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DAMODARAM SANJIVAYYA NATIONAL LAW

UNIVERSITY

VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE:
Duties of a Bailee

SUBJECT:
Contract Law - II

NAME OF THE FACULTY:


Assistant Professor - Mr. P. Jogi Naidu Sir

Name of the Candidate: Sai Suvedhya R.


Roll No.: 2018LLB076
Semester: 3rd Semester

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ACKNOWLEDGEMENT

Firstly, I would like to express my sincere gratitude to my respected Contract Law – II


professor- Assistant Professor- Mr. P Jogi Naidu Sir, for giving me a golden opportunity to
take up this project titled – ‘Duties of a Bailee’ and my sincere thanks for the continuous
support of my study and related research, for his patience, motivation, and immense
knowledge. His guidance helped through all of my research. I could not have imagined
having a better advisor and mentor for my research.

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ABSTRACT

The concept of the duty of care of bailee emerged from the idea of liability base on gross
negligence. Although, the modern concept of duty is established as the concept of reasonable
care by bailee, which translates to, “will carry out the services with reasonable care and
skill”. Bailment has always been an integral part of commercial contracts both under English
law and Indian Contract Act. One of the foremost important concepts involved in the
Bailment is of the duties of the bailee. Section 151 of The Indian Contract Act, 1858, deals
with the objective of care to be taken by bailee. As per the section 151, In all the cases of
bailment the bailer is bound to take as much care of the goods bailed to him as a man of
ordinary prudence would under similar circumstances, take of his own goods of the same
bulk, quality and value as the goods bailed. This project would try to explain the concept of
duty of care under both English law and Indian Law. The project would also try to debate on
the concept of bailee by the analysis of certain case laws. The project would also deal with
the concept of the man of ordinary prudence and the case laws explaining the same. The
concept Standard of care would also be discussed in the current project. The project would
deal with the situations where bailee is not liable for the damages to the goods. In the end, the
project would also discuss the controversies relating to the liabilities of a bailee with regard
to goods bailed to him.

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SYNOPSIS

Introduction:

Bailment is a concept of common law. Under Common law, bailment is the process of
placing personal property or goods in the temporary custody or control of another. For a valid
bailment, it is necessary that bailee must have actual physical control of the property with the
intent to possess it. The bailee is generally not entitled to the use of the property during his
possession. A bailor can demand for return of the property at any time.

Literature Review:

In this paper I have studied texts from various journals, books, cases and websites and have
compiled it all into this research paper.

Research Questions:

1) What are the duties of a Bailee under the Indian Contract Act, 1858?

2) Under what circumstances is the Bailee not liable under the Indian Contract Act, 1858?

Objective of the Study:

1) To understand the meaning of the provisions under section 151 and section 152, Indian
Contract Act, 1858.

2) To understand and test the applicability of these sections by studying relevant case laws.

Significance of the Study:

1) To understand the importance of section 151 and section 152 of Indian Contract Act, 1858.

2) To understand the extent of applicability of this provision.

Research Methodology:

The nature or method of this legal study includes:

1) Descriptive Study

2) Exploratory Study

3) Explanatory Study

4) Analytical Study

5) Comparative Study

4
Primary Sources:

i. The Indian Contract Act, 1860


a. Section 151
b. Section 152

Secondary Sources:
i. Pollock and Mulla Indian contract and specific relief act, ( Nilima Bhadbhade,
14th ed., 2012)
ii. Joseph Chitty, Chitty on Contracts, (31st Ed., 2012)
iii. Norman Plamer, Palmer on Bailment, (3rd Ed, 2009)
iv. T.S. Venkateswa Iyer, The Law of Contracts & Tenders, (10th Ed., 2008)

Scope of the Study:

This project mainly focuses on the following aspects:

1) To understand the exact meaning and the various interpretations of Section 151 and section
152 of Indian Contract Act, 1858.

2) To understand the different ways and the extent to which this section can be used in the
court of law.

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TABLE OF CONTENTS:

 Introduction--------------------------------------------------------------------------------------07
 Who is a Bailee---------------------------------------------------------------------------------08
 Duty of Care of Bailee-------------------------------------------------------------------------12
 Debate on Standard of Care with Relevant Case Laws------------------------------------13
 Absoluteness of Doctrine though not Exhaustive------------------------------------------26
 Whether the Bailee can escape Liability----------------------------------------------------27
 Where Bailee is not Liable--------------------------------------------------------------------28
 Burden of Proof of Bailment------------------------------------------------------------------29
 Conclusion---------------------------------------------------------------------------------------30
 Bibliography-------------------------------------------------------------------------------------31

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INTRODUCTION

Bailment1 has always been an integral part of commercial contracts both under English law
and Indian Contract Act. One of the foremost important concepts involved in the Bailment is
of the duties of the Bailee. Bailment is a concept of common law. Under Common law,
bailment is the process of placing personal property or goods in the temporary custody or
control of another. For a valid bailment, it is necessary that bailee must have actual physical
control of the property with the intent to possess it. The bailee is generally not entitled to the
use of the property during his possession. A bailor can demand for return of the property at
any time. According to Contract Act, bailment means delivery of goods by one person to
another for some purpose upon a contract that these goods shall be returned or disposed of
according to the directions of the person delivering them when the purpose will be
accomplished

Section 1512 of The Indian Contract Act, 1858 deals with the duty of care to be taken by
bailee. As per the section 151, in all the cases of bailment the bailer is bound to take as much
care of the goods bailed to him as a man of ordinary prudence would under similar
circumstances, take of his own goods of the same bulk, quality and value as the goods bailed.
This project would try to explain the concept of duty of care under both English law and
Indian Law. The project would also try to debate on the concept of bailee by the analysis of
certain case laws. The project would also deal with the concept of the man of ordinary
prudence and the case laws explaining the same. The concept Standard of care would also be
discussed in the current project. The project would deal with the situations where bailee is not
liable for the damages to the goods. In the end, the project would also discuss the
controversies relating to the liabilities of a bailee with regard to goods bailed to him.

