DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

2018-19

CONTRACTS PROJECT
ON

“CONCEPT OF BAILMENT AND STATUTORY BAILMENT IN LIGHT OF CASE

LAWS.”

SUBMITTED BY: UNDER THE GUIDANCE OF:

ANIKET SACHAN DR. VISHALAKSHI VENGESENA
RollNo-28 ASSOCIATE PROFESSOR (LAW)
SECTION-“A” DR. RAM MANOHAR LOHIYA
B.A. LLB (Hons.), IIIrd SEMESTER NATIONAL LAW UNIVERSITY

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 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Dr. Vishalakshi Vengesena ,
who gave me the golden opportunity to do this wonderful project of Economics on “CONCEPT
OF BAILMENT AND STATUTORY BAILMENT IN LIGHT OF CASE LAWS.”, Who also
helped me in completing my project and has rendered endless support, kind and understanding spirit
during my project completion.
I came to know about so many new things I am really thankful to them. The completion of this
project could not have been possible without the participation and assistance of various people thus,
I would also like to thank my parents and friends who helped me a lot in finalizing this project
within the limited time frame.
I would also like to thank the Great Almighty, source of supreme knowledge for countless love
rendered on me.

ANIKET SACHAN
ROLLNO-28
ENROLLMENT ID- 170101028

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Contents
INTRODUCTION.................................................................................................. 4

INDEGRIENTS OF BAILMENT ......................................................................... 5

DELIVERY OF GOODS- .................................................................................. 5

DELIVERY FOR SOME PURPOSE- ................................................................ 6

RETURN OF GOODS- ...................................................................................... 6

STATUTORY BAILMENT .................................................................................. 7

Bailment with a contract ..................................................................................... 7

Bailment without a contract ................................................................................ 8

Law Commission Recommendation ................................................................... 9

OTHER ACTS PROVIDING FOR STATUTORY BAILMENT....................... 10

Railway Act, 1980 ................................................................................................... 10

Customs Act, 1962 ............................................................................................ 11

In case of Post Office ........................................................................................ 11

FOREIGN POSITION REGARDING BAILMENT WITHOUT CONTRACT 12

CONCLUSION .................................................................................................... 13

BIBLIOGRAPHY ................................................................................................ 14

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  INTRODUCTION
Bailment is the delivery of goods for some specific purpose, and when that purpose is over goods
are delivered back or to be dealt with in a manner so provided by the bailor. Bailment means and
includes any kind of handling over of the goods. Change of possession, physical or constructive
is main essential feature of bailment. "In the contract of bailment, the bailer takes the possession,
to redeliver them.
According to Section 148 of the Indian Contract Act: "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". The person to whom the
goods are delivered is called the "bailee".
Bailment is dealt with contract act only in cases where it arises from a contract but it is not correct
to say that contract there cannot be a bailment without an enforceable contract.
Since then the law has evolved to say that the standard of care is equal for all categories of
bailment, such that the standard of care expected of a bailee is to use such care a careful and
vigilant person would exercise in the custody of his or her property of the like character and in the
like circumstances. In addition, it should be noted that in bailment cases the onus of proof is on
the bailee to demonstrate that they were not negligent in losing or damaging the property.

The word "bailment" was originally derived from a French word meaning "to deliver". In law, a
bailment occurs where one person voluntarily delivers chattels to another person on trust that they
will be returned in their original or altered form, and without any transfer of ownership of the
chattels occurring. In other words, it is where one person gives property to another person,
expecting to get it back. In a bailment, the person delivering the property is called the bailor, and
the recipient of the property is the bailee. Under certain circumstances it is also possible for a sub-
bailment to exist, where the bailee then bails the goods to another person, who becomes a sub-
bailor.

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  INDEGRIENTS OF BAILMENT
1) Delivery of goods
2) For some purpose
3) Goods must be returned to bailor when purpose accomplished or be disposed of according
to directions of bailor.

 DELIVERY OF GOODS-
Delivery is general sense means transfer of possession of the goods from one person to another. It
need not always be actual. It in some cases be constructive or symbolic delivery. For further
explanation to meaning of delivery of possession Section 149 of Indian Contract Act, 1872 can be
referred.
It provides: The delivery to the bailee may be made by doing anything which has the effect of
putting the goods in the possession of the intended Bailee or of any person authorized to hold them
on his behalf.
Delivery of possession is of two types-
i) Actual- when the bailor hands over to the Bailee the physical possession of the goods,
that is called actual delivery.
ii) Constructive or Symbolic: it takes place when there is no change of physical
possession, goods remaining where they are, but something is done which has effect of
putting them in possession of the Bailee. For e.g. – delivery of a railway receipt, transfer
of key of godown also fall under this.1
In Jagdish Chandra Trikha v. Punjab National Bank2, plaintiff father entrusted box containing
jewelry to defendant bank at Peshawar before partition of country. It was properly locked and
sealed before handing over. When it was received at Delhi branch, it was not in same position and
its packing also has been changed and the contents were lost. The plaintiff claimed ornaments and
jewelry or value of Rs. 3,72,400. Court held that position of bank was that of bailee and it failed

