Tuesday, 26 August 2014



The rightful possession of goods by one who is not the owner

Delivery of goods by one person to another
For some purpose
Upon a contract that they shall be returned or disposed off according to the directions of the person delivering them

Delivery of possession (not mere custody)

Actual delivery

Reaves V Capper (1838)
Coat taken by waiter without being asked

Kalliaperumal Pillai V Visalakshmi (1938)
Melting of jewels-half made jewels handed over to lady every evening-kept in box in the goldsmiths room-key of box in possession of lady-jewels stolen one night.

Constructive delivery

N R Srinivas Iyer V New India Insurance Company (1983)
Car involved in accident-delivered on behalf of insurers to garage for repairs-Insurance company is bailee and garage is sub-bailee-both held responsible for the loss of car in a fire on the premises.

Atul Mehra Vs. Bank of Maharashtra: (2003)
In this case, the locker room was robbed. The robbers had used gas torches to open the lockers. The customer claimed that the bank had been negligent in the construction of the strong room & while taking care of the goods. The bank contended that it is not a bailee of the goods. The bank does not maintain a record of the things stored in the locker.

Commissioner, Corporation of Madras Vs. S. Alagaraj: (1995)
A person parked his scooter alongside the road in a space earmarked by the corporation for parking, and paid Re. 1 to an attendant. The scooter was stolen. Held that this was not a case of bailment. The person collecting the fee, which is nominal, provides a facility of parking space. He is not undertaking to ensure the safety of the vehicle.

Mahesh Enterprises Vs. Arun Kumar Gumber: (2000)
A car was stolen from the car park of Delhi airport in 1993. The contractor managing the car park had charged Rs. 10. The park had one entry and an exit. It was held that this was a case of bailment. The basis for this decision was that the contractor, under the agreement with the AAIA, was supposed to provide for the safety of the parked vehicles.

Delivery upon contract

In the Indian context, delivery of goods should be made for some purpose and upon a contract that when the purpose is accomplished the goods shall be returned to the bailor.
It follows that if a person’s goods go into the possession of another without contract, there is no bailment

Ram Gulam V Government of UP (1950)
Theft-recovery of ornaments by police – disappearance from police custody- State not responsible
English law recognises bailment without contract
This view has been accepted by the Supreme Court

Basava K D Patil V State of Mysore (1977)
Theft-recovery of ornaments by police – disappearance from police custody- State held responsible

Goods to be returned to the bailor (or a third party if bailor so directs)
Bailment of goods is always made for some purpose and is subject to the condition that when the purpose is accomplished the goods will be returned to the bailor or disposed of according to his mandate.


Duty of Gratuitous Bailor

The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware.

Duty of Bailor for reward

The bailor is responsible for such damage, whether he was or was not aware of the existence of such faults in the goods bailed.
Reed V Dean (1949)
Plaintiff hired motor-launch from defendant for picnic on the river Thames-caught fire-fire fighting equipment on board was out of order-defendant held liable for injury and loss.


Duty of reasonable care*:

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.
*Care which the nature and quality of the articles requires
**Whether gratuitous or for reward

R. S. Deboo v M. V. Hindlekar, (1995).
The Hindelkar’s clothes sent for dry cleaning-liability in case of loss: 20 times laundering charges or half of the value of unreturned articles-expensive clothes destroyed in fire-Questions:
·      whether terms & conditions on the reverse of a receipt form part of the contract ?
·      whether non return of the article entrusted is prima facie proof of negligence?
·      Can bailee insure goods as well as claim from insurer?
Deboo, the dry cleaner, had an insurance policy for the factory, and he got the insurance amount. However, the dry-cleaner refused to reveal the details to Hindlekar, even after the latter served legal notices on him. Held that the bailee was merely a trustee for the insurance amount obtained in respect of goods belonging to the bailors. No bailee is entitled to unjustly enrich himself by retaining the insurance amount recovered by the bailee in respect of the bailors articles. Lower courts estimate of damages of Rs.3,560 was upheld.

N R Srinivas Iyer V New India Insurance Company (1983) 
Questions: Whether garage was repairing car on behalf of Iyer & Insurance company was reimbursing on behalf of Iyer? If not, was the garage sub bailee?  When the car was in the custody of sub bailee did he take reasonable care? Garage owner failed to establish that it had taken care.
The courts have recognised the right of the owner against the sub-bailee.

