Contents
In 1995, the Appellant visited the Bank to operate the locker and deposit the locker rent. He was informed that the Bank had broken open his locker in 1994 for non-payment of rent dues for the period of 1993 to 1994. As per of the Companies Act, 2013, the person https://1investing.in/ appointed as an auditor of a company shall sign the auditor’s report or sign or certify any other document of the company, in accordance with the provisions of Section 141. A gratuitous bailment is terminated by the death either of the bailor or of the bailee.
It is the duty of the bailor to indemnify the bailee for the cost incurred due to the defective title of goods bailed to the bailee. Non-gratuitous bailment is one where consideration passes between the bailor and the bailee. Gratuitous bailment is one where no consideration passes between the bailor and the bailee. Section 148 of the Indian Contract Act, 1872 – Definition of bailment, bailor and bailee. The Hon’ble Supreme Court imposed costs of Rs. 5,00,000/ on the Bank which is to be paid as compensation from deducting from the salary of the erring officers, if still in service. The Hon’ble Supreme Court opined that the approach adopted by the National Commission was the correct approach as the number of items originally deposited by the Appellant inside the locker was a contested fact.
The liability of the contents of a bank locker is placed on the customer itself as long as he has a part in accessing the lockers while the liability would undoubtedly shift to the bank in case of breach of trust on any of employee’s parts. In fact, nowadays banks are insisting that anyone opting for a bank safety vault facility should first get the valuables insured before placing them in the safe deposit locker. That becomes an additional cost to the individual on top of the locker rent, which has to be anyways paid to the bank. There is, however, no substantive domestic legislation or sector specific regulation, which may throw light upon the issue of whether banks are responsible under the laws of bailment for the loss of articles placed inside the locker. In 2006, the Reserve Bank of India had issued a Draft Circular on Safe-deposit Lockers . Even in the relevant foreign precedents, the application of the principles of bailment was contingent on determining whether possession was transferred in the facts of the case.
The Supreme Court of India addressed these issues in its judgment inAmitabha Dasgupta v. United Bank of India. It has basically laid down that the bailee must be made aware of the contents of anything he receives for safe custody so as to gauge the amount of any possible liability that may arise in the future. In this case, the bank had no knowledge of the quality, quantity, or nature of goods kept inside the locker. And being a contract, all-natural requirements of the contract are applicable on bailment. Thus, it includes an act of delivering goods from one person to another for a specified purpose and for a specified period of time on trust.
The Supreme Court held that clearly, the relationship between the bank and locker holder is in the nature of the bailor and bailee, even though the bank was not privy to the contents of the locker. Here the delivery of goods means delivery of possession which is essential for bailment. The transfer of possession of the bailed goods from bailor to bailee for whatever is the purpose of bailment must be distinguished from mere custody. That the Consumer Forum is not equipped to undertake such evaluation since it only has jurisdiction to conduct a summary trial. Therefore, the appellant was directed to approach the civil court for adjudication on the contents of the locker. Against the claim of seven items of jewellery, the bank claimed that only two pieces were found in the locker when it was broken open which was evident from the inventory prepared in the presence of an independent witness.
Bailment is a voluntary delivery of goods for a temporary purpose ‘on the understanding that they are to be returned in specie in the same or substitute form. On appeal filed by the Bank, the State Commission (‘SC’) accepted the District Forum’s findings on the question of deficiency of service, though it reduced the compensation from Rs. 50,000/ to Rs. 30,000/. In this article, the author explains what are safe deposit boxes and whether renting them is bailment or not. In case the locker is to be broken open, then the same is to be done only in the presence of authorized officials and an independent witness.
