BAILMENT

BAILMENT
• Bailment – A delivery of personal property by one person
(the bailor) to another (the bailee) who holds the property
for a certain purpose under an express or implied contract.
Unlike a sale or gift of personal property, a bailment
involves a change in possession but not in title.
- Black’s Law Dictionary (8th Edn.)
• Indian Contract Act, 1872
Section 148: “Bailment”, “Bailor” and “Bailee”
defined –
A “bailment” is the delivery of goods by one person to
another for some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or
otherwise disposed of according to the directions of the
person delivering them.
 The person delivering the goods is called the
“bailor”.
The person to whom they are delivered is
called the “bailee”.
Explanation.- If a person already in possession of
the goods of another contracts to hold them
as a bailee, he thereby becomes the bailee,
and the owner becomes the bailor of such
goods, although they may not have been
delivered by way of bailment.
• Delivery of Goods
• From one person to another
• For some purpose
• Contract
• Goods to be returned after accomplishment
of purpose
BAILMENT – ESSENTIAL ELEMENTS

BAILMENT – ESSENTIAL ELEMENTS

SPECIFIC
DELIVERY OF CONTRACT PURPOSE MOVABLE
POSSESSION PROPERTY

GOODS TO BE
RETURNED ON
ACCOMPLISHMENT
OF PURPOSE
 Bailment - Essential elements
Delivery of Possession
by one person to another
• Delivery of Possession as distinguished from
mere custody
– “One who has custody without possession, like a
servant, or a guest using his host’s goods is not a
bailee”
– “The goods must be handed over to the bailee
for whatever is the purpose of bailment”
– “Once this is done, a bailment arises, irrespective
of the manner in which this happens.”
 Ultzen v. Nicols (1894) 1 QB 92
Brief Facts:-
• Defendant was a restaurant-keeper
• Plaintiff went into the restaurant for the
purpose of dining
• According to plaintiff, when he entered the
room, a waiter took his coat, without being
asked, and hung it on a hook behind him.
• When the plaintiff rose to leave, the coat was
gone.
• Plaintiff brought an action to recover damages
for the loss of the plaintiff’s coat by the
negligence of the defendant (restaurant-
keeper).
• The jury returned a verdict for the plaintiff
• Appeal preferred by the defendant
 Defendant’s arguments
• “There was no evidence of a bailment of the
overcoat, which was never in the exclusive
custody of the defendant or his servants.
• It does not appear that it was any part of the
waiter’s duty to take charge of the coats of
customer
or that what he did was more than an act of
courtesy towards the plaintiff
 Defendant’s arguments (contd...)
• There is no suggestion that the theft was
committed by any of the defendant’s servants
and the defendant is under no greater
liability towards his customers than a
lodging-house keeper, who is not responsible
to his lodger for a theft committed by a
stranger (Holder v. Soulby)
 Plaintiff’s arguments
• “There was ample evidence of a bailment of the
coat.
• The waiter took the coat without being asked by
the plaintiff to do so, and hung it up;
the jury may therefore infer that he offered
to take the coat, and that he did so in the
ordinary course of his duty as a servant of the
defendant.
The question whether he did it in the course of his
duty or merely as an act of politeness is purely a
question for the jury...”
Jury had decided in favour of the plaintiff.
 Questions for determination
1. Whether the defendant was a bailee of the
coat?
2. Whether there was on the defendant’s part
any negligence, owing to a want of reasonable
care?
 Court’s decision
• “As to the second point, there was, in my
opinion, ample evidence of negligent
conduct. The first point is more troublesome.”
• “Whether the facts shew a bailment of the
coat or merely shew that it was taken by the
waiter as an act of good-nature or an act of
service, and without any intention of taking
charge of it.”
• “Upon the evidence, I think that the jury were
justified in finding that there was a bailment.”
• “The evidence really comes to this, that it was
the waiter who relieved the plaintiff of his
coat, and who selected the place where it
should be put.”

• “As I suggested during the argument, there

might have been a waiter at the door of the
room, or in the vestibule, to take the coats of
the guests before entering the dining-room.”
• If such a man takes a customer’s coat, the mere
fact of his taking and disposing of it where he
chooses would be evidence upon which a jury
might properly find that the restaurant-keeper
was a bailee of the coat, for such a system might
obviously add to the popularity of the
establishment, and would probably be adopted
with that very object in view.
• In my opinion, there is only a difference in
degree between the case of the restaurant-
keeper providing a servant to take his
customer's coats in that way and the present
case.
 Kaliaperumal Pillai v. Visalakshmi Achi
AIR 1938 Mad 32
• Plaintiff handed over certain jewels to a
goldsmith for the purpose of being melted
and utilized for making new jewels.

