TAJ MAHAL HOTEL versus UNITED INDIA INSURANCE COMPANY LTD. & ORS. on 14 November 2019

850

[2019] 13 S.C.R. 850

SUPREME COURT REPORTS

[2019] 13 S.C.R.

TAJ MAHAL HOTEL

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v.

UNITED INDIA INSURANCE COMPANY LTD. & ORS.

(Civil Appeal No. 8611 of 2019)

B

NOVEMBER 14, 2019

[MOHAN M. SHANTANAGOUDAR ANDAJAY RASTOGI, JJ.]

Consumer Protection – Vehicles of guests handed over to theChotels for valet parking – Liability of hotels in case of theft/loss –Bailor-bailee relationship under the Contract Act, if exists –Respondent no.2’s car parked under the valet parking of theappellant-hotel – Car driven away by another person– Respondentno.1 (insurer) settled the insurance claim by respondent no.2 – Bothfiled complaint against the appellant – Dismissed by the StateDCommission on the locus standi of the insurer – National Commissionremanded the complaint back to the State Commission whichallowed the complaint – National Commission dismissed the appealfiled by the appellant– Held: Complaint filed by the insurer assubrogee, along with the original owner as co-complainant ismaintainable – In a situation where the hotel actively undertakesEto park the vehicle for the owner, keep it in safe custody and returnit upon presentation of parking slip in a manner such that theparking of the vehicle is beyond the control of the owner, acontract of bailment exists – Hotel liable as a bailee for returningthe vehicle in the condition in which it was delivered – However,Fimposition of strict liability under common law for loss or damageto vehicles of guests is overly burdensome and should not be giveneffect in the Indian context, instead, the rule of prima facienegligence should be adopted – To this extent, the NationalCommission erred in adopting the common law rule – Under ss.151& 152, 1872 Act, the bailee has duty to keep its premises in aGcondition of safety, reasonable to prevent loss, damage, or theftof the goods of its guests – Responsibility to take such measuresis higher with respect to 5-star hotels – Hotel cannot refute theexistence of bailment by contending that its valet parking servicewas complimentary in nature and that the consumer (bailor) hadnot paid for the same – Burden of proof is on the hotel (bailee) toH

TAJ MAHAL HOTEL v. UNITED INDIAINSURANCE COMPANY LTD.

show that it took efforts to take reasonable care of the vehiclebailed, and the theft did not occur due to its neglect/misconduct –Entire case of the appellant is premised on the exclusion clause inthe notice, and not on the absence of negligent conduct on its part– There was an admission of the fact that one of the three youngboys who had visited the hotel, stole the car of respondent no.2while its keys were under the watch of the valet driver – Theft ofthe respondent no.2’s car was result of the appellant’s negligence– Exemption clause on the parking tag will not exclude its liability– Contract Act, 1872 – ss.148, 149, 151, 152 – Principle of strictliability for vehicles infra hospitium; Prima facie liability rule.

Contract Act, 1872 – ss.151, 152 – Standard of care to betaken by the bailee (hotel) for the vehicles parked within itspremises – Discussed – Consumer Protection.

Contract Act, 1872 – ss.148, 149 – ‘Delivery’ under – When– Held: In a scenario where possession of the vehicle is handedover to hotel employee for valet parking, it can be said that‘delivery’ of the vehicle has been made for the purposes of s.148and 149 – Consequently, a relationship of bailment is created –Parking token so handed over to the bailor is evidence of acontract, by which the bailee (hotel) undertakes to park the carand return it in a suitable condition when the vehicle owner sodirects – Consumer Protection.

Contract Act, 1872 – ss.151, 152 – Vehicles of guests parkedunder the valet parking of the hotels – Loss/theft of – Distinctionbetween gratuitous bailee and bailee for reward – If any – Held:ss.151 and 152 do not distinguish between a gratuitous bailee anda bailee for reward – It is irrelevant as to how much parking feewas paid by the consumer, or whether any parking fee was paidat all, as the duty of care required to be taken by the hotel will bethe same in all circumstances – However, this is not a strict liabilitystandard insofar as s.152 excludes the liability of a bailee for lossor damage of the bailed goods if he is able to show that he fulfilledthe standard of reasonable care u/s.151 – Whether or not suchstandard of reasonable care was fulfilled will depend upon the factsand circumstances of each case – Consumer Protection.

Words & Phrases – ‘in the absence of any special contract’in s.152, 1872 Act – Meaning of – Held: Though courts may haveconstrued the phrase ‘in the absence of any special contract’ in AB

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As.152 to mean that a bailee can reduce his liability u/s.151 but,such an interpretation is incorrect – Words ‘in the absence of anyspecial contract’ in s.152 clearly indicate that it is open to thebailee to accept a higher standard of liability than s.151 undercontract, and not otherwise – However, this does not mean thatthe hotel would be liable in all scenarios or that it cannot imposeBany exemption clause through a contract – Contract Act, 1872 –ss.151, 152 – Interpretation of Statutes – Consumer Protection.

Dismissing the appeal, the Court

HELD: 1.1 COMPLAINT FILED BY INSURER AS ASUBROGEEC

It has been settled by a Constitution Bench of this Courtin Economic Transport Organisation that even though aconsumer complaint filed by an insurer in its own name is notmaintainable, a complaint filed by the insurer acting as a subrogeeis maintainable if it is filed by: i) the insurer in the name of theDassured, wherein the insurer acts as the attorney holder of theassured; or ii) the insurer and the assured as co-complainants.In the instant case, respondent no. 2 (actual consumer/assured)had executed a POA and a letter of subrogation in favour ofrespondent no. 1 (car insurer). Consequently, the complaintEbefore the state commission was filed by respondent nos.1 and2 as co-complainants. Hence, both the conditions are squarelyapplicable to this case and the complaint is maintainable. [Paras8, 9] [865-E-G]

Economic Transport Organisation v. Charan SpinningFMills (Pvt.) Ltd. (2010) 4 SCC 114 – followed.Oberoi Forwarding Agency v. New India AssuranceCompany Limited[2000] 1 SCR 554 ;B. Dutta, SeniorAdvocate v. Management of State (2010) 1 CPC 319 ;Klaus Mittelbachert v. East India Hotels Ltd. AIR 1997Del 201 ;Hotel Hyatt Regency v.Atul Virmani IIIG(2008) CPJ 281 (NC) – referred to.1.2 LIABILITY OF HOTELS FOR THEFT OR LOSS OFVEHICLES OF GUESTS

The imposition of strict liability for loss or damage toHvehicles of guests is overly burdensome in today’s context. The

strict liability rule had emerged in an age and time where travelwas rare and tourism was virtually non-existent, therebyprompting Courts to hold hotel owners liable so as to protectthe interests of the guests. However, in today’s context ofeconomies with well-established hotel industries and mandatoryinsurance of vehicles owned by guests, there has been a trendacross jurisdictions of moving away from the strict liability ofinnkeepers in respect of vehicles of guests. Persons visitinghotels and parking their cars in their premises or under valetparking, cannot be left at the mercy of hotel owners. It isessential to balance the interests of hotel owners and guests,and it is found that the prima facie liability rule strikes thisbalance without placing undue burden on either of the parties.The fact that guests are already protected by virtue of insuranceof their vehicles tips the scale in favour of adopting a relativelymoderate approach. Thus, given that the prima facie liability ruleis premised on the existence of a bailment relationship, in caseswhere such a relationship is found to exist between the hoteland its guest, the rule should be applied in respect of vehiclesso bailed to the hotel. This is also the approach that has foundmention under Indian law. The general rule has been that in acontract of bailment, if goods are lost or damaged while in thepossession of the bailee, he will be liable. The burden of proofwill be on the bailee to show that he took a reasonable degreeof care in respect of the bailed goods (N.R. Srinivasa Iyer v. NewIndia Assurance Co. Ltd.). This is because there is an implicitexpectation between the hotel and the guest when a vehicle ishanded over for valet parking that the vehicle would be takenreasonable care of, and returned in a proper condition. Thus,the failure to return the vehicle strikes at the root of the bailmentrelationship and gives rise to a prima facie case of negligenceagainst the hotel. The strict liability rule under common law isa relic of the past and should not be given effect in the Indiancontext. To this extent, the National Commission erred inadopting the common law rule without justifying its choice orwithout noting the well-recognised exception in respect of thevehicles of guests. [Paras 15.2, 16] [872-A-B-F-H; 873-A-C]

N.R. Srinivasa Iyer v. New India Assurance Co. Ltd.AIR (1983) SC 899 : [1983] 3 SCR 479 – relied on.

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A1.3 EXISTENCE OF BAILMENT RELATIONSHIP

The existence of a contract of bailment often turns on thedegree of control exercised by the prospective bailee over theproperty or good in question. In other words, the crucial pointto be considered is whether the custody or possession of theBvehicle is purposefully handed over to the hotel (as is the casewith valet parking) or whether the complainant is merely allowedto park his car in a parking space or facility. While the laws ofbailment apply in the former case, the latter is only a licensor-licensee relationship where laws of bailment or the prima facieliability rule cannot be applied. In a situation where the hotelCactively undertakes to park the vehicle for the owner, keep itin safe custody and return it upon presentation of a parking slipin a manner such that the parking of the vehicle is beyond thecontrol of the owner, a contract of bailment exists. Thus, thehotel would be liable as a bailee for returning the vehicle in theDcondition in which it was delivered. In a scenario wherepossession of the vehicle is handed over to a hotel employeefor valet parking, it can be said that ‘delivery’ of the vehicle hasbeen made for the purposes of Section 148 and 149.Consequently, a relationship of bailment is created. The parkingtoken so handed over to the bailor is evidence of a contract, byEwhich the bailee (hotel) undertakes to park the car and returnit in a suitable condition when the vehicle owner so directs. Acontract of bailment under Section 148 may be gratuitous. In anycase, it is common knowledge that ‘complimentary’ servicesprovided by 5-star hotels are not actually free-of-cost. TheseFservices are covered by the exorbitant rates charged for rentingof rooms, food, entry fee to lounges and clubs, and so on. Itcannot be denied that valet parking service, even if offeredgratuitously, benefits the hotel. A hotel holding itself out to thepublic as providing such a service seeks to pitch it as a valueaddition to the experience of a guest and incentives greater footGfall. Therefore, for such cases, there exists an impliedconsideration for the contract of bailment created by virtue ofthe valet parking service. Respondent No. 2 had given uppossession of his car by handing it over to the valet. Thus,the Appellant-hotel cannot refute the existence of bailmentHby contending that its valet parking service was purely complimentary in nature and that the consumer (bailor) had notpaid for the same. The existence of a bailment relationship isclear. [Paras 18, 18.3, 18.7 and 18.8] [873-E-F; 874-E-F; 875-B-C; 878-C-H]

Bombay Brazzerie v. Mulchand Agarwal (2002)NCDRC 42 – disapproved.

