According to Section 148 of the Indian Contract Act, 1872 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 and the person to whom they are
delivered is called the bailee.
Bailment is another type of special contract. 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 goods are to be returned after the
purpose is over.
Bailment is a term which is derived from the French word bailor which means to
. It is generally considered to be a contractual relationship between
the two parties i.e. the bailor (the one who gives the good on bailment) and the
bailee (the one who takes the goods on bailment), bind themselves in a contract
either expressly or impliedly to act according to particular terms. The control
or possession of the property is transferred to the bailee along with the goods,
while the ownership and its interest are retained with the Bailor only.
What needs to be kept in mind while talking about bailment is it can be only of
goods and does not include services. And ‘goods’ according to section 2(7) of
the Sale of Goods Act means every kind of movable property other than money
and actionable claim and thus keeping money in a bank account is not bailment
and services or personal favor such as asking a person to look after your house
in your absence is not bailment, as a house is not a movable property.
concept of bailment is also different from that of sale which includes the
intentional transfer of ownership of goods or personal property in exchange for
a monetary value. On the contrary, bailment does not transfer ownership of goods
or property and only transfers possession or custody for a specific period of
time. It is an activity or a process in which the property of one person
temporarily goes into the possession of another. In our daily lives, we face
several instances where the possession of the property is transferred to someone
else for a specific purpose or a specific time such as giving a dress to the
tailor for stitching, or parking our car in a parking lodge, giving our mobile
phone for repair, etc.
Essential Features Of Bailment
After discussing the meaning and the scope of bailment, there are some of its
essential features that need to be elaborated, they are as follows:
- Delivery of goods:
Delivery of goods or property is often confused
with custody, but they are not the same. Delivery involves the transfer of
possession of goods or property to a third person for a specific reason and for
a specific amount of time. For instance, the servant holding an umbrella of his
master is not a bailee but a custodian until there is a purpose for holding the
umbrella by the servant, thus there should be a purpose for the transfer of
property, without which it will not qualify as a contract of bailment.
There is a case named Ultzen vs Nicols 1894, in which the plaintiff went to a
restaurant for dinner, and when he entered the room, the waiter took his coat
and hung it on a hook behind him. After the dinner when the plaintiff was going
to leave, the coat was gone. So in this case, it was held that the waiter
voluntarily took the responsibility of keeping the coat while the customer was
dining and was thus a bailee. Therefore, he was liable to return it.
There are two types of delivery in the contract of bailment i.e. Actual and
Constructive. 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. In other words,
the bailee authorizes the person to keep possession of the goods. In 1966 there
was a case by the name Bank of Chittor v. Narsimbulu AIR 1966, in which a
person pledged cinema projector with the bank but the bank allowed him to keep
the projector so as to keep the cinema hall running. In this case, the court
held that this was constructive delivery because something was done that changed
the legal possession of the projector. Even though the physical possession was
with the person, the legal possession was with the bank.
- Delivery upon contract:
In order to have a valid bailment, the
delivery of the goods and property must be done upon a contract mentioning that
the goods will be returned when the purpose is accomplished. And if the goods
are given without any contract, there is no bailment. The same was held in the
case of Ram Gulam v. Govt. of UP, in which the jewelry of the plaintiffs was
stolen and was later seized by police. Later on, the jewelry was stolen from the
police custody after which the plaintiff sued the govt. for returning the
jewelry. In this case, it was adjudged that the goods were not given to the
police under any contract and thus there was no bailment.
However, the decision of this case was later criticized by and lapsed in the
case of State of Gujarat v. Menon Mohammad AIR 1967 in which the SC held that
bailment can happen even without an explicit contract. In this case, certain
motor vehicles were seized by the State under Sea Customs Act, which was then
damaged and the court held that the govt. was indeed the bailee and the State
was responsible for proper care of the goods.
- Conditional Delivery:
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.
This is a key feature of
bailment that distinguishes it from other types of relations such as agency. It
was observed in the case of U Co. Bank v. Hem Chandra Sarkar 1990, that the
distinguishing feature between a bailment and an agency is that the bailee does
not represent the bailor. He merely exercises some rights of the bailor over the
bailed property. The bailee cannot bind the bailor by his acts. Thus, a banker
who was holding the goods on behalf of its account holder for the purpose of
delivering them to his customers against payment was only a bailee and not an
Relation Between Bailment And Bank Locker
Keeping our family jewelry in bank lockers is an age-old practice in India. But
a recent response by the RBI to a "Right to Information (RTI)" query has
virtually set the cat among the pigeons. The RBI has categorically stated that
the banks cannot be held liable for the loss of valuables in a bank locker if
such a loss was caused by theft or burglary.
Stance of Law on the Subject of Bank Locker Liability
Surprisingly, the legal rules and procedures of the bank locker contract
actually vouch for this reality. The safe deposit memorandum of hiring the
locker clearly states that the bank will not be responsible for any loss or
damage of the contents of the safe deposit vault in the case of war, civil
disorder, theft, or burglary.
