Case Note & Summary
The petitioner, a manufacturing company, issued a purchase order to the respondent, a trading company, for the supply of stainless steel seamless tubes to be used in heat exchangers for an oil and gas refinery. The tubes were delivered and inserted into heat exchangers, after which pitting and rusting were observed. The parties attempted remedial measures, but the petitioner eventually rejected all tubes and refused payment. The respondent invoked arbitration and obtained an award for the invoice amount along with interest and an indemnity for import duties. The petitioner filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the award. The petitioner contended that the arbitrator erroneously applied Section 42 of the Sale of Goods Act, ignoring contractual clauses that allowed rejection even after acceptance. The petitioner argued that clause 6(b) expressly varied rights under the Sale of Goods Act, as permitted by Sections 13 and 62, and that clause 12 prevented any waiver by indulgence. The petitioner also submitted that the arbitrator misinterpreted the contract and relied on an inapplicable precedent. The court heard arguments and reserved judgment on 18 December 2025, but the provided text does not include the court's final analysis or decision.
Issue of Consideration
Whether the arbitral award suffers from patent illegality and perversity in its interpretation of contractual clauses 6(b) and 12, and in applying Section 42 of the Sale of Goods Act, 1930, thereby requiring interference under Section 34 of the Arbitration and Conciliation Act, 1996.
Law Points
- Section 42 of Sale of Goods Act
- 1930
- Section 13 of Sale of Goods Act
- Section 62 of Sale of Goods Act
- contractual variation of rights and duties
- acceptance of goods does not preclude subsequent rejection if contract provides
- clause 6(b) preserves right to reject
- clause 12 prevents waiver by accommodation
Case Details
2025 LawText (BOM) (12) 85
Commercial Arbitration Petition No. 232 of 2024
Ms. Arti Raghavan i/b Bachubhai Munim & Co., Mr. Rashmin Khandekar i/b Purnanand & Co.
Godrej And Boyce Manufacturing Company Limited
Remi Sales and Engineering Limited
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging a sole arbitrator's award in a commercial dispute over supply of stainless steel tubes.
Remedy Sought
Petitioner seeks to set aside the arbitral award dated 8 February 2023 which awarded Rs. 4,25,44,680/- with interest to the Respondent and directed indemnification for import duties.
Filing Reason
Petitioner alleges patent illegality and perversity in the award, contending that the arbitrator misapplied Section 42 of the Sale of Goods Act and ignored contractual clauses 6(b) and 12, which preserved the right to reject goods after acceptance.
Previous Decisions
The sole arbitrator passed the award on 8 February 2023. Prior to that, the High Court appointed the arbitrator under Section 11 by order dated 12 April 2018. The petitioner previously deposited the decretal amount and the respondent was allowed to withdraw it subject to bank guarantee.
Issues
Whether the arbitral award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on grounds of patent illegality and perversity?
Whether the arbitrator erred in applying Section 42 of the Sale of Goods Act, 1930 despite contractual clauses varying the rights of parties?
Whether the arbitrator ignored Clause 12 of the purchase order regarding waiver?
Submissions/Arguments
Petitioner argued that Clause 6(b) of the purchase order expressly varied the provisions of Section 42 of the Sale of Goods Act, allowing rejection even after acceptance; that Section 13 and Section 62 of the Sale of Goods Act permit such contractual variation; that the nature of goods required comprehensive inspection which was impossible at delivery; that the arbitrator's reliance on Shah Mohanlal Manilal was misplaced as that case lacked a similar contractual clause; that the arbitrator ignored Clause 12 which stipulated that any indulgence or accommodation does not constitute waiver; that the arbitrator effectively rewrote the contract.
Respondent likely defended the award on its merits (details not provided in the extract).
Judgment Excerpts
Petitioner has filed the present Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the Award of the learned sole Arbitrator dated 8 February 2023.
Clause 6(b) of terms and conditions to the purchase order expressly varied the rights, duties and liability of the parties under Section 42 of the Sale of Goods Act
Section 13 of the Sale of Goods Act permits parties to agree contrary to the provisions of Section 42 of the Sale of Goods Act.
Clause 12 of the Purchase Order, under which any indulgence or accommodation given by the Petitioner by not insisting upon strict observance of terms and conditions of purchase order, was not to be considered as waiver.
Procedural History
On 24 August 2016, petitioner issued purchase order to respondent for supply of stainless steel seamless tubes. Disputes arose over defects. Respondent invoked arbitration on 18 December 2017. High Court appointed arbitrator on 12 April 2018. Arbitrator issued award on 8 February 2023. Petitioner filed Section 34 petition on (date not mentioned), which was heard and reserved on 18 December 2025, judgment pronounced on 24 December 2025.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 34, 11
- Sale of Goods Act, 1930: 42, 13, 62