1
Joseph Chitty, Chitty on Contracts, (31st Ed., 2012), Bailment is defined in Chitty as a contract of hire of
goods. Also, it stands at the point which contract, property and tort converge. A simple contract of bailment is a
contract of hire of goods. As per Norman Plamer, Palmer on Bailment, (3rd Ed, 2009), bailment can be said as
“denotes a separation of the actual possession of goods from some ultimate reversionary possessory rights.”

2
The Indian Contract Act, 1858

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WHO IS A BAILEE

A bailee is an individual who temporarily gains possession, but not ownership, of a good or
other property. The bailee, who is also called a custodian, is entrusted with the possession of
the good or property by another individual known as the bailor. As mentioned above, the
bailee is given custody of a piece of property, but cannot legally lay a claim of ownership to
it. This means the bailor is still the rightful owner, even while the goods are in the bailee's
possession. However, the bailee is responsible for the property's safekeeping and the eventual
return of the goods. The bailee is typically not entitled to use the goods or property.

A bailee can serve as the overseer of an investment portfolio for a specified time period or
can be appointed to manage a rental property in the owner's absence. The bailee ensures the
assets are kept safe until the owner of those assets is able to resume management, and cannot
use them at any time for personal reasons. Reasonable care must be exercised by the bailee at
all times.

The short-term transaction between the bailee and bailor is governed by a contract, often as
simple as the reverse side of a dry cleaning tag or receipt, or the chit from a coat check
attendant.

When the bailee takes possession of a piece of property, he or she assumes a legal and
fiduciary responsibility for its safekeeping. As mentioned above, the bailee is expected to
take reasonable care with the property, even if there is no fee involved. The bailee must,
therefore, return the goods to the bailor as they were entrusted. The bailor can sue for
damages if he can prove the bailee did not use reasonable care during the bailment.

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DUTY OF CARE OF BAILEE

The concept of the duty of care of bailee emerged from the idea of liability base on gross
negligence.3 Although, the modern concept of duty is established as the concept of reasonable
care by bailee which translates to “will carry out the services with reasonable care and
skill”. English law differentiates bailment in form of gratuitous bailment4 and bailment for
reward.5 The duty of bailee for reward6 under the English jurisprudence was established in
the case of Brabant & Co v. King7 which said that duty of bailee is “to exercise the same
degree of care towards the preservation of goods entrusted to him from injury which might
reasonably be expected from a skilled storekeeper, acquainted with risk to be apprehended”.

The concept of reasonable care was established by the case of Blount v. War Office.8
Although, it was later established that the duty of bailee doesn’t includes duty of conversion.
The case of Houghland v. R.R. Low9 also laid down that standard of care is determined by the
circumstances of each particular case and situation. The duty of care on part of bailee only
arises when the bailer can show that certain conditions have been met. The bailer should
prove that the goods have been delivered to the bailee. Further, the initial burden of
establishing that the loss or injury occurred during the course of bailment also lies upon the
bailer.10

In G Merel & Co Ltd v. Chessher11 it was held by Salmon J. that the dating of loss need to be
established only upon the balance of probabilities. In the above case, the plaintiffs failed in

3
Finucane v. Small (1795) 1 Esp; 170 ER
4
Since there is no consideration in deposit, it is an instance of bailment without contract. A bailment may be for
reward, although no consideration moves from bailer. If gratuitous bailee fails to return goods on demand, he
may be called an insurer.
5
Norman Plamer, Palmer on Bailment, (3rd Ed, 2009)
6
Joseph Chitty, Chitty on Contracts, (31st Ed., 2012). Where the goods are delivered to bailee to be taken care of
him in return of remuneration to be paid by the bailor, the contract is one for custody of reward. Transfer of
possession of chattel to bailee is necessary.
7
(1895) AC 632 at 640
8
(1953) 1 All ER 1071
9
(1962) 1 QB 694 at 698
10
O’ Reagen v Hui Bros Transport Pty Ltd P. & N.G.L.R 261
11
(1961) 1 Lloyd’s Rep. 534 at 537

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their actions as they failed to prove that the loss of goods occurred from the defendant before
the plaintiffs themselves were in possession of them.12

The final condition required by bailer to prove is that bailee had a duty to take care and they
failed is to establish that there was a valid contract between the parties. 13 The bailer in order
to establish a valid contract must show that the goods were accepted by the defendant bailee.
He must also prove that the goods weren’t involuntary cast or harboured by him. The
condition of valid contract in most of the cases tends to be the easiest to proof as there are
written contract of bailment in most of the cases.

The Indian Contract Act differs from the English Jurisprudence as the duty of care of bailee
under Contract Act is defined as uniform irrespective of circumstances. The duty of care for
hire or gain is the same i.e. the duty of care remains same for both gratuitous or bailment for
rewards.14 Although, it fails to provide any reasonable explanation about whether it’s open to
parties to make a contract to contrary as defined under the English law. Furthermore, under
Indian law there has been considerable number of cases where duty of care was escaped on
the grounds of non existence of bailer-bailee relationship between the parties.15

Section 151 lays down this duty in the following terms:

Care to be taken by the bailee(S.151).--- In all cases of Bailment the bailee is bound to take
as much care of the goods bailed to him as a man of ordinary prudence would, under
similar circumstances take, of his own goods of the same bulk, quality and value as the
goods bailed.

The following are the duties and liabilities of a Bailee:

(i) Care

In all cases of bailment, bailee is bound to take care of bailed goods in the same manner in
which a man of ordinary prudence takes care of his own goods of the same quality and value.

12
Ibid.
13
Fankhauser v Mark Dykes Pty Ltd (1960) V.R. 376 at 377
14
Secy of State v. Ramdhan Das Dwarka Das Firm, AIR 1934 Cal 151
15
Messrs Damodar Valley Corporation V State of Bihar, 1960 Indlaw SC 270,

10
(ii) Unauthorized use of Bailed Goods

If bailee makes any use of goods bailed and such use in not according to conditions of
bailment, he is liable to make compensation to bailor for any damage, which is caused to the
goods during such use.

(iii) Mixing of Bailed goods with Bailee’s goods

If bailee mixes bailed goods with his own goods without consent of bailor, his liability arises
in the following two cases;

a. When goods can be separated?