Commissioner, Corporation of Madras v. S. AlagrajI (1996) CPJ 54 (NC) ; Rohini Group of Theatres v.V. Gopalakrishnan II (1996) CPJ 1 (NC) ;New IndiaAssurance Co. Ltd. v. Delhi Development Authority AIR1991 Del 298 – referred to.

1.4 THE REQUIRED DEGREE OF CARE UNDERBAILMENT

Given the existence of a bailment relationship, the failureof the Appellant to deliver the car to Respondent No. 2 (car-owner), raises a prima facie case of negligence against it. Thus,the burden of proof is on the hotel (bailee) to show that effortswere undertaken by it to take reasonable care of the vehiclebailed, and that the theft did not occur due to its neglect ormisconduct. Under Sections 151 and 152, the bailee has a dutyto keep its premises in a condition of safety that would bereasonable to prevent loss, damage, or theft of the goods of itsguests. With respect to 5-star hotels specifically, theresponsibility to take such measures is higher. Sections 151 and152 of the Contract Act do not distinguish between a gratuitousbailee and a bailee for reward. It is irrelevant as to how muchparking fee was paid by the consumer, or whether any parkingfee was paid at all, as the duty of care required to be taken bythe hotel will be the same in all circumstances. However, thisis not a strict liability standard insofar as Section 152 excludesthe liability of a bailee for loss or damage of the bailed goods ifhe is able to show that he fulfilled the standard of reasonablecare under Section 151. Whether or not such standard ofreasonable care was fulfilled will depend upon the facts andcircumstances of each case. [Para 19, 20.1-20.3] [879-B-E-F;880-C; 881-B-C]

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A1.5 The records show that the car of Respondent No.2 wasstolen when three young boys who had parked their car in theAppellant-hotel came out of the hotel, asked the valet driver tobring their car to the porch, and one of them then picked upthe keys of the car of Respondent No.2 from the desk, went tothe parking area and stole the car. Entire case of the appellantBhas been premised on the exclusion clause in the notice, andnot on the absence of negligent conduct on its part. In fact, therehas been an admission of the fact that one of the three youngboys who had visited the hotel stole the car of Respondent No.2, while its keys were under the watch of the valet driver. The Cmanner in which the car was stolen manifests that no steps hadbeen taken by the Appellant-hotel to ensure that car keys werekept outside the reach of outsiders or that the cars were parkedin a safe location with adequate barriers to verify their owners.In the absence of such measures, the Appellant failed todischarge its burden of disproving the prima facie case ofDnegligence against it. Thus, the theft of the car of RespondentNo.2 was a result of the negligence of the Appellant-hotel. [Para21] [881-D-H; 882-A]

Sheik Mahamad Ravuther v. The British Indian SteamNavigation Co. Ltd. (1909) ILR 32 Mad 95 ;KariadanEKumber v. British India Steam Navigation(1913) 38Mad. 941 ; Hollandia Pinmen v. H. Oppenheiner AIR1924 Rang 356 ; Bombay Steam Navigation Ltd v.Vasudev Baburao KamatILR (1928) 52 Bom 37 ;Lakhaji Dollaji & Co. v. Boorugu Mahadeo Rajanna41 Bom LR 6 ; Indian Air Lines Corporation v. JothajiFManiramAIR 1959 Mad 285 ;State Bank of Indiav. M/s Quality Bread Factory, BatalaAIR 1983 P&H244 ; Central Bank of India v. M/s Grains & GunnyAgenciesAIR 1989 MP 28 ; Nath Bros. EximInternational Ltd. v. Best Roadways Ltd.(2000) 4 SCCG553 : [2000] 2 SCR 538 – referred to.

2.1EXCLUDING LIABILITY BY CONTRACT

Upon perusal of the relevant decisions on this point, it isfound that White C.J. and Wallis J’s opinion in Sheik Mahamadwas peculiar to the facts of that case. With respect to liabilityHfor vehicles bailed to a hotel as is the case with valet parking,

Sankaran Nair J.’s opinion in Sheik Mahamad should be adopted.Given that such vehicles would normally be parked in the hotel’sown parking facility, or in the vicinity of the hotel, the hotel staffis well-placed to ensure safe custody of the vehicle and monitorits condition. Though valet parking may be offered as an optionalcomplimentary service in some instances, more often than not,guests visiting the hotel have no other option but to entrust theirvehicles to the hotel’s custody, especially given the congestedurban areas where such hotels are located. The guest has animplicit expectation that the repute and standards of 5-star hotelswould entail adequate safety of the vehicles handed over for valetparking. Thus, in such a scenario, if the hotel is allowed toexclude its liability for negligence by way of a contract, thestandard of care imposed under Section 151 will become illusoryand virtually redundant, rendering consumers vulnerable withoutany remedy. The standard of care required to be taken by thehotel as a bailee under Section 151 is sacrosanct and cannot becontracted out of. Though courts may have construed the phrase‘in the absence of any special contract’ in Section 152 to meanthat a bailee can reduce his liability under Section 151, such aninterpretation is incorrect. The words ‘in the absence of anyspecial contract’ in Section 152 clearly indicate that it is opento the bailee to accept a higher standard of liability than Section151 under contract, and not otherwise. However, this does notmean that the hotel would be liable in all scenarios or that itcannot impose any exemption clause through a contract. Theremay be situations where the loss or damage may be caused dueto the negligence of third parties, the bailor’s own negligenceor unforeseen circumstances beyond the bailee’s control, whichcould not have been foreseen with ordinary diligence. This wouldinclude, for example, acts of God, seizure of the vehicle underlegal process or by public authorities, damage due to naturalcauses such as unforeseen weather conditions, presence ofinherent defects in the vehicle, acts of loss or damage causedby the guest’s own negligence and so on. A joint reading ofSections 151 and 152 shows that, in such cases, the ContractAct intended that the bailee should not be liable for the loss ordamage of the goods bailed on all occasions. Section 152expressly states that the bailee, in the absence of any specialcontract, is not responsible for loss or damage of the thing bailed, A

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Aif he is able to prove that he has taken the amount of carerequired under Section 151. Therefore, hotels are at liberty toprint clear contractual disclaimers notifying their guests that theirliability is excluded for loss or damage to vehicles taken for valetparking which are occasioned by acts of a third party,contributory negligence or by force majeure events. However,Bthis would always be subject to the hotel discharging its initialburden of proving that it fulfilled the standard of care imposedunder Section 151 of the Contract Act. Where the hotel or itsservants have actively connived against or acted negligently insafeguarding the vehicles delivered for valet parking, ‘owner’sCrisk’ clauses in the parking token will not come to their rescue.Where a valet or servant has been handed custody of the vehicle,and such a servant takes away the vehicle without authority, thehotel will be liable. This is because there will still be a primafacie assumption that the hotel has exercised laxity insupervising the actions of its servants. However, the hotel willDnot liable where, in spite of due diligence, a servant or employeewho was not entrusted with custody of the vehicle takes itwithout authority, as this would be similar to a case of theft by athird-party. The above observations are limited to the issue forconsideration, that is, the liability of hotels as bailees for vehiclesEhanded over to them for valet parking. Whether the rule as laiddown by White C.J. and Wallis J. in Sheik Mahamad, andfollowed in subsequent High Court decisions, holds good in otherkinds of contracts is not being commented upon, and it isdesisted from commenting further on this aspect. In a case oftheft of a vehicle given for valet parking, the hotel cannot claimFexemption from liability by arguing it was due to acts of thirdparties beyond their control, or that they are protected by an‘owner’s risk’ clause, prior to fulfilling its burden as requiredunder Section 151 and 152. While a case of a robbery by forceis visibly beyond a bailee’s control, in cases of private stealth,or simple theft where no force or violence is involved, the baileeGstill has the prima facie burden of explaining that the loss ordisappearance of the goods in his custody is not attributable tohis neglect or want of care. This is because no one apart fromthe bailee is in a position to explain the fate of the goods. Inthe instant case, given the finding that the theft of the car ofHRespondent No.2 was a result of the negligence of the Appellant- hotel, the exemption clause on the parking tag will not excludethe Appellant’s liability. Hence, the argument of the Appellant-hotel on this count fails. In conclusion: (i) The hotel-owner cannotcontract out of liability for its negligence or that of its servantsin respect of a vehicle of its guest in any circumstance. Oncepossession of the vehicle is handed to the hotel staff or valet,there is an implied contractual obligation to return the vehiclein a safe condition upon the direction of the owner. (ii) Evenwhere there is a general or specific exemption clause, thereremains a prima facie burden of proof on the hotel to explainthat any loss or damage caused to the vehicles parked was noton account of its negligence or want of care per Sections 151and 152 of the Contract Act. It is only after this burden of proofis discharged that the exemption clause can come into force. Theburden of proving that such loss or damage was covered by theexemption clause will also be on the hotel. [Paras 28-30] [889-D-H; 890-A-H; 891-A-H; 892-A-B]

2.2 The consumer complaint in consideration ismaintainable as it was filed by the insurer as a subrogee, alongwith the original owner as a co-complainant. Further, strictliability cannot be imposed on hotel owners in respect of loss ofor damage to vehicles of their guests. Instead, the rule of primafacie negligence should be adopted. The Appellant has notexplained why its failure to return the vehicle to RespondentNo. 2 was not on account of fault or negligence on its part. Thus,liability should be affixed on the Appellant-hotel due to want ofthe requisite care towards the car bailed to it. [Para 31] [892-C-D]

Law Commission of India,Contract Act, 1872 (LawCom No 13, 1958) para 125 ;Pollock and Mulla, TheIndian Contract and Specific Relief Acts(NilimaBhadbhade ed, updated 14[th] edn, 2013) 1505, 1522;Pollock and Mulla (n 32) 1505 – referred to.

Dickerson v. Rogers 4 Humph 179 (1843) ;Aria v.Bridge House Hotel (Staines) Ltd. (1927) 137 LT 299;Williams v. Linnitt, 1 ALL E.R. 2 78 (Eng. 1951) ;Lairdv. Eichold 10 Ind. 212 (1858) ; Ashby v. Tolhurst[1937]2 K.B. 242 ;Tinsley v. Dudley [1951] 2 K.B. 19 ;Port Swettenham Authority v. T.W. Wu & Co. [1979]

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AA.C. 580 ; Price & Co v.Union Lighterage Company(1903) 1 K.B. 750 – referred to.

