NATIONAL LAW UNIVERSITY, ODISHA

A PROJECT WORK ON CONTRACT LAW- II

TOPIC: CASE ANALYSIS ON ATUL MEHRA V. BANK OF MAHARASHTRA

UNDER THE GUIDANCE OF:

MS SONAL SINGH
(RESEARCH ASSOCIATE CUM TEACHING ASSISTANT)

SUBMITTED BY:
Samriddhi
22/BA/085
Suhani Sharma
22/BA/100

SEMESTER AND COURSE:

3RD SEMESTER – BATCH (2022-2027)
 AKNOWLEDGEMENT
We would like to take this opportunity to express my heartfelt gratitude to all those who have
supported and encouraged me during the course of this research project.

Firstly, we would like to thank our faculty Ms Sonal Singh for her invaluable guidance,
expertise and unwavering support throughout this project. We are extremely grateful for her
patience, understanding and encouragement that has been critical to the successful
completion of this research.

We would also like to acknowledge the invaluable assistance and support that we received
from my colleagues and friends. Their encouragement and constructive criticism helped us to
stay motivated and focused during the most challenging phases of this project.
TABLE OF CONTENTS

AKNOWLEDGEMENT............................................................................................................2
INTRODUCTION......................................................................................................................3
FACTS–.....................................................................................................................................4
ISSUES......................................................................................................................................5
CONTENTIONS OF BOTH PARTIES.....................................................................................5
1. APPELLANT..................................................................................................................5
2. RESPONDENT...............................................................................................................6
JUDGEMENT............................................................................................................................6
ANALYSIS................................................................................................................................8
CONCLUSION..........................................................................................................................9
 INTRODUCTION

Bailment, a concept outlined in Section 148 of the Indian Contract Act, 1872, involves
entrusting goods from one individual to another for a specific purpose. This is done under a
contractual agreement stipulating that once the intended purpose is fulfilled, the goods will
either be returned to the original owner (the bailor) or disposed of as per the bailor's
instructions. This definition underscores a crucial element: the transfer of possession of the
goods from the bailor to the bailee.

This transfer of possession can take two forms: actual or constructive. Regardless of how the
possession is transferred, once it is in the hands of the bailee, a legal contract of bailment is
established. There are three essential components of a bailment which includes the delivery
of goods for a specific purpose, the delivery that is made is based on a contractual agreement
and the bailed goods must be returned once the designated purpose is accomplished, or they
must be disposed of following the bailor's instructions.

It is important to note that there are two types of possession delivery: actual and constructive.
Actual delivery involves physically handing over possession of movable goods to the bailee
by the bailor. In contrast, constructive delivery entails entrusting responsibility to the bailee
without necessarily transferring physical possession. In this case analysis, we will delve into
the case of Atul Mehra v. Bank of Maharashtra, exploring its relevance and implications
within the context of bailment.

FACTS

Atul Mehra was the appealing party in this court, who filed the case before the Trial Court,
where issues 1, 2, and 3 were decided against him while issue 4 was decided against the
Respondent since it was not squeezed. With expenses, the lawsuit was dismissed. As a result,
an investigation was filed by Atul Mehra, the person appealing in this case, at the lower
appellate court, which upheld the findings made by the knowledgeable trial court. the present
Regular Second Appeal, thereafter. On January 15, 1986, at Bank of Maharashtra (the
respondent in the current scandal), Atul Mehra (the litigant in the scandal) hired storage No.
75.

He claimed that the estimated value of the jewellery he had put in the aforementioned
storage was Rs. 4,26,160. The storage was located in a sturdy chamber, but thieves broke in
and stole the contents. A formal complaint for the same was recorded on January 9th, 1989.
The FIR stated that all 43 of the storage units in the solid area had been broken into and their
contents stolen. All 44 owners of storage spaces informed the bank on February 2nd, 1989,
through an official affirmation that pointed out the respondent's egregious negligence and
crime in maintaining the storage spaces.

They said that the supposedly solid room was fabricated, and that it was composed entirely of
compressed wood when iron and cement should have been used instead. A representation
having this effect was also given to the Senior Superintendent of Police in Amritsar and the
Ministry of Finance, Government of India, on February 20th, 1989. The police had filed a
report concerning the inadequate solid room and the storage spaces there on July 21st, 1989.

ISSUES

1) Is the hiring of a locker sufficient to establish a bailment relationship under Section

148 of the Indian Contract Act, 1872, or is it also obligatory to substantiate the
entrustment, quantity, quality, and value of the property through independent
evidence?
2) Has the defendant's misconduct and negligence resulted in damages to the plaintiffs?
3) If issue No. 1 is established, are the plaintiffs eligible to seek monetary
compensation? If yes, what is the appropriate amount of compensation?

