What is Bailment? What are essentials of Bailment?


Bailment consists in delivery of goods, i.e., movable property, by one person, who is generally the owner thereof, to another person for some purpose. The goods are to be returned to their owner after the purpose is accomplished, or they are to be disposed of according to the directions of the person delivering them. For example, when you take a fan on hire, or give your suit for dry-cleaning, or give a watch for repairs, or give a parcel to a carrier for being transported to some place, there is bailment in each case.

According to Chitty, “Bailment  is the delivery of goods to another, other than as a servant, for some purpose upon a condition, express or implied, that after the purpose has been fulfilled they shall be redelivered to the bailor, or otherwise dealt with according to his directions, or kept till he reclaims them.”

Bailment involves change of possession

Bailment involves change of possession. It is a technical term of the Common Law, though etymologically it might mean any kind of handing over. So natural a transaction, bailment must be recognised at an early date by every system of law. In English Law, it was protected by the writ of detinue long before the evolution of a general contractual remedy.

Bailment involves delivery of possession

The main characteristic of a bailment is that the delivery of possession contemplated is for a temporary purpose. The delivery of goods is, thus, made on condition that the recipient would ultimately restore them to the owner. There can be no bailment where the thing delivered is not to be specifically returned or accounted for. Therefore, it would be no bailment where the delivery of property is for an equivalent in money or other-commodity. Such a transaction might be sale or exchange.

Bailment involves the transfer of possession

Bailment, thus involves the transfer of possession of goods to a person, who holds the goods either for or at the direction of their owner, to whom-they will be returned. It implies a sort of relationship in which the personal property (movable) of one person temporarily goes into the possession of another. The ownership of the goods is in one person and the possession thereof in another. It happens in numerous situations. Delivering a car or any other article for repair, leaving a cycle or car in a parking zone, depositing luggage in a cloak room or delivering garments to a dry cleaner for cleaning, delivering goods for warehousing or carriage and so forth, are such situations which create the relationship of bailment. Bailment is, thus, a subject of common public importance.

In bailment, there must be delivery of possession but not transfor of ownership. There can be thus, no bailment if the whole property in goods in transferred. In a contract of bailment, the person who delivers the goods is called the “bailor”, and the person to whom the goods are delivered is called the “bailee”.

Taking over possession by Corporation

When the corporation takes over possession of the plant and machinery in exercise of its statutory power, apart from its obligation as a “bailee”, it also acts as a “trustee”. Its action otherwise must be fair and reasonable. Whereas the Corporation has a right to realize its dues, it must act strictly in terms of the statutory and constitutional scheme. While it exercised its enormous statutory power, it is expected to perform its duties also. Such a duty is envisaged not only under the law but also under Article 14 of the Constitution. A person aggrieved by the action of the State must have an effective remedy. The purpose of taking over possession and that too of an ongoing concern, without taking over the management, would be to sell the unit. If the plant and machinery are kept in order and in a working condition they would fetch one price but if the machinery are stolen or allowed to rust, the same would not, [Everest Wools (P) Ltd. v. U.P. Financial Corpn., (2008) 1 SCC 643.]

Transfer of right

Transfer of right to use any goods is not in the nature of bailment. It is a deemed sale under the legal fiction engrafted in Article 366(29-A)(d) [20th Century Finance Corpn. Ltd. v. State of Maharashtra, (2000) 6 SCC 12.]

Section 148 of the Indian Contract Act, 1872, defines bailment as under :

148. ‘Bailment’, ‘bailor’ and ‘bailee’ defined.-A “bailment” is 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 “bailor”, the person to whom they are delivered is called the “bailee”.

Essentials of Bailment

1. Delivery of goods for some purpose.

2. Return of the goods after the purpose is achieved, or their disposal according to the bailor’s directions.

1. Delivery of the goods for some purpose

“Delivery” means transfer of possession of the goods from one person to another. Delivery need not always be actual. It may sometimes be a constructive or symbolic delivery. Section 149 recognizes other than actual delivery also. It provides :

“The delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf.”