John E. H. Sherry, The Laws of Innkeepers: ForHotels, Motels, and Restaurants (3[rd] edn, CornellUniversity Press 1993) 415-417 ; Joseph JamesBHemphling, ‘Innkeeper’s Liability at Common Lawand Under the Statutes’ (1929) 4(7) Notre Dame LawReview 421, 422; Wayne Quinton, ‘Liability forAutomobile Parking at Hotels: The Tennessee CaseAbstract’ (1992) 16(1) Hospitality Research Journal109, 110 ;Sylvan H. Hirsch, ‘Limited Liability ofCInnkeepers Under Statutory Regulations’(1928) 76University of Pennsylvania Law Review 272 ;JohnH. Sherry, ‘The Innkeeper’s Liability for Automobilesand Their Contents’ (Aug 1964) <https://doi.org/10.1177/001088046400500202 > accessed 2DNovember 2019 ;Park-O-Tell Co. v. Roskamp, 203Okla. 493, 223, P.2d 375 (1950) ;Abercrombie v.Edwards, 62 Okla. 54, 161 P. 1084 (Okla. 1916) ; L.J.Blom-Cooper, ‘Second Report of the Law ReformCommittee on the Law of Innkeepers’ Liabilities forProperty of Travellers, Guests, and Residents (MayE1954)’ (Jul 1955) 18(4)The Modern Law Review 374,376 ; Hotel Proprietors Act 1956, s 2(2) (UnitedKingdom); Innkeepers Act 1968, s 6(a) (New SouthWales) ;Carriers and Innkeepers Act 1958, s 29(a)(Victoria); Annex to the Convention on the Liabilityof Hotel-Keepers concerning the Property of theirFGuests, Article 7 (Paris, 1962) – referred to.

Case Law Reference

TAJ MAHAL HOTEL v. UNITED INDIAINSURANCE COMPANY LTD.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8611of 2019.

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From the Judgment and Order dated 05.02.2018 of the NationalConsumer Disputes Redressal Commission at New Delhi in First AppealNo. 440 of 2016

Gopal Jain, Sr. Adv., Ms. Meenakshi Midha, Kapil Midha,Ms. Pritika Juneja, Ms. Prashanti, Chander Shekhar Ashri, Advs. forthe Appellant.

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Amit Kumar Singh, Ms. K. Enatoli Sema, Gaurav Prakash,Asutosh Sharma, Kuldeep Singh Tomar, S.L. Gupta, Varinder KumarSharma, for the Respondents.

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The Judgment of the Court was delivered by MOHAN M. SHANTANAGOUDAR, J.

1. Leave granted.

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2. This appeal, by special leave, arises out of judgment dated05.02.2018 passed by the National Consumer Disputes RedressalCommission (‘National Commission’) dismissing the appeal against orderdated 29.01.2016 passed by the State Consumer Disputes RedressalCommission (‘State Commission’), New Delhi in Complaint Case No.198/1999.

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A3. The following are the facts out of which this appeal arises:

3.1. On the night of 01.08.1998, at around 11 p.m., RespondentNo. 2 herein (Complainant No. 2) visited the Appellant-hotel in hisMaruti Zen car. While the car was insured with Respondent No. 1herein (Complainant No. 1), the Appellant-hotel had taken a non-Bindustrial risk insurance/liability policy from Respondent No. 3. Uponreaching the hotel, Respondent No. 2 handed over his car and its keysto the hotel valet for parking, and then went inside the hotel. The parkingtag handed over to him read inter alia:

“IMPORTANT CONDITION: This vehicle is being parked atthe request of the guest at his own risk and responsibility in orCoutside the Hotel premises. In the event of any loss, theft ordamage, the management shall not be held responsible for thesame and the guest shall have no claim whatsoever against themanagement.”

When Respondent No. 2 came out of the hotel at about 1 a.m.,Dhe was informed that his vehicle had been driven away by anotherperson. Upon enquiry with the security officer, he found that threeyoung boys had come to the hotel in their separate car, parked it, andgone inside the hotel. After some time, they came out and asked thevalet to bring their car to the porch. During this process, one of theboys, one Deepak, picked up the keys of the car of Respondent No. 2Efrom the desk, went to the car parking, and stole the Maruti Zen car.Though the security guard tried to stop him, he sped away. A complaintwas lodged with the police, but the car remained untraced.

3.2. Respondent No. 1 (car insurer) settled the insurance claimraised by Respondent No. 2 (car owner) in respect of the stolen carFfor Rs. 2,80,000. Thereafter, Respondent No. 2 executed a Power ofAttorney (‘POA’) and a letter of subrogation in favour of RespondentNo. 1. They both then approached the State Commission by filing acomplaint against the Appellant-Hotel seeking payment of the value ofthe car and compensation for deficiency in service.G3.3. Relying upon this Court’s decision in Oberoi Forwarding Agency v. New India Assurance Company Limited,[1] the StateCommission dismissed the complaint on the ground that an insurancecompany acting as a subrogee cannot qualify as a ‘consumer’. Hence,Respondent No. 1 filed an appeal before the National Commission.

H1 (2000) 1 SCR 554.

3.4. Notably, Oberoi was partly overruled by a subsequentdecision of a Constitution Bench of this Court in Economic TransportOrganisation v. Charan Spinning Mills (Pvt.) Ltd.[2] In light of thischange in law, by order dated 20.09.2010, the National Commission inappeal remanded the complaint back to the State Commission, observingthat Respondent No. 1 (car insurer) had locus standi to file thecomplaint.

3.5. Deciding on merits, the State Commission relied on thedecisions of the National Commission in Bombay Brazzerie v.Mulchand Agarwal[3] and B. Dutta, Senior Advocate v. Managementof State[4] to hold that laws of bailment apply when a customer pays topark his car in a parking lot and it is then stolen or damaged. It wasnoted that the price paid for food consumed in the hotel would includeconsideration for a contract of bailment from the consumer (bailor) tothe hotel (bailee). Applying this to the facts of this case, the StateCommission observed that though the Appellant-hotel had averred thatRespondent No. 2 had not had dinner at the hotel that night, it wasimprobable for him to have stayed inside the hotel from 11 p.m. to 1a.m. without consuming any food or snacks or paying any kind of bill.Hence, the State Commission proceeded on the assumption thatRespondent No. 2 had paid consideration for the contract.

In light of this, the State Commission allowed the complaint anddirected the Appellant-hotel to pay Respondent No. 1 a sum of Rs.2,80,000 (the value of the car) with interest at 12% per annum andRs. 50,000 as litigation costs. In addition to this, it directed payment ofRs. 1,00,000 to Respondent No. 2 for inconvenience and harassmentfaced by him. The State Commission also held that Respondent No. 3(insurer of the hotel) would not be liable to indemnify the loss causedto the Appellant-hotel, as the theft of the car had not been notified toit within due time.

3.6. Appeal filed against this order by the Appellant herein wasdisposed of vide the impugned judgment. On the question of locusstandi of Respondent No. 1 (subrogee) to file the complaint, the NationalCommission observed that its earlier order dated 20.09.2010 (supra)had not been challenged, and had consequently attained finality. Hence, 2 (2010) 4 SCC 114.

3 (2002) NCDRC 42.

4 (2010) 1 CPC 319.

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Ait was held that the Appellant could not argue that Respondent No. 1(car insurer) did not have locus standi.

The National Commission further applied the principle of infrahospitium (Latin for ‘within the hotel’) and observed that common lawhas historically imposed strict liability on a hotel for the loss of a guest’sBproperty if the guest and the property were within the hotel premises.It was noted that once the guest presents the car keys to the valet andpossession of the car is transferred from the guest to the hotel, arelationship of bailment is established. Relying on various decisions byforeign Courts on strict liability for property kept infra hospitium, theCNational Commission held that the liability of a hotel cannot be precludedby a printed notice on the parking tag disclaiming liability. Consequently,the appeal against the order of the State Commission was dismissed,although the interest awarded was modified from 12% per annum to9% per annum. Hence, the present appeal.

D4. Learned Senior Counsel for the Appellant made submissionson two fronts. With respect to the locus standi of Respondent No. 1,he argued that Respondent No. 1 does not qualify as a ‘consumer’.On merits, he vehemently submitted that the decision of the NationalCommission is erroneous inasmuch the principle of infra hospitium isnot established under Indian law. He further relied on the decisions inEBombay Brazzerie and B. Datta to argue that a bailment necessarilyexists under a contract, the terms of which are encapsulated in theparking tag in this case. Since the liability for theft is specificallyprecluded under the terms stated on the parking tag, he submitted thatthe Appellant cannot be held liable.F

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5. Per contra, Counsel for Respondent No. 1 submitted that it isentitled to file a joint complaint with the original consumer in its capacityas a subrogee. Further, he relied on Klaus Mittelbachert v. East IndiaHotels Ltd.[5]and Hotel Hyatt Regency v. Atul Virmani,[6] to argue thatthe duty of care owed by 5-star hotels is higher, and the Appellant mustGtherefore be subject to the highest standard of insurer liability in caseof theft of goods from its premises.

6. Heard learned Counsel for both parties.

5 AIR 1997 Del 201.

6 III (2008) CPJ 281 (NC).

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7. At this juncture, it is pertinent to note that the compensationawarded by the State Commission (including interest) has already beenpaid by the Appellant to Respondent Nos. 1 and 2. Thus, we are onlyconcerned with the questions of law involved in the matter. Based ona perusal of the record, the following issues arise for consideration inthe present appeal:

First, whether the insurer had locus standi to file the complaintas a subrogee?; Second, whether the Appellant-hotel can be held liable for thetheft of a car taken for valet parking, under the laws of bailment orotherwise?; Third, if the second question is answered in the affirmative, whatis the degree of care required to be taken by the Appellant-Hotel?; and Fourth, whether the Appellant-hotel can be absolved of liabilityby virtue of a contract?

We will be adverting to each of these in turn.

I. COMPLAINT FILED BY INSURER AS A SUBROGEE

8. It has been settled by a Constitution Bench of this Court inEconomic Transport Organisation (supra) that even though aconsumer complaint filed by an insurer in its own name is notmaintainable, a complaint filed by the insurer acting as a subrogee ismaintainable if it is filed by:

i) the insurer in the name of the assured, wherein the insureracts as the attorney holder of the assured; or

ii) the insurer and the assured as co-complainants.