Non Contractual Cases:

State of Gujarat v Memon Mahomed Haji Hasan (1965):
Seizing of trucks by customs-trucks left in open space-parts of truck,tyres & wheels pilfered-customs raise contention that as seizure was lawful there could be no liabilities on law enforcement agency-bailment only under contract-contention was that the siezure wasn’t final -Whether owner had the right to demand the property siezed or its value? Govt became liable to return the goods, the owner had the right either to demand property siezed or its value....

Trustee of the Port of Bombay v Premier Automobiles Ltd (1981):
Imported machinery-port trust employees negligent while landing & transfering to warehouse-machine falls of trolley & is damaged-Port Trust Act had given immunity to the Board & its employees from liability in torts-Board contented that it had no contract with PAL; Board was performing a function vested in it by law-can bailment arise out of possession?

Duty not to make unauthorised use:
If the bailee makes any use of the goods bailed which is not according to the conditions of bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them
A contract of bailment is avoidable at the option of the bailor, if the bailee does any act with regard to the goods bailed, inconsistent with the condition of the bailment.

Duty not to mix:
Bailee should maintain the separate identity of the bailor’s goods.

Duty to return:
Return or deliver the goods according to the bailor’s direction, without demand, as soon as the term for which they were bailed has expired, or the purpose for which they are bailed has been accomplished.

Duty not to set up the defence of jus tertii:
That is to say, that the goods belong to a third person.
(Even if there is a person who has a better title than that of the bailor)
The third person may apply to the court to prevent the bailee from returning the goods to the bailor & to have the question of title decided.

Juggilal Kamalapat Oil Mills V Union of India (1976)
Oil consigned with Railways Kanpur to Calcutta-Reaches Calcutta intact-Sender instructs railways to bring it back to Kanpur-Before formalities are completed oil seized by Food Inspector-found adulterated-destroyed under orders of High Court-Bailee not liable where subject matter is taken away from him by authority of law.

Duty to return increase:
Bailee is bound to return to the bailor the natural increases or profits accruing to the goods during the period of bailment.

Finder of Goods:

Finder may sue for specific reward offered.
Finder may retain the goods until he receives the reward
Finder has no right to sue the owner for compensation of trouble and expense voluntarily incurred by him to preserve the goods & to find the owner.
But he may retain the goods against the owner until he receives such compensation

Finder of thing commonly on sale may sell it:
If the owner cannot with reasonable diligence be found,
Or if he refuses, upon demand, to pay the lawful charges of the finder:
·      When the thing is in danger of perishing or of losing a greater part of its value
·      When the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value


Right to compensation:
If the bailor has no right to bail the goods, or to receive them back or to give directions respecting them and the bailee is exposed to some loss

Right to necessary expenses or remuneration

Right of lien:
Particular Lien
General Lien (exercised by Bankers, Factors, Wharfingers,  Attorneys of High Court, Policy Brokers)

Right to sue
If a third person wrongfully deprives the bailee of the use or possession of the goods bailed


The bailment of goods as security for payment of debt or performance of a promise.

Pledge is a special kind of bailment

The chief basis of distinction is the object of the contract
Bailment is to provide a security for a loan or for the fulfillment of an obligation
Bailor is called the pawnor
Bailee is called the pawnee

Delivery of possession is a necessary element in the making of a pawn
Delivery may be actual or constructive

Delivery of documents of title is equally effective to create a pledge
Morvi Mercantile Bank V Union of India (1965)
Goods consigned with railways-consignor endorsed railway receipts to bank against advance of 20000-goods lost in transit-bank sues railways for actual worth 35500-trial court rejects-High Court allows 20000-Supreme court held that endorsing railway receipt is a pledge-Pledgee will have the same remedies as the owner of goods.

Pledge by hypothecation
Bank of Chittor V Narasimbulu (1966)
Cinema projector & accessories pledged with bank-bank allowed property to remain with pledgers since they formed the equipment of a running cinema-pledgers sold the machinery-held there was constructive delivery.

Pledge is a conveyance pursuant to a contract

Delivery and advance need not be simultaneous
Pledge may be perfected by delivery after the advance is made
Delivery may be made before or in contemplation of an advance

Rights of the Pawnee

Right of retainer:
Until dues are paid (interest & expenses)

Right to extraordinary expenses:
Expenses incurred for the preservation of the goods
No right of retainer, he can only sue to recover

Right of sale when pawnor defaults:
After giving pawnor reasonable notice of sale
If proceeds are less than the amount due, pawnor is still liable to pay the balance & if proceeds are greater than the amount due, the pawnee shall pay over the surplus to the pawnor

No comments:

Post a Comment