-----------

• The jewels were lost one night

• “The evidence shows that the plaintiff arranged
that certain jewels which she desired to be
made should be got made by certain goldsmiths
working in the defendant's house, apparently
because there was more convenient
accommodation there.
• The plaintiff admits that she used to attend
every day in the defendant's house during the
time that the goldsmiths were at work.
• It is true that even according to the defendant's
written statement he received at the outset two
old jewels from the plaintiff for the purpose of
being melted into gold and being utilized for the
making of the new jewels;
• All that the evidence discloses is that every
evening, as soon as the gold-smiths’ work for
the day was over, the plaintiff used to receive
the half made jewels from the goldsmiths,
put them into a box which the defendant had
given her for her use and put the box in a
room in the defendant's house.
• One of the plaintiff's witnesses adds that even
the key of that room was kept in the
plaintiff's possession.
 Question for determination
• Whether the defendant can be charged as a
bailee and made liable for the loss of some
gold belonging to the plaintiff ?
 Court’s view
• “On these facts, I do not see my way to hold
that the defendant can be regarded as a
bailee in respect of the gold or the half
finished jewels.”
• Under the provisions of Sections 148 and
149, Contract Act, delivery is necessary to
constitute the bailment.
• It is true that the delivery may be made by doing
anything which has the effect of putting the
goods in the possession of the intended bailee;
• but the mere leaving of the box in a room in the
defendant's house, when the plaintiff herself
took away the key of that room, cannot certainly
amount to delivery within the meaning of the
provision in Section 149.
• “The evidence shows that one morning, when
the plaintiff went into the room to take out the
jewels for further work, the jewels were found
missing.
• It is not the plaintiff's case that on the previous
day she handed over the unfinished jewels to
the defendant.
• I cannot agree with the contention of the
learned Counsel for the respondent that
because in the first instance the old jewels were
handed over to the defendant the bailment
thereby constituted continued for all time”
• “Every day when the unfinished jewels were
handed back by the goldsmith to the plaintiff,
the jewels came back to her possession
• and if at the later stages she desires to throw
upon the defendant the onus of exonerating
himself from the obligations of a bailee, she
must prove some acts whereby the articles
could be held to have gone into the
defendant's possession.
• I find no such proof in the present case.”
• “...any bailment that could be gathered from
that admission must be taken to have come
to an end as soon as the plaintiff was put in
possession of the melted gold.
• There is nothing in the evidence to suggest
that the gold that thus came into the
plaintiff's possession was ever thereafter
"delivered" to the defendant by the plaintiff.”
 Atul Mehra and Anr. v. Bank of Maharashtra
AIR 2003 P & H 11
Would hiring of a bank’s locker and storing things
in it would constitute a bailment?
Brief Facts
• Appelants hired a locker from the respondent-
bank
• According to the appellants, they had deposited
jewellery in the value of Rs. 4,26,160/-.
• It was alleged that respondent-bank on account
of its misconduct and negligence did not take
proper care of the lockers and the strong room
which were built at the back of the building.
• According to the appellants, the alleged
strong room was made up affair and it was
made only of plywood, whereas it ought to
have been made of iron and concrete.
• All the 44 lockers in the alleged strong room
of the respondent-bank were broken by
miscreants and the contents thereof were
stolen.
 Issues framed by the Trial Court
• 1. Whether the plaintiffs have suffered loss due
to misconduct and negligence by the defendant?
• 2. If issue No. 1 is proved, whether the plaintiffs
are entitled to recover any amount. If so, to
what amount?
• 3. Whether the defendant-Bank has no
contractual liability to make good loss incurred
by the plaintiffs?
• 4. Whether the plaintiffs have no cause of action
or locus standi to file the present suit?
• 5. Relief.
• After considering the evidence, produced by
the rival parties, the learned trial Court
decided issue Nos. 1, 2 and 3 against the
appellants and issue No. 4 was not pressed
and thus, it was decided against the
respondent.
• Suit of the appellants dismissed by Trial Court
• The Lower Appellate Court upheld the
findings given by the trial Court.
• Hence, the present Regular Second Appeal.
Additional question of law formulated
in the present appeal
• "Would the relationship between the locker
hirer and the bank fall within the definition
of bailment as given in Section 148 of the
Indian Contract Act, 1872, merely on the
locker being hired;
or is it necessary also to prove by
independent evidence entrustment,
quantity, quality and value of the property
claimed?”
 Appellant’s arguments and Court’s
view
• Counsel for Appellant argued that the learned
courts below (i.e. Lower court and lower
appellate court) failed to consider vital pieces
of evidence.
 Court’s view
• A perusal of the Judgment of the learned trial Court
shows that learned trial Court has meticulously
considered the entire evidence led by the parties.
• there was a legal contract between the appellants and
the respondent-bank.