1
Avtar Singh, Contract and Specific Relief (12th edn, Eastern Book Company) 673.
2
Jagdish Chandra Trikha v Punjab National Bank AIR 1998 Delhi 288.
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in its duty to take due care of goods and return to the plaintiff and they were liable to pay amount
coupled with 12% interest.
Even if person assumes custody of another person’s goods, without formal arrangements, that is
enough to constitute bailment. As in Ultzen vs. Nicols3, an old customer went to restaurant for
purpose of dining there. When he entered the room a waiter took his coat, without being asked,
and hung it on a hook behind him. When customer rose to leave, coat was gone. In this case it was
held that defendant was Bailee of coat and would be liable for loss which arose due to negligence
of his servant.

 DELIVERY FOR SOME PURPOSE-

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
direction of bailor. There is no bailment where the thing is not to be specifically accounted for.4 If
the person to whom the goods are delivered is not bound to restore them to the person delivering
them or to deal with them according to his directions, their relationship is not of bailor and bailee.

 RETURN OF GOODS-
It is the duty of the bailee to return or deliver the goods bailed, without demand, or as soon as the
time for which they were bailed has expired, or the purpose for which they were on bailed has been
accomplished.5 If by the default of the bailee, the goods are not returned, delivered or tendered at
the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods
from that time.6 In every bailment, the same thing is to be returned either in same form or an altered
form. When the cloth is given for being stitched into a suit or gold for being converted into
ornaments or wheat for converting into flour, there is bailment in each case. But when money is
deposited in bank, it is not bailment because banker is not to return same money to depositor.7

3
Ultzen v Nicols (1894) 1 QB 92.
4
Avtar Singh, Contract and Specific Relief (12th edn, Eastern Book Company) 676.
5
Section 160, the Indian Contract Act.
6
Section 161, the Indian Contract Act.
7
Ichha dhanji v Natha (1888) 13 Bom 338.
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  STATUTORY BAILMENT

 Bailment with a contract

Initially when a person's good go into the position of another without any contract there is no
bailment under sec 148. A well-known illustration is decision of Allahabad High Court in Ram
Gulam v. Govt, of U.P. Whether the bailment can arise by a contract only or the same can be
inferred by implication of law and fact, has been a matter of controversy. In the case of Ram Gulam
v. Govt, of U.P8, Allahabad High Court has expressed the view that bailment can arise only out of
contract and not otherwise. In this case plaintiff’s property, which had been stolen, was recovered
by the police. The property was then kept in the police Malkhana- From there it was stolen again
and the same could not be traced thereafter. In an action against the State to recover the value of
the property with the police was in the capacity of a Bailee and the State was liable for its failure
to return the property It was held that in the absence of a contract to that effect, there was no
bailment and therefore the State was not liable.
But where the police have acted on mere suspicion and have seized the goods according to the
procedure established under criminal procedure code. Then until the final decision of the court is
declared the police have to act as a Bailee of goods and the burden of proof is upon Bailee to show
that he has exercised reasonable care.
If the person to whom the goods are delivered is not bound to restore them to person delivering
them or to deal with them according to his directions then there relationship is not that of bailor
and Bailee. The liability as a Bailee does arise independent of the contract.
But English law recognizes bailment without contract. In the words of Cheshire and Fifoot: “ we
put at the present day no doubt in at the present day, no doubt, in most instances where goods are
lend or hired or deposited for safe custody or security for debt, the delivery will be result of a
contract.”9