Delivery of Goods i.e. Delivery of Possession:
We deliver our goods to another person or leave them in the power of another person for a purpose and expect to receive our goods back when the purpose has been achieved. The alleged loss of goods did not result from any force majeure conditions, or acts of third parties, but from the gross negligence of the bank itself. A finder of the goods is a person who finds the goods belonging to some other person and keeps them under his protection until the actual owner of the goods is found. Also known as physical delivery, where the delivery takes place when the goods are physically handed over by the bailor to the bailee. The National Commission by the impugned judgment, accepted the State Commission’s holding on the limited jurisdiction of the Consumer Forum to adjudicate on the recovery of the contents of the locker.
- Here the delivery of goods means delivery of possession which is essential for bailment.
- In fact, nowadays banks are insisting that anyone opting for a bank safety vault facility should first get the valuables insured before placing them in the safe deposit locker.
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- In a contract of Bailment where the goods are delivered from one person to the another, on some purpose.
Even if the landlord-tenant argument of the bank is to be taken into consideration, the respondent had a responsibility to safeguard the premises of the bank, including the strong room, just as a landlord would be expected to protect the premises of the property given on rent. The bank should not have been able to get away merely because there was no “explicit responsibility” on its part. For instance, a guest, having the “physical custody” of a glass during a party, cannot be said to have “possession” of the same, and hence, a bailor-bailee relationship does not exist between the guest and the host. This distinction becomes significant in answering the questions regarding the legal status of the relationships between the customers of the safe deposit box services and these service providers. The Supreme Court finally held that, at this juncture, it was pertinent for the RBI to lay down comprehensive directions mandating the steps to be taken by banks with respect to locker facility or safe deposit facility management. In view of the same, they directed the RBI to issue suitable rules or regulations within six months from the pronouncement of the judgment.
LAW OF CONTRACT
However, the right of lien arises only when the bailee uses skill and labor on the goods to confer an additional value on the goods. Stay updated with the latest Current affairs and other important updates regarding video Lectures, Test Schedules, live sessions etc.. Check your Securities /MF/ Bonds in the consolidated account statement issued by NSDL/CDSL every month. Indiankanoon.org needs to review the security of your connection before proceeding. The National Consumer Disputes Redressal Commission dismissed the Revision Petition filed against the judgment of the State Consumer Disputes Redressal Commission.
Thus, the SC held the National Commissions’ judgment of leaving the question of law and fact upon civil courts as correct. The same goods that were bailed must be returned to the bailor in the same condition after the accomplishment of purpose as they were handed over to the bailee in the beginning. If an animal gives birth during the period of bailment, the bailee must return the animal with the offspring at the conclusion of the bailment. As per Section 149 , the delivery can also be made to the bailee by doing anything which has the effect of putting the bailed goods in the possession of the intended bailee or any person authorized by him for this purpose. Bailment is a type of special contract and thus, all basic requirements of contract like consent of parties, competency, etc are applicable to any contract of Bailment.
The delivery of the goods is done to the premises of the bank and not to the bank itself. This legal relationship is analogous to the relationship between a landlord and a tenant. A landlord cannot be said to have a control over the personal property of the tenant, but merely provides the tenant with a place to store their property. Therefore, even though the landlord might be obligated to exercise ordinary care to protect the premises of the rented property, the landlord cannot be expected to extend this care to protecting the personal property of the tenant.
Lastly, this proposition held by the courts might provide an escape to the banks who are generally the drafters of such agreements. Late nineteenth century was the time period when it became commonplace for banks to provide safe deposit services and most of them did so in a casual manner, without getting involved in much documentation. Where the relationship between these parties was not described, whether in writing or in oral form, it was almost held invariably by the courts that their relationship was that of bailment. It was reasoned that the innate nature of the transaction and the primary cause for which safe-deposit boxes are taken on rent, impose upon the service providers, such duties which might have been imposed if it were a case of bailment. In actual delivery, the physical possession of the goods is handed over to the bailee while in constructive delivery the possession of the goods remains with the bailor upon authorization of the bailee.
There is no proof of any is hiring of bank locker bailment kind to show the value of the jewelry which was kept in the locker. No expert witness has been produced to show that the jewelry mentioned in the plaint would be worth the amount claimed. Each bank follows its own set of procedures and there is no uniformity in the rules when it comes to rules concerning lockers. Banks are under the mistaken impression that not having knowledge of the contents of the locker exempts them from liability for failing to secure the lockers themselves as well.
