The Bombay High Court has reiterated a significant principle of commercial law by holding that once goods are put to use by the buyer, such conduct amounts to deemed acceptance under Section 42 of the Sale of Goods Act, 1930, and the buyer cannot subsequently reject the goods on the ground of alleged defects. The Court clarified that in such circumstances, the only remedy available to the buyer is to claim damages for breach of warranty and not to reject the goods altogether. This ruling came while deciding a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award.
The dispute arose between Godrej and Boyce Manufacturing Company Limited and Remi Sales and Engineering Limited concerning the supply of stainless steel seamless tubes intended for use in heat exchangers at an oil refinery project in Oman. The purchase order, issued in August 2016, involved the supply of 8,339 tubes conforming to ASTM A213 TP 316/316L specifications, with a contract value exceeding ₹5 crore. The goods were supplied in 2017, accepted by the buyer, and subsequently installed in the heat exchangers. After installation, the buyer alleged that certain tubes exhibited rusting, pitting, and discoloration. Following discussions between the parties, some tubes were sent for cleaning under an approved procedure, and the cleaned tubes were reinstalled. Despite this, the buyer later sought to reject the goods and withheld payment, leading the supplier to initiate arbitration proceedings.
The arbitral tribunal, after examining extensive documentary and oral evidence, held that the goods supplied were in conformity with the contractual specifications. It relied on multiple quality assurance documents, including raw material certificates, mill test certificates, intergranular corrosion test reports, third-party inspection reports, and PMI tests conducted by the buyer itself. The tribunal further held that since the buyer had accepted and used the goods, such conduct amounted to deemed acceptance under Section 42 of the Sale of Goods Act. It also found that the alleged defects were not material in nature and had been effectively addressed through the cleaning process. Accordingly, the tribunal awarded a sum of ₹4,25,44,680 along with interest at 10% per annum in favour of the supplier.
Aggrieved by the award, the buyer approached the High Court under Section 34, contending that the arbitral tribunal had erred in its interpretation of contractual clauses and had wrongly applied the concept of deemed acceptance. It was argued that the contract permitted rejection of goods even after acceptance and that the defects discovered post-installation justified such rejection. However, the Court rejected these contentions and upheld the arbitral award.
The Court emphasized the limited scope of interference under Section 34 of the Arbitration Act, reiterating that it cannot act as an appellate forum to reappreciate evidence. It observed that the arbitral tribunal had based its findings on substantial material on record and that no case of patent illegality or perversity had been established. The Court further held that once the buyer had used the goods by installing them in heat exchangers, such use constituted an act inconsistent with the ownership of the seller, thereby attracting the deeming fiction of acceptance under Section 42 of the Sale of Goods Act.
Addressing the argument regarding contractual deviation, the Court examined Clause 6(b) of the purchase order and held that it did not override the statutory provision of deemed acceptance. The clause merely allowed inspection and rejection prior to use and provided a right to withhold payment in case of non-conformity, but it did not permit rejection after the goods had been put to use. The Court clarified that there is a distinction between withholding payment and rejecting goods, and the contractual terms did not authorize post-use rejection.
The Court also dealt with the allegation of defects and found that no material evidence was produced to establish that the cleaned tubes continued to suffer from any functional issues. It noted that the alleged rusting and pitting were not shown to be material defects affecting performance and that no boroscopy reports were placed on record to substantiate the claims. The tribunal’s finding that the defects, if any, were minor and curable was therefore upheld.
Importantly, the Court applied the principle that a party cannot approbate and reprobate simultaneously. It observed that the buyer had initially accepted the supplier’s proposal to clean the tubes and had approved the cleaning process, thereby electing a particular course of action. Having done so, the buyer could not later revert to its original stance and claim that the goods were defective so as to justify rejection. Such inconsistent conduct was held to be impermissible in law.
The Court ultimately concluded that once goods are accepted, Section 42 of the Sale of Goods Act comes into operation, and any subsequent discovery of defects does not revive the right of rejection. The buyer’s remedy, if any, lies only in claiming damages for breach of warranty. Since the buyer in the present case had not pursued such a claim appropriately, and had instead attempted to reject the goods after using them, its challenge to the arbitral award was dismissed.
Case Details:
Case Title: Godrej and Boyce Manufacturing Company Limited v. Remi Sales and Engineering Limited
Court: Bombay High Court
Case Number: Commercial Arbitration Petition No. 232 of 2024
Judge: Justice Sandeep V. Marne
Judgment Date: 24 December 2025
Statutes Involved: Arbitration and Conciliation Act, 1996 and Sale of Goods Act, 1930