Out of mixed goods, if bailed goods can be separated or divided, bailee will be under
obligation to bear all expense of separation or division, and any damage, which is caused
from such mixture.

b. When goods cannot be separated?

Out of mixed goods, if bailed goods cannot be separated or divided, bailee will be under
obligation to compensate the bailor for such loss of bailed goods.

(iv) Return of Bailed goods

It is duty of bailee to return bailed goods to bailor without any demand an according to
directions of bailor on expiration of time or accomplishment of purpose.

(v) Non-return of Bailed Goods

If bailee fails to return bailed goods at proper time, it is his liability to compensate bailor for
any destruction or loss from this time.

(vi) Increase or Profit from bailed goods

In absence of any contrary contract or according to directions of bailor, bailee is also under
obligation to deliver to bailor any increase or profit, which may have accrued from bailed
goods.

11
STANDARD DUTY OF CARE

The section lays down a uniform standard of care for “all cases of Bailment”.16 Originally in
English law “liability in Bailment was absolute”. Bailment is a concept older than contract
itself. It means “delivery of goods by bailor to bailee for a definite purpose in condition of
their return or disposal, when purpose is accomplished”.17

It is not always necessary that bailment be enforced through the way of a contract only. It is
a sue generis relationship.18 When the intention of the parties was to deal the bailment as a
contract only then the contract act comes into play. Bailment may also be voluntary or
involuntary. Possession is a central point to bailment; when the bailee receives the possession
of the goods, it subjects him to certain obligations such as taking care of the goods 19, not to
make wrongful use of the goods20, to return bailed goods21, etc.

Out of these duties, taking care of goods is arguably the most important responsibility of the
bailee. Section 151 and Section 152 of the I.C Act;1872 deal with the above mentioned duty
of the bailee. But the standard of duty of care mentioned in these sections has always been a
matter of debate in the courts. “Man of ordinary prudence”22 is a very subjective concept.
This project delves into the nuances of ‘reasonable care’, how courts have interpreted it over
years in different landmark cases, the burden of proof and if a bailee can exempt himself
from any liability by means of a special contract. It was no excuse for the bailee to say that
the damage or failure to return was due to no fault of his own; he was liable in any case.23

16
Willson v Brett, (1843) 11 M&W, 113
17
Anirudh Wadhwa, Mulla: The Indian Contract Act (13th edn, Butterworths, 2011) 1921
18
Per Shelat J. in State of Bombay v. Memon Mahomed Haji Hasam, 1967 AIR 1885.
19
The Indian Contract Act, 1872, § 151.
20
Ibid § 154.
21
Ibid § 159 and § 160.
22
The Indian Contract Act, 1872 § 151. Note: Care to be taken by bailee. In all cases of bailment the bailee
is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under
similar circumstances, take of his own goods of the same bulk, quantity and value as the goods bailed.
23
See C.V Davidge, Baiment, (1925) 41 LQR 433, 436

12
DEBATE ON STANDARD OF CARE WITH RELAVENT CASE LAWS

English Law:

Under the above Jurisdictions, if all the facts stated are proved, then the defendant bailee can
only escape liability if he can show that he took all the reasonable care to avoid damage and
loss.24 The concept of reasonable care was established in the case of Brook’s Wharf and Bull
Wharf Ltd v. Goodman Bros. The standard of care principle was further elaborated in Joseph
Travers & Sons Ltd v Cooper25.

Joseph Travers & Sons Ltd v Cooper:

It is one of the leading judgement which set guidelines for establishing the concept of
standard of care. In this case, the defendant bailee who was in the possession of salmon fish
lost the goods on account of him being absent for a long time and finding good at the final
stage of submersion on the banks of Thames river. The defendant, although being clearly
negligent claimed that they should not be held liable as the firstly, plaintiff failed to establish
any casual connection between default of plaintiff and sinking of barge.

Secondly, they said that the barge was sunk when it became mud-sucked while resting on the
river bed which couldn’t be rectified even by human efforts.26 Although, it is clear that
defendants filed to take reasonable care when the goods were bailed to them but it is also
established that defendants cannot be held liable for something which is not foreseeable.
Furthermore, it is also clear from the facts that even proper care from the bailee would not
have prevented the damage which was clearly held by the judge correctly.

24
Norman Plamer, Plamer on Bailment, 3rd Ed. Sweet & Maxwell, London 2009
25
(1915) 1 KB 73
26
Ibid.

13
Indian Law:

Under the section 151 of Indian contract Act, the standard of care required by the bailee
would be of an average prudent man but the amount of care required can differ from case to
case.

Lakshmi Narain Baijnath v. Secy of State in India27:

FACTS

The goods after arrival at Chitpur Ghat were transhipped into a boat of the Calcutta Shipping
& Landing Company by 10 A.M., on the 20th September, 1916 and the boat was detained at
the ghat for the day. On the night on the 21st September, there was a severe cyclone and the
boat sprang leaks as it bumped against the other boats and the jetty to which it was securely
fastened during the cyclone. On the 22ud September the leaky boat was towed to Rajgunj
where the goods were delivered to the National Jute Mills on the 23rd September. The goods
were damaged by water which entered the boat through the leaks, and as stated above they
were rejected by the Jute Mills with the consequence that they had to be sold by the plaintiff
at a loss.

Under Section 72 of the Indian Bail ways. Act, IX of 1890, the responsibility of a Railway
Administration for the loss of goods delivered to it to be carried by railway is that of a bailee
under Sections 151, 152 and 162 of the Indian Contract Act, 1872. Section 151 of the
Contract Act lays down that in all cases of bailment, the bailee is bound to take as much care
of the goods, bailed, to him as a man of ordinary prudence would under similar
circumstances, take of his own goods of the same bulk, quality and value as the goods bailed
and Section 152 provides that in the absence of any special contract, the bailee is not
responsible for the loss of the things bailed if her has taken the amount of care of it described
in Section 151.