• The learned trial Court on the basis of the evidence
came to the conclusion that a robbery did take place
in the bank. The lockers were opened with a gas
cylinder.
• The robbery was beyond the control of the Bank
Manager.
• It has further been held that the respondent-bank was
obliged to keep the locker intact.
• Thereafter, it has been held that the locker is
operated without any knowledge to the
respondent-bank as to how many articles and
of how much weight and value have been
stored in the locker. These facts are personal
to the customer.
• It has been held that the contents of the
locker were never brought to the notice of
the respondent-bank.
• There is merely oral statement of the
appellants with regard to the contents of the
locker.
• The learned trial Court has also held that there
was no negligence on the part of the Bank
Manager.
• It has also been held by the learned trial Court
that he (Bank Manager) was not required to give
a report with regard to the construction of the
strong room or the lockers.
• The learned trial Court, thereafter, held that the
appellants could have produced a building
expert who could have thrown some light as to
whether the strong room was built in
accordance with the norms.
• No such expert was produced
 Lower Appellate Court’s findings
• It has been held that from the evidence produced by
the parties, negligence cannot be attributed to the
respondent-bank because it was a case of burglary
and the officials cannot apprehend that such a
situation shall arise.
• not only the respondent-bank denied the knowledge
about the contents of the locker, but, even PW-7 Smt.
Pushpa Mehra, plaintiff No. 2, had admitted in her
cross-examination that the list of the contents of the
locker were never supplied to the respondent-bank.
• Therefore, the learned Lower Appellate Court came to
the conclusion that there was no entrustment of the
goods allegedly kept in the locker by the appellants.
 Lower Court’s findings (contd...)
• It was held that the appellants could have
proved the factual position with regard to the
nature and quality of the strong room and
the lockers by producing an expert witness,
such as Civil Engineer.
• Counsel for the appellant painstakingly,
argued that the relationship between the
appellants and the respondent-bank was that
of a bailor and bailee as given in Section
148 of the Indian Contract Act, 1872.
• According to the learned Counsel, once it is
accepted that the relationship between the
parties is that of "bailment", the lack of
knowledge of the contents of the locker by
respondent-bank would not affect their
liability to compensate the appellants.
• Reliance was placed, inter alia, upon a number of cases
to illustrate the law in England with regard to
bailment.
• “These authorities are of no assistance to the
appellants in the present case.
• In all these cases, exclusive possession of the
property had been handed over by the bailor to the
bailee.
• I am of the considered opinion that, exclusive
possession is sine qua non for bailment.
• Therefore, I have no hesitation in coming to the
conclusion that mere hiring of a locker would not be
sufficient to constitute a contract of bailment as
provided under Section 148 of the Indian Contract
Act, 1872.”
• In order to constitute bailment, as provided
in Section 148 of the Act, it is further necessary
to show that the actual exclusive possession of
the property was given by the hirer of the locker
to the bank.
• It is only thereafter that the question of
reasonable care and quantum of damages would
arise.
• In the present case, it is impossible to know the
quantity, quality or the value of the jewellery
that was allegedly kept in the locker at the time
when the robbery occurred
• “In all the authorities (supra) the common
feature is that exclusive possession of known
property was given by the bailor to the bailee.
• In the present case, the plaintiffs alone had
the knowledge of contents of locker,
therefore, the plaintiffs had to lead
independent evidence to prove that the
jewellery was actually in the locker on the
date of the robbery.
• Even if the plaintiffs had proved this peculiar
facts; they would still have to prove the value
of the jewellery.
• No evidence, except the bald statement of the
plaintiffs, and the list Annexure-A, has been
produced by the plaintiffs.
• Therefore, clearly the plaintiffs have failed to
prove entrustment of the jewellery to
constitute bailment as required under Section
148 of the Indian Contract Act, 1872.”
• The respondent-bank could only be fastened
with liability on the contents of the locker
being disclosed to it.
• In the absence of this information, it would
have to be held that there was no
entrustment of the goods to constitute
bailment as required under Section 148 of the
Indian Contract Act, 1872.
• Kaliaperumal Pillai case relied upon.
• These observations seem to be fully applicable
to the facts and circumstances, of this case.
• There is no evidence whatsoever to suggest
that the jewellery was ever deposited in the
locker.
• Furthermore, there is no evidence to prove
that the value of the jewellery was as
claimed by the plaintiffs.
National Bank of Lahore Ltd. v. Sohan Lal Saigal
and Ors. AIR 1962 P & H 534
Whether a contract of bailment exists between
a customer, who has hired a locker on rent,
and the bank?
• In this case, lockers hired out were tampered,
and only such lockers were given which could
be opened/accessed without key of the
customer (in fact, without any key in this case)
• “The learned counsel has sought to assail the
