2025 Supreme(Online)(Bom) 351876

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Sandeep V. Marne, J
Godrej And Boyce Manufacturing Company Limited – Appellant
Versus
Remi Sales and Engineering Limited – Respondent
COMMERCIAL ARBITRATION PETITION NO. 232 OF 2024

Under Section 42 of the Sale of Goods Act, a buyer who uses goods in a manufacturing process is deemed to have accepted them. Such acceptance precludes subsequent rejection of the goods, limiting the buyer's remedy to a claim for breach of warranty for any alleged latent defects.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to Arbitral Award - Scope of interference - Court sitting under Section 34 is not an appellate court and cannot reappreciate evidence unless findings are perverse or show patent illegality - An award cannot be set aside simply because another view is possible or because the reasoning is inadequate if evidence supports the conclusion. (Paras 26, 28, 61)

(B) Sale of Goods Act, 1930 - Sections 13, 42 and 62 - Acceptance of goods - Deeming fiction under Section 42 - Buyer who uses goods in manufacturing process is deemed to have accepted them, thereby precluding rejection - Contractual clauses that do not explicitly negate the statutory consequence of acceptance upon use do not allow for rejection after consumption - Claims post-acceptance for defects are relegated to the realm of breach of warranty. (Paras 34, 35, 43, 49, 50)

(C) Evidence - Admissions - An admission is a piece of evidence rather than conclusive proof and can be explained or contextualized by the circumstances under which it was made. (Paras 58)

Facts of the case:
The petitioner challenged an arbitral award arising from a dispute over the supply of industrial tubes. After the petitioner accepted delivery and installed the tubes in heat exchangers, it observed instances of surface rust and pitting. While the petitioner sought to reject the goods, it concurrently entered into a remedial arrangement with the respondent to clean the tubes, which were subsequently reinstalled. The petitioner later refused to pay the invoice, leading to arbitration. The arbitrator found that the tubes conformed to specifications, that the petitioner’s use of the tubes constituted deemed acceptance, and that any claims relating to defects should have been framed as a breach of warranty rather than a rejection of goods.

Findings of Court:
The court held that the arbitrator’s findings of fact regarding the conformity of the goods with specifications were supported by substantial evidence and were not perverse. It further ruled that the petitioner’s action of incorporating the tubes into machinery constituted 'acceptance' under the statute, which barred the rejection of the goods. The court affirmed that a party cannot blow hot and cold by electing to accept a remedial cleaning process and subsequently seeking to reject the goods entirely.

Issues: The main issues were whether the goods supplied met the agreed specifications, whether the petitioner was entitled to reject the goods after their use in manufacturing, and whether the arbitral award suffered from patent illegality or perversity.

Ratio Decidendi: The court ruled that a petitioner cannot circumvent the statutory deeming provision of acceptance by claiming defects after the goods have been utilized in production. Once goods are consumed or put into use, they are deemed accepted, and any grievance regarding defects must be pursued under the law of warranty, not through rescission/rejection, especially when the petitioner had previously elected to pursue a repair/cleaning solution.

Result: Arbitration Petition dismissed.