Atul Mehra v Bank of Maharastra – Case Study on Bailment under the Indian Contract Act

Bailment, as defined under Section 148 of the Indian Contract Act, 1872 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 (bailor)[1].

One of the key ingredients emphasized on by this definition is the delivery of possession of the goods from the bailor to the bailee. The delivery of possession may be actual or constructive. Once the possession is handed over to the bailee, a contract of bailment arises regardless of the manner in which it was entered into. Hence, in one peculiar case, where the lady had handed over some of her jewels to a goldsmith to be utilized for making new jewels, and the lady used to take back the half-made jewels every evening for the purpose of safekeeping in her own box, the contract of bailment got over every evening as soon as the lady took the half-made jewels in her possession.[2] It was held in the Madras High Court that the lady did not have any action against the goldsmith as the jewels were lost from the possession of the lady at a time when the contract of bailment was not in force.

The two kinds of delivery of possession are

1. Actual delivery – when there is a physical transfer of possession of the goods, it is actual delivery. For example, when A and B who are classmates decide to exchange their notebooks to compare notes, they exchange the physical possession of the notebooks hence creating a contract of bailment.
2. Constructive delivery – where there is no physical transfer of possession, but something is done which has the effect of putting them in possession of the bailee. For example, when X goes out of town, he requests his neighbor Z to keep an eye on his car and hands him the keys. Though Z does not actually hold the car in his premises, the act of handing over of the keys constitutes delivery of possession of the goods from X to Z hence creating a relationship of bailor and bailee.

Considering this, it had become necessary for the court in the case of Atul Mehra v Bank of Maharashtra[3] to determine whether the hiring of the lockers by the plaintiffs constitutes actual delivery of possession to the defendants. This case was filed by Atul Mehra in appeal at the High Court of Punjab and Haryana. It is one of the landmark cases in India because it lays down the principle that hiring lockers at banks does not constitute a contract of bailment. It was previously talked about in some cases, and this court has upheld the principle that merely hiring a bank locker does not constitute delivery of possession which is a necessary ingredient for the contract of bailment. It was also said by the learned Judge that in order to constitute a contract of bailment, the bailee must be made aware of the contents of the locker so that it can gauge the nature and extent of the security and possible liability.

Facts of the Case

PARTIES IN THE CASE :-

Atul Mehra … Appellants

Bank of Maharashtra … Respondent

CITATION:- AIR 2003 P&H 11

• The case was filed at the Trial Court by Atul Mehra, the appellant in present court, whereby issue Nos. 1, 2 and 3 were decided against him and issue No. 4 was decided against the Respondent as it was not pressed. The suit was dismissed with costs. Thereby, an appeal was filed by the appellant in this case, Atul Mehra, in the Lower Appellate Court which has upheld the findings given by the learned Trial Court. Hence, the present Regular Second Appeal.
• Atul Mehra (i.e. the appellant) in the present appeal had hired locker No. 75 on 15 th January 1986 at Bank of Maharashtra (i.e. the respondent). He had deposited jewellery in the said locker the value of which he claimed as Rs 4,26,160.
• The strong room in which the locker was located was broken in and the contents thereof were stolen by miscreants. On 9 th January 1989 an FIR for the same was filed. It was stated in the FIR that all other 43 lockers in the strong room were also broken in and contents thereof stolen.
• On 2 nd February 1989, all the 44 locker holders made representation to the bank by a registered acknowledgment duly pointing out the gross negligence and misconduct of the respondent in maintaining the lockers. They have contended that 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.
• On 20 th February 1989, a representation to this effect was also made to the Ministry of Finance, Government of India, and the Senior Superintendent of Police, Amritsar.
• On 21 st July 1989, the police had made a report about the defective strong room and the lockers therein.
• In contesting the suit, the Respondent has contended that the appellants had no locus standi to bring the suit against the Respondents. They have denied the following facts to be true :-
  • That jewelry in the value of Rs. 4,26,160/- was kept in the locker,
  • That there was any misconduct or negligence on the part of the respondent-bank in taking care of the lockers and strong room,
  • The police report dated 21 st July 1989,
  • That there was any statutory or contractual liability on them to make good the loss allegedly suffered by the appellants.
  • That the appellants had taken locker No. 75 from the respondent-bank on 15 th January 1986.
  • That the lockers were broken by miscreants and content of the same were stolen.

  Issues raised

  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. Would the relationship between the locker hirer and the bank fall within the definition of bailment as given in Section 148of 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?