ARGUMENTS

27
AIR 1924 Cal 92

14
It is contended before us on behalf of the appellant that the defendant failed to take care of
the goods which he was required by law to take. The first ground is that the boat should not
have been detained at Chitpur Ghat on the 20th September but should have been despatched
at once to Rajgunj as on the morning of the 20th September, intimation was; received of an
expected storm within thirty-six hours. It is urged that the 20th September was a fair day,
there was only one shower of rain in the afternoon, and the distance from Chitpur Ghat to
Rajgunj Ghat being about twenty miles the boat could have reached its destination long
before the cyclone. But as the learned Subordinate Judge rightly points, out the storm was
expected within and not after thirty-six hours, the defendant's agents could not know when
the storm would come and the storm signal was given evidently to detain the boats at the
ghat. It would have been imprudent to start the boat in these circumstances at once, because,
it might have been overtaken on its way to Rajgunj by the storm which was expected every
moment. We are accordingly of opinion that the defendant could not be liable on this ground.

The second ground urged is that the bales of jute ought to have been unloaded from the boat
and stored in the goods shed, at any rate upon the open pantoon with tarpaulins spread over
them, and should not have been left in the boat when a cyclone was expected. It appears that
after the storm signal was hoisted on the morning of the 22nd September the boat was
fastened with the jetty like other boats. The Court of first instance pointed out that coolies
were available for the purpose of unloading the boat, and that the goods could have been
stored in the goods shed, at any rate placed on the open pantoons, with tarpaulins spread ever
them which would have saved them from being damaged to any very great extent. But it is
found by the Court of Appeal below that in the ordinary course of business boats are not
unloaded when the storm signal is hoisted. That being so, this ground also fails. The third
ground is that the defendant in sending the bales of jute in a leaky boat from the Chitpur Ghat
to Rajgunj did not act as a man of ordinary prudence would have done under similar
circumstances with his own goods.

It is found that the boat while fastened to the jetty at Chitpur Ghat during the cyclone had
bumped against the jetty and, other boats and had sprung 20 to 30 leaks of 1 or 1 1/2 inches
in length. The Defendant as a bailee was bound to use all reasonable care, skill and diligence
to avoid the consequences of an act of God, and if there was any damage which is attributable
to this breach of duty he is liable for damages. A man of ordinary prudence would not have
sent the bales of jute in boat with 20 to 30 leaks of 1 or 1 1/2 inches in length. The Court of

15
first instance found that "the boat was kept afloat by continuous pumping of the water that
got into the hold." The goods as a matter of fact remained in that condition for thirty hours,
and from the letter, the brokers, we got it that some of the bales when received appear to have
been lying in the water. That the goods would be further damaged if sent in such a boat struck
even the manji, and he asked for orders for unloading it, but the Agent of the Calcutta
Landing & Shipping Co. did not permit him to do so. On the contrary, he sent for a launch
and ordered the boat with the cargo to be towed to its destination. That it was a very rash act
none possessed with a sense of fitness of things could doubt for one moment. The facts found
by the Court of first instance have practically been accepted by the Court of Appeal below.

The degree of the care required of a carrier in dealing with goods depends upon and varies
with the nature and condition of the thing carried. Had the goods been of such a nature that
they would not have been damaged even if carried in a leaky boat, and left in the hold of the
boat for thirty hours, the pumping out of the water would be sufficient to show that
reasonable care was exercised, because in that case the only thing nece3sary was to see that
the boat was not sunk. But bales of jute would be wetted and damaged by water entering the
boat; the defendant's agent must have been perfectly aware of the same. A man of ordinary
prudence would not have sent his own jute in a boat with twenty or thirty leaks of 1 or 1 1/2
inches in length and kept the jute in the hold of the boat for thirty hours. The pumping out of
the water no doubt saved the boat from being sunk, but it is clear that the goods were
damaged by their being despatched in such a leaky boat, as the learned Subordinate Judge
himself finds that they were damaged by water which entered the boat through the holes. It
was not, and could not be, suggested that a good boat was not available at the Chitpur Ghat,
and we think the learned Subordinate Judge, upon the facts found, should have come to the
conclusion that the defendant by despatching the sixty-eight bales of jute in a boat with 20 to
30 leaks, 1 or 1 1/2 inches in length, on its sides, and allowing the jute to remain in the hold
of the boat for 30 hours did not take as much care of the goods as a man of ordinary prudence
would under similar circumstances take of his own goods of the same bulk, quality and value.

It is contended by the learned Pleader for the respondent that the finding arrived at by the
Court of Appeal below is a finding of fact which cannot be interfered with in second appeal.
We are, however, not questioning the facts found, indeed the facts are not in dispute in this
case. We are differing as to the inference which the Court below drew from those facts and as
to the legal standard of reasonable care set up by it. We think it is open to us to see whether

16
the Court below was right in holding that the defendant in despatching baled jute in a boat
with 20 or 30 leaks, 1 or 1 1/2 inches in length, through which water entered into the boat, the
jute being left in the hold of the boat for thirty hours, complied with the requirements
of Section 151 of the Contract Act, merely because there was continuous pumping out of the
water which had only the effect of saving the boat.

JUDGEMENT

We are of opinion that the decree of the lower Appellate Court should be set aside and that of
the Court of first instance restored with costs here and below, and we direct accordingly.

Gour Chandra Mukherjee v. Andrew Yules Co-op Credit Society Ltd28:

FACTS

The petitioner was an elected director of the Andrew Yule's Co-operative Credit Society
Limited. According to the arrangement, an elected director being an employee of the Concord
Insurance was to handle society's fund appertaining to the Concord unit and to render
statement of receipts and payments at the close of the day's transaction. A cash box inside a
lock drawer was provided for keeping the money pending disbursement or remittance. The
petitioner at the material time was an elected director of the society and handled the cash of
that unit during the relevant period. The petitioner reported to the Vice Chairman of the
Society that he had kept a sum of Rs. 5842.38. When he opened the cash box he found that
the cash amount stated above was missing. The Vice-Chairman reported the matter to the
Chief Executive of the Concord Insurance who ultimately sent a report to the police. The
police made investigation but the results were not known. Thereafter the Managing
Committee considered the position and directed the petitioner to make good the loss arising
out of the alleged disappearance of the cash within a specified time. As the requisition was
not complied with the Society raised a dispute being No. 40/Calcutta of 1973-74 claiming Rs.
5842.38 with interest from the petitioner. The dispute was referred to the Arbitrator No. III
for adjudication. The Arbitrator after taking evidence and considering the material on record
decreed the amount in favour of the society directing the petitioner to pay the aforesaid
amount with interest thereon from 26-6-73 till realisation.

