?
- Holding: The High Court dismissed the Arbitration Petition, upholding the Arbitral Tribunal's award.
- Reasoning: The Court reasoned that the Arbitral Tribunal's finding that the tubes conformed to specifications was supported by evidence, including test reports and TPIA certifications. The Court held that the Petitioner's act of inserting the tubes into heat exchangers constituted acceptance under Section 42 of the Sale of Goods Act, precluding rejection. The Court interpreted Clause 6(b) of the purchase order as not varying the statutory provisions of Section 42, emphasizing that it merely provided a right to withhold payment, not a right to reject after use. The Court also found that the Petitioner failed to prove the tubes were defective after cleaning and that the Arbitral Tribunal's interpretation of the contract was a possible one, not warranting interference under Section 34. The Court stated, "Once the goods are used, Section 42 deems such act as acceptance of goods thereby preventing the buyer from rejecting the same." The Court further noted that the Petitioner's defense was an "afterthought" and that the Arbitral Tribunal had rightly considered the conduct of the Petitioner in accepting the cleaning process.
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