The Contract of Bailment – Case Analysis

Introduction

The concept of ‘bailment’ is dealt with in chapter IX of the Indian Contract Act, 1872. ‘Bailment’ is a technical common-law term that encompasses change or transfer of possession of goods, upon a contract to return or dispose of the goods in accordance with the direction of the person’s delivering them, once the purpose for such transfer is completed.[1] The core vital feature of bailment is the change of possession, either physical or constructive.[2] The Indian Contract Act, 1972, under section 148 defines the Contract of the Bailment, and in successive sections deals with certain rights, duties and obligations imposed onto the bailor and bailee, in order to safeguard their interest.

How Does Bailment Arise?

Arising of Bailment is always a matter of debate, the moot point being, whether it arises only out of Contract or can be incidental by implication of laws and facts, in case of Ram Gulam v. Govt, of U.P.,[3] the court was of the opinion that the obligation of bailee is a contractual obligation, which flows from the Contract of Bailment, and it cannot arise without the existence of the Contract. The court observed that the plaintiff had not transferred the possession of the ornaments to the Government. Hence. The Government does not fall under the ambit of the bailee. Therefore, the Government is not liable to pay any damages suffered by the plaintiff.

However, in the case of L.M. Co-Operative Bank v. Prabhudas Hathibhai,[4] the court hold a contrary opinion. In the present case, X has pledged some packets of tobacco, which belongs to him. However, the packages have remained in X’s go-down. However, the keys were kept with the plaintiff bank. Due to the non-payment of some income-tax dues by X, the tobacco packages were affixed by the Collector, although they allowed the packets to be kept within the same go-down. However, they passed over the keys to the police. There have been heavy rains, the ceiling of the go-down dripped and it damaged the packages kept inside the go-down. The court observed that although the belongings of X were not in possession of the government as per the bailment of the contract, however, the government has stepped into the shoes of the bailee. Therefore, the burden is upon them, to prove that they took considerable care and the damage caused to the belongings of X was not under their limit.

Similarly, in State of Gujarat v. Memon Mahomed,[5] the court observed that the position of the state government was that of the bailee, as there was an obligation on the state to return the seized belongings of the respondent, in its similar state in which it was seized. Moreover, the court stated, “Bailment is dealt with by the Contract Act only in cases where it arises from a contract, but it is not correct to say that there cannot be a bailment without an enforceable contract.” Similarly, the apex court, in Smt. Basavva Kom Dyamangouda vs the State of Mysore And Anr,[6] case hold that the state is liable for the damaged caused to the Appellant, as the property was stolen from their possession, and they could not establish that they took reasonable care.

Due to this difference in opinions of different courts, the Law Commission of India examined this issue. Moreover, in its 13th Law Commission Report came up with a recommendation, In our opinion, the present definition of the bailment should not be altered. However, the case of what has been described as quasi-contract of bailment should be provided for in a separate section stating that the bailor and Bailee in such cases, must, so far as may be, perform the same duties, as if they were bailors and Bailee under contract express or implied as provided in Section 148.”[7]

Moreover, the position in America and England is parallel to the Law Commission recommendation. Lord Coleridge, C.J., in R v Macdonald,[8] observed that bailment could exist, even without the existence of the contract.

Duties and Liabilities of Bailor and Bailee

In the case of Kaliaperumal Vs. Visalakshmi,[9] the court held that possession is a vital component of bailment. However, in the present case, there was re-delivery of the goods. Therefore, liabilities do not arise. Thus, it is the duty of bailor to place the bailee into the possession of the goods.[10]

Furthermore, the Bailor is duty-bound by the statute to unveil any shortcomings of the goods, bailed to the bailee.[11] If, any future deterioration occurs, because of the non – acknowledgement, it puts an obligation onto the Bailor to bear the charges. Even if the goods in the transfer is for hire, it is the Bailor who is liable for the damages. His knowledge or lack of knowledge of the defect in the goods is no excuse.[12]

In the Lyell v. Ganga Dai[13] case, the court holds a view that an individual who communicates an article of a deadly and explosive character to a railway company to be carried by such company, without revealing to the attendants of the company the deadly character of the article, is accountable for the repercussions of detonation, whether it arises in a way which he could not have envisaged as possible, or not.