theory of a bailment being created in such
circumstances on the ground that the
definition of bailment given in the Indian
Contract Act would not justify the view that a
relationship of bailor and bailee comes into
existence between persons who take on rent
a locker in a safe deposit vault and the bank.”
• Section 148 defines bailment as...
 High Court’s view
• It may be that the person who hires a locker
retains some control over it by having one key
with himself but if the locker can be operated
without any key, as was possible in the
lockers which were rented out to the plaintiffs,
then at once any impediment in the way of
control and possession of the Bank to whom
the locker belonged and in whose strong
room it has to be found, would be removed
and it could well be said that the bank was
strictly in the position of a bailee.
• Section 149 – Delivery to bailee how made –
The delivery to the bailee may be made by
doing anything which has the effect of
putting the goods in the possession of the
intended bailee or of any person authorised to
hold them on his behalf.
 Actual or constructive delivery
• Actual Delivery – “When the bailor hands
over to the bailee physical possession of the
goods, that is called actual delivery.”
 Constructive Delivery
• “There is no change of physical possession,
goods remaining where they are, but
something is done which has the effect of
putting them in the possession of the bailee.”
Bank of Chitoor Ltd. v. P. Narasimhulu Naidu and
Ors. (AIR 1966 AP 163)
• Defendants borrowed Rs. 10,000/- under a promissory
note from the Bank for family necessity
• A cinema projector and other accessories belonging to
defendants (Nos. 1 to 3) were pledged with the
plaintiff-Bank.
• The property pledged was kept by the Bank with
defendants 1 to 3, since they formed the equipment of
a running Cinema.
• While matters stood thus, the pledged machinery was
sold away by defendants 1 and 2 to the 4th defendant,
contrary to the terms of the pledge, and the 4th
defendant obtained the same in spite of his
knowledge, that they were pledged to the Bank.
 Letter to bank acknowledging possession
• "The Manager, The Bank of Chittoor Ltd., Nagari.
Nagari,
dated 19-9-1949.
Dear Sir,
Ref: Loan dated 19-9-1949 on the pledge of Cinema
machinery and allied machinery:--
I request you to leave the Cinema projector and allied
machinery pledged to the loan dated 19-9-1949 in my
possession to run the shows. I will hold the same to the
Bank in trust and will be prepared to give possession of the
entire machinery to the Bank whenever so demanded.
During the possession of the machinery I will keep all the
articles and the projector safe and I would be responsible
for any loss or damage to the same.
Yours faithfully,
Sd. Appalaswami Naidu.”
• “This letter acknowledged the possession of
the Bank in respect of the pledged goods, and
recited that the first defendant was having
the possession of the pledged goods as a
trustee of the Bank, and that he agreed to
deliver the machinery to the plaintiff
whenever so demanded.”
 Contention of one of the Defendants
• One of the contentions on behalf of the 4th
defendant –
there is no valid pledge at all..., as the
Bank never had possession.
 Court’s view
• Court referred to Sections 148 and 149 of the
Indian Contract Act, 1872.
• Court held that it is clear “...that delivery to the
bailee may be made by the bailor by doing
anything which has the effect of putting them in
the possession of the bailee or of any person
authorised to hold them on his behalf.
• It is, therefore, not always necessary that the
bailee himself should be in physical possession
of the goods. Delivering them to a person
authorised to hold them on behalf of the bailee
is also sufficient delivery, and constitutes a valid
bailment
• “In the instant case, having regard to the
language of Ex. A. 3 (i.e. Letter) , it must he
held that there was a constructive delivery, or
delivery by attornment (expressed or implied
consent to a transfer of right...), to the Bank.
• Since then there was a change in the legal
character of the possession of goods, though
not in the actual and physical custody.
• Even though the bailor continued to remain
in possession, it was the possession of the
bailee.”
 N.R. Srinivasa Iyer v. New India Assurance Co.
Ltd. and Ors. (1983) 3 SCC 458
• Plaintiff-Appellant was the owner of a motor
car
• The car was insured in respect of accident,
loss or damage.
• The car suffered damage in an accident
(within the period of insurance)
• Car was taken to a repairing workshop and left
there.
• Intimation regarding such accident was sent to
the insurer requesting it to discharge its
obligation under the insurance policy
• Insurer accepted the repair charges and
informed about the same to the plaintiff-
appellant as well as the repairer
• Car was in the custody of the repairer since
the date of accident, for repair work
• Fire occurred in repairer’s workshop and the
car was destroyed
 Questions for determination
• Whether the Insurer was a bailee of the
plaintiff’s/appellant’s car?
• Whether the Insurer failed to take as much
care of the car as a person of ordinary
prudence would in similar circumstances take
of his own car of the same quality and value?
• Trial Court’s decision – Para 4
• High Court’s decision – Para 6
• Question regarding bailment – Para 9
• Paras 15, 16 and 20
 Plaintiff’s arguments
• Plaintiff called upon the Insurer to indemnify
him for the loss as per the terms of the policy of
insurance alleging that the Motor Car was in the
