Duties of bailee are provided in the Indian Contract Act 1872. Bailee has some duties towards the bailor in a bailment. Section 148 of Indian Contract Act 1872 defines ‘bailment’ as the delivery of goods by one person to another for some purpose, upon a contract, that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘balior’ and the person to whom they are delivered is called the ‘bailee’. Duties of bailee are as follows:-
A bailee has to observe the following duties:
1. Duty to take reasonable care of the goods bailed. (Secs151-152).
2. Duty not to make unauthorized use of the goods bailed.(Secs. 153-154).
3. Duty not to mix bailor’s goods with his own goods. (Secs 155-157).
4. Duty to return the goods on fulfilment of the purpose. (Secs. 159-161, 165-167).
5. Duty to deliver to the bailor increase or profit on the goods bailed. (Section 163).
1. Duty to take reasonable care of the goods bailed (Secs. 151-152)
According to Section 151:
“In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed.”
The standard of care required is that of a reasonable man. The amount of care to be taken should be such as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quantity and value as the goods bailed. This Section lays down a uniform duty of care for every kind of bailment, whether the same is for reward, or is merely gratuitous.
Bailee should act as a prudent man
In Union of India v. Udho Ram & Sons A.I.R. 1963 S.C. 422, certain goods were consigned by M/s Radha Ram Sohan Lal from Calcutta to Delhi by rail, and the Railway Receipt was endorsed in favour of the plaintiffs, M/s Udho Ram and Sons. Some of the articles out of this consignment, having been stolen during transit, the same were not delivered to the plaintiffs. The plaintiffs brought an action to recover compensation for the same. The trial Court found that the wagon in which the goods were loaded was properly rivetted and sealed when the train left Howrah at 1.30 a.m., but seals and rivets of one of the doors of the wagon were found open when it reached Chandanpur station after about 2 hours. The theft took place at an in-between point when the train stopped there for the home signal at 2.05 A.M. for about 15 minutes. It was found that railway protection police was also there in the guard’s van. The question which had arisen in this case was, could the railway authorities be considered to be negligent and guilty of failing to take due care as prescribed by Section 151, Indian Contract Act?
It was held that the railway did not take due care. Firstly, they did not prove from record that the railway protection police which escorted the train was sufficient in strength, and secondly, that unlike a prudent man, the railway protection police did not keep an eye on wagons, particularly when the train stopped, to prevent the theft of the goods. The defendants were held liable.
According to Section 151, the bailee should take such care of the goods as a man of ordinary prudence would take of his own goods. If the bailee has not acted like an ordinary prudent man, he cannot be excused by pleading that he had taken similar care of his own goods also, and his goods, have also been lost or damaged along with those of the bailor, or that the bailor had the knowledge that his goods were being kept in a negligent manner.
In Calcutta Credit Corporation Ltd. v. Prince Peter of Greece A.I.R. 1964 Cal. 374, a car received for repairs by an automobile garage was damaged by fire. The following facts came to be noted. The garage was a pucca structure, walled by wooden planks. In the garage were put not only vehicles containing petrol but also other combustibles like thinners and paints. The garage was partitioned by wooden walls and a part of it was allowed to be used for cooking purposes. There was inadequate arrangement for extinguishing the fire. The room in which plaintiff’s car was kept could not be opened for 15 minutes after the fire was noticed, as the keys of the room were not available. It was held that the defendants had not taken due care and they were liable.
In this case, the defendants wanted to avoid the liability by pleading that they had taken the same amount of care of the plaintiff’s car as of their own ones, and that should be deemed to
be sufficient care. They further pleaded that the plaintiff had the knowledge that the defendants kept the cars in certain manner and law of estoppel should apply against him. Both the pleas were rejected, and it was observed:
“The words ‘as a man of ordinary prudence would take of his own goods’ do not mean that if the bailee’s own goods are lost together with the bailed goods, kept at the same place, it necessarily shows that the bailee has taken the reasonable care required of him by law with respect to the bailed goods. Even a knowledge on the part of the bailor that the bailee keeps the goods in his possession in a particular manner would not stop the bailor from pleading that the bailee had failed to take the care required of him by statute. A plea of this nature, based on the maxim “Volenti non fit injuria was rejected by the House of Lords in Barbant and Co. v. King ((1895) AC 632, at 641), The only cases where the bailee would be immune are laid down, in India, expressly in Section 152 of the Contract Act, namely, “if he has taken the amount of the care of it as described in Section 151.”