28
AIR 1957 Mys 55

17
ISSUES

1) Whether the defendant appellant was custodian of the cash appertaining to Concord Unit?

(2) Whether he had any civil liability arising out of the disappearance of the cash balance and
if so, what is the extent of the liability?

ARGUMENTS

In coming to his decision the appellate authority in agreement with the Arbitrator noted the
informal arrangement made by the Managing Committee in maintaining the cash. It was held
that even so, such arrangement did not alter the fact of the petitioner's being the custodian of
the cash and the petitioner was liable to make good the loss arising out of sheer negligence of
his duty.

Mr. Banerjee appearing for the petitioner submitted that both the Arbitrator as also the,
appellate authority acted without jurisdiction in holding that the petitioner was guilty of
negligence when there was no issue framed on that basis. He submitted that if an issue was
framed the petitioner would have been in a position to establish that he had followed the
informal and conventional arrangement for maintaining the cash and was not negligent in any
respect and the arrangement being imperfect the Managing Committee should have been held
guilty of contributory negligence..

The second issue as to whether he had a civil liability arising out of disappearance of the cash
balance embrace all aspects of the question involving the liability of the petitioner. This point
for decision as already stated involved the question of determination of the conduct of the
petitioner in regard to the maintenance of the cash the arrangement made by the Managing
Committee.

It has next been, said that on the findings arrived at by the appellate authority the petitioner
should not have been found liable for the amount under claim, it has been held by the
appellate authority that the Managing Committee had evolved arrangement in exercise of
their lawful jurisdiction and such arrangement was acted by the successive directors who
have been in charge of the cash without any protests on the part of the committee. Even so,
the authority held that informal or conventional nature of arrangement did not alter the fact of

18
the petitioner being the custodian of the cash. Mr. Banerjee contended that the petitioner was
not negligent in respect of the disappearance of cash.

The petitioner was the legal custodian and in charge of the cash for day-to-day operations. He
accordingly owed an obligation and legal duty to the Managing Committee for safe custody
of the cash belonging to the Society kept in his charge. In discharge of his duty, he was
expected and bound to take all such precautions as a reasonable man would take in similar
circumstances. A practice insecure and risky as is obvious, is no answer to the omission to
take adequate care and precaution a reason-able man entrusted with cash would and is
expected to take in such circumstances. It is also no answer that the Managing Committee
acquiesced to the practice imperfect as it was for the Managing Committee had put a director
in charge of the cash who was free to take all precautions in discharge of his legal
responsibility.

It has further been pointed that the petitioner on two occasions remitted heavy cash to the
office of the Concord Insurance for safe custody. He remitted Rs. 11,000/- to the Head Office
keeping a balance of Rs. 5842.38 . It was said that the Vice-Chairman refused to accept any
amount beyond Rs. 15,000/- for safe keeping in custody of Concord Insurance Company. The
Vice-Chairman was a witness in the proceedings but no such question on his alleged refusal
was put to him. Accordingly it was rightly found that his alleged explanation for not keeping
the cash with Concord office was incredible. Further there also appears to be a practice about
the deposit of cash with the Concord office which was not availed of by the petitioner and no
reason therefore has 'been established.

JUDGEMENT

The court held that the fact that many others would have resorted to the same measure of care
cannot bring the ‘care’ taken by bailee within the standard requirements of this section29. The
bailee’s duty of care isn’t limited only till the period of bailment. If after the expiry of
bailment, the bailee doesn’t want to keep the goods anymore, he has to ask the bailee to take
them away within a specified time and if the bailor doesn’t. comply then he can dispose of
with the goods after serving a proper notice of the sale of the goods to the bailor. A bailee

29
Supra note 6.

19
can’t escape his duty by delegating his duty30. It is also the duty of the bailee to try and
minimise the loss31. A bailee is also liable for the negligence of his servants acting in their
course of employment about the use or custody of the goods bailed to him32 although a
contract of exemption of liability for any loss or damage caused due to the negligence of the
servants is binding on the parties and is not hit by Section 2333 of the ICA.34

State of Bombay vs Memon Mahomed Haji Hasam35:

FACTS

The respondent was carrying the business of fish exporter in Junagadh. In 1947 custom
authorities of Junagadh under the Junagadh State Sea Customs Act seized two motor vehicles,
a station wagon and other goods on suspicious grounds. The respondent (owner of the
vehicles) filed an appeal against this order. While the appeal was pending, the state of
Junagadh merged with the state of Saurashtra which merged with the former state of Bombay
and on the division of Bombay became the part of the state of Gujarat.
Then the appeal transferred to the revenue tribunal constituted by the state of Saurashtra.
On Feb 06, 1952, the revenue tribunal set aside the order of customs authority and directed to
return the vehicles to the respondent. But when the respondent filed for the return of the
vehicles he was informed that the said vehicles were disposed off as per the order of the
magistrate under section 523 of the Code of Criminal Procedure. The respondent filed the
current suit for the return of the vehicles or an alternative remedy.

ISSUES

1. Whether the state was in the position of bailee and liable to indemnify the respondent for
the loss caused to him?
2. Whether the state was liable for the tortuous act of its servants and liable to compensate
the respondent?
30
Morris v. C.W. Martin & Sons Ltd., (1965) 2 All ER 725 (CA); Vijaya Bank v. Corpn, AIR 1991 Ker 209.
31
Kuchwar Lime and Stone Co. v. Dehri Rohtas Light Rly & Co. Ltd., AIR 1969 SC 193 as cited in Nilima
Bhadbhade, Pollock and Mulla: The Indian Contract and Special Relief Acts, (14th edn, Butterworths, 2012)
1905.
32
Hastmal v. Raffi Uddin, AIR 1953 Bho 5; Secy of State v. Ramdhan Das Dwarka Das Firm, AIR 1934 Cal
33
The Indian Contract Act, 1872 § 23
34
Central Bank of India v. Grains and Gunny Agencies, AIR 1989 MP 28.