9. In the instant case, Respondent No. 2 (actual consumer/assured) had executed a POA and a letter of subrogation in favour ofRespondent No. 1 (car insurer). Consequently, the complaint before theState Commission was filed by Respondent Nos. 1 and 2 asco-complainants. Hence, both the conditions are squarely applicable tothis case and the complaint is maintainable.

10. Having considered the maintainability of the complaint, wenow proceed to examine the liability of the Appellant-hotel for theft ofthe vehicle of Respondent No. 2.

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AII. LIABILITY OF HOTELS FOR THEFT OR LOSS OFVEHICLES OF GUESTS

11. The liability of hotel owners or innkeepers (as they weretraditionally called) for the loss of, or damage to goods of their guesthas been a subject of judicial consideration for a long time. Though theBissue has come up before this Court for the first time in this case, ithas received ample judicial and academic attention in other commonlaw jurisdictions. Thus, we find it appropriate to allude to thisjurisprudence for a comparative context to the legal issue at hand.Though other jurisdictions have dealt with the liability of innkeepers withCrespect to goods or property of the guests in general, we will beconfining our discussion to vehicles of guests, as the present case isconcerned with the same.

12. Broadly, two approaches have been taken towards the liabilityof an innkeeper for loss or damage to the vehicles of his guest[7] – first,Dthe common law rule of insurer’s liability wherein the innkeeper istreated as an insurer and made responsible for any loss or damage tothe vehicle of its guest, regardless of the presence or absence ofnegligence on his part (‘the common law rule’); and second, the ruleof prima facie negligence wherein the innkeeper is presumed to be liablefor loss or damage to the vehicle of his guest, but can exclude his liabilityEby proving that the loss did not occur due to any fault or negligence onhis part (‘prima facie liability rule’).

A. Common law Rule

A. Common law Rule

13. At common law, innkeepers were held strictly liable for theFloss of or damage to a guest’s horse or carriage placed within theconfines of the inn, i.e. infra hospitium. They were excused fromliability only if the loss or damage occurred by an act of God, an act ofthe public enemy, or the fault or negligence of the guest himself.[8]

13.1. The earliest recorded opinion discussing this rule isGDickerson v. Rogers,[9] where the Supreme Court of Tennessee State(USA) held the innkeeper liable for injury caused to a horse brought 7 John E. H. Sherry, The Laws of Innkeepers: For Hotels, Motels, and Restaurants(3[rd] edn, Cornell University Press 1993) 415-417.

8 Joseph James Hemphling, ‘Innkeeper’s Liability at Common Law and Under theStatutes’ (1929) 4(7) Notre Dame Law Review 421, 422.H9 4 Humph 179 (1843).

by the guest and placed in the stable of the inn. Citing English commonlaw, the Court noted as follows:

“It is laid down by Chancellor Kent (2 Com. 593), upon theauthority of the English cases, that an innkeeper is bound to keepsafe the goods of his guest deposited within the inn, except wherethe loss is occasioned by inevitable casualty, or by superior force,as robbery. And Mr. Justice Story says (Law of Bailments, 306,sec. 470) that an innkeeper is bound to take, not ordinary careonly, but uncommon care of the goods and baggage of his guests.If, therefore, the goods or baggage of his guest are damaged inhis inn, or are stolen from it by his servants or domestics, or byanother guest, he is bound to make restitution…

…If this rule was not inflexibly enforced, no traveller would besafe in entrusting his horse to the hands of the inn-keeper untilhe had first inspected his stables, and selected a place for hishorse to be kept, an inconvenience which could not be endured.”

13.2. The imposition of such strict liability was dictated by theconditions of the time. It emerged in a context where inns were intendedto provide a safe haven to travelers against bands of marauders androbbers. However, the popular prejudice was that innkeepers wouldcollude with such persons to rob the guests of their properties.[10] Giventhe vulnerability of travelers to robbery and violence in such a setting,the judges fashioned the strict liability rule to allow travelers to recoverfrom innkeepers without the need to prove fault. This is well-capturedin the following observations made in Dickerson (supra):

“…rigorous as this rule may seem, and hard as its operation maybe in a few instances, it is founded on the great principle of publicutility, to which all private considerations ought to yield. “For”as Sir William Jones justly observes (Bailments, 95), “travellerswho are most numerous in a rich and commercial country, areobliged to rely almost implicitly on the good faith of innkeepers,whose education and morals are none of the best, and who mighthave frequent opportunities of association with ruffians andpilferers, while the injured guest would seldom or never obtain 10 Wayne Quinton, ‘Liability for Automobile Parking at Hotels: The Tennessee CaseAbstract’ (1992) 16(1) Hospitality Research Journal 109, 110; Sylvan H. Hirsch,‘Limited Liability of Innkeepers Under Statutory Regulations’ (1928) 76 Universityof Pennsylvania Law Review 272.

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Alegal proof of such combinations, or even of their negligence, ifno actual fraud had been committed by them.”

13.3. As the horse and buggy gave way to modern transportationincluding automobiles and motor vehicles, the common law rule of strictliability was extended to them. In Aria v. Bridge House Hotel (Staines)BLtd.,[11] it was further held that the insurance liability of an innkeeperfor the goods of his guest also applied to automobiles parked in a spaceadjoining the hotel, upon directions given by the porter. Since the carof the plaintiff in that case had been parked in such a manner and wasstolen while he was dining at the hotel, the defendant hotel was heldliable.

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13.4. English Courts as well as some jurisdictions in the UnitedStates continued to apply the strict liability principle for vehicles ofguests through the first half of the 20[th] century.[12] In England, this waspartly possible as the Innkeeper’s Liability Act of 1863 did not excludeor limit the innkeeper’s liability for motor vehicles. The high point ofDEnglish case law on this point came with the decision in Williams v.Linnitt,[13] where the Court held the innkeeper strictly liable for theft ofthe car of a guest who had parked it in an open lot provided free ofcharge. The Court noted that the provision of free parking space wasan invitation to the guest to park there, which was sufficient to constituteEthe lot as being infra hospitium. Notably, liability was imposed despitea notice in the car park stating that the innkeeper would not be liablefor loss or damage to any vehicle or goods therein. The followingobservations of Asquith L.J. are noteworthy:

“The most material facts in this case are that the area, being anFarea contiguous to the inn, is one in which the guest with a motorcar is invited to leave it; that there is no evidence that any otheraccommodation belonging to the inn is provided for cars, thougha garage was marked as being in the neighbourhood of the innon a plan which was not agreed or proved; and that it is part ofthe innkeeper’s normal business to provide for guests who arriveG

1 1 (1927) 137 LT 299. See John H. Sherry, ‘The Innkeeper’s Liability for Automobilesand Their Contents’ (Aug 1964) <https://doi.org/10.1177/001088046400500202>accessed 2 November 2019.

1 2 See Park-O-Tell Co. v. Roskamp, 203 Okla. 493, 223, P.2d 375 (1950);Abercrombie v. Edwards, 62 Okla. 54, 161 P. 1084 (Okla. 1916).

1 3 Williams v. Linnitt, 1 ALL E.R. 278 (Eng. 1951).

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in cars. These circumstances are very strong evidence that thearea is within the “hospitium”, and, as I read the judgment, thejudge has so found.

If I am wrong in thinking that the question is substantially one offact, I consider that the conclusion which the judge has reachedon this point is the right legal inference from the circumstancesreferred to, and, if his conclusion is right, the strict liabilityattached and could not, in my view, be displaced by such noticeas was put up in the car park, which, incidentally, would be quiteinvisible at 9 p.m. on a February night. For these reasons, andthose given by my Lord, I agree that the appeal, though veryattractively argued, should be dismissed.”

13.5. However, with increasing commercial development, theconditions in which the common law liability of innkeepers originatedbegan fading away. Mindful of these changes, in 1954, the Law ReformCommission in England recommended that the extent of absolute liabilityof innkeepers be reduced. It observed that the most serious hardshipsdue to the strict liability rule occurred with respect to motor vehicles,since these cases were often a battle between two insurancecompanies. Recognising the increasing burden of liability as in casessuch as Williams v. Linnitt (supra), the Committee recommended thatliability should only be imposed when the innkeeper is negligent.[14]

13.6. These recommendations were eventually given effect withthe introduction of the Hotel Proprietors Act, 1956, which continues toremain in force in the United Kingdom till date. The Act is significant,as it was the first time that the strict liability of hotels in relation tovehicles of their guests was considered. While it retains strict liabilityof hotel proprietors in respect of guest’s property in certaincircumstances, it specifically excludes motorcars and other vehicles ofany kind as well as property left in them.[15] In effect, the application ofthe common law strict liability has been limited by this legislation, inrecognition of the unfair burden placed on the innkeepers.

13.7. A study of the law in other jurisdictions reveals that theunlimited common law liability of innkeepers with respect to vehicles

1 4 L.J. Blom-Cooper, ‘Second Report of the Law Reform Committee on the Law ofInnkeepers’ Liabilities for Property of Travellers, Guests, and Residents (May1954)’ (Jul 1955) 18(4) The Modern Law Review 374, 376.

1 5 Hotel Proprietors Act 1956, s 2(2) (United Kingdom).

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Ahas been similarly restricted by legislation. In Singapore, the Innkeeper’sAct of 1921 specifically excludes horse, live animals, a car or carriagefrom the purview of strict liability. Likewise, several states in Australia(including Victoria and New South Wales) have excluded motor vehiclesand their contents from the liability of innkeepers, recognizing that this is a well-established exception to the innkeeper’s liability.[16] Arguably,Bthis limitation has been on the basis of the availability of travel insurancefor motor vehicles, and the absence of any undue burden thereby fallingon the guest. This exception is also recognized in the Convention onthe Liability of Hotel-keepers concerning the Property of their Guests,which applies to several members of the European Union. Under theCConvention, no form of strict liability has been fastened with respectto vehicles, any property left in vehicles, or to live animals.[17]

13.8. While the exception has increasingly been adopted in thesejurisdictions, some states in the United States, such as Oklahoma andUtah, continue to apply the strict rule of insurance liability to anDinnkeeper with respect to goods kept infra hospitium.[18] At the sametime, other States have attempted to balance the interests of hotel ownersand guests by adopting the relatively moderate prima facie liability rule,which we will now discuss.

B.Prima facie liability RuleE

14. Though there has been a shift away from the common lawinsurer’s rule with respect to vehicles of guests, this has not meant thatlegislatures have completely absolved hotel owners of liability. Instead,they have adopted an approach where the hotel owner/proprietor is heldresponsible only for those losses that occur as a result of his negligence.FUnder this rule, the hotel owner is presumed to be liable for loss ordamage to the vehicle of the guest upon his failure to return the same.However, he has an opportunity to exonerate himself by proving thatthe loss did not arise due to negligence or fault on his part or that ofhis servants. The rationale for adopting this approach is well-explainedin Laird v. Eichold:[19]G

1 6 Innkeepers Act 1968, s 6(a) (New South Wales); Carriers and Innkeepers Act 1958,s 29(a) (Victoria).