  Arguments advanced

  By the Appellant (Atul Mehra)

  1. It was also argued that vital pieces of evidence was not considered by the later courts. Mr Chibbar had cited the Supreme Court’s judgment in the case of Ishwar Dass Jain v. Sohan Lalwhere it has been held that “the High Court can interfere with the concurrent findings of fact recorded by the Courts below if vital pieces of evidence have not been considered which, if considered, would have led to a different conclusion”[4].
  2. According to the learned Counsel, once the relationship between the appellant and respondent is established as that of bailor and bailee, the lack of knowledge on the part of the respondent would be of no affect to their liability to compensate the appellant. It was argued repeatedly by the Counsel that the relationship between the parties is that of bailment as defined under Section 148 of Indian Contract Act, 1872.
  3. The learned Counsel has aptly argued that if the bailee undertakes to mind some goods for reward, but fails to produce them to the bailor when asked to do so, it is a reasonable inference that the bailee has been negligent[5]. Hence, in the present case, it is reasonable to infer that the respondent has at least been negligent.
  4. The learned counsel for the Appellant, Mr R. K. Chhibbar has argued that both the lower courts have erred in the judgment because they had based their findings on the case of Mohinder Singh Nanda v. Bank of Maharashtra[6] which he contends to be per incuriam.
  5. Chhibbar, learned Senior Advocate, has also argued that both the learned Courts below have failed to take notice of the fact that the strong room, as well as the lockers, had been built in contravention of the guidelines on security arrangements in the banks issued by the Indian Banks Association and the guidelines issued by the Reserve Bank of India. According to the learned Counsel, these guidelines are to be strictly construed and strong room was to be built in accordance with the specification given therein. Learned Counsel has further pointed out that even DW-1, P. K. Aggarwal, Senior Manager of the respondent-Bank, had admitted that the guidelines issued by the Indian Banks Association are binding.
  6. By the Respondent (Bank of Maharashtra)
  7. Mr Ashok Pal Jaggal, learned counsel for the Respondent, has put forward the argument that the agreement between the parties constitutes the relationship of landlord and tenant. The agreement uses the term “rent and hirer”. This relationship cannot be equated with bailment. He has relied on Section 106 of the Transfer of Property Act which provides for giving a notice for termination of the tenancy. The hiring agreement between the two parties provides for a written notice of termination.
     

  Judgment

  The Bench, comprising of Justice S.S. Nijjar, has held that exclusive possession of the goods is sine qua non for bailment. Therefore, 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. He has added that the question of reasonable care and quantum of damages would arise only after it has been shown that actual exclusive possession of the property was given by the bailee to the bailor, i.e. the bank. Since the bank was not aware of the contents of the locker, hence it was 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. The appellant’s only evidence was of a witness’s statement that “he cannot admit or deny that there was jewellery weighing 1273 grams worth Rs. 4,26,160/- are kept in the locker”. The judge held it insufficient to prove that the appellant had entrusted the jewellery to the respondent. Learned judge has further added that the appellants alone had the knowledge of the contents of the locker. No sufficient evidence had been produced by the plaintiffs for the same. The plaintiff thus had failed to prove entrustment of the jewellery to constitute bailment.

  On the argument of Mr Jaggal that the relationship between the two parties is of landlord and hirer, it was said that it cannot be said that such a relationship existed because the supposed hirer (the plaintiff) did not have direct access to the land that he has hired and the assistance of the bank employees is required in doing so.

  The judge has also referred to the Mohinder Singh Nanda’s[7] case which refers to the same incident of the robbery of 44 lockers. The judge had held that it is not per incuriam hence the same will be binding on this court. In this case, it was held that there was no exclusive possession to the bank hence no compensation was allowed to the plaintiff. The lower courts have also relied on this judgment and the present court has established that there is no error in doing so.

  In another case[8] the judge referred to lays down the same principle that it has to be proved that the bailor was aware of the value of the property and was entrusted with its safekeeping. The bank, in this case, was entrusted with the jewellery and the valuation of the jewellery had been proved with sufficient evidence produced to the police at the time of the robbery. The bank was held liable for negligence because the robbery was committed by the manager within the bank itself. The judge has asserted that the plaintiffs have miserably failed to prove the entrustment of the jewellery which was allegedly kept in the locker. 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 plaint would be worth the amount claimed.

  

  The appeal was decided in favour of the Respondent.
  

  Critical analysis

  The whole decision relies on a previous judgment by the same court which relates to the same incident of robbery of Bank of Maharashtra’s 44 lockers. This judgment has laid down a crucial principle in the context of delivery of possession of goods in a contract of bailment. 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.

  The court has been right in giving this decision in favor of the respondents because holding the bank responsible for the loss of any goods kept in the locker by their customers would give rise to uncountable amount of liability as it may be found difficult to prove that there was no exclusive possession of the contents of the locker. 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. 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.

  1. Indian Contract Act, 1872
  2. Transfer of Property Act
  3. Avatar Singh
  4. R.K. Bangia

  [1] Section 148 of the Indian Contract Act 1872

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

  [3] AIR 2003 P&H 11: (2003) 2 Banking Cases 570: (2002) 3 ICC 138

  [4] 1999 (9) JT SC 305 : AIR 2000 SC 426

  [5] Hunt & Winterbotham (West of England) Ltd. v. B.R.S. (Parcels) Ltd (1962) 1 QB 617

  [6] 1998 ISJ (Banking) 673

  [8] National Bank of Lahore Ltd., Delhi v. Sohan Lal Saigal, AIR 1962 Punjab 534