35
1967 SCR (3) 938, 1967 AIR 1885

20
ARGUMENTS
The bailment could arise only when there is a contractual obligation between the parties but
in case of specific property, it can arise even in the absence of any enforceable contract.
Therefore the state was holding the property as a bailee and needs to take proper care of the
property till the final disposal of the case.

Concerning the second issue, the state was liable to compensate the respondent for the loss
caused to him.

JUDGEMENT

In this case the court held that when state seized the property of some person upon the orders
of Custom officer and that order is subject to appeal and later the grounds of seizures are
found to be invalid, the state has an implied obligation to take reasonable care of the seized
goods so as to enable it to be returned in the same condition in which it was seized. The court
had also held in the same case that there can be bailment and the 'relationship of a bailor and
bailee in respect of specific property without there being an enforceable contract.

Shanti Lal v. Tara Chand Madan Gopal36:

FACTS

The plaintiff had a commission agency shop at Agra in which he carried on the business of
purchasing and selling grain and other goods for his constituents. In October 1924, a large
quantity of grain purchased by the plaintiff on behalf of the defendants was lying in the
godown of the plaintiff. On 6th October 1924, this grain was damaged by an unexpected
flood which came to Agra. The river Jumna rose in flood and the godown in which the grain
was stored was submerged. Under the orders of the Health Officer a large quantity of grain
had to be destroyed. The plaintiff alleged that he was entitled to recover from the defendants
the price of the grain which he had to destroy under the order of the Health Officer. The
defendants resisted the suit upon various grounds. They pleaded that the plaintiff had not
acted with prudence in taking care of the goods bailed to him and that in view of the
provisions of Section 214 coupled with Sections 151, 152 and 189, Contract Act, the bailee
was responsible for the price of goods which were lost or destroyed from his custody.

36
AIR 1933 All 158 as cited in P C Markanda, The Law of Contract Vol.2 (1st edition, Wadhwa and Company).

21
ISSUES

1. Whether the plaintiff is entitled to recover from the defendants?

2. Whether the plaintiff failed to take due care of the good bailed to him?

ARGUMENTS

The standard of diligence required of a bailee under Sections 151, and 152, Contract Act, is
that of the average prudent man; and where the bailee has taken the same care of the property
entrusted to him as a reasonably careful man may be expected to take of Ms own goods of the
same bulk, quality and volume as the goods bailed, he is not responsible for the loss,
destruction or deterioration of the thing bailed. No cast-iron standard can be laid down for the
measure of the care due from him and the nature and amount of care must vary with the
posture of each case. The Courts below have arrived at a definite finding that in view of the
peculiar circumstances of this case, the bailee has not been remiss in his obligations to his
principal and has not been negligent in the care of the goods bailed to him. The position of
the bailee in this case was one of supereme difficulty. The appearance of a flood was
unknown and unprecendented in the annals of Agra. The factors and godown keepers had no
past experience to guide them. It could not be predicted with certainty that the river would
rise in flood. No forecast could be made of the time of its advent. The plaintiff may well have
thought that if the river rose in flood it may not reach the area where his godown stood. The
removal of the goods to some other locality was perhaps out of the question.

In an emergency the bailee has the same power to act as the agent under S., 189, Contract
Act, and in cases of difficulty he is under the same duty as has been cast upon the agent
under Section 214 of the Act which makes it incumbent on the agent to use reasonable
diligence in communicating with his principal and in seeking to obtain his instructions. The
finding of the lower appellate Court is that he fulfilled and carried out this duty. Whether the
bailee used all reasonable diligence is in the main a question of fact. From the facts found by
the lower appellate Court, the finding followed as a legitimate conclusion. The finding does
not appear to us to be open to challenge upon any legitimate ground and we must accept it.
Out of the goods cast away, 80 bags of laha and 7 bags of arhar appear to have been
recovered by the plaintiff immediately after the flood. He had however given no intimation of
this fact to the defendants. The finding of the Court below is that when they were found, the
grain contained in these bags was in an unsaleable condition. The Court of first instance

22
directed that the loss of these bags which had been damaged by the floods should be shared
half and half by the parties. The defendants in their appeal to the lower apellate Court raised a
point contesting the correctness of this order, but the plea was apparently not pressed before
that Court. We are of opinion under the circumstances the defendants should not be permitted
to raise any plea with reference to the goods. The defendants had deposited with the plaintiff
594 maunds of laha. Out of these, 37 have not been accounted for. The lower appellate Court
came to the conclusion that this result might have been due to natural causes and the
deficiency may well have been caused by the process of either shrinkage or dryage. The
Court below observes as follows:

It is a well-known fact of which the Court must take judicial notice that grain when freshly
harvested is heavier in weight than after six months' storage in a godown because the grain
dries and the natural moisture is expelled. In the present case 37 maunds' shrinkage out of
594 maunds amounts to six per cent and this is not excessive.

JUDGEMENT

The defendants were therefore entitled to a deduction of this amount from the amount
decreed by the lower appellate Court. The lower appellate Court had modified the decree of
the trial court by allowing a deduction of Rs. 22 from Rs. 1,121-3-6. To this sum of Rs. 22
should be added a further sum of Rs. 255. The result is that we allow the appeal in part and
modify the decrees of the Courts below to the extent indicated above. The parties must
receive and pay costs in proportion to their success and' failure throughout.

Ram Ghulam v. Government of U.P.37

FACTS

The suit for revision was instituted by plaintiff against the Government of United Provinces
so as to recover certain ornaments or their price. Plaintiff’s ornaments got stolen.
Subsequently, they were recovered from another house. The police searched and seized the
property by exercising the powers conferred to it under the Code of Criminal Procedure.
Thereafter, they were kept in Collectorate Malkhana.But, this time again, they were stolen
and were untraceable.

37
AIR 1950 All 206

23
The plaintiffs applied unsuccessfully to the Magistrate for an order for the restoration of the
ornaments. But, it was dismissed on finding that the Government is not liable to compensate.
The plaint alleged that the plaintiffs have learnt that the ornaments are not available at the
Malkhana on account of the defendant’s servants, and that they have not been returned inspite
of notice and ended the prayer with alternative reliefs.