8
Ram Gulam v Govt of UP A.I.R. (1950) All. 106.
9
LAW OF CONTRACT (6th Edn, 1964) 73.
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  Bailment without a contract
Later in case of L.M. Co-Operative Bank v. Prabhudas Hathibhai10, the Bombay High Court has
taken the contrary view. In this case some packages of tobacco belonging to A had been pledged
to the plaintiff bank but they were still lying in A's godown. The godown was locked and its keys
were handed over to the plaintiff bank. Owing to the non-payment of some income-tax dues by A,
the said goods were attached by the Collector though they were allowed to remain in the same
godown. The key of the godown was handed over to the police there were heavy rains, roof of the
godown leaked and the goods inside were damaged. Even though the goods were not in the
possession of the Government under a contract, the state was still held liable as a bailee.
Similarly, according to the Supreme Court decision in State of Gujarat v. Memon Mahomed11, ,the
position of the State in respect of the goods seized by the customs authorities is that of a bailee. If
such goods are disposed of before the matter is finally decided and the authorities are not able to
return the same when the final order is made, the state has been held liable for the same.
In Trustees, Port of Bombay v. Premier Automobilies Ltd., the Supreme Court has, however, held
that in the case of statutory bailment the liability of the bailee may be subject to the provisions of
some other Act and not to the Indian Contract Act. In this case- the plaintiff had imported some
machinery from Italy. On arrival at Bombay, the port authority took possession of the same. While
the machinery was being transported by the employees of the Board constituted under the Bombay
Port Trust Act in a trolly it fell down and was substantially damaged. In an action by the plaintiff
it was held that the Board was not liable because according to Section 87 of the Bombay Port Trust
Act. The Board was immune from liability for the acts of misfeasance, malfeasance, of any
employee appointed under the Act.
It may be mentioned that a great hardship is created for the owner of the goods when he is not able
to have any remedy against another person, who negligently loses it, as happened in Ram Gulam
v. Govt of U.P., or when the transaction is recognized to be bailment but the bailee is not subject
to the duty of care as was the position in Trustees, Port of Bombay v. Premier Automobilies.

10
L.M. Co-Operative Bank v Prabhudas Hathibhai A.I.R. (1966) Bom 34.
11
State of Gujarat v Memon Mahomed A.I.R. (1967) S.C. 1685.
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Bailment is to be dealt with by Indian Contract Act where it arises from a contract but it is not
correct to say that there cannot be a bailment without an enforceable contract.12
Bailment is a relationship sue generis and unless it is sought to increase or diminish the burdens
imposed on the bailee by the very fact of bailment, it is not necessary, to incorporate it into the law
of contract and to prove a consideration.13
There can, therefore be bailment and the relationship of a bailor and Bailee in respect of specific
property without there being an enforceable contract. Nor is consent indispensable for such a
relationship to arise.

 Law Commission Recommendation

The Law Commission examined this problem and recommended that in every kind of bailment
there should be the same kind of liabilities and disabilities of the bailors and the bailees as stated
in the Indian Contract Act. The recommendation states as: “In our opinion the present definition
of the bailment should not be altered. But the case of what has been described as quasi-contract
of bailment should be provided for in a separate section .stating that the bailor and bailee in such
cases, must, so far as may be, perform the same duties, and be subject to the same liabilities and
disabilities as if they were bailors and bailees under a contract express or implied as provided in
Section 148.14”
It is submitted that in all cases when the goods belonging to one person are in possession or control
of the other, this should be treated as bailment. Section 71 of the Indian contract Act is an example
of a situtation of quasi-bailment in resect of the finder of goods. In all cases of bailment, howsoever
arising, the liability and responsibility of the parties should be treated as same to that of the bailor
and the bailee under the Indian Contract Act.15

12
State of Gujarat v Memon Mahomed A.I.R. (1967) S.C. 1685.
13
Sanjiv Row’s, Contract and act relating to Tenders (9th edn, Delhi Law House) 2439.
14
Law Commission of India, 13th Report, The Indian Contract Act, 1872, p..58.
15
Queen v McDonald, 13 QB 323;
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  OTHER ACTS PROVIDING FOR STATUTORY BAILMENT

Railway Act, 1980

Under sub-S.(1) and (2) of S. 77 of the Railways Act, it may be seen that a statutory bailment is
created in respect of goods entrusted to the railways for carriage during the interregnum after the
termination of transit and before the clearance of the goods. Since the railway administration has
been placed in the position of a bailee, the Legislature, in its wisdom, has deemed it fit to restrict,
under S. 77 (2) the period of liability of the railway administration.16

The liability of the railway for a period of thirty days (—prior to 1972 Amendment which restricted
it to 7 days) from the termination of the transit being absolute in character, it stands to reason that
the absolvent of the liability must also be an unqualified and unrestricted one. It is not correct to
say that the railway administration is burdened with two types of liability, one as a bailee for a
period of thirty days and the other as a mere custodian of goods after the period of thirty days.

There is no scope whatever for construing the crucial words in the sub-section to mean that the
responsibility of the railway for loss, destruction, damage, deterioration of non-delivery
of goods extends even beyond the bailment period of thirty days fixed under the sub-section.17

S. 77 (2) 18has no application where goods are actually available for delivery after a period of thirty
days is over and where the goods have not suffered any loss, destruction, damage, deterioration,
etc.