Transferring of the key of the godown may be deemed to be delivery of the goods. Explanation to Section 148 gives an illustration of constructive theory.

According to this provision: “If a person already in possession of the goods of another contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment.” For example, A sells his watch to B. Instead of delivering the watch to B, A is asked to continue keeping the watch with him for one month on B’s behalf. After this arrangement, A is the bailee of the watch. The watch was already in the possession of A. Earlier he was having it as himself the owner, but now he holds the same as a bailee for B.

A finder of goods is also deemed to be the bailee of those goods. Section 71 of the Indian Contract Act, 1872 deals with responsibility of finder of goods.

71. Responsibility of finder of goods.—A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee.

In Jagdish Chandra Trikha v. Punjab National Bank A.I.R. 1998 Delhi 266, the plaintiff’s father had entrusted a box containing 480 tolas, i.e., about 5600 grams gold ornaments and jewellery to the defendant Bank at Peshawar (now in Pakistan) before the partition of the country. The jewellery box was locked, wrapped and sealed when delivered. A proper receipt describing the contents of the box was given by the Bank. From Peshawar the box came to Lahore branch of the Bank and thereafter to the Delhi branch. It was found that when the jewellery box was delivered to the plaintiff in Delhi, it was not in the same condition as it was delivered at Peshawar. The Lahore branch of the bank had put their own wrapper on the box and it was not now locked.

The plaintiff claimed the gold ornaments and jewellery deposited with the bank or their value amounting to Rs. 3,72,400. It was held that the position of the Bank was that of a bailee and it failed in its duty to take due care of the goods and return them to the plaintiff. The Bank was held liable to pay the sum of Rs. 3,72,400 along with simple interest @ 12% p.a. from the date of the institution of the suit till the date of realization of the amount.

If a person assumes the custody of another person’s goods, even without any formal arrangement, this is sufficient to constitute bailment. In Ultzen v. Nichols (1894) 1 Q.B. 92, the plaintiff went to the defendant’s restaurant for the purpose of dining there. When the plaintiff entered the restaurant, a waiter took the plaintiff’s coat from him without being requested to do so, and hung it on a hook behind the plaintiff. When the plaintiff wanted to leave, he found that the coat had been lost. It was held that the defendant was the bailee of the coat as his servant had assumed the possession of the same and he was, therefore, liable for its loss which was due to his negligence.

If the owner maintains control over the goods, there is no bailment

When a person keeps his goods in the premises of another person but himself continues to have the control over them, this is not sufficient delivery for being considered to be bailment. In Kaliaporumal Pillai v. Visalakshmi A.I.R. 1938 Mad. 32, a lady took her old jewels to a goldsmith for being melted and being converted into new jewels. Every evening she used to receive the half made jewels, put the same into a box and lock the same. She allowed the locked box to remain in the premises of the goldsmith but kept the key in her possession. One night the jewels were stolen. It was held that there was no bailment as she had not handed over the possession of the jewels to the goldsmith, and, therefore, the goldsmith could not be made liable for the loss.

Similar would be the position if a locker in a safe deposit vault is given by a bank to a customer and the customer is also given one such key of the locker, without which the locker cannot be opened. In such a case, although the locker may be in the premises of the bank, the person who has kept his valuables in the locker has control over such goods, and there is no bailment of such goods to the bank. The position would, however, be different if the locker in the safe deposit vault of the bank can be operated even without the key of the customer. This may be explained by the case of the National Bank of Lahore v. Sohan Lal.

In National Bank of Lahore v. Sohan Lal case, the appellant bank used to maintain a safe deposit vault in its Jullundur City branch, where locker cabinets were rented to customers for the safe custody of jewellery and other valuables. One key pertaining to a locker was given to the customer, without which the locker could not be opened. The bank manager of that branch fraudulently filed the levers of the locks of the lockers rented to the plaintiffs, so that now those locks could be opened even without the key with the customer. The valuables kept by the plaintiffs in the locker were found missing. Apart from the question of vicarious liability of the bank for the fraud of its agent, the question of the liability of the bank as a bailee for the customer’s valuables in the locker had also arisen. The bank contended that since one key, and thereby the control of the valuables in the locker, was with the customer, the Bank could not be considered to be a bailee of the valuables in the locker. It was held that, as in this case, the locker could be operated even without the key with the customer, customer’s control over the valuables in that locker had gone, and the same was with the bank, and therefore, the bank was bailee and was liable as such, for the loss of the belongings of the customer in the lockers. In addition to that, the bank was, of course, also liable on account of its vicarious liability for the fraud committed by the bank manager.