ISSUES

1. Whether or not the Government was liable to indemnify the plaintiffs since it was in
the position of a bailee and the ornaments were lost through its negligence or that of
its servants?

2. Whether or not the Government was liable to indemnify the plaintiffs in accordance
with the rule that a master is liable for the tortuous acts of his servants?

ARGUMENTS

The first issue was not seriously considered. Since, the obligation for a bailee is a contractual
one and shall not arise independently. In this case, the ornaments were not made over to the
Government under any contract. So, the government never acquired the position of the bailee
and is not liable to indemnify the plaintiffs.

The second issue was considered as a substantial question of law. Accordingly, Justice Seth
said “Government is the political organizations through which the sovereign will of the State
finds expression, and through which the State functions”. On reading the Section 176,
Constitution Act, 1935 and Section 32, together it is found that such suits are only
maintainable against the Provincial Governments in respect of affairs of the Provinces, as
could be maintained against East India Company before Government Of India
Act,1858.Therefore, it was determined whether a suit for compensation was maintainable
against East India Company for the tortious acts of its servants.

East India company held a dual character till 1858. It was that of a trading corporation and a
body possessed of certain sovereign rights, although not fully sovereign. This reference was
made in the case to decide whether the tortuous acts were committed to determine the
responsibility of the Company or Secretary of State pursuant to commercial or non-
commercial undertakings. Judicial opinion is divided on the point whether the immunity

24
extends in respect of torts committed in the performance of all transactions carried on in the
exercise of sovereign powers or is confined to particular kinds of transactions only .The suit
shall fail on the ground that the alleged tortuous act was performed in discharge of an
obligation imposed by law.

JUDGEMENT

Given by Seth J.

In Ram Ghulam , the first issue was overlooked. Since, the obligation of a bailee is a
contractual obligation and cannot arise independently from a contract. In the given case, the
plaintiff did not hand over the ornaments to the Government.

The rule embodied in the maxim “Respondent Superior”is a known exception. Accordingly,
master is not liable for the acts of the servants which he performed in discharge of duty
imposed by law. Therefore, the Government is not liable to compensate for the stolen
ornaments.

25
ABSOLUTENESS OF DOCTRINE THOUGH NOT EXHAUSTIVE

Originally in English Law liability in bailment was absolute.38 After a period of time, the
English law differentiated the duty of care of a bailee who did the safekeeping of goods for
consideration and a gratuitous bailee39. In Coggs v. Bernar40, a distinction was made between
a mandate, where the duty was to use a reasonable care, and a deposit, where there was no
liability except for gross negligence41.

However, English law moved away from this distinction with the ruling in Morris v. C.W.
Martin & Sons Ltd.42 and in Houghland v. R.R. Low (Luxury Coaches) Ltd,43 and Martin v
London County Council44 which stated that every bailee is to take reasonable care and the
standard of care is the standard demanded by the circumstances of each particular case
respectively. Under ICA, Section 15145 and 152 46
treat all the bailees as same and require
each one of them to use the same degree of care on the goods as any ordinary prudent person
would do. The duty of care of the bailee has always been uniform, whether it was gratuitous
or for reward. Under this act, the standard of care is of an average prudent person in respect
of his own goods of the same bulk and value in similar circumstances.

38
Southcot v Bennet, 1601 78 ER 1041
39
Gratuitous bailment is a kind of bailment in which there is no payment, but the bailee is still responsible.
40
(1558-1774) All ER Rep 1.
41
As cited in Anirudh Wadhwa, Mulla: The Indian Contract Act (13th edn, Buttherworths, 2011) 1921.
42
1966 QB 716 at 726, 732, 738
43
1962 1 QB 694 at 698
44
(1947) KB 628.
45
Supra note 6
46
The Indian Contract Act, 1872 § 152. Note: Bailee when not liable for loss, etc., of thing bailed. The bailee,
in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing
bailed, if he has taken the amount of care of it described in § 151.

26
WHETHER THE BAILEE CAN ESCAPE LIABILITY

Sec. 15247 of I.C. Act,1987 has created much debate whether a bailee can contract himself
out of the duty prescribed by Sec. 15148? The ICA doesn’t explicitly prohibit contracting out
of obligations mentioned in Sec.15149. There has been contrasting judgments given regarding
exemption of the liability of the bailee with the help of a “special contract”. In Bombay Steam
Navigation Co v. Vasudev Baburao50 the court held that it was open to bailee to contract
himself out of the obligations imposed by Section 151 and it would be curbing liberty of him
if he is denied to do so. Court followed the same line of reasoning in State of Bank v. M/s.
Quality Bread Factory, Batala51 also. But this interpretation of Sec. 15252 defeats the purpose
of establishing minimum standard of care for the bailee.

Avatar Singh in his book53 has stated that the words in Sec. 15254 “in the absence of any
special contract” would permit the standard of duty of care to be revised upwards and not to
be diluted and also that no one can get a license to be negligent. Even the authors of Pollock
and Mulla55 have stated that it is not valid to exempt the bailee totally of his liability from
negligence. The court in United Indian Assurance Co Ltd v. Pooppally Coir Mills56 held that
bailee cannot claim a total exemption from the minimum standard of care by taking recourse
to the provision contained in Section 121 of the Major Port Trusts Act, 1963 (protection from
liability for acts done in good faith).

In Central Bank of India v. Grains and Gunny Agencies57 too, the court held that even when
bailee has contracted himself out of liability due to his own negligence, the bailee has still to
show that he took much care of the pledged goods as an ordinary prudent man. In my opinion
too, it will appear to be a superficial reading of the law if it is claimed that a bailee can get rid
of his duties by way of contract. On the conjoint reading of both Sec 15158 and 15259, it

47
Supra note 14
48
Supra note 6
49
Ibid
50
AIR 1983 P&H 224
51
Supra note 14
52
Avatar Singh, Contract and Special Relief, (10th edn, EBC) 1973.
53
Supra note 14
54
Nilima Bhadbhade, Pollock and Mulla: The Indian Contract and Special Relief Acts, (14th edn,
Butterworths, 2012) 1905.
55
1994 2 Ker LT 473
56
Supra note 23
57
Supra note 6
58
Supra note 14

27
seems clear that unless the standard of care of the bailee has been enhanced by a special
contract, he will be liable only when he fails to observe the minimum required standard of
duty of care.

