Court Dismisses Godrej's Petition, Confirms Deemed Acceptance of Defective Tubes Under Sale of Goods Act
In a significant ruling, the Bombay High Court upheld the arbitral award favoring Remi Sales and Engineering Limited in a dispute with Godrej and Boyce Manufacturing Company Limited regarding the supply of stainless steel seamless tubes. The court, presided by Justice Sandeep V. Marne, dismissed Godrej's petition challenging the arbitral tribunal's decision which directed Godrej to pay Remi a sum of Rs. 4,25,44,680 along with interest.
The dispute arose when Godrej rejected stainless steel tubes supplied by Remi, claiming defects post their insertion into heat exchangers. Godrej argued that the defects warranted rejection under contractual terms, diverging from the statutory deeming fiction of acceptance as per Section 42 of the Sale of Goods Act, 1930. The arbitral tribunal, however, held that once the tubes were used, they were deemed accepted, making the rejection wrongful. The tribunal further noted that any defects fell under warranty claims rather than grounds for rejection.
The High Court concurred with the tribunal's findings, stating that Godrej's act of using the tubes in heat exchangers constituted acceptance under Section 42 of the Sale of Goods Act. The court emphasized that the contractual clause invoked by Godrej did not enable rejection of goods post-usage, reinforcing the tribunal’s interpretation that any defects should be addressed through warranty claims.
Justice Marne highlighted that the arbitral tribunal's conclusions were well-supported by evidence, including multiple test reports confirming the tubes conformed to specifications. The court also underscored the limited scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996, reinforcing that it cannot reappraise evidence or act as an appellate body over the tribunal’s findings.
This judgment serves as a critical reminder of the importance of adhering to statutory provisions and the limitations of contractual variations in commercial disputes. The court's decision reinforces the principle that once goods are used in a manner inconsistent with the seller's ownership, they are deemed accepted, barring claims of rejection.
Bottom Line:
Arbitration Award - Interpretation of Contract - Deeming fiction of acceptance under Section 42 of the Sale of Goods Act applies when goods are used in a manner inconsistent with ownership of the seller, barring rejection after use.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 34, Sale of Goods Act, 1930 Sections 13, 42, 62