It was also observed in this case that the degree of care needed varies with the kind of engagement, and therefore, “when a person undertakes such a job, the law not only requires that he should possess the requisite skill but also that he has the requisite plants and appliances and that his premises are also reasonably suitable for doing that job.”
When a carrier of goods transports jute in a boat which has leaks on its side and the goods get damaged, or a commission agent purchases silver bars for his principal but keeps them at an unattended and unsafe place from where some of them are lost, or a guest’s goods in a hotel room are stolen, while the room, to the knowledge of the hotel keeper, is in an insecure condition, there is lack of due care on the part of the bailee in each case, and he is liable for the damage caused to the bailor by his negligence.
Liability of bailee to pay compensation for damaged goods
In Alias v. EM Pal, A.I.R. 2004 Ker. 214, where owner of vehicle had given vehicle for repair to automobile workshop. Vehicle was allowed by workshop owner to be driven by a person having no driving licence at the time of its repair. It amounted to unauthorized use by bailee. Accident had occurred causing death of third party. Owner was entitled to recover damages from bailee. Victim was also entitled to get compensation from bailee. Further, held that since owner had entrusted vehicle to workshop, owner and accident happened when vehicle was being repaired, Insurance Company would also be liable to pay compensation.
Agreement exempting bailee from liability
Whether a bailee can make a special contract to exempt himself from liability arising under Section 151 came in for consideration in some cases. The consensus appears to be in favour of the view that such a contract can be made. The M.P. High Court in Central Bank of India v. Grains & Gunny Agencies A.I.R. 1989 M.P. 28 following Calcutta and Madras High Court decisions and the view of the majority of the judges on this point in the Privy Council decision in Sheik Mahamad’s case, (1909) I.L.R. 32 Mad. 95 (F.B.) has held that a contract exempting a bailee from liability for any loss or damage due to the fault, carelessness or negligence of its staff binds the parties and is not unlawful as it is not hit by Section 23 of the Contract Act. According to facts in Central Bank of India v. Grains & Gunny Agencies, there was found to be negligence of the bailee’s (pledgee banks) staff resulting in loss of goods and there was no agreement exempting the bailee from such liability, the bailee was held liable.
Bailee not liable when he takes due care
According to Section 152 the Indian Contract Act, 1872:
“The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in Section 151.”
Section 151 describes the amount of care which a bailee is supposed to take. If he has taken due care, he will not be liable for any loss which may be caused to the goods bailed to him. If due care has not been taken and there is damage to the goods as a consequence of his negligence, he will be answerable for the same. When he is negligent, he cannot avoid the liability by pleading that his own goods have also been damaged along with the goods bailed, or the bailor was aware that the goods bailed were being kept in a negligent manner (Calcutta Credit Corp. Ltd. v. Prince Peter of Greece, A.I.R. 1964 Cal 374, at 379).
Bailee is required to take care of goods bailed to him as a man of ordinary prudence. Therefore, the bailee is not liable for the loss due to destruction of goods in accidental fire (Pyramid Finance Ltd. v. Ramkrishna lyer, 2007 Cri LJ 1767 (Bom) (Goa Bench)).
Hiring of bank lockers
Amount of care to be taken depends upon the circumstances of a particular case. What may otherwise be negligence may not be so under exceptional circumstances. This may be explained by the case of Gopal Singh Hira Singh v. Punjab National Bank A.I.R. 1976 Delhi 115. In this case, the plaintiff firm pledged certain goods with the Jahania office of the defendant bank in 1946. After the partition of the country in August, 1947, that area where the branch of the bank was situated became part of Pakistan. The plaintiff firm brought an action for the recovery of more than 2 lakh rupees, being the value of the goods pledged and interest thereon, because the bank failed to return the goods pledged to the plaintiff firm, who had migrated to India. To avoid the liability, the defendant bank pleaded that the goods pledged had been plundered or destroyed by the rioters in the course of riots which happened to be there at that time. The Court found that as the conditions prevailed at that time on the partition of the country, there was insecurity of the life and property of the non-Muslim population under the compulsion of adverse circumstances, there was extraordinary breakdown of law and order machinery, and compulsive migration of mass of these persons from Pakistan to India. That was also true about institutions manned by Hindu staff, as was the defendant bank. It was held that under these circumstances, since the property with the bank had to be left uncared there, the bank could not be considered to be guilty of any negligence. It was observed that “the obligation of the bank to take care of the pledged goods must be seen in the context of the extraordinary situation that developed.”