WHERE BAILEE IS NOT LIABLE

Section 152 of Indian contract Act says that,


“Bailee in the absence of any special contract, is not responsible for loss, destruction or
deterioration of the thing bailed, if he has taken the amount of care required under section
151.”
As per under the section 151, bailee has responsibility only to take reasonable care of goods
bailed to him, he cannot be termed equal to an insurer. In Lakhmi Das v Babu Megh60, it was
held that bailee is not liable for loss of goods if he has taken reasonable care and the same can
be proved by him.

Gopal Singh Hira Singh v. Punjab national bank:61

During the partition of 1947, when bank employees were threatened for their life and
property, they were not held liable for the damage incurred to the goods bailed to them and
the court held that they had no duty of care.62 The court also correctly held that the bank has
discharged its duty of care properly and has taken all the steps to protect the property which
was certainly required for that time.A contract to increases liability can easily be formed
under section 152.

Kariadan Kumber v. British India Steam Navigation Co Ltd:63

In this case it was interpreted that the care enjoined on a bailee under section 151 is subject to
contract to contrary.64 It clearly signifies that liability can also be reduced by bailee through a

60
(1900) Pune rec no 90
61
Gopal Singh hira Singh v. Punjab national bank , AIR 1976 Del 115
62
Ibid.
63
(1913) 38 Mad 941
64
Pollock and Mulla Indian contract and specific relief act, ( Nilima Bhadbhade, 14th ed., 2012)

28
special contract under section 151 which has created an amendable position of law in the
recent times.

BURDEN OF PROOF OF BAILMENT

When there is any loss or damage to the goods during the period of bailment, it is itself prima
facie evidence of negligence on behalf of the bailee and burden of proof, therefore, to
disprove it lies on him.65 If he can prove that he exercised due care and in spite of that the
loss had occurred, then he would absolved of his liabilities.66 Where the machinery imported
from Liverpool had admittedly been pilfered while still in the custody of the port
commissioners, it was held that since it was not shown that care was taken by them, they
were obliged to make good the loss.67 In Sri Narasimhaswami Namagiri Amman and Sri
Ranganathaswami Temples68 the temple jewels went missing at a time when the defendant
was properly in custody of them as a bailee. He was held liable for the loss because it was
reasonably clear that either he was negligent in not taking the requisite amount of care,
caution or diligence or he must have misappropriated the jewels for himself.

65
Supra note 23
66
Ibid
67
I.T.C. Ltd. V. Board of Trustees for the Port of Calcutta, AIR 1990 Cal 129
68
AIR 1962 Mad 244

29
CONCLUSION

The discharge of duty of care by bailee is directly affected by multiple numbers of factors.
Value of goods, hazards, availability of resources with bailee, perish ability of goods, the
condition of goods bailed and professional expertise with bailee should be taken into account
while determining his duty of care. In words of Lord Hammerton, The bailee is of course not
an insurer and “is not obliged to take every conceivable or possible precaution to prevent loss
of goods bailed to him”. However, this cannot be used as a defence if he says that he used all
his best resources still the damage couldn’t be perceived or avoided.

Thus, a bailee receiving goods as a warehouseman must show degree of care as required by
him i.e. of a skilled shopkeeper who has all the resources to make sure that the goods bailed
are safe with him under his capacity of bailee.

Also, certain loopholes in law and wrong interpretation by jurists have resulted in wrongdoers
escaping liability. The legislature needs to define certain standards to measure the duty of
care so that it doesn’t create a situation of injustice towards any of the parties whether it be
gratuitous bailment or bailment for reward. Further, we need to eliminate the discrepancies
under both § 151 and 152 as it has created a stir on position of law. Both § 151 & 152 should
be read together and position of 152 should be determined as it leaves much scope for a very
wide interpretation regarding liability arising out of special contracts. Also, scope of
increasing and decreasing liability under § 152 should be ascertained to establish a firm
position of law in order to prevent further controversies.

It can be finally be concluded that bailee’s duty of care and after liability is a situation based
concept and is a question of what, in the final analysis, the bailee has promised to do.

30
BIBLIOGRAPHY

Books used

v. Pollock and Mulla Indian contract and specific relief act, ( Nilima Bhadbhade,
14th ed., 2012)
vi. Joseph Chitty, Chitty on Contracts, (31st Ed., 2012)
vii. Norman Plamer, Palmer on Bailment, (3rd Ed, 2009)
viii. T.S. Venkateswa Iyer, The Law of Contracts & Tenders, (10th Ed., 2008)

Cases
i. Finucane v. Small, (1795) 1 Esp; 170 ER
ii. Brabant & Co v. King, (1895) AC 632 at 640
iii. Blount v. War Office, (1953) 1 All ER 1071
iv. Houghland v. R.R. Low, (1962) 1 QB 694 at 698

v. O’ Reagen v Hui Bros Transport Pty Ltd , P. & N.G.L.R 261


vi. Fankhauser v Mark Dykes Pty Ltd, (1960) V.R. 376 at 37
vii. Secy of State v. Ramdhan Das Dwarka Das Firm, AIR 1934 Cal 151
viii. Messrs Damodar Valley Corporation V State of Bihar, 1960 Indlaw SC 270
ix. Travers & Sons Ltd v Cooper, (1915) 1 KB 73
x. Lakshmi narain Baijnath v. Secy of State in India, AIR 1924 Cal 92
xi. Gopal Singh hira Singh v. Punjab national bank , AIR 1976 Del 115
xii. Calcutta Credit Corp Ltd v. Prince Peter of Greece, AIR 1964 Cat 374
xiii. Kariadan Kumber v. British India Steam Navigation Co Ltd, (1913) 38 Mad 941

Statutes Used
ii. The Indian Contract Act, 1860
c. Section 151
d. Section 152

31