CONTENTIONS OF BOTH PARTIES

1. APPELLANT

It was argued that important pieces of evidence were overlooked by the later courts. In
reference to Ishwar Dass Jain v. Sohan Lal, Mr. Chibbar cited the Supreme Court's ruling,
which stated that "the High Court can interfere with the concurrent discoveries of certainty
recorded by the Courts below if fundamental bits of evidence has not been viewed as which,
when considered, would have prompted an alternate conclusion. According to the
knowledgeable Counsel, if the relationship between the appealing party and respondent is
established as one of bailor and bailee, then the lack of information on the respondent would
have no bearing on their risk of compensating the litigant.
The Counsel repeatedly argued that the relationship between the assemblages is one of
bailment, as defined by Section 148 of the Indian Contract Act of 1872.The knowledgeable
Counsel has persuasively argued that it is reasonable to conclude that the bailee has been
negligent if the bailee accepts to mind some goods for compensation but fails to deliver them
to the bailor when required to do so. Therefore, it makes sense to assume that the respondent
in the current case has at the very least been careless. According to the appellant's legal
counsel, Mr. R. K. Chhibbar, both lower courts failed in their verdict because they combined
their findings regarding the case of Mohinder Singh Nanda v. Bank of Maharashtra, which he
fights to be per incuriam.

Senior Advocate Chhibbar has also argued that the two academic courts below have failed to
take into account how the solid room and storage spaces have been constructed in defiance of
the Reserve Bank of India's and the Indian Banks Association's rules on security game plans
in banks.

The Academic Counsel advised that these regulations should be carefully construed and that
the solid chamber should be operated in accordance with the instructions provided therein.
Additionally, learned counsel has drawn attention to the fact that even DW-1, P. K.
Aggarwal, Senior Manager of the respondent-Bank, acknowledged the validity of the Indian
Banks Association's standards.

2. RESPONDENT

The respondent's competent attorney, Mr. Ashok Pal Jaggal, has argued that the parties'
agreement establishes a landlord-tenant relationship. The phrase "rent and hirer" is used in
the agreement. This arrangement cannot be compared to a bailment. He has cited Section 106
of the Transfer of Property Act, which outlines the requirements for providing a notice of
tenancy termination. A written notice of termination is required per the parties' hiring
agreement.

JUDGEMENT

On issue 1, Justice S.S. Nijjar opined that exclusive possession of goods is a sine qua non for
establishment of “Bailment” under section 148 of the Indian Contract Act, 1872. As a result,
merely hiring a locker would not establish a contract of bailment under Section 148 of the
Indian Contract Act of 1872. He further stated that the issue of reasonable care and the level
of damages would arise only when it was demonstrated that the bailee gave the bailor, i.e. the
bank, actual exclusive control of the property. Because the bank was unaware of the contents
of the locker, it was difficult to determine the amount, quality, or worth of the jewellery that
was purportedly held in the locker at the time of the alleged robbery. The appointed authority
ruled that it was insufficient to show that the appealing party relied on the respondent's
responsibility of the adornments. The appellants were the only ones who knew what was
substantially kept in the locker/storage, according to the learned constituted authority. The
offended parties have not provided appropriate proof for the equivalent. In the above manner,
the injured party had failed to demonstrate entrustment of the adornments in order to prove
bailment.

On Issue 2 regarding the presence or absence of any misconduct or negligence on behalf of

the respondent, the court RELIED on several precedents while applying the established
principle to the current case, The bench held that The principle of res ipsa loquitur can be
used to infer negligence but not misconduct. In this case, the respondent bank had no
knowledge of what was inside the locker. Merely because the plaintiff entrusted their
belongings to the bank and used their services to access the locker does not mean that the
bank was aware of the specific contents of the locker. Only the appellant possesses full
knowledge of what was stored in the locker that was subject to the robbery.

Mr. Chhibbar, the learned Senior Counsel, has cited another judgment from this Court, Mela
Ram v. Mohan Singh, AIR 1978 Punj & Bar 323. In this case, it was established that the
principle of res ipsa loquitur can be invoked when an accident appears more likely to have
been caused by negligence for which the respondent is responsible than by any other factor.
In such cases, the mere occurrence of the accident serves as prima facie evidence of
negligence.

There is no disagreement with the aforementioned legal principles outlined in the mentioned
decisions. However, these principles must be applied to the specific circumstances of the
current case. In my considered opinion, there is insufficient evidence on record to support the
inference that, given the facts and circumstances of this case, the robbery was a result of
negligence on the part of the respondent-bank. Similar to the "skid" of the bus in the Ram
Pertap case (referenced above), the robbery is a neutral event. It cannot reasonably be
claimed that the robbery would not have occurred if the lockers and strong room had been
constructed in accordance with the guidelines issued by the Indian Bankers Association and
the Reserve Bank of India. The plaintiffs have not presented any evidence to demonstrate that
the strong room and lockers were not built to the specified standards. Therefore, even if
bailment is established, both the lower courts have correctly ruled that the respondent-bank is
not liable. Consequently, the appellant's case, alleging misconduct and negligence on the part
of the respondent bank in safeguarding the entrusted locker, lacks merit due to the appellant's
failure to substantiate their claims of bailment.