possession and custody of M/s P.S.N. Motors Ltd
on behalf of the Insurer
• Car was being repaired at the sole responsibility
of the Insurer under its instruction and
• since the Insurer had entrusted the Motor Car
for repairs to a workshop in which several
automobiles with inflammable materials like oil,
petrol, tyres etc. were lying without ascertaining
whether the workshop was insured against fire
and other risks, the Insurer was liable to make
good the loss.
 Trial Court’s decision
• The trial court held that the Motor Car was
entrusted to the repairer for and on behalf of
the Insurer and the insurance company was
liable for the loss of the Motor Car as it was
in possession of the agent of the insurance
company.
 High Court’s decision
• “The High Court came to the conclusion that it is clear
from the correspondence between the parties ... that
the car was entrusted to P.S.N. Motors Ltd. Trichur by
the plaintiff's son on behalf of the plaintiff for the
repairs and that it was done without reference to the
insurance Company and that all that the defendant-
insurance Company agreed was to pay to the plaintiff
or to P.S.N Motors Ltd. on his behalf, the amount which
was settled as the charges for carrying out all the
repairs.
• Approaching the matter from this angle, the High
Court held that the Insurer was not a bailee of the
Motor Car and the plaintiff cannot succeed in his
claim as founded on a contract of bailment...”
 Supreme Court’s decision
• ...the contract of insurance as evidenced by the insurance
policy clearly spelt-out a duty and an obligation to remove
the damaged car covered by the policy to the nearest
repairer as soon as the accident occurred.
• This was an obligation cast on the Insured to be carried
out on behalf of the Insurer, and this was to be done for
the benefit of the Insurer because the Insurer had the
option to repair or to replace the car.
• In the background of these facts, the handing over of the
car by son of the plaintiff to the repairer would constitute
a delivery on behalf of the Insurer who would be the
bailee and the repairer would be the sub-bailee.
• This inference is further strengthened by the
correspondence that ensued between the Insurer and the
repairer
• The obligation to get the car repaired was of the
Insurer. It had a right to take the car into its
custody.
• It did formally take the car into the custody when
it expected the repairer to whom the custody was
given as the one acceptable to them and entered
into negotiations about the repair charges and
finally agreed to pay the repair charges to the
repairer.
• Unquestionably, the Insurer would be the bailee
and the repairer would be the sub bailee.
• Whether the respondent-company failed to take as
much care of the Motor Car as a person of ordinary
prudence would in similar circumstances take of his
own Motor Car of the same quality and value?
• Car was destroyed by fire while it was in the custody of
sub-bailee (repairer’s workshop)
• sub-bailee was bound to take the same care as a man
of ordinary prudence would take in regard to his own
goods of the same quality and value as was expected
of the bailee.
• Now no evidence has been led by the defendants to
explain what amount of care the bailee or the sub-
bailee took in respect of the car.
• When the custody is of the bailee or the sub-
bailee, the burden is on them to show how
they handled the car. This is well-established
and need no authority.
• The burden was on the bailee and sub-bailee
to establish to the satisfaction of the Court as
to what degree of care was taken in respect
of the damaged car.
• Plaintiff has led some evidence in this behalf
as to the careless manner in which the car
was kept in the workshop where
inflammable material was kept.
• Without doubt the burden being on the bailee
and the sub-bailee and the same having not
been discharged, the learned trial Judge was
perfectly justified in accepting the evidence of
the plaintiff and in recording the finding that
bailee and the sub-bailee had not taken such
care of the car as was expected of the prudent
man in respect of his own goods of the same
quality and value.
• Therefore, the bailee is liable for the loss
suffered by the plaintiff the bailor.
 Sub-bailment
• Who is a sub-bailee?
“A sub-bailee is a person to whom the
actual possession of goods is transferred by
someone who is not himself the owner of
goods, but has a present right to possession
of them as bailee of the owner” (Halsbury’s Laws
of England Vol. 4, 5th edition, 2011)
 Sub-bailment (contd...)
• “Authority to sub-bail may be inferred from
practices in vogue that can be imparted to the
parties.
• A carrier might sub-bail by engaging another
carrier as sub-contractor and in such case,
the sub-bailee would be treated as bailee of
the original bailor.” (Learoyd Bros. & Co. v. Pope Sons
(Dock Carriers) Ltd. (1966) 2 Lloyd’s Rep 142)
Sub-bailment with the authority of owner
• “Where the bailee sub-bails the goods with
the authority of the owner, the relationship
between the owner and the sub-bailee is that
of bailor and bailee, and the owner is bound
by the terms on which the goods are sub-
bailed, if he has impliedly consented to the
bailee making the sub-bailment containing
those conditions, but not otherwise.” (Singer Co.
(U.K.) Ltd. v. Tees and Hartlepool Port Authority (1988) 2
Lloyd’s Rep 164) following Morris v. CW Martin and Sons Ltd.)
 Delivery should be upon contract
• “When a person’s goods go into the
possession of another without any contract,
there is no bailment within the meaning of