1 7 Annex to the Convention on the Liability of Hotel-Keepers concerning the Propertyof their Guests, Article 7 (Paris, 1962).

1 8 Sherry, supra note 11.

H1 9 10 Ind. 212 (1858).

“Innkeepers, on grounds of public policy, are held to a strictaccountability for the goods of their guests. The interests of thepublic, we think, are sufficiently subserved, by holding theinnkeeper prima facie liable for the loss or injury of the goodsof his guest; thus throwing the burden of proof upon him, to showthat the injury or loss happened without any default whateveron his part, and that he exercised the strictest care and diligence.And it is more in accordance with the principles of natural justice,to permit him to exonerate himself by making such proof, thanto shut the door against him, and hold him responsible for anaccident happening entirely without his default, and against whichstrict care and prudence would not guard.”

14.1. Today, this rule is prevalent in several jurisdictions in theUnited States including Indiana, Illinois, Kentucky, Maryland, Texas, andVermont,[20] as well as in other common law jurisdictions where strictliability for vehicles has been excluded by statute.

14.2. In most States, the liability is predicated on the existenceof a bailment relationship between the guest and the hotel owner.[21]Where a contract of bailment can be said to exist, the mere failure todeliver the vehicle, or its redelivery in a damaged condition, constitutesa prima facie case against the bailee (hotel owner). He must then bringforth evidence to show that the loss was not caused by his negligence.

C.Position in India

15. In the backdrop of the aforementioned two approachesadopted in other jurisdictions, we will now examine the relevantprovisions under Indian law and the approach that should be adoptedin the Indian context in respect of liability of hotel owners for loss ofor damage to vehicles of their guests.

15.1. Notably, we have not found any instances where Indiancourts have applied the common law rule of insurer’s strict liability upona hotel owner. It appears that the impugned judgment of the NationalCommission is the first time that the principle of strict liability forvehicles infra hospitium was read in and applied in the Indian context.

20 Sherry, supra note 7, at 417.

21 Sherry, supra note 11.

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A15.2. From an examination of the underlying rationales for eachof the approaches, we find that the imposition of strict liability for lossor damage to vehicles of guests is overly burdensome in today’s context.The strict liability rule had emerged in an age and time where travelwas rare and tourism was virtually non-existent, thereby promptingBCourts to hold hotel owners liable so as to protect the interests of theguests. However, in today’s context of economies with well-establishedhotel industries and mandatory insurance of vehicles owned by guests,there has been a trend across jurisdictions of moving away from thestrict liability of innkeepers in respect of vehicles of guests.

C15.3. Keeping in view the change in socio-economic conditionsin India, we do not think it proper to impose a standard of strict liabilityupon hotel owners. Due to the growing population and the paralleleconomic expansion in the country, hotels and similar establishmentsare much more accessible to the public than they may have been aDfew decades ago. Hotels have also launched diversified services to keepup with changing times and to meet growing competition from alternatehospitality ventures. Hence, a person may frequent hotels for limitedperiods of time for purposes other than residing as a guest in the rooms.For example, a person may visit a hotel for business meetings,conferences, weddings, dinner outings, and so on. In all such situations,Eif the hotel is made strictly liable for the safety of vehicles of thesepersons without proof of negligence on its part, it may lead to graveinjustice. Given the growing number of visitors, hotels cannot beexpected to maintain surveillance of each and every vehicle parked ontheir premises at all times.F

16. At the same time, it is true that persons visiting hotels andparking their cars in their premises or under valet parking, cannot beleft at the mercy of hotel owners. It is essential to balance the interestsof hotel owners and guests, and we find that the prima facie liabilityrule strikes this balance without placing undue burden on either of theGparties. The fact that guests are already protected by virtue of insuranceof their vehicles tips the scale in favour of adopting a relativelymoderate approach. Thus, given that the prima facie liability rule ispremised on the existence of a bailment relationship, in cases wheresuch a relationship is found to exist between the hotel and its guest,Hthe rule should be applied in respect of vehicles so bailed to the hotel.

Notably, this is also the approach that has found mention underIndian law. The general rule has been that in a contract of bailment, ifgoods are lost or damaged while in the possession of the bailee, he willbe liable. The burden of proof will be on the bailee to show that hetook a reasonable degree of care in respect of the bailed goods (SeeN.R. Srinivasa Iyer v. New India Assurance Co. Ltd.[22]). This isbecause there is an implicit expectation between the hotel and the guestwhen a vehicle is handed over for valet parking that the vehicle wouldbe taken reasonable care of, and returned in a proper condition. Thus,the failure to return the vehicle strikes at the root of the bailmentrelationship and gives rise to a prima facie case of negligence againstthe hotel. In our considered opinion, the strict liability rule under commonlaw is a relic of the past and should not be given effect in the Indiancontext. To this extent, we find that the National Commission has erredin adopting the common law rule without justifying its choice or withoutnoting the well-recognised exception in respect of the vehicles of guests.

17. In light of this exposition on the applicability of the prima facieliability rule in India, we will now examine whether a bailmentrelationship exists in the present case for such liability to be affixed onthe Appellant-hotel.

D.Existence of bailment relationship

18. The existence of a contract of bailment often turns on thedegree of control exercised by the prospective bailee over the propertyor good in question. In other words, the crucial point to be consideredis whether the custody or possession of the vehicle is purposefullyhanded over to the hotel (as is the case with valet parking) or whetherthe complainant is merely allowed to park his car in a parking space orfacility. While the laws of bailment apply in the former case, the latteris only a licensor-licensee relationship where laws of bailment or theprima facie liability rule cannot be applied.

18.1. In a number of decisions, the National Commission has heldthat the manager of a parking facility cannot be held liable as a ‘bailee’for loss of vehicles parked therein. In Commissioner, Corporation ofMadras v. S. Alagraj,[23] a 3-member Bench held that a person whoprovides parking facility for a nominal fee does not undertake to ensure 22 AIR 1983 SC 899.

23 I (1996) CPJ 54 (NC)

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Athe safety of the vehicle. Later, a 5-member Bench in Rohini Groupof Theatres v. V. Gopalakrishnan[24] relied upon Alagraj (supra) andheld that an attendant in a theatre parking lot who collects a nominalfee for parking of the vehicle cannot be said to be a bailee, as in suchcases, it cannot be said that the vehicle was ‘delivered’ for some‘purpose.’ Hence, the operators of the parking lot would not be liableBfor the vehicle going missing.

18.2. However, in our opinion, these decisions do not support thecase of the Appellant, as they relate to situations where the possessionof the vehicle was not purposefully handed over to the hotel ormanagement of the parking facility, or their servants. In theCaforementioned cases decided by the National Commission, theconcerned facility had only licensed out its premises for parking, andleft it to the discretion of the vehicle owner as to where to park thecar. In such instances, the manager of the premises does not undertakethe safe return of the vehicle and there is no ‘parking service’ renderedDby the parking facility operator as such. Rather, it is the owner’sresponsibility to find a suitable parking spot, park the vehicle correctly,return, and take out the vehicle upon display of the parking token/slip.Hence, in such situations, it cannot be considered that possession hasbeen handed over or that a relationship of bailment has been created.

E18.3. On the other hand, in a situation where the hotel activelyundertakes to park the vehicle for the owner, keep it in safe custodyand return it upon presentation of a parking slip in a manner such thatthe parking of the vehicle is beyond the control of the owner, a contractof bailment exists. Thus, the hotel would be liable as a bailee forFreturning the vehicle in the condition in which it was delivered. To furtherelaborate upon this point, we may refer to the following provisions ofthe Indian Contract Act, 1872 (‘Contract Act’):

“148. ‘Bailment’, ‘bailor’ and ‘bailee’ defined.—A ‘bailment’is the delivery of goods by one person to another for someGpurpose, upon a contract that they shall, when the purpose isaccomplished, be returnedor otherwise disposed of accordingto the directions of the person delivering them. The persondelivering the goods is called the ‘bailor’. The person to whomthey are delivered is called the ‘bailee’…

H24 II (1996) CPJ 1 (NC)

149. Delivery to bailee how made.—The delivery to the baileemay be made by doing anything which has the effect of puttingthe goods in the possession of the intended baileeor of any personauthorised to hold them on his behalf.”

In view of these provisions, it is clear that in a scenario wherepossession of the vehicle is handed over to a hotel employee for valetparking, it can be said that ‘delivery’ of the vehicle has been made forthe purposes of Section 148 and 149. Consequently, a relationship ofbailment is created. The parking token so handed over to the bailor isevidence of a contract, by which the bailee (hotel) undertakes to parkthe car and return it in a suitable condition when the vehicle owner sodirects.

18.4. The distinction between a person who leaves his vehiclein a car park, and a person making delivery of a vehicle for safekeepinghas been well-established in common law by the Court of Appeal inAshby v. Tolhurst.[25] In this case, the plaintiff parked his car in a carpark owned by the defendants and received a parking ticket with an“owner’s risk” clause. The car park attendant allowed another personto take away the car based upon a mistaken impression that the thiefwas the true owner of the car. The Court of Appeal held that norelationship of bailment was established, and the defendant was underno contractual liability to the plaintiffs as:

“It seems to me that reading the document as a whole, includingits own description of itself, namely “Car park ticket,” it reallymeans no more than this: the holder of this ticket is entitled topark his car in the Seaway Car Park, but this does not meanthat the proprietors are going to be responsible for it…If that bethe true view, the relationship was a relationship of licensor andlicensee alone, and that relationship in itself would carry noobligations on the part of the licensor towards the licensee inrelation to the chattel left there, no obligation to provide anybodyto look after it, no liability for any negligent act of any person inthe employment of the licensor who happened to be there.

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Afor it he would get into it and drive it away. There is no questionof giving, no question of physical delivery coming into it at all. Itis not like articles in a railway cloak-room which have to behanded out by the cloak-room attendant before the personclaiming them can get them. This is a case where any one canwalk on to the land and get into a car, and I cannot myself readBthat one phrase as evidence of any such delivery as Mr. Cloutmanadmits is essential for the success of his case.”