ISSUES
In a nutshell whenever someone place their valuables in a bank locker, they need to take a few basic steps to protect their interest. This petition is filed against the judgment of the National Consumer Disputes Redressal Commission wherein the commission dismissed a revision petition filed against the judgment of the State Consumer Disputes Redressal Commission. Also, the bailor is under the duty to pay the extraordinary expenses incurred by the bailee for such bailment. If bailor fails to disclose such faults then he will be responsible for the damage caused to goods or loss suffered by the bailee. There are many instances of bailment in our daily lives – when we give our clothes for laundry, when we use valet parking for our cars.
A bailment for the mutual benefit of the parties is created when there is an exchange of performances between the parties. A bailment for the repair of an item is a bailment for mutual benefit when the bailee receives a fee in exchange for his or her work. Thus, it is clear that the nature of is hiring of bank locker bailment possession is very important to determine whether a delivery is for bailment or not. If the owner continues to have control over the goods, there can be no bailment. This is a bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailee.
What are the objects or goods that can use in a Bailment?
If a bank is given actual and exclusive possession of the property inside a locker by the person who hired the locker, only then can bailment under Section 148 can be presumed. One of the key ingredients emphasized on by this definition is the delivery of possession of the goods from the bailor to the bailee. Once the possession is handed over to the bailee, a contract of bailment arises regardless of the manner in which it was entered into.
In IOB in Chennai account holders were so shocked by a daring daylight robbery that there was a literal clamor to withdraw their savings and empty their lockers in the branch. In this case the safe deposit box provider company was held liable for “being negligent in exercising the amount of care that was diligently required on their part”, for allowing government officials to seize the contents of the safe deposit box. The banks should not have the liberty to impose unilateral and unfair terms on the consumers. Therefore, mere leasing out of the locker would not establish a relationship of bailment between the bank and the locker holder. In order to establish exclusive possession, the claimant must prove that the bank had knowledge of the contents of the locker. Alternatively, where the locker holder alone has knowledge of the contents, they must lead independent evidence to prove that their articles or valuables were actually inside the locker, and the valuation of the same.
A bailment created for an indefinite period is terminable at will by either party, as long as the other party receives due notice of the intended termination. Once a bailment ends, the bailee must return the property to the bailor or possibly be liable for conversion. It means that the delivery of the goods is not permanent and is based on a specific condition or a purpose after the accomplishment of which it has to be returned to be the actual owner. The possession is given to the bailee only on the condition that he will either return the goods or dispose of them according to the wishes of the bailer after the purpose for which the goods were given. For instance, when we give a electronic gadget for repair, the shopkeeper is supposed to return it after repairing it.
In case a bailee is not bound to return the goods to the bailor, then the relationship between them is not of bailment. It was also left open to the RBI to issue suitable rules with respect to the responsibility owed by banks for any loss or damage to the contents of the lockers, so that the controversy on this issue is clarified as well and the Appeal is disposed of accordingly. In bailment, the delivery of goods is upon a contract and once the purpose is done, such goods shall be returned to the bailor. This means there should be a contract between two parties for transaction of delivery and subsequent return. If there is no possession of goods obtained by someone other than contract, there should be no bailment.
For a contract of bailment to come into existence, there should be an intention on the part of the bailor, to deliver the “control” or the “possession” of the bailed goods to the bailee. The judge, in this case, has also referred to Mohinder Singh Nandas case which refers to the same incident of the robbery of 44 lockers. The court, in this case, held that exclusive possession of the goods is sine qua non for bailment. Such uncountable liability would also discourage banks to give such a facility which is currently utilized by countless number of people around the globe. The judgment acts as a good precedent as it mitigates the responsibility of the banks to some extent which is absolutely required in to allow them to provide service to the public.