There can be bailment without a contract

In some cases the question which has arisen is, can there be a bailment, when a person obtains the possession without a contract of bailment?

In Ram Gulam v. Govt. of U.P. A.I.R. 1950 All 106, the Allahabad High Court expressed the view that obligation of a bailee can arise only out of a contract of bailment and not otherwise. In this case, plaintiff’s property had been stolen. The same was recovered by the police and was kept in the police Malkhana. From there, it was again stolen and could not be traced. The plaintiff brought an action to recover the value of the property. The State was held not liable, firstly, because it did not occupy the position of a bailee and, therefore, it was not liable as such, and secondly, the police, when it took and kept the property in its possession, was acting in discharge of the obligations imposed by law, rather than in obedience to some executive orders.

The point of decision in the above case that a bailment cannot arise without a contract, does not appear to be convincing. The law itself recognizes the finder of goods as bailee in section 71 of Indian Contract Act 1872. In some subsequent cases, it has been held that bailment can be there even without a contract.

In L.M. Co-operative Bank v. Prabhudas Hathibhai A.I.R. 1966 Bom 134 A pledged some packages of tobacco to the plaintiff bank. The packages were lying in A’s godown. The godown was locked and the key of the godown was given to the plaintiff bank. A failed to clear some income-tax dues and the Income-tax Officer ordered the attachment of those packages of tobacco. The goods were attached by the Collector and they were kept in the same godown, the godown was locked and the key was handed over to the police. There were heavy rains, roof of the godown leaked and the goods inside got damaged. It was held that the Government stood in the position of a bailee and it was liable for having failed to take due care of the goods. In this case Naik, J. observed :

“The heavy rains in this case do not amount to an act of  God. It was the duty of the Government Officers to take such care as every prudent manager takes of his own goods The Government stood in the position of bailees and it is for them to prove that they had taken as much care as was possible for them and that the damage was due to reasons beyond their control.”

In State of Gujarat v. Memon Mahomed A.I.R. 1967 S.C. 1885 the Supreme Court has also expressed the view that there is a possibility of bailment even without a contract. It has been observed in this case that “the bailment is dealt with by the Contract Act only in case where it a arises from a contract but it is not correct to say that there cannot be a bailment without an enforceable contract. In this case, the Customs authorities seized two motor trucks, station wagon and other goods belonging to the plaintiff on the ground that the plaintiff had not paid import duties on the said trucks, they were used for smuggling goods and that some of the goods were smuggled goods. Subsequently, the Revenue Tribunal set aside the said order of confiscation of the Customs authorities and directed the return of the said vehicles to the plaintiff. When the plaintiff applied for the return of the vehicles, he was told that the same had been disposed of under the orders of a magistrate. It may be noted that the order of disposal was obtained by making a false representation that the property was an unclaimed property. The plaintiff brought an action for the return of the said vehicles or in the alternative for their value amounting to about Rs. 32,000. It was held that after the Tribunal had set aside the order of confiscation and directed the return of the said property to the plaintiff, the Government had a duty to do so, and on its failure to do the same, the Government was bound to pay compensation.

In Basava v. State of Mysore, AIR. 1977 SC. 1769, it was held that where the property is stolen, lost or destroyed and the State or its officers cannot prove due care on their part, State may be asked to pay the value of the property.

In United India Insurance Co. Ltd. v. M/s Aman Singh Munshilal AIR 1994 P&H 206, the owner of the goods drew Hundi on the consignee and the goods were to be delivered to him only after he accepted the Hundi. It was held that since the Hundi had yet to be accepted, the ownership of the goods did not pass to the consignee, and, therefore, he had no right to recover damages for the loss to the goods during transit. However, the consignor (owner) of the goods could claim compensation for the loss to the goods during transit from the Insurance Company.