In Anil Mehra v. Bank of Maharashtra AIR 2003 P & H 11, it has been held that mere hiring of bank locker would not result in contract of bailment. There is no exclusive possession delivered to the bank and hence there is no question of bailment. Moreover, the bank does not know the content of the locker, the plaintiff alone knows about that.
If the bank is looted and the hirer of the locker alleges any loss, the bank cannot be held liable for the same.
If the bailee has taken due care and the damage to the goods is because of the circumstances beyond his control, he will not be liable for the loss. Thus, if the food grains stored in the bailee’s godown are damaged by unprecedented floods in the town, the bailee cannot be made liable for the loss(Shanti Lal v Tara Chen, A.I.R. 1913 AII 158).
In Union of India v. United India Fire, etc. Insurance Co. Ltd. A.I.R. 1981 Mad. 162 cotton bales belonging to the consignee company were unloaded by the consignee company itself and kept outside the railway goods sheds and covered with tarpaulin. The consignee company did not have sufficient warehousing facilities, and its many goods including the cotton bales were lying in and outside the goods shed. The company had provided watchmen and the Railway protection staff was also there to take care of these goods. The company did not take delivery of the goods in spite of repeated requests to do so, and 13 days after the unloading of the said bales, the cotton bales caught fire for unknown reasons. The railway staff took all possible steps to extinguish the fire. It was held that the railway authorities could not be held liable for negligence under these circumstances.
In Sunder Lal v. Ram Sarup A.I.R. 1982 AII 205, a wooden shop was hired under a written agreement that the shop will be returned in the same condition, and the hirer will be liable for any loss or damage to it. The shop was burnt by the mob during the communal riots in the city. It was held that since the destruction of the shop was due to no negligence on the part of the hirer, he was not liable for the loss.
If the bailor by his conduct indicates a certain kind of care which he expects from the bailee, he cannot subsequently be allowed to say that such care was less than that which the bailee should have taken. This is clear from the case of Boseck & Co. v. Mandlestan. In Boseck & Co. v. Mandlestan case, the plaintiff was a jeweller at Lahore and the defendant, a firm of jewellers at Calcutta. The plaintiff used to receive items of jewellery from its customers for repairs and sent the same to the defendant by post uninsured. After doing the necessary work, the defendant used to return the jewellery by V.P.P. to the plaintiff, uninsured, the sum to be recovered through V.P.P., being the cost of repair of the articles. One such V.P.P. parcel was dispatched to the plaintiff. After the parcel arrived, the plaintiff did not take the delivery but requested the post office to keep it for him until he should send for it. The parcel was then lost. In an action against the defendant to recover the value of the jewellery lost in the parcel, it was held that the defendant was not liable for the loss of the parcel as it did not arise from his negligence, and moreover, by his previous conduct in sending and receiving uninsured parcel, the plaintiff was estopped from urging that the act of sending an uninsured parcel was negligence on the part of the defendant.
2 Duty not to make unauthorized use of the goods bailed (Secs. 153 & 154)
When the goods have been bailed for a particular purpose, the bailee is supposed to use them only for that purpose and none else. If he makes unauthorized use of the goods bailed, there are two remedies available to the bailor:
(i) The bailor may terminate the bailment. (Section 153)
(ii) The bailor may recover compensation for the loss caused due to unauthorized use of goods. (Section 154).
(i) Termination of bailment
According to Section 153, if the bailor finds that the bailee is making such use of the goods which is inconsistent with the conditions of bailment, he may terminate the bailment and claim
back the goods. Section 153 is as follows:
“153. Termination of bailment by bailee’s act inconsistent with conditions. A contract of bailment is voidable at the option of the bailor, if the bailee does any with regard to the goods bailed, inconsistent with the conditions of the bailment.
A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the option of A, a termination of the bailment.”
(ii) Damages for loss due to unauthorized use
If the bailee makes such use of the goods which is contrary to the conditions of bailment, he is liable to make compensation to the bailor for any damage to the goods due to unauthorized use. Such a liability arises even if the unauthorized use was being made with care. Section 154, which makes a provision in this regard, is as under:
“154. Liability of bailee making unauthorized use of goods bailed. If the bailee makes any use of the goods bailed, which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them.
(a) A lends a horse to B for his own riding only. B allows C a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.
(b) A hires a horse in Calcutta from B expressly to march to Benaras. A rides with due care, but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse.”