This means unless the loss of valuables happens
due to internal fraud or misappropriation, the banks will not undertake any
responsibility for valuables in your locker. In fact, the bank locker agreement
clearly stipulates that the valuables will remain in the safe deposit vault
purely at the personal risk of the hirer who has hired the locker for storing
The contract also contains a very generic statement that the bank
in question will take all measures and necessary precautions to ensure that the
locker and its contents are protected.
However, it is very clear from the
agreement that in any eventuality, the bank does not assume any liability for
the value of the items stored in the vault.
Importance of issue of bank locker liability
In recent times there have been a number of such cases where the liability of
the banker in the event of loss to locker valuables comes into question. There
have been few high-profile cases in the recent past. For instance, there was a
group of burglars, who in a daring robbery attempt, dug a 125 feet long tunnel
and decamped with valuables from more than 75 lockers at the PNB, Sonepat
In another case over 40 lockers of Central Bank branch UP were
completely emptied out. 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. The common thing in all of these
cases I that the bank has refused to accept any responsibility for valuables
lost from the locker. 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.
The relationship between the bank and the person hiring the locker is not that
of a landlord and tenant. On the contrary, it is a relationship between the
bailor and bailee. That means the bank is not aware of the contents of the
locker and that is something only the individual knows. A bailor-bailee
relationship means that the bank does not take responsibility for the contents
of the safe deposit locker and that continues to be the sole liability of the
individual. The locker can only be opened by the person who has kept the
valuables in the locker combined with the master key of the bank. In any
unforeseen circumstance like theft, burglary, war, or civil strife, the bank is
absolved of any responsibility pertaining to the contents of the locker. The
bank only takes responsibility in the event of deficiency in service.
In a nutshell whenever someone place their valuables in a bank locker, they need
to take a few basic steps to protect their interest.
Atul Mehra v. Bank of Maharastra
In this case Atul Mehra (the appellant) in the present appeal had hired
locker on 15th January 1986 at Bank of Maharashtra (the respondent). He had
deposited jewelry in the 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 9th 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 were thereof stolen. In 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 the affair and it was made only of plywood, whereas it ought to have
been made of iron and concrete.
Issues: The following issues were contended in the present case:
- Whether the plaintiffs have suffered a loss due to misconduct and negligence by
- Whether the defendant-Bank has no contractual liability to make good loss
incurred by the plaintiffs?
- 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
The court, in this case, 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. And it was also 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 value of the
jewelry that was allegedly kept in the locker at the time when the robbery
The judge, in this case, has also referred to Mohinder Singh Nanda’s case
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
In another case, the judge referred to lay 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 in which the bank was entrusted with the jewelry
and the valuation of the jewelry 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
But in the present case, the judge has asserted that the plaintiffs have
miserably failed to prove the entrustment of the jewelry which was allegedly
kept in the locker. There is no proof of any 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.
Therefore the judgment was given in the favour of the respondent i.e. the bank.
Termination Of Bailment
A bailment is ended when its purpose has been achieved when the parties agree
that it is terminated, or when the bailed property is destroyed. 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.
A contract of bailment terminates under the following circumstances
- If the bailment is for a specified period, the bailment terminates as
soon as the stipulated period expires
- If the bailment is for a specific purpose, the bailment terminates as
soon as the purpose is fulfilled.
- If the bailee does any act with regard to the goods bailed, which is
inconsistent with the terms of bailment, the bailment maybe terminated by the
bailor even though the term of bailment has not expired or the purpose of
bailment has not been accomplished.
- A gratuitous bailment can be terminated by the bailor at any time,
even before the specified time or before the purpose is achieved, subject to the
limitation that where such termination causes loss in excess of benefit actually
derived by the bailee, the bailor must indemnify the bailee for the amount in
which the loss occasioned exceeds the benefit derived.
- A gratuitous bailment is terminated by the death either of the bailor
or of the bailee.
As we analyzed the case of Atul Mehra v Bank of Maharastra
, we observed that 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 the 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.
According to me, 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 people around the globe.
Subsequently, the judgment acts as a good
precedent as it mitigates the responsibility of the banks to some extent which
is absolutely required 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 the
- Section 148 of the Indian Contract Act 1872
- Singh Avatar, Contract and Specific Relief (6th Edition, 2016).
- Section 2(7) of the Sale of Goods Act.
- Bailment and bank locker, https://www.academia.edu/16505951/bailment_and_bank_locker (accessed on
27/09/20 at 10.55 pm).
- Supra note 2.
- Ultzen v. Nicolls [1894 1 QB 92].
- Bank of Chittor v. Narsimbulu, AIR 1966 AP 163
- Ram Gulam v. Govt. of UP, AIR 1950 All 206.
- Gujarat v. Menon Mohammad, AIR 1967.
- U Co. Bank v. Hem Chandra Sarkar, 1990 AIR 1329.
- Understanding the nuances of bank locker liability, https://www.motilaloswal.com/blog-details/Understanding-the-nuances-of-bank-locker-liability/1282 (accessed
at 27/09/20 at 11.08 pm).
- Atul Mehra v Bank of Maharastra, AIR 2003 P H 11, II (2003) BC 570.
- Supra note 4.