18.5. Similarly, in Tinsley v. Dudley,[26] the plaintiff went to aCpublic inn and parked his motorcycle in the premises. No parking feewas charged, nor was there any attendant to look after the vehicles.Relying upon Ashby (supra), the Court of Appeal held that the inn wouldnot be liable:

“But, apart altogether from that point, it seems quite plain thatDthe decision in this court proceeded upon the view that one whoparks his car in a car park does not thereby deliver over thepossession or custody of the motor car to the keeper of the park— at any rate in the absence of some unusual or specialcircumstances which did not exist in that case and were not toEbe imported by the giving or the terms of the ticket.

It seems to me clear, therefore, that there is no basis for sayingthat there was any delivery over to the defendant, or to any agentof his, of the possession or custody of the motor-bicycle. Therewas nobody about, and it is not suggested that access to the yardFwas not available to any who liked to walk in…

…As Romer, L.J., said in Scarborough v. Cosgrove, all thesecases must depend upon their own facts; and it should not beassumed that in every case in which, adjoining a public housethere is a place provided for the leaving or storage of motor carsGby patrons of the house it will follow that the publican is underno liability. That question will depend on whether, in the particular”case, a contract of bailment comes into existence or not.

18.6. Indian courts have also followed this distinction. In NewIndia Assurance Co. Ltd. v. Delhi Development Authority,[27] theinsurer had filed a civil suit (as subrogee) to recover damages onaccount of theft of a truck from the parking facility maintained by thedefendant-authority. While holding that this was a case of bailment underSections 148 and 149, the Delhi High Court made the following pertinentobservations:

“6…There is nothing on the record to show that the Idle TruckParking Centre was only an open space of land where licencewas being granted to the truck owners to park their trucks onpayment of certain fee without their being any obligation on thepart of the defendants to look after the safety of the vehiclesparked therein…

7…If I may apply the principle of law as laid above, it is a clearcase of bailment and the defendants as bailee having failed toshow having exercised reasonable care as man of ordinaryprudence are liable for the loss of the truck…

10. Essence of bailment is possession. The possession of the truckwas handed over to the defendants when the truck was parkedin the Parking Centre of the defendants. The defendants hadissued a receipt and charged Rs. 3/- for the safe keeping of thevehicle for a period of 24 hours. Immediately at that time acontract of bailment came into being. The defendants as baileehaving failed to deliver the vehicle back to the second plaintiffwithin the contracted period and not having shown to haveexercised any prudent care for the safetly of the truck, are liablefor its loss. It is immaterial if the driver of the truck was alsosleeping in the vehicle. The vehicle could not have been takenout of the Parking Centre without surrendering the receipt.This is particularly, so when the plaintiffs have submitted that thetruck was under the charge, custody, control and possession ofthe defendants. I would have certainly agreed with Mr. AmitChadha, learned counsel for the defendants, if there was anythingon the record to show that the defendants were merely collectinga fee for parking and were not to guard or watch the vehiclesparked generally in the Idel Parking Centre…

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A…I find, in the present case, the vehicles was parked in the TruckParking Centre against a receipt and it was the duty of thedefendants to guard the truck for 24 hours and to deliver the sameback to the plaintiff No. 2 within this period. It was not that thedefendants had merely granted a licence to the plaintiff to parkthe truck at any open space on a certain fee without there beingBany liability on the part of the defendants to look after the truck”for its safe keeping.

18.7. In view of the foregoing discussion, we find that theCdecision in Bombay Brazzerie (supra) is wrong insofar as the NationalCommission observed that the laws of bailment would apply only whena customer makes a separate payment to park the car in a parking lot.It is not disputed that a contract of bailment under Section 148 may begratuitous. In any case, it is common knowledge that ‘complimentary’services provided by 5-star hotels are not actually free-of-cost. TheseDservices are covered by the exorbitant rates charged for renting ofrooms, food, entry fee to lounges and clubs, and so on. It cannot bedenied that valet parking service, even if offered gratuitously, benefitsthe hotel. A hotel holding itself out to the public as providing such aservice seeks to pitch it as a value addition to the experience of a guest Eand incentives greater foot fall. In fact, many luxury hotels are locatedin central urban areas which are prone to congestion, therebynecessitating valet parking to protect guests from overcrowding andpollution caused by haphazard parking of vehicles. In such a setting,the provision of valet parking offers the hotel an edge over others, asvisitors are generally inclined to accept the invitation of greaterFconvenience furnished by the hotel, i.e. of having someone else parktheir vehicles in a secure place. Therefore, for such cases, there existsan implied consideration for the contract of bailment created by virtueof the valet parking service.

18.8. Applying this to the instant case, Respondent No. 2 hadGgiven up possession of his car by handing it over to the valet. Thus,the Appellant-hotel cannot refute the existence of bailment bycontending that its valet parking service was purely complimentary innature and that the consumer (bailor) had not paid for the same. Inother words, the existence of a bailment relationship is clear. In viewof this finding, the requisite standard of care under such a bailmentHcontract merits examination.

TAJ MAHAL HOTEL v. UNITED INDIA INSURANCECOMPANY LTD. [MOHAN M. SHANTANAGOUDAR, J. ]

III. THE REQUIRED DEGREE OF CARE UNDERBAILMENT

19. Given the existence of a bailment relationship, the failure ofthe Appellant to deliver the car to Respondent No. 2 (car-owner), raisesa prima facie case of negligence against it. Thus, the burden of proofis on the hotel (bailee) to show that efforts were undertaken by it totake reasonable care of the vehicle bailed, and that the theft did notoccur due to its neglect or misconduct.

20. To ascertain the standard of reasonable care to be taken bythe bailee (hotel) for vehicles parked within its premises, Sections 151and 152 of the Contract Act are relevant:

“151. Care to be taken by bailee.—In all cases of bailmentthe bailee is bound to take as much care of the goods bailed tohim as a man of ordinary prudence would, under similarcircumstances, take of his own goods of the same bulk, quantityand value as the goods bailed.

—152. Bailee when not liable for loss, etc., of thing bailed.The bailee, in the absence of any special contract, is notresponsible for the loss, destruction or deterioration of the thingbailed, if he has taken the amount of care of it described insection 151.”

20.1. Under Sections 151 and 152, the bailee has a duty to keepits premises in a condition of safety that would be reasonable to preventloss, damage, or theft of the goods of its guests. With respect to 5-starhotels specifically, we find that the responsibility to take such measuresis higher. Counsel for Respondent No.1 sought to rely on KlausMittelbachert and Hotel Hyatt Regency (supra) to argue that 5-starhotels should be subject to the strict liability standard of insurers undercommon law. Here, it is crucial to note that Klaus Mittelbachert wasin respect of personal injury caused to the guests on account ofnegligence by the hotel. As mentioned supra, such standard cannot beapplied in the context of liability for vehicles of guests. However, wedo agree with the observations of Lahoti J. in Klaus Mittelbachert thatthe high prices charged by such hotels imply a relatively higher degreeof care as a reasonable person would normally expect higher qualityand safety of the services made available by such hotels. This is alsoin consonance with the observations of the National Commission in A

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AHotel Hyatt Regency (supra) that five star hotels have a high duty ofcare for cars parked in their premises.

20.2. This would mean that it is not sufficient for the hotel tomerely appoint an attendant or security guard who takes theresponsibility of parking the vehicle and keeping the car keys in hisBcustody until the vehicle owner is inside the hotel premises. The hotelmust take additional steps to guard against situations which may resultin wrongful loss or damage to the car. This includes, for example,ensuring that the car keys are kept out of reach of outsiders, that thevalet parks the car in a safe location, that parking spaces which are inthe vicinity of the hotel are well-guarded, that parking spaces insideCthe hotel (if any) are reasonably well-maintained and CCTV camerasare installed there for detecting any suspicious activity, that the car ishanded over only to those who present the parking slip and so on.Needless to say this is only an illustrative, and not an exhaustive list.

20.3. Further, it is relevant to note that Sections 151 and 152 ofDthe Contract Act do not distinguish between a gratuitous bailee and abailee for reward. In Port Swettenham Authority v. T.W. Wu & Co,[28]the Privy Council commented on Sections 104 and 105 of the Contracts(Malay States) Ordinance of 1950, which are in pari materia withSections 151 and 152 of the Contract Act, as follows:

E“It will be observed that these sections apply to all bailments andmake no distinction between bailments for reward and gratuitousbailments…

…There is no compelling authority that a gratuitous bailee whofails to return the goods left in his custody is not obliged to explainwhy he is not able to return them and to show that their loss isFnot due to his failure to have taken as much care of the goodsas a man of ordinary prudence would have taken of his owngoods in similar circumstances. In any event, a bank, which offersits customers, in the ordinary course of business, the service oflooking after goods deposited with it, can hardly be described asGa gratuitous bailee. The bank must realise that were it to refusea customer such a service it would probably lose the customerwho would have no difficulty in finding another bank which wouldbe happy to render the service which is normally offered by banksto their customers.

H28 [1979] A.C. 580

However, this may be, in their Lordships’ view the onus is alwaysupon the bailee, whether he be a bailee for reward or a gratuitousbailee, to prove that the loss of any goods bailed to him was notcaused by any fault of his or of any of his servants or agents towhom he entrusted the goods for safe keeping.”

Therefore, it is irrelevant as to how much parking fee was paidby the consumer, or whether any parking fee was paid at all, as theduty of care required to be taken by the hotel will be the same in allcircumstances. However, this is not a strict liability standard insofar asSection 152 excludes the liability of a bailee for loss or damage of thebailed goods if he is able to show that he fulfilled the standard ofreasonable care under Section 151. Whether or not such standard ofreasonable care was fulfilled will depend upon the facts andcircumstances of each case.

21. Coming to the facts of the instant case, the records showthat the car of Respondent No. 2 was stolen when three young boyswho had parked their car in the Appellant-hotel came out of the hotel,asked the valet driver to bring their car to the porch, and one of themthen picked up the keys of the car of Respondent No. 2 from the desk,went to the parking area and stole the car. It has been stated in thecomplaint that the thief escaped despite an attempt by the hotel guardto stop him. Notably, in the written statement filed by the Appellant-hotel, it has denied negligence by stating that the guest was aware ofthe risk of valet parking, which was not a service for safe custody ofthe vehicle, especially given the terms printed on the parking tag. Itsentire case has been premised on the exclusion clause in the notice,and not on the absence of negligent conduct on its part. In fact, therehas been an admission of the fact that one of the three young boyswho had visited the hotel stole the car of Respondent No. 2, while itskeys were under the watch of the valet driver.