Section 148 of the Contract Act, 1872.”
 Ram Ghulam and Anr. v. Govt. of United
Provinces
AIR 1950 All 206
Brief facts
Civil Revision
• “Certain ornaments were stolen from the house of the
plaintiff.
• On a search made by the police, they were recovered
from another house.
• Those ornaments were produced as exhibits at the
trial.
• Thereafter they were kept in the Collectorate
Malkhana.
• They were again stolen from the Malkhana and could
not be traced.
• Plaintiff sued the Government for recovery of the
ornaments and in the alternative for the recovery of
their price.
• Suit was dismissed.
Grounds on which dismissal in the impugned
judgment was sought to be assailed.
1. Position of the government was that of the bailee,
and it was liable to indemnify the plaintiffs, if the
ornaments were lost through its negligence or
through, the negligence of its servants.
2. Government is liable to indemnify the plaintiffs in
accordance with the rule that Master is liable for the
tortuous acts of its servants.
 Court’s view
• “The first ground is manifestly untenable and
does not deserve any serious consideration, for
the obligation of a bailee is contractual
obligation and springs only from the contract of
bailment.
• It cannot arise independently of a contract.
• In this case, the ornaments were not made over
to the Government under any contract
whatsoever; in fact the ornaments were not at all
handed over by the plaintiffs to the Government.
• The Government, therefore, never occupied the
position of a bailee and is not liable as such to
indemnify the plaintiffs.
Non-Contractual Bailments – Bailment
without contract
• Cheshire and Fifoot – “At the present day, no
doubt in most instances where goods are lent
or hired or deposited for safe custody, or as
security for a debt, the delivery will be the
result of a contract. But this ingredient,
though usual, is not essential.”
• Bailment without contract is recognised by
English law.
Indian cases where obligation was imposed on
bailee without contract
 State of Gujarat v. Memon Mahomed Haji
Hasam AIR 1967 SC 1885
• Respondent carried on business as exporter of
fish
• The Customs authorities seized two motor
trucks, a station wagon and other goods
belonging to the respondent (grounds – they were
used for smuggling goods in the state; some of the goods
were smuggled goods etc.)
• An appeal was filed by the respondent under
the statutory provision (subsequently appeal was
transferred to the Revenue Tribunal competent to hear it)
• 06.02.1952 - Revenue Tribunal set aside the
order of confiscation of customs authority
and directed the return of such goods to the
respondent
• 13.03.1952 - Respondent applied for return of
the vehicles
• But he was informed that they had been
disposed of under an order of Magistrate
• Respondent filed suit for return of said
vehicles, or in the alternative for their value
• Ground for filing of suit
- Pursuant to the order of Revenue
Tribunal, which in the absence of any
proceedings against it had become final, State
Government was bound to hand over the said
vehicles.
• Order of Revenue Tribunal
• No proceedings against such order
• Order became final
• Government bound to hand over the vehicles
to Respondent
• Police applied to the Magistrate for disposing
of the vehicles as unclaimed property, in
spite of the fact that they had the knowledge
of the vehicle being seized from the
respondent.
• No proper notice was served upon the
respondent regarding the application for
disposal of the vehicle
• Respondent was not aware of the
proceedings and order of disposal passed by
Magistrate
Evidence showed that
• Vehicles were seized in 1947 by Customs
Officer (State of Junagarh)
• They were kept in an open space opposite to
the police station at Veraval
• Vehicles remained wholly uncared for from
1947 to October 1951
Result – greater part of the machinery of
the vehicles, tyres and even some wheels
were pilfered away leaving only skeletons of
the vehilces
• Bailment is dealt with by the Contract Act only in
cases where it arises from a contract but it is not
correct to say that there cannot be a bailment
without an enforceable contract.
• As stated in "Possession in the Common Law" by
Pollock and Wright, p. 163, "Upon the whole,
it is conceived that in general any person is to be
considered as a bailee who otherwise than as a
servant either receives possession of a thing from
another or consents to receive or hold possession of a
thing for another upon an understanding with the
other person either to keep and return or deliver to
him the specific thing or to (convey and) apply the
specific thing according to the directions antecedent
or future of the other person"
• There can, therefore, be bailment and the
relationship of a bailee in respect of specific
property without there being an enforceable
contract. Nor is consent indispensable for
such a relationship to arise.
• A finder of goods of another has been held to
be a bailee in certain circumstances.
• On the facts of the present case, the State Government no
doubt seized the said vehicles pursuant to the power under
the Customs Act.
• But the power to seize and confiscate was dependent upon
a customs offence having been committed or a suspicion
that such offence had been committed.
• The order of the Customs Officer was not final as it was
subject to an appeal and if the appellate authority found
that there was no good ground for the exercise of that
power, 'the property could no longer be retained and had
under the Act to be returned to the owner.