Issue 3–There is no proof of any kind to show the value of the Jewellery which was kept in
the locker, No expert witness has been produced to show that the jewellery mentioned in the
list Annexure-A to the plaint would be worth the amount claimed.

The judge also cited the case of Mohinder Singh Nanda, which involved the same incident of
the robbery of 44 lockers. The judge in that case determined that it was not per incuriam,
making it binding on this court. In that case, it was ruled that the bank did not have exclusive
possession of the items, and consequently, no compensation was awarded to the plaintiff. The
lower courts relied on this precedent, and the current court has confirmed the correctness of
this reliance in determining the test of entrustability of the possession to give rights of the
bailee-bailor relationship as mentioned under section 148 of the Indian Contract Act, 1872

In another case, the judge established a similar principle, emphasizing the need to
demonstrate that the bailor was aware of the property's value and entrusted it for safekeeping.
In this instance, the bank was entrusted with jewelry, and the value of the jewelry was
adequately substantiated by evidence provided to the police at the time of the robbery. The
bank was found liable for negligence since the robbery was committed by the bank's manager
on its premises. The plaintiffs have entirely failed to show the entrustment of the allegedly
kept items in the locker. There is no evidence of any kind to demonstrate the value of the
jewellery kept in the locker, and no expert witness has been presented to substantiate that the
item stated in Annexure-A to the plaint is worth the amount claimed.

ANALYSIS

Given this, the court in the case of Atul Mehra v Bank of Maharashtra had to decide whether
the plaintiffs' rental of the lockers constituted real surrender of possession to the defendants.
Atul Mehra filed an appeal at the High Court of Punjab and Haryana in this case. It is one of
the most significant in India because it establishes the notion that leasing lockers at banks
does not constitute a bailment contract.It has already been discussed in various cases, and this
court has supported the idea that just leasing a bank locker does not represent conveyance of
possession, which is an essential element for the bailment contract. The erudite Judge further
said that in order to constitute a bailment arrangement, the bailee must be made aware of the
contents of the locker so that it may assess the type and extent of the security and potential
liabilities.

The entire judgment is based on a prior finding by the same court about the same occurrence,
which involved the burglary of 44 lockers at the Bank of Maharashtra. This decision
established a significant concept in the area of providing goods under a bailment contract.
Essentially, it said that the bailee (the entity receiving the item for safekeeping) must be
informed about the substance of what they are receiving in order to assess potential future
culpability. The bank had no idea about the quality, amount, or type of the things held within
the locker in this case. By deciding in favor of the respondents, the court made the correct
choice since holding the bank liable for the loss of objects placed in the locker by their clients
would possibly result in an overwhelming amount of liabilities. Proving that the bank had
sole custody of the locker's contents may be difficult. Such broad responsibility may also
deter banks from providing this service, which is frequently utilized by many people
throughout the world. This decision establishes an important precedent by relieving banks of
some of their obligations, which is necessary for them to provide services to the public. The
customer is liable for the contents of a bank locker as long as they are involved in accessing
the lockers, but accountability would undoubtedly transfer to the bank in the case of a breach
of trust by any of its staff.
 CONCLUSION

In the case of bailment according to Section 148 of the Indian Contract Act, 1872, the Atul
Mehra v. Bank of Maharashtra case offers a key legal precedent. The core idea of bailment,
as it is defined in this Act, is the transfer of ownership of commodities from the bailor over to
the bailee to obtain a certain purpose under the auspices of a contract.Whether renting a bank
locker constituted a bailment contract was the main issue in this case. The court's ruling made
it clear that a bailment is not automatically established by the simple act of renting a locker.
The proof of entrustment and how possession is transmitted, whether actually or
constructively, are the key components. A bailment contract cannot be created without such
proof.This situation emphasizes how crucial it is to present precise, convincing proof when
claiming a bailment relationship. It emphasizes that, assuming the necessary conditions are
met, a bailment contract may be triggered by the delivery of either real or constructive
possession. The case ultimately serves as an example of the complex legal complexities
involving bailment and the need for parties to expressly specify their rights and obligations in
agreements concerning the delivery of commodities. It reaffirms the idea that ownership is at
the core of bailment and that the legal system of bailment is ineffective without correct
transfer of possession. The relevance of comprehending the nuances of bailment in
contractual agreements is highlighted by the Atul Mehra v. Bank of Maharashtra case,
demonstrating the importance for guaranteeing that each of the bailors and bailees are
cognizant of their responsibilities and liabilities under the law.