3. Duty not to mix bailor’s goods with his own goods (Secs. 155-157)
Mixture of goods with bailor’s consent
A bailee should not mix the bailor’s goods with those of his own without the bailor’s consent. If the bailor consents, the bailee may mix the bailor’s goods with those of his own, and in such a
case, the bailor and the bailee shall have an interest in the mixed goods in proportion to their respective shares. Section 155 makes the following provision in this regard:
“155. Effect of mixture, with bailor’s consent, of his goods with bailee’s. If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest in proportion to their respective shares, in the mixture thus produced.”
Mixture of goods without bailor’s consent
When the bailee mixes bailor’s goods with those of his own without the consent of the bailor, depending upon the nature of the goods, there are two possibilities:
(1) Bailor’s and the bailee’s goods can be separated.
(ii) Bailor’s and the bailee’s goods cannot be separated.
(i) When the mixed goods can be separated
When the goods mixed can be separated, the bailor and the bailee remain the owners in accordance with their respecitve shares.The bailee is responsible to bear the expense of separation or division of the goods and also for any damage arising from the mixture. Section 156, which contains a provision in this regard, is as under:
“156. Effect of mixture without bailor’s consent when the goods can be separated.-If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods, and the goods can be separated or divided, the property in the goods remains in the parties respectively, but the bailee is bound to bear the expense of separation or division, and any damage arising from the mixture.
A bails 100 bales of cotton marketed with a particular mark to B. B, without A’s consent, mixes the 100 bales with other bales of his own bearing a different mark. A is entitled to have his 100 bales returned, and B is bound to bear all the expenses incurred in the separation of the bales, and any other incidental damage”
(ii) When the mixed goods cannot be separated
In case, the nature of the goods is such that the bailor’s goods cannot be separated from those of the bailee, it is deemed to be the loss of goods and the bailor can recover compensation for the same from the bailee. Section 157 makes the following provision in this regard :
“157. Effect of mixture, without bailor’s consent when the goods cannot be separated.-If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods in such a manner that it is impossible to separate the goods bailed from the other goods, and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods.
A bails a barrel of Cape flour worth Rs. 45 to B. B without A’s consent mixes the flour with country flour of his own, worth only Rs. 25 a barrel. B must compensate A for the loss
of his flour.”
4. Duty to return the goods on the fulfilment of the purpose (Secs. 160 & 161, 165-167)
According to Section 160:
“It is the duty of the bailee to return, or deliver according to the bailor’s directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed has been accomplished.”
Since the bailment of the goods is either for a certain purpose or a certain period, the bailee is bound to return the goods to the bailor as soon as the time for which they were bailed has expired, or the purpose of bailment has been accomplished.
According to Section 161:
“If, by the default of the bailee, the goods are not returned, or delivered or tendered at the proper time, he is responsible to the bailor for loss, destruction or deterioration of the goods from that time.”
If a bailee is not in a position to deliver back the goods, for instance, when they are lost due to the fault of his servants, the responsibility for such loss is that of the bailee.
A bailee is liable for the loss due to non-return or non-delivery of goods if that is due to his fault. A bailee is excused from returning the subject-matter of the bailment to the bailor or his agent where the subject-matter was taken away from him by the authority of law exercised through regular and valid proceedings. In J.K. Oil Mills v. Union of India A.I.R. 1976 SC. 227, the appellants gave a consignment of mustard oil to the respondents for being transported from Kanpur to Calcutta. After the tank wagon containing the oil had safely reached Calcutta, it was suspected to be adulterated and was, therefore, seized by the Food Inspector under lawful orders of the competent authority under the Calcutta Municipal Act. On examination, the oil was found adulterated and the same was destroyed under the orders of the Calcutta High Court. It was held that the loss, damage or destruction of the goods was not due to the misconduct of the Railway administration or its servants, and the respondents were not liable for the failure to deliver the goods back to the appellants.
It has been noted above that according to Section 161, the bailee is responsible for loss to the goods, “if by the default of the bailee, the goods are not returned, or delivered or tendered at the proper time. In case, there is no negligence on the part of the bailee, or the goods are lost due to bailor’s own default, the bailee cannot be made liable for the same. In Boseck & Co. v. Mandlestan, the plaintiff was a jeweller at Lahore and the defendant was a firm of jewellers at Calcutta. According to a course of dealing between these parties, the plaintiff sent an uninsured parcel of certain jewellery to the defendant, and the defendant, after making necessary repairs, sent the same to the bank uninsured by V.P.P., the value payable being the cost of repair of the jewellery. When the parcel sent by the defendant arrived at Lahore and was tendered to the plaintiff, he told the Post Office to keep it for him till he should send for it. The parcel was then lost, while it was with the Lahore Post Office. In an
action by the plaintiff against the defendant to recover the value of the contents of the parcel, it was held that: (1) There was no negligence on the part of the defendant in sending an uninsured parcel, because it was sent uninsured with the plaintiff’s consent, as suggested by the course of dealing between the parties, and (2) when the parcel was tendered by the Post Office to the plaintiff, and he instead of taking the delivery, had asked the Post Office to keep the same for him until he sends for it, the Post Office became the plaintiff’s agent in holding the parcel. Since there was no negligence by the defendant, and the parcel was lost by the plaintiff’s agent, the defendant could not be made liable for the same.