In Forbes Forbes Campbell and Co. Ltd. Vs. The Board of Trustees of the Port of Bombay and Metal Fabs India Pvt. Ltd.,[14] case the court observed that the contract of bailment has arisen. Therefore, the bailee is entitled to the necessary expenses that have incurred for the purpose of bailment. Under Section 158 Of Indian Contract Act, 1872, the bailor is liable to pay back the bailee, necessary expenses, incurred for the purpose of the contract of bailment.  Moreover, the bailor is held liable to pay the bailee, in case of a defect in his title.[15]

Section 159 of the Contract Act, 1872, duty bounds the bailor to indemnify the loss incurred by the bailee to sustain the contract. The person who lends the goods can ask back for it at any point of time for its use, if he paid it gratuitously, despite the fact that he lent it for a predetermined time or reason. However, if, on the confidence of such credit made for a predefined time or reason, the borrower has functioned in such a way, that the paying back the goods loaned before the time settled upon would produce damages surpassing the advantage really got by him from the goods. Therefore, the lender must, if he induces the return, reimburse, i.e., indemnify the borrower for the sum wherein the misfortune so prompted surpasses the advantages so determined.[16]

According to the contract of bailment, once the purpose of the bailment accomplishes, or the specific time for which the goods were bailed finishes, the bailee is required to return the good. Moreover, the Indian Contract Act, 1872 has laid down the provisions, which duty bounds the bailee to return the goods bailed to the bailor. Furthermore, the Act also imposes liabilities on to the bailee for not taking reasonable care of the bailed goods.

In Chaturgun v Shahzady[17] the defendant borrowed the ornament for Ram Lila, which was stolen. Defendant denied its liability to compensate the plaintiff. The court observed that while borrowing the ornament, the defendant has made an implied contract to return the borrowed goods to the plaintiff. Section 160 of the Act[18] delivers that once the purpose of the bailment is fulfilled or the specific time for which the goods are bailed are expired, the bailee becomes liable to pay back the borrowed goods following the directions of the bailor, without bailor’s demand. In the present case, the purpose of the bailment is completed as the Ram Lila ended on 24th October 1924 while the complaint about the theft of the ornament was registered on 27th October 1924. The appeal was allowed by the court. Moreover, in Kush Kanta Barkakati v. Chandra Kanta Kakati [19] case the court clarifies the liabilities of the bailee if he fails to deliver back the bailed goods to the bailor after the time for which it was bailed expires or the purpose gets completed for which it was bailed.

Under the Indian Contract Act, the duty of care for bailee is general and uniform, and it applies across the board in all cases of bailment. It is provided under section 151 and section 152 of the Act.[20]

For an illustration, when a port trust stocks goods as a bailee, then he is in obligation to take reasonable care, i.e., as much care as an ordinarily prudent person in the parallel scenario would take. If a fire breaks out at the port, which leads to the destruction of the stocked goods, the port trust will be held liable, as the trust failed to take reasonable care.[21] However, the duty of care also rests on the kind and quality of the bailed goods. In Shanti Lal v Tara Chand[22] case the Allahabad High Court was of the opinion that ‘no cast-iron standard could be laid down for the measure of the care due from him and the nature and amount of care must vary with the posture of each case.’[23]

In Coldman v Hill[24] the court observed that if the bailee goods are lost or stolen when the good were kept with the bailor, the burden lies on bailee to prove that he had made all reasonable efforts to get back those goods, or else he will be held liable for the negligence.

Although the words of section 152[25] read “in the absence of any contract” which might be interpreted that lawmakers would believe that the bailee should have the rooms for limiting their extent of liability. However, in Bombay Steam Navigation Co v Vasudev Baburao[26] case, the court was of the opinion that the section does not explicitly prohibits the bailee from limiting its range of liabilities. If it does so, then it is curtailing the liberty of an individual to enter into the contract of bailment of his choice.

The views of Hugh Evander Willis that all kinds of bailees should be permitted to excuse themselves from accountability for carelessness unless forbidden by distinct statutory enactments was also grounded on the principle of individual’s freedom of choice.

However, the abovementioned interpretation of section 152 is problematic as it allows a window to the bailee to escape from the minimum standard of care which he has to keep in order to protect the interest of the bailor. On reading of both the sections 151 and 152, the interpretation that can be drawn in section 151 entails the bailee to take the minimum standard of care of the bailed goods and in the case as per section 152 that standard of care is not enhanced through any contract. The liability of the bailee will only depend upon the minimum standard of care prescribed in section 161 of the Indian Contract Act, 1872.

Conclusion

To conclude, we saw the shift that took place in judgements of the court from Ram Gulam case to Memom Mehmood case. It was the big step taken by the apex court in order to protect the rights and interests of the parties to the contract of bailment, who solely relied on the implied contract. Furthermore, recognition of non-contractual bailment as a valid contract has also provided a kind of securities to the parties to enter into the contract fearlessly. As the judiciary has secured their rights; however, on the part of the legislation, no concrete step has been taken to incorporate this provision in the very Act[27] of the Nation.

