Scroll Top

AN IN-DEPTH ANALYSIS OF STATUTORY BAILMENT AND ITS DEVELOPMENT

Introduction

Section 148[1] of the Indian Contracts Act, 1872 defines ‘bailment’ as a special contract. Etymologically, it means to ‘hand over’ or ‘change of possession of goods’. The statutory provisions of bailment are covered in sections 148-171 and 180-181 of the Indian contracts act, 1872. By bailment, we refer to the handover of goods from one person to another for a specific purpose under the agreement that they will return the goods upon successful delivery of the purpose to the bailor i.e. the person who delivers the goods. Bailee is the title given to the person who receives the goods and Bailed Property is the name of the property that has been bailed. An illustration of the above approach can be seen in the case of Kaliaperumal Pillai v. Visalakshmi[2] which deals with the question of whether the defendant as a bailee can be held liable for the loss of some gold owned by the plaintiff.

Development of Statutory Bailment through Landmark Judgments

The notion that bailment can be an independent contractor is a recent development in the legal arena. It elucidates the contractual-consensual concept and is based on the parties’ mutual consent. On the contrary, non-contractual bailment arises from the mere possession of goods owned by someone else irrespective of their consent. Since the contract of bailment is built on a Sui generis concept, an action against a bailee can be brought neither in contracts nor in tort, but only as an action on its own. The Indian contracts act remains silent and does not specifically address the above-mentioned topic. As a result the question of whether bailment can exist exclusively in conjunction with a contract or can it exist independently of the contract still lies in a grey area.

Ram Gulam v. Government of U.P. [3]

Under section 148[4], if a person’s goods were transferred or they went in the position of another person without any contact then there will be no contract of bailment. This claim can be demonstrated through a 2001 case held in the Allahabad High court called Ram Gulam v. Government of U.P.[5] In this case, the plaintiff’s property was stolen by a third party. The police recovered the stolen stuff, but the recovered property was stolen again due to the police’s negligence. This time, despite all efforts, the property was not recovered. The plaintiff then filed a lawsuit against the state for the full amount of the damages claiming the plaintiff to have acted as a bailee and hence the state should be entitled. The question before the court arose as to whether the government should have acted as a bailee and if yes, could they be held liable?

According to sections 151[6] and 152[7] of the Indian contracts act, 1872 which deals with the duties of the bailee,  the onus is said to be on the bailee to take due care of the bailer’s goods. However, the whole question of whether the government acted as a bailee or not was overlooked. Stating the ‘Respondent Superior’ doctrine which states that the master is only responsible for the tortuous act perpetrated by the servant in the course of his or her employment. The court then held that the action of the police to keep the recovered property in their possession is the discharge of the obligation imposed by law. The Allahabad high court ruled that there was no contract of bailment because the parties did not give consent to the agreement and therefore there was no existing contractual relationship. As a result, the issue of state liability to perform the duties of a bailee does not arise in this case.

L.M. Co-operative Bank v. Prabhudas Hathibhai[8]

In this case, Prabhudas Hathibhai possessed some packages of tobacco. The bank i.e. the plaintiff handed over tobacco packages belonging to the defendant as a pledge. Since the defendant failed to pay the income tax, the collectorate official ordered to seize the tobacco goods from the godown. The keys were handed over to the police but the goods got damaged before the seizure could be completed due to heavy rainfall which lead to a leakage in the godown’s roof.  The plaintiff claimed an act of God. The defendant stated that assuming for a second that it was due to the heavy rain that the goods were damaged, still does not mean that there was no negligence on the part of the officers responsible for the damage. The officials stood in the place of a bailee and therefore had a duty of care.

Unlike the case of Ram Gulam, the court found the bank i.e. respondent accountable since they were not able to prove that they had taken due care in the position of a bailee and that the damage was caused due to the act of good. The defendant in its argument emphasized the commendable difference between an action taken in exercise of the sovereign power of the state and an action or welfare activities. As a result, the Bombay high court held that a bailment contract can be non-contractual.