For example, in Union of India v. H.S.S. Karkhana Ltd. A.I.R. 2011 Gan. 78, the Railway was expressly instructed not to deliver the goods consigned with them, without production of original Railway receipt, they were held liable for the loss of the goods when the Railway delivered the goods to an unauthorised person without obtaining the original R.R., but on Indemnity Bond. The Railways were directed to compensate the consignor-claimant for loss caused.
It follows, that, in case, there is no negligence on the part of the bailee, he cannot be made liable for the failure to return the goods bailed.
Restoration of goods lent gratuitously
When the goods are bailed gratuitously, i.e., when the lender of the goods is to receive no remuneration in respect of the goods bailed, the bailor can ask for the return of the goods at any time, even though the time for which they were lent has not expired. According to Section 159, the lender of a thing for use may, at any time, require its return if the loan was gratuitous, even though he lent it for a specified time or purpose. In case the bailor asks for return before the agreed time, this may sometimes cause some loss to the bailee. The bailor is bound to indemnify the bailee for any loss suffered by him for premature return of the goods. Section 159 makes the following provision in this regard :
“The lender of a thing for use may at any time require its return, if the loan was gratuitous, even though he lent it for specified time or purpose. But if, on the faith of such loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him loss exceeding the benefit derived by him from the loan, the lender must, if he compels the return, indemnify the borrower for the amount in which the loss so occasioned exceeds the benefit so derived.”
According to Section 162 A gratuitous bailment is terminated by the death either of the bailor or of the bailee. If such a situation occurs, the bailee or his representatives must return the goods to the bailor or his representatives, as the case may be.
Return when bailment by several joint owners
If several joint owners of goods bail them, then, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all, in the absence of any agreement to the contrary (Section 165).
Return of goods to the bailor, when he has no title to them
According to Section 166, “if the bailor has no title to the goods, and the bailee, in good faith, delivers them back to or according to the directions of the bailor, the bailee is not responsible to the owner in respect of such delivery.” It means that even if the bailor of the goods has no title to the goods and somebody else claims a better title, the bailee cannot be made liable for the return of the goods to the bailor. The bailee’s duty to return the goods is to the bailor only and nobody else. The bailee has no right to refuse to return the goods to the bailor by pleading jus terrtii, Le., the title of a third person being better than that of the bailor. The third person, who claims better title than that of the bailor, may take their delivery from the bailee only through a Court of law. According to Section 167, if a person other than the bailor, claims the goods bailed, he may apply to the Court to stop the delivery of the goods to the bailor, and to decide the title to the goods.
Bailor’s lack of title may cause some loss to the bailee, eg, in an action by the third party to recover those goods, he may be involved in the litigation. According to Section 164, “the bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them.”
5. Duty to deliver to the bailor increase or profit on the goods bailed (Section 163)
According to Section 163, “in the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed.” For instance, A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A.
According to Section 163, accretions in respect of the goods bailed are part of the bailed goods and hence such accretions do not belong to the bailee, and, therefore, they have to be handed over to the bailor when the goods bailed are returned.
Position of Right Shares and Issue of Bonus shares
In Standard Chartered Bank v. Custodian A.I.R. 2000 SC 1488, it has been held by the Supreme Court that if shares and debentures are pledged, bonus shares, dividend and interest in respect of them are to be regarded as accretions thereto and they form part of the pledged securities. The bank has lien in respect of accretions also. Such accretions are to be returned at the time of redemption of property and they cannot be ordered to be handed over unless redemption takes place. The Supreme Court has also held that the position of Right Shares in respect of the pledged stock is not the same as in the case of Bonus Shares, where there is natural increase in the pledged stock. If the pawnee bank has paid for the Right Shares, they belong to the bank and not the pawnor. The Bank is entitled to retain them irrespective of the question whether they formed part of the pledge or not.