• That being the position and the property being liable to be

returned there was not only a statutory obligation to
return but until the order of confiscation became final an
implied obligation to preserve the property intact and for
that purpose to take such care of it as a reasonable person
in like circumstances is expected to take.
• Just as a finder of property has to return it
when its owner is found and demands it, so
the State Government was bound to return
the said vehicles once it was found that the
seizure and confiscation were not
sustainable.
• There being thus a legal obligation to preserve the
property intact and also the obligation to take
reasonable care of it so as to enable the Government
to return it in the same condition in which it was
seized, the position of the State Government until the
order became final would be that of a bailee.
• If that is the correct position once the Revenue
Tribunal set aside the order of the Customs Officer and
the Government became liable to return the goods the
owner had the right either to demand the property
seized or its value, if, in the meantime the State
Government had precluded itself from returning the
property either by its own act or that of its agents or
servants. This was precisely the cause of action on
which the respondent's suit was grounded.
 Magistrate’s order for disposal- effect
• The fact that an order for its disposal was passed by a
Magistrate would not in anyway interfere with or
wipe away the right of the owner to demand the
return of the property or the obligation of the
Government to return it.
• The order of disposal in any event was obtained on a
false representation that the property was an
unclaimed property.
• Even if the Government cannot be said to be in the
position of a bailee, it was in any case bound to return
the said property by reason of its statutory obligation
or to pay its value if it had disabled itself from
returning it either by its own act or by any act of its
agents and servants.
Basavva Kom Dyamangouda Patil v. State of
Mysore AIR 1977 SC 1749
• Theft took place in complainant-Appellant’s
house
• Large number of ornaments and cash etc. stolen
• Stolen articles were recovered from accused
persons
• Articles were seized by police from the
possession of accused
• Articles produced before court of CJM
• CJM directed police officer concerned to retain
the articles in his custody (until same was
verified and value determined by a goldsmith)
• Subsequently court ordered to produce the
articles kept in custody of police
• Sub-Inspector on opening the trunk found
that it contained only stones
• The articles had disappeared
Application before the Trial Magistrate
• After conclusion of trial
• Complainant filed an application before Trial
Magistrate
– for return of the stolen articles, or in the absence of
the same,
– for payment of equivalent value thereof.
• Application rejected by the Trial Magistrate
Ground of rejection –
as articles never reached the custody of the court,
complainant was not entitled to their
restoration
• Appeal before Sessions Court – dismissed
• Revision before High Court of Mysore –
dismissed
Ground – provisions of Cr.P.C. have no
application as articles had not been placed in
custody of the court.
 Supreme Court
• Object and scheme of various provisions of
Cr.P.C. – “where property which has been the
subject matter of an offence is seized by the
police it ought not to be retained in the
custody of the court or of the police for any
time longer than what is necessary.”
• As the seizure of the property by the police
amounts to a clear entrustment of the
property to a government servant, the idea is
the property should be restored to the
original owner after the necessity to retain it
ceases.
Sup. Ct. on Sessions Court and High Court’s view
• “The High Court and the Sessions Judge proceeded on
the footing that one of the essential requirements of
the Code is that the articles concerned must be
produced before the Court or should be in its custody.
• The object of the Code seems to be that any property
which is in the control of the Court either directly or
indirectly should be disposed of by the Court and a
just and proper order should be passed by the Court
regarding its disposal.
• In a criminal case, the police always acts under the
direct control of the Court and has to take orders
from it at every stage of an inquiry or trial. In this
broad sense, therefore, the Court exercises an overall
control on the actions of the police officers in every
case where it has taken cognizance.”
 Sup. Ct. On Decision of High Court in particular
• High Court’s findings that articles in question
were never actually produced by the police
before the Court – factually incorrect
• “articles were actually produced before the
Court but were retained by the Sub-Inspector
under the directions of the Court.
• A production before the Court does not mean
physical custody or possession by the Court
but includes even control exercised by the
Court by passing an order regarding the
custody of the articles.
• “In the instant case when once the Magistrate,
after having been informed that the articles
were produced before the Court, directed the
Sub-Inspector to keep them with him in safe
custody, to get them verified and valued by a
goldsmith, the articles were undoubtedly
produced before the Court and became
custodia legis.”
• “Where the property is stolen, lost or destroyed
and there is no prima facie defence made out
that the State or its officers had taken due care
and caution to protect the property, the
Magistrate may, in an appropriate case, where
the ends of justice so require, order payment of
the value of the property.
• We do not agree with the view of the High Court
that once the articles are not available with the
Court, the Court has no power to do anything in
the matter and is utterly helpless.”
• Appeal was allowed
• Orders of the High Court along with the two
other courts (Trial Court and Sessions Court)
were set-aside.
• State was directed to pay compensation to
the complainant.
 (1977) 4 SCC 13 (Journal Section)

• Article – “Government Liability for the Goods

Lost in Custody: A Step in the direction of
Reasonable Accountability” – B.B. Pande
 Delivery should be upon some purpose – has to
be returned after its accomplishment
• Bailment – always made for some purpose
• Condition - After accomplishment of purpose
– goods have to be returned to bailor or
disposed of according to the bailor’s
directions
• If the person to whom goods are delivered is
not bound to restore them to the person
delivering them or to deal with them
according to his directions – relationship is
not of bailor and bailee
• Example –
Deposit of money with a Banker – not
bailment
Reason – Bank is not bound to return the same
notes and coins
Bailment distinguished from sale, exchange or
barter
- Bailment – transfer of possession only and
not ownership
Specific Movable Goods
Comparison of bailment with similar
relations
SALE, EXCHANGE OR
BAILMENT
BARTER