As mentioned supra, to meet the requisite standard of care, thehotel must go beyond appointing an attendant or security guard and takeadditional measures to guard against situations that may result inwrongful loss of or damage to the car of its guest. Here, the mannerin which the car was stolen manifests that no steps had been taken bythe Appellant-hotel to ensure that car keys were kept outside the reachof outsiders or that the cars were parked in a safe location withadequate barriers to verify their owners. In the absence of such A

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Ameasures, the Appellant has failed to discharge its burden of disprovingthe prima facie case of negligence against it. Thus, we find that thetheft of the car of Respondent No. 2 was a result of the negligence ofthe Appellant-hotel.

IV. EXCLUDING LIABILITY BY CONTRACT

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22. Since the parking tag given to Respondent No. 2 stated thatthe parking would be at the guest’s own risk, it is to be consideredwhether it is open to the Appellant-hotel (bailee) to contract out hisliability for negligence beyond what is already provided under Section152 of the Contract Act. In other words, can the bailee contractuallyCexclude liability for his negligence or that of his servants?

23. Under Indian law, the seminal decision on this point is thatof a Full Bench of the Madras High Court in Sheik MahamadRavuther v. The British Indian Steam Navigation Co. Ltd.[29] In thatcase, the plaintiffs alleged that their goods were damaged on accountDof the negligence of the defendant shipping company. The trial courtand the lower Appellate Court found that there had been no negligenceon the part of the defendants. However, in second appeal, though theDivision Bench of the High Court agreed that the defendants werenegligent, they differed on whether the terms of the bill of ladingexcluded liability for negligence. Consequently, the case came beforeEthe Full Bench by way of a Letters Patent Appeal.

On facts, Sir Arnold White C.J. and Sankaran Nair J. of the FullBench found that the defendant had been negligent and allowed theappeal, whereas Wallis J. dissented. However, with respect to thequestion of whether the bill of lading excluded liability for negligence,FWhite C.J., and Wallis J. were of the opinion that a carrier is notexempted from liability for his negligence or that of his servants, unlesssuch an exemption is made in express terms through a ‘specificnegligence clause’. While holding so, they noted that such a contractualexemption, if properly made, would not be contrary to public policy.GHowever, on facts, White C.J. found that such a specific negligenceclause had not been inserted in the bill of lading. Thus, he allowed theappeal. Placing significant reliance upon the decision of the King’sBench in Price & Co v. Union Lighterage Company, (1903) 1 K.B.750 while arriving at this conclusion, he observed that:

H29 (1909) ILR 32 Mad 95.

“…The view which I take appears to be in accordance with thedecision of the Court of Appeal in Rathbone Brothers & Co. v.David MacIver Sons & Co. where the Court holding that thecarriers were unable, on the facts, to claim the benefit of a specialproviso relating to unseaworthiness, the carriers were held liablenotwithstanding general words in the bill of lading whichexempted them in the case of injury or default…

…The words “in all cases and under all circumstances” in thepresent bill of lading are no doubt as wide and as general aspossible, but the reiterated use of general words does not ofcourse exclude the application of the special canons ofconstruction which a long course of Judicial decisions has heldapplicable to the construction of contracts which purport to relievea carrier from liability for negligence. The authorities werediscussed by Walton, J., in Price & Co. v. Union LighterageCompany. In that case goods were loaded on a barge under acontract for carriage by which the barge owner was exempt fromliability “for any loss of or damage to goods which can be coveredby insurance.” The barge was sunk owing to the negligence ofthe servants of the barge owner, and the goods were lost. Thelearned Judge held that the barge owner was not protected fromliability by the contract. In the course of his judgment the learnedJudge observed: “...If it were right or permissible to deal withthis case without regard to the rules of construction which havebeen laid down in a well-known series of cases and looking onlyat the language used, it might very well be said that its meaningwas that the defendants wore to be exempt from liability forinsurable losses whether caused by negligence or not. But thereis, I think, a well-established rule of construction applicable tothe present case. The law of England, unlike in this respect thelaw of the United States of America, does not forbid the carrierto exempt himself by contract from liability for the negligenceof himself and his servants; but if the carrier desires so to exempthimself, it requires that he shall do so in express, plain, and”unambiguous terms.

After discussing the authorities Walton, J., summarises theireffect in these words: “it really comes to this, that if a carrierwishes to exempt himself from liability for the negligence of his AB

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servants he must insert in his contract, in one form or another,-something equivalent to what is wellknown as a negligenceclause.” Now I understand a negligence clause to be a provisionwhich in express terms exempts a carrier from liability for thenegligence of his servants. The specific condition in the bill oflading in the present case contains no such provision…

… It is no doubt true that the bill of lading in the present casedoes not contain contradictory terms and, in a sense, it is notambiguous, but the portion of the bill of lading which deals withthe liability of the carrier at the particular stage of the adventurewhen the negligence occurred, is not express with reference tothe question of negligence, and this being so I do not think thecarrier is protected…

… As in my view of the law a shipowner is not exempted fromliability for negligence unless the contract which exempts him isboth clear and express, and as the contract in the present case,though it may perhaps be said to be clear is certainly not express,I am of opinion that the defendants are not protected by theirbill of lading. Two other questions remain for consideration. I candeal with them shortly. Mr. Sundara Ayyar contended that acontract which purported to relieve a shipowner from his liabilityas a carrier for negligence was contrary to public policy andshould not be enforced. As pointed out by Walton, J., in Price &Co. v. Union Lighterage Company, the law of the United Statesof America forbids a carrier to exempt himself by contract fromliability for negligence, whilst the law of England does not. I amof opinion that on a question of this character Courts in India”ought to follow the law of England.

Wallis J. in his dissent, similarly relied upon Walton J.’s decisionin Union Lighterage Company (supra) and observed that:

“As regards the second point I am of opinion that it is not opento us to hold that contracts exempting a carrier from liability forthe negligence of his servants are void as opposed to public policy.As pointed out by Walton, J., in Price & Co. v. UnionLighterage Company “the law of England, unlike the law of theUnited States of America, does not forbid the carrier to exempt himself by contract from liability for the negligence of himselfand his servants; but, if the carrier desires so to exempt himself,it requires that he shall do so in express, plain, and unambiguousterms.” So far as the general question goes this is the law whichhas been received and applied by the Indian Courts, [Jellicoe v.The British, India Steam Navigation. Co. and Hajee IsmailSait v. The Company of the Messageries Maritimes ofFrance]. Contracts have been made and business has beencarried on for many years in India on this footing, and if the law”is to be altered now it must be by the legislature.

24. Notably, neither White C.J. nor Wallis J. adverted to theprovisions of the Contract Act, which was in force in India at that time,in their opinions on the enforceability of contractual ‘negligenceclauses’. Rather, they primarily placed reliance upon the common lawin England which governed the issue at the time. On the other hand,Sankaran Nair J. in his concurring judgment, upon a detailedconsideration of the provisions of the Contract Act, particularly theprovisions relating to bailment, opined that it is not open to a bailee tocontract out of the minimum standard of liability under Section 151. Henoted that while the rule of law in England allowed shipowners tocontractually exclude their responsibility for the negligence of theirservants, the validity of the exemption clause under Indian law wouldnecessarily have to be tested on the touchstone of the provisions ofthe Contract Act. The following portions of his opinion are importantfor deciding this issue:

“Under Section 151 of the Act, the defendants, therefore, arebound to take as much care of the goods as a man of ordinaryprudence would under similar circumstances. It is only the incidentof any contract not inconsistent with its provisions that remainsunaffected by the Contract Act (see Section 1 of the ContractAct). The incident of the contract before us that the bailee isexempt from taking the care required by Section 151 appears tome to be clearly inconsistent with that section. Section 152 seemsto make this clear. It declares that the bailee’s liability is limitedas declared by Section 151, “in the absence of any specialcontract,” or in other words he may by contract undertake ahigher responsibility, for instance, that of an insurer. The provision AB

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in Section 152 that a bailee may undertake a higher responsibility,the absence of a similar provision that he may limit the liabilityimposed by Section 151, and the fact that, in the chapter IXrelating to Bailment, whenever a rule of law is intended tooperate only in the absence of a contract to the contrary it is-expressly so stated (see Sections 163, 165, 170, 171 and 174)leave no doubt in my mind that a bailee’s liability cannot bereduced by contract below the limit prescribed by Section 151.In fact, throughout the Act, whenever the legislature intended thatthe provisions of the Act should be enforced only in the absenceof a contract between the parties they have said so. (See Sections109, 113, 116, 121, 93, 94, 95, 202, 219, 221, 230, 241, 253, 256,261, 265)

The obligation imposed by Section 151 applies to bailees as wellas to their servants in the discharge of their duty. The agentrepresents the bailee under the Act. The Contract Act thussweeps away all the distinctions between the degrees of carerequired of the bailees. In the English law the amount of carerequired seems to depend upon the benefit accruing to the bailee.Under the Contract Act the obligation arises from the simple factof accepting delivery or receiving property for a certain purpose,and the care to be taken is the same in all cases…

…The relations between parties may well be left to be regulatedby contract when the degree of care required is dependent uponthe benefit derived from the bailment, but when the same amountof care is required independent of any benefit to the bailee thenit may well be that the legislature did not think it right to allowthe bailee to reduce his liability. Assuming then that the rule ofEnglish law that a common carrier can get rid of his liability bycontract has been accepted in India, the contract itself must beobviously one which will be recognized in the Indian Courts, and,if I am right in the view above set forth, it necessarily followsthat while a common carrier may exempt himself from the liabilityof an insurer by contract, he cannot exempt himself from theliability of an ordinary carrier imposed by Section 151 of theIndian Contract Act.

…The reason why a common carrier is bound to receive goodstendered and the great responsibility of an insurer is imposed upon him is that necessity compels the owners of goods to trusthim…As Best, C.J., puts it in Riley v. Horne, “When goods aredelivered to a carrier, they are usually no longer under the eyeof the owner.... If they should be lost or injured by the grossestnegligence of the carrier or his servants, or stolen by them, theowner would be unable to prove either of these causes of loss;his witnesses must be the carrier’s servants, and they, knowingthat they could not be contradicted, would excuse their mastersand themselves.” For the above reasons it is essential thatcommon carriers must in India also be subject to the Englishcommon liability, and the Privy Council have now placed thematter beyond dispute. Where the obligation is imposed upon thecommon carrier for the benefit of the public he cannot get rid ofthat obligation by agreement, if it is not reasonable.