Furthermore, the bailee and the bailor is conferred with specific duties and obligation, which bounds them to perform in a particular specific manner in order to perform the contract of bailment. In each contract, they are bound with certain fixed obligations to comply with even though the contract does not explicitly talk about such obligation. Although the obligations depend upon the facts of the case, however, certain obligations such as the duty of reasonable care by the bailee are inherent to every contract of bailment and are uniform and apply across the board.

Bibliography

 STATUTE:

  1. The Indian Contract Act (9 of 1872).

BOOKS

  1. Nilima Bhandbhade, Pollock & Mulla: Indian Contract & Specific Relief Acts (12th edn, Butterworths, 2001).

CASE LIST

  1. Ram Gulam v. Govt, of U.P. AIR 1950 AII 206.
  2. L.M. Co-Operative Bank v. Prabhudas Hathibhai AIR 1966 Bom 134.
  3. State of Gujarat v. Memon Mahomed 1967 AIR 1885.
  4. Smt. Basavva Kom Dyamangouda vs the State of Mysore And Anr AIR 1977 SC 1749.
  5. R v Macdonald 2014 SCC 3.
  6. Kaliaperumal Vs. Visalakshmi AIR 1938 Mad 32.
  7. Lyell v. Ganga Dai (1875) ILR 1 All 60.
  8. Forbes Forbes Campbell and Co. Ltd. Vs. The Board of Trustees of the Port of Bombay and Metal Fabs India Pvt. Ltd. AIR 2006 Bom 162.
  9. Chaturgun v Shahzady AIR 1930 Oudh 395.
  10. Kush Kanta Barkakati v. Chandra Kanta Kakati 
  11. Cochin Port Trust v Associated Cotton Traders Ltd. AIR 1983 Ker 154.
  12. Shanti Lal v Tara Chand 1933 All 158.
  13. Coldman v Hill [1918-19] All ER Rep 434

Bombay Steam Navigation Co v Vasudev Baburao AIR 1928 Bom 5.

[1] Nilima Bhandbhade, Pollock & Mulla: Indian Contract & Specific Relief Acts (12th edn, Butterworths, 2001) 1959.

[2] Ibid.

[3] Ram Gulam v. Govt, of U.P. AIR 1950 AII 206.

[4] L.M. Co-Operative Bank v. Prabhudas Hathibhai AIR 1966 Bom 134.

[5] State of Gujarat v. Memon Mahomed 1967 AIR 1885.

[6] Smt. Basavva Kom Dyamangouda vs the State of Mysore And Anr AIR 1977 SC 1749.

[7] Thirteenth Report of the Law Commission of India 1958.

[8] R v Macdonald 2014 SCC 3.

[9]  Kaliaperumal Vs. Visalakshmi AIR 1938 Mad 32.

[10] The Indian Contract Act, 1872, Section 149.

[11] The Indian Contract Act, 1872, Section 150.

[12] Ibid.

[13] Lyell v. Ganga Dai (1875) ILR 1 All 60.

[14] Forbes Forbes Campbell and Co. Ltd. Vs. The Board of Trustees of the Port of Bombay and Metal Fabs India Pvt. Ltd. AIR 2006 Bom 162.

[15] see n 11.

[16] The Indian Contract Act, 1872, Section 150.

[17] Chaturgun v Shahzady AIR 1930 Oudh 395.

[18] The Indian Contract Act, 1872, Section 160.

[19] Kush Kanta Barkakati v. Chandra Kanta Kakati AIR 1924 Cal 1056.

[20] The Indian Contract Act, 1872, Section 151, Section 152.

[21] Cochin Port Trust v Associated Cotton Traders Ltd. AIR 1983 Ker 154.

[22] Shanti Lal v Tara Chand 1933 All 158.

[23] Ibid.

[24] Coldman v Hill [1918-19] All ER Rep 434 as cited in Nilima Bhandbhade, Pollock & Mulla: Indian Contract.

[25] See n 20.

[26] Bombay Steam Navigation Co v Vasudev Baburao AIR 1928 Bom 5.

[27] The Indian Contract Act, 1872.


ABOUT THE AUTHOR

Priya Singh

Priya-1

Priya is pursuing B.A. LLB (H) from West Bengal National University of Juridical Sciences, Kolkata. She’s in her second year of the five-year course. Her areas of interest are Constitutional Law, Criminal Law, and Human Rights Law. She enjoys researching and writing on policy issues. Additionally, she’s an avid reader and likes to read on history and polity.

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