CHANGE IN
CHANGE ONLY POSSESSION AND
IN POSSESSION OWNERSHIP

BAILEE BOUND BUYER UNDER NO

TO RETURN OBLIGATION TO
GOODS RETURN
 UCO Bank v. Hem Chandra Sarkar (1990) 3 SCC
389; AIR 1990 SC 1329 (Para 15)
• “One important distinguishing feature between
agency and bailment is that the bailee does not
represent the bailor. He merely exercises, with
the leave of the bailor (under contract or
otherwise), certain powers of the bailor in
respect of his property.
• Secondly, the bailee has no power to make
contracts on the bailor’s behalf;
nor can he make the bailor liable, simply as
bailor, for any acts he does.
 BAILMENT AND AGENCY - Distinction
UCO Bank v. Hem Chandra Sarkar (1990) 3 SCC 389; AIR 1990
SC 1329 (Para 15)
BAILMENT AGENCY

BAILEE DOES NOT AGENT

REPRESENT REPRESENTS
BAILOR THE PRINCIPAL
AGENT CAN MAKE
BAILEE CANNOT MAKE CONTRACTS ON
CONTRACTS ON PRINCIPAL’S
BAILOR’S BEHALF BEHALF

BAILEE CANNOT MAKE AGENT CAN MAKE

BAILOR LIABLE FOR ANY PRINCIPAL LIABLE
ACT HE DOES FOR HIS ACTS
 HIRE – PURCHASE AGREEMENTS
• Section 2(c), Hire-Purchase Act, 1972
• (c) “hire-purchase agreement” means an
agreement under which goods are let on hire
and under which the hirer has an option to
purchase them in accordance with the terms
of the agreement and includes an agreement
under which—
• (i) possession of goods is delivered by the
owner thereof to a person on condition that
such person pays the agreed amount in
periodic instalments, and
• (ii) the property in the goods is to pass to
such person on the payment of the last of
such instalments, and
• (iii) such person has a right to terminate the
agreement at any time before the property
so passes;
HIRE-PURCHASE AGREEMENT
HIRE-PURCHASE
POSSESSION OF GOODS
AGREEMENT DELIVERED BY OWNER TO
HIRER
GOODS ARE LET CONDITION – AMOUNT TO BE
ON HIRE PAID IN PERIODIC
INSTALMENTS
HIRER HAS
OPTION TO PROPERTY TO PASS TO
PURCHASE THOSE HIRER ON PAYMENT OF
GOODS LAST INSTALMENT

PURCHASE TO
BE MADE HIRER HAS RIGHT TO
ACCORDING TO TERMINATE THE
TERMS OF AGREEMENT BEFORE
AGREEMENT PROPERTY SO PASSES
Instalment Supply (Pvt.) Ltd. V. Union of India and Ors.
AIR 1962 SC 53

• “... The transaction partakes of the nature of a

contract of bailment with an element of
sale,... added to it.
• “In such an agreement, the hirer may not be
bound to purchase the thing hired; he may or
may not be.
 Investment Supply (Pvt.) Ltd. (contd...)
• But in either case, if there is an obligation to buy,
or an option to buy, the goods delivered to the
hirer by the owner on the terms that the hirer, on
payment of a premium as also of a number of
instalments, shall enjoy the use of the goods,
which ultimately may become his property, the
transaction amounts to one of hire-purchase,
even though the title to the goods has remained
with the owner and shall not pass to the hirer
until a certain event has happened, namely, that
all the stipulated instalments have been paid, or
that the hirer has exercised his option to finalise
the purchase on payment of a sum, nominal or
otherwise.”
• “It is well settled that a mere contract of
hiring, without more, is a species of the
contract of bailment, which does not create a
title in the bailee, but the law of hire
purchase has undergone considerable
development during the last half a century or
more and has introduced a number of
variations, thus leading to categories, and it
becomes a question of some nicety as to
which category a particular contract between
the parties comes under.
 Damodar Valley Corporation v. State of Bihar
(AIR 1961 SC 440)

• “Ordinarily, a contract of hire purchase confers

no title on the hirer, but a mere option to
purchase on fulfillment of certain conditions.
• But a contract of hire purchase may also provide
for the agreement to purchase the thing hired
by deferred payments subject to the condition
that title to the thing shall not pass until all the
instalments have been paid. There may be other
variations of a contract of hire purchase
depending upon the terms agreed between the
parties.”
BAILMENT – ESSENTIAL ELEMENTS

BAILMENT – ESSENTIAL ELEMENTS

SPECIFIC
DELIVERY OF CONTRACT PURPOSE MOVABLE
POSSESSION PROPERTY

GOODS TO BE
RETURNED ON
ACCOMPLISHMENT
OF PURPOSE
 TYPES/CLASSIFICATION OF BAILMENTS
BAILMENT

CONSIDERATION BENEFIT DERIVED BY

PARTIES

FOR EXCLUSIVE
NON- BENEFIT OF
GRATUITOUS
GRATUITOUS BAILOR

FOR EXCLUSIVE
BENEFIT OF BAILEE

FOR MUTUAL BENEFIT

OF BAILOR AND
BAILEE