This video will help you in learning the meaning and how to pronounce the Legal Maxim i.e. Contemporanea Expositio Est Optima Et Fortissimo In Lege.


Bailment can be created by any person who is in possession/custody of goods but not necessarily the owner of the goods, [Rasiklal Kantilal & Co. v. Port of Bombay, (2017) 11 SCC 1].

In case of storage of agricultural produce in cold storage by farmers on payment of rent, the nature of relationship was a bailor-bailee relationship. Neither were the goods kept in trust, nor on commission, [Canara Bank v. United India Insurance Company Ltd., (2020) 3 SCC 455].

Existence of bailment relationship

The laws of bailment apply where custody or possession of the vehicle is purposefully handed over to the hotel (as is the case with valet parking). However, but where a person is merely allowed to park his car in a parking space or facility, there is only a licensor-licensee relationship and laws of bailment/prima facie liability rule cannot be applied. In a situation where hotel actively undertakes to park vehicle for the owner, keep it in safe custody and return it upon presentation of a parking slip in a manner such that parking of vehicle is beyond control of the owner, a contract of bailment exists. Thus, hotel would be liable as a bailee for returning vehicle in the condition in which it was delivered. [Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers, (2020) 2 SCC 265].

2. Return of the goods after the purpose is achieved

The delivery of the goods, in a bailment, is only for some purpose, e.g., for safe custody, for carriage, or for repair, etc. When the purpose is accomplished, the goods are to be returned or otherwise disposed of according to the directions of the person delivering them.

As stated by Section 148, the goods “shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.” This element distinguishes bailment from other transactions like sale of goods, or gift, where the property in the goods is transferred and they are not to be returned in any case. In every bailment, the same thing is to be returned either in the same form or in an altered form. When the cloth is given for being stitched into a suit, or gold for being converted into ornaments, or wheat for being converted into flour, there is bailment in each case.

In Ichha Dhanji v. Natha, (1888) 13 Bom. 338, when the money is deposited in a bank, it is not bailment, because the banker is not to return the same money to the depositor.

Similarly, when an agent receives some payment on behalf of the principal, he is not the bailee thereof, because he is only bound to pay an equivalent of it to the principal rather than exactly the same currency (Bridges v. Garrett, (1870) LR. 5 CP 451). In Secretary of State for India in Council v. Sheo Singh (1880) 2 All 756, it has been held that when a number of Government promissory notes are given to a treasury for being cancelled and their consolidation into a single note of a higher denomination, there is no bailment, as the same notes are not to be returned.

When the goods are delivered without an intention to take them back and the exact cost of the goods has been charged, it would be a transaction of sale rather than a contract of bailment. This may be explained by referring to the decision of the Supreme Court in Kalyani Breweries Ltd. v. State of West Bengal AIR 1998 S.C. 70. In this case, the appellant brewed and sold beer in beer bottles. Customers were required to pay the exact cost of the bottles, apart from the price of the contents. The empty bottles could be retained by the customers but if any customer wanted to return the empty bottles, the exact cost of bottles paid by him was to be refunded to him. It was held that there was only sale of bottles, rather than bailment. The deposit amount of bottles was, therefore, liable to sales tax.

Hiring of Locker is not Bailment

In Atul Mehra v. Bank of Maharashtra A.I.R. 2003 P. & H. 11 the Punjab and Haryana High Court held that mere hiring of locker of bank would not constitute bailment as provided under Section 148. The Court said that exclusive possession of the property was sine qua non for bailment, which should be given by the hirer of the locker to the Bank. It was only thereafter, the question of reasonable case and quantum of damages to the bailed goods, would arise. In the instant care, it was not possible for the Bank to know the quantity, quality and the value of the goods that was allegedly kept in the locker. Hiring of locker, the Court thus ruled was a transaction wholly distinct in nature from a transaction of bailment.

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