CAN A BUYER REJECT THE GOODS AFTER USING THE SAME AND NOT RAISING ANY COMPLAINT AGAINST ITS QUALITY WITHIN A REASONABLE TIME ?

 CAN A BUYER REJECT THE GOODS AFTER USING THE SAME AND NOT RAISING ANY COMPLAINT AGAINST ITS QUALITY WITHIN A REASONABLE TIME ?

GODREJ & BOYCE (BUYER) VS REMI SALES & ENGG. LTD--- DECIDED 24-12-2025 BY MUMBAI HIGH COURT

FACTS OF THE CASE

Godrej & Boyce (buyer) stainless purchased steel seamless tubes from Remi Sales & Engg. Ltd. (seller) in 2016 for heat exchangers. In early 2017, tubes were supplied and Godrej inserted the same into exchangers, then claimed defective due to pitting and rusting.

Godrej rejected all tubes and withheld payment, prompting arbitration where seller claimed over ₹4.47 crore and buyer counter-claimed ₹3.10 crore.

MUMBAI HIGH COURT DECISION

The Bombay High Court upheld a ₹4.25 crore arbitral award against Godrej & Boyce, ruling that a buyer cannot reject goods after using them if they conform to specifications.

Arbitral Award was upheld by Mumbai Court: Remi Sales & Engg. Ltd (Seller) gets ₹4.25 crore plus 10% interest; Godrej deposited ₹7.53 crore, released against bank guarantee.

DID GODREJ IMMEDIATELY REJECT THE GOODS ON DELIVERY?

No. Godrej installed, commissioned, and used the machinery in its factory.

Godrej conduct is important in sale of goods law as use of goods is a classic indicator of acceptance under commercial law.

Godrej retained the goods without rejecting them within a reasonable time and this is under Sale of Goods principles, Godrej deemed to have accepted goods.

A buyer who uses the goods cannot later pretend that the contract never existed.

KEY ARBITRAL TRIBUNAL FINDINGS

Tribunal relied on quality certificates, mill test reports, IGC tests, and third-party inspections confirming tubes met specifications.

Burden shifted to buyer to prove defects, which they failed to do adequately. Usage in heat exchangers constituted acceptance under Section 42 of SOGA, barring rejection.

GODREJ’S ARGUMENT

“A buyer is entitled to reject the goods even after using them, if it is later discovered that the goods do not conform to contractual specifications, quality standards, or performance requirements.”

HIGH COURT’S DECISION

High Court held Clause 6(b) preserved payment withholding for non-conformity but not rejection after use or title passage. Buyer's cleaning acceptance and re-insertion barred inconsistent defect claims, per Bhagwat Sharan v. Purushottam (2020).

No perversity or patent illegality found, dismissing challenge under Section 34 of Arbitration Act.

LESSONS LEARNED

The decision emphasizes the shift in burden of proof once quality evidence is established and limits rejection rights post-acceptance under the Sale of Goods Act, 1930.

FURTHER COURSE OF ACTION AVAILABLE TO GODREJ & BOYCE

Godrej suffered a heavy loss as it has to pay 10% interest along with original cost which amounts to Rs 3.28 crore which is about 80% of the original cost of pipes purchased.

Godrej can appeal to Supreme Court against the decision of Arbitral Award and High Court as both have not taken into account the following:

GODREJ CAN CITE THE PROVISION IN SOGA TO PROTECT THE BUYER AGAINST DEFECTIVE GOODS .

Section 42 & 43 of the Sale of Goods Act, 1930 – acceptance requires goods to conform to contract.

LATENT DEFECT DOCTRINE – defects not discoverable on reasonable inspection allow later rejection.

FUNDAMENTAL BREACH PRINCIPLE – use does not waive rights where the breach goes to the root of the contract.

R V SECKAR , FCS, LLB 79047 19295