The reasons given above by Lord Holt, Lord Mansfield andAbbot, C.J., are, it appears to me, conclusive to show that it isagainst public policy to allow a claim for exemption as the onenow put forward. There is practically no freedom of choice, andpersons when entrusting shipowners with their property areobliged to accept any condition that may be imposed upon themby the steamship companies. The cargo-owners have no controlover the servants, and it is only right that the master and not thecargo-owner should suffer for the misuse of his powers by theservant as he has armed him with those powers. The law whichrequires care and diligence on the part of a carrier will, otherwise,to illusory in the case of steamship companies, as everything isleft to the servants. There will be a tendency to lax supervisionover the servants, and to make their selection dependent moreupon cheapness than on efficiency…Nothing is more easy thanfor the carriers to call their servants as witnesses and to proveprima facie that the goods were protected in the usual way. Itwould then be impossible for the plaintiff to bring negligence orcriminality home to the carriers although the goods may not be”forth coming and no explanation given how the loss occurred.

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Apublic policy. This would be true even in a case where the bailor agreedto pay lower remuneration to the bailee on the condition that the latterwould not be liable for their servant’s negligence.

25. Admittedly, the opinion of Sankaran Nair J. forms part of oneschool of thought on the point of contractual exclusion of liability forBnegligence. However, in India, the opinion of White C.J. and Wallis J.in Sheik Mahamad (supra) on this point has largely been followed insubsequent decisions of various High Courts. These decisions have heldthat a bailee would be liable for the negligence of its servants, exceptin cases where a specific negligence clause is inserted in the contract.They have all noted that the Contract Act does not prohibit a party fromCcontracting out of its duty of care under Section 151.[30]

26. Notably, academic opinion has also supported the view thata bailee may contract out of his liability under Section 151. The LawCommission of India has opined that the view of White C.J. and WallisJ. in Sheik Mahamad (supra) is correct and that the words “in theDabsence of any special contract” ought to be added to Section 151 ofthe Contract Act to resolve the controversy.[31] Similarly, in theircommentary on the Contract Act, Pollock and Mullahave noted thatthough a bare reading of Section 152 indicates that a bailee may makea contract to increase his responsibility over and above the standardEunder Section 151, the provision has been interpreted to mean that theduty of care enjoined on a bailee under Section 151 may be subject toa contract excluding such responsibility. Hence, a contract of exemptionfrom liability for any loss or damage due to the fault, carelessness ornegligence of the bailee’s staff would bind the parties and not be voidas opposed to public policy.[32]F

27. On a closer reading, we find that the decision in SheikMahamad (supra) and the subsequent High Court decisions which 3 0 See Kariadan Kumber v. British India Steam Navigation (1913) 38 Mad. 941;Hollandia Pinmen v. H. Oppenheiner AIR 1924 Rang 356; Bombay SteamGNavigation Ltd v. Vasudev Baburao Kamat ILR (1928) 52 Bom 37; Lakhaji Dollaji& Co. v. Boorugu Mahadeo Rajanna 41 Bom LR 6; Indian Air Lines Corporationv. Jothaji Maniram AIR 1959 Mad 285; State Bank of India v. M/s Quality BreadFactory, Batala AIR 1983 P&H 244; Central Bank of India v. M/s Grains & GunnyAgencies AIR 1989 MP 28.

3 1 Law Commission of India, Contract Act, 1872 (LawCom No 13, 1958) para 125.3 2 Pollock and Mulla, The Indian Contract and Specific Relief Acts (Nilima BhadbhadeHed, updated 14[th] edn, 2013) 1505, 1522.

followed it were in the context of common carriers as bailees. Withrespect to liability of common carriers, it is settled that the opinon ofSankaran Nair J now holds the field. A Division Bench of this Courthas clarified in Nath Bros. Exim International Ltd. v. Best RoadwaysLtd.[33] that their liability is equivalent to that of an insurer and is absolute.Further, it has been observed that such liability is governed by theCarriers Act of 1865 and not by Sections 151 and 152 of the ContractAct, and can therefore not be excluded by way of a special “owner’srisk” clause in a contract. However, given that the present caseconcerns with liability of a hotel for loss of vehicles of its guest due tonegligence, the question arises whether White C.J.’s opinion in SheikMahamad holds good with respect to Section 151 and 152 and theprima facie liability standard which we have laid down supra.

28. Upon perusal of the relevant decisions on this point, we findthat White C.J. and Wallis J’s opinion in Sheik Mahamad (supra) waspeculiar to the facts of that case. The case of a common carrier atsea is different from a hotel which undertakes to park vehicles for itsguests on ground. In the former case, given the unpredictable conditionsat sea, and the fact that the shipowner may be unable to supervise theconduct of his servants during an overseas voyage, it can be arguedthat carriers should have the liberty to contract out of liability for theirservants’ negligence.

However, with respect to liability for vehicles bailed to a hotelas is the case with valet parking, we are of the considered opinion thatSankaran Nair J.’s opinion in Sheik Mahamad should be adopted. Giventhat such vehicles would normally be parked in the hotel’s own parkingfacility, or in the vicinity of the hotel, the hotel staff is well-placed toensure safe custody of the vehicle and monitor its condition. Thoughvalet parking may be offered as an optional complimentary service insome instances, more often than not, guests visiting the hotel have noother option but to entrust their vehicles to the hotel’s custody, especiallygiven the congested urban areas where such hotels are located. Asemphasized earlier, the guest has an implicit expectation that the reputeand standards of 5-star hotels would entail adequate safety of thevehicles handed over for valet parking. Thus, in such a scenario, if thehotel is allowed to exclude its liability for negligence by way of acontract, the standard of care imposed under Section 151 will become AB

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Aillusory and virtually redundant, rendering consumers vulnerable withoutany remedy. In our view, the standard of care required to be taken bythe hotel as a bailee under Section 151 is sacrosanct and cannot becontracted out of.

It is important to clarify that though courts may have construedBthe phrase ‘in the absence of any special contract’ in Section 152 tomean that a bailee can reduce his liability under Section 151, such aninterpretation is incorrect. The words ‘in the absence of any specialcontract’ in Section 152 clearly indicate that it is open to the bailee toaccept a higher standard of liability than Section 151 under contract,and not otherwise.C

However, this does not mean that the hotel would be liable in allscenarios or that it cannot impose any exemption clause through acontract. There may be situations where the loss or damage may becaused due to the negligence of third parties, the bailor’s own negligenceor unforeseen circumstances beyond the bailee’s control, which couldDnot have been foreseen with ordinary diligence. This would include, forexample, acts of God, seizure of the vehicle under legal process or bypublic authorities, damage due to natural causes such as unforeseenweather conditions, presence of inherent defects in the vehicle, acts ofloss or damage caused by the guest’s own negligence and so on. AEjoint reading of Sections 151 and 152 shows that, in such cases, theContract Act intended that the bailee should not be liable for the lossor damage of the goods bailed on all occasions. To re-iterate, Section152 expressly states that the bailee, in the absence of any specialcontract, is not responsible for loss or damage of the thing bailed, if heis able to prove that he has taken the amount of care required underFSection 151.

Therefore, hotels are at liberty to print clear contractualdisclaimers notifying their guests that their liability is excluded for lossor damage to vehicles taken for valet parking which are occasionedby acts of a third party, contributory negligence or by force majeureGevents. However, as mentioned supra, this would always be subject tothe hotel discharging its initial burden of proving that it fulfilled thestandard of care imposed under Section 151 of the Contract Act. Wherethe hotel or its servants have actively connived against or actednegligently in safeguarding the vehicles delivered for valet parking,H‘owner’s risk’ clauses in the parking token will not come to their rescue.

In this regard, it is relevant to note where a valet or servant hasbeen handed custody of the vehicle, and such a servant takes awaythe vehicle without authority, the hotel will be liable. This is becausethere will still be a prima facie assumption that the hotel has exercisedlaxity in supervising the actions of its servants. However, the hotel willnot liable where, in spite of due diligence, a servant or employee whowas not entrusted with custody of the vehicle takes it withoutauthority[34], as this would be similar to a case of theft by a third-party.

At this juncture, we would like to emphasize that the aboveobservations are limited to the issue for consideration before us, thatis, the liability of hotels as bailees for vehicles handed over to them forvalet parking. We are not commenting on whether the rule as laid downby White C.J. and Wallis J. in Sheik Mahamad, and followed insubsequent High Court decisions, holds good in other kinds of contracts,and we desist from commenting further on this aspect.

29. In light of the above discussion, in a case of theft of a vehiclegiven for valet parking, the hotel cannot claim exemption from liabilityby arguing it was due to acts of third parties beyond their control, orthat they are protected by an ‘owner’s risk’ clause, prior to fulfilling itsburden as required under Section 151 and 152. It is by now wellestablished, that while a case of a robbery by force is visibly beyond abailee’s control, in cases of private stealth, or simple theft where noforce or violence is involved, the bailee still has the prima facie burdenof explaining that the loss or disappearance of the goods in his custodyis not attributable to his neglect or want of care. This is because noone apart from the bailee is in a position to explain the fate of the goods.

In the instant case, given our finding that the theft of the car ofRespondent No. 2 was a result of the negligence of the Appellant-hotel,the exemption clause on the parking tag will not exclude the Appellant’sliability. Hence, the argument of the Appellant-hotel on this count fails.

30. In conclusion, we would summarize our observations on thispoint as follows:

(i) the hotel-owner cannot contract out of liability for itsnegligence or that of its servants in respect of a vehicle of its guest inany circumstance. Once possession of the vehicle is handed to the hotel 34 See Pollock and Mulla (n 32) 1505.

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Astaff or valet, there is an implied contractual obligation to return thevehicle in a safe condition upon the direction of the owner.

(ii) Even where there is a general or specific exemption clause,there remains a prima facie burden of proof on the hotel to explainthat any loss or damage caused to the vehicles parked was not onBaccount of its negligence or want of care per Sections 151 and 152 ofthe Contract Act. It is only after this burden of proof is discharged thatthe exemption clause can come into force. The burden of proving thatsuch loss or damage was covered by the exemption clause will also beon the hotel.

C31. In view of the foregoing discussion, we hold that theconsumer complaint in consideration is maintainable as it was filed bythe insurer as a subrogee, along with the original owner as a co-complainant. Further, we find that strict liability cannot be imposed onhotel owners in respect of loss of or damage to vehicles of their guests.Instead, the rule of prima facie negligence should be adopted. ApplyingDthis rule to the present case, it is clear that the Appellant has notexplained why its failure to return the vehicle to Respondent No. 2 wasnot on account of fault or negligence on its part. Thus, liability shouldbe affixed on the Appellant-hotel due to want of the requisite caretowards the car bailed to it. The instant appeal is dismissed accordingly.

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Divya Pandey

Appeal dismissed.

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