Analysis of the Relevant Cases:

With the passage of time, both the Apex court and the high court in the Ram Gulam case realized the value of statutory bailment and with the emergence of L.M. Co-operative[9] case, the case of Ram Gulam was overruled. Various similar cases were brought during this judgment and it was concluded that the most efficient way to define bailment will be in terms of both possession and consent. In the Ram Gulam Judgment, it was held that consent of the two parties and a valid contract are essential elements for bailment. The court ignored the issue of a contract under bailment and only noticed the issue of whether the government is responsible for the action of its servants. The judgment was given based on the exceptions of the ‘Maxim Respondent Superior’ doctrine in favor of the defendant.[10] However, it was in the case of Prabhudas Hathibhai that the court determined that the government was obligated to exercise reasonable care as a bailee and that excessive rains were not an act of god. Therefore, we can conclude that the possession of the good has been transferred but not the ownership, and if it has also been transferred for a particular amount of time, then a contract of bailment is still a possibility even without a contract.

In the landmark decision of the State of Gujarat[11], the honourable supreme court acknowledged the concept of non-contractual bailment. It was noted that the state did not take reasonable care and precautions in storing the motor vehicles that were confiscated. It was then claimed that the state was not obligated to look after the goods because they were not in the position of a bailee. This case was considered to be a kind of quasi-contract, the definition of which is not explicitly mentioned in the Indian contracts act, 1872. The 13th law commission report believed that the current definition of bailment should not be changed. Instead, a separate section for quasi-contract of bailment should be provided asserting that the bailee and bailor in such cases must, to the extent possible perform the same duties as if they were bailee and bailor under contract express or implied as provided in section 148.

Conclusion

Law is dynamic and not static. It keeps evolving with the time and social growth of society. As a result, if a need for a specific provision to handle non-contractual bailment develops, the demand should be met to avoid ambiguity. The status of the quasi-bailment contract is still disputed. However, the comparative analysis of the relevant landmark cases is a clear directive for comprehending the idea of non-contractual bailment. In a situation where there is a statutory authority or other circumstances to possess another’s goods for a certain period, the quasi-contract of bailment arises. When a person freely takes ownership of something, even if there is no prior commitment to possess it. They are bound to perform the duties of a bailee under the law. Various countries like Great Britain and the USA recognize non-contractual bailment to be a valid form of bailment contract. The 13th Indian law commission’s recommendations draw a similar conclusion to that of C.J. Lord Coleridge in the case of R v. Macdonald[12]. He argued that the term ‘contract of bailment’ should be avoided since it implies that the bailment may only occur as a result of a contract. He claimed that a complete bailment may exist without the need for a contract. Therefore, it can be concluded that yes, a  contract of bailment can arise without any contract based on precedent judgments however nothing has been mentioned in the Indian contracts act, 1872. Although our judiciary correctly interpreted the judgment according to changing times, the legislature has still not taken any meaningful steps to supplement this clause in the act itself.

Author(s) Name: Devishi Gupta (O.P. Jindal Global University, Sonipat)

References:

[1] Indian Contract Act, 1872, § 148, Acts of Parliament, 1872 (India).

[2]Kaliaperumal Pillai v. Visalakshmi, AIR 1938 Mad. 32.

[3]Ram Gulam v. Govt. of U.P. L.M., AIR. 1950 All. 106.

[4] Supra note, 1.

[5] Supra note, 3.

[6]Indian Contract Act, 1872, § 151, Acts of Parliament, 1872 (India).

[7]Indian Contract Act, 1872, § 152, Acts of Parliament, 1872 (India).

[8]L.M. Co-operative Bank v. Prabhudas Hathibhai, AIR1966 Bom 134.

[9] Supra note, 8.

[10] Snegapriya V.S, Non-contractual Bailment: A Glance At Statutory Bailment, 1 LCJLS 1, 7 (2021).

[11] State of Gujarat v. Memon Mahomed, A.I.R. 1967 S.C. 1885.

[12]R v. Macdonald, (2014) SCC 3.