When, under a statute, the Railways are obligated to take care of the goods only for a period of
thirty days from the termination of transit, it goes without saying that the railway administration
cannot be saddled with liability for the loss that had occurred after its duty to keep vigil over the
goods had statutorily come to a close. The mere fact that the uncleared goods remained in their
premises beyond the period of thirty days would not have the effect of extending the period of
bailment or creating a statutory liability of any other kind for them to take care of the goods. After

16
Lloyd Bituman Products (P) Ltd. Ambattur Estate v Union of India, 1980 SCC OnLine Mad 73.
17
Lloyd Bituman Products (P) Ltd. Ambattur Estate v Union of India, 1980 SCC OnLine Mad 73.
18
Railways Act, 1980 s 77(2).
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the expiry of the statutory period the goods can only be construed to be kept in the premises of the
respondent at the risk of the owners.

 Customs Act, 1962

Section 62 of the Act indicates that the Customs Authorities have complete control over the
warehoused goods. No doubt, there is no provision similar to Section 62 in relation to the goods
in possession of the custodian appointed under Section 45(1). However, reading of the entire
provision contained in Chapter-VII makes it clear that the Customs Authorities exercise complete
control over the imported goods while in possession of custodian.

In the light of the aforesaid provisions, in so far the importer is concerned, the moment imported
goods lands in customs area, since statutorily it has to remain in the custody of the Customs
Authorities till it is released either for home consumption or for warehousing, there will be a
statutory creation of bailment and the Customs Authorities become the bailee vis-a-vis the
importer. 19Therefore, in my considered opinion, the customs authorities are principally liable for
the proper return of the imported goods to the importer concerned on its clearance. No doubt, the
custodian is a statutory creation.20 However, it is an arrangement made by the customs department
for proper storage of the imported goods till they are cleared. On that ground, the customs
authorities cannot plead that they are not liable to answer the importer for any loss or damage to
such imported goods, though in possession of the custodian.

 In case of Post Office

If there is no contract, the Post Office is not a bailee, by contract, because bailment requires
delivery of goods “on contract” under the Indian Contract Act. Hence the obligation of a bailee to
take as much care of the goods as a man of ordinary prudence would take of his own goods, may
not apply.

Since, however, the Post Office professes to accept goods of a certain description for conveyance
to the addressee, it must be regarded as standing in some position akin to a bailee. As a matter of

19
Mysore Sales International Limited v United India Insurance Company Limited, 2009 SCC OnLine Kar 116.
20
Mysore Sales International Limited v United India Insurance Company Limited, 2009 SCC OnLine Kar 116
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fact, there is one view that a bailment can exist independently of contract. But, apart from that, a
person who receives goods knowingly, and for certain service to be performed thereon, cannot
remain absolutely without legal obligation. On this reasoning, the duty to take reasonable care may
arise, and an action may lie in tort irrespective of contract. The relationship existing between the
sender and the Post Office, and the nature of the service performed by the Post Office (apart from
statute), might impose on the Post Office the obligation to take reasonable care of the goods.21

 FOREIGN POSITION REGARDING BAILMENT WITHOUT CONTRACT

England

In the case of R v. Macdonald, Lord Coleridge, C.J. observed that “it is not correct as it appears to
me, to use the expression ‘contract of bailment’ in a sense which implies that every bailment must
necessarily in itself be a contract. It is perfectly true that in almost all cases a contract either express
or implied by low accompanies a bailment, but it seems to me that there may be a complete
bailment without the contract.”22

America
The American law also recognises a contract of bailment by implication of law. The law is thus
stated in American Jurisprudence: “It has previously been observed that an actual contract or one
implied in fact is not always necessary to create a bailment; that such a contract may be implied in
law as well as in fact. Where, otherwise than by a mutual contract of bailment, one person has
lawfully acquired the possession of personal property of another and holds it under circumstances
whereby he ought, upon principles of justice, to keep it safely and restore it or deliver it to the
owner, for example, where possession has been acquired accidentally, fortuitously, through
mistake, by an agreement since terminated, or for some other purpose, such person and the owner
of the property are, by operation of law, generally treated as bailee and bailor under a contract of
bailment.

21
Law Commission of India — Report No. 38 (February, 1968).
22
R v. Macdonald (1885) 15 QBD 323.
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  CONCLUSION

There can be bailment without a contract. If a person deposits or delivers the goods under stressful
circumstance like fire flood, riots or if the person who is depositing the goods is incapable of
appreciating the value of the action, it is still regarded as bailment despite the absence of a contract.
Delivery of goods to another under a mistake of identity of the person is also treated as bailment
without a contract as long as the bailor took reasonable care to ascertain the identity.
The Law Commission of India in its 13th report suggested that bailment without contract should
also be included in the Indian Contract Act, 1872 but no concrete steps have been taken as yet.
Presently, the Indian Courts have taken the position that bailment can exist without a contract. In
some of these cases, even the government has been held liable as a bailor despite the absence of a
contract.
The case of Lasalgoan Merchants Bank vs. Prabhudas Hathibhai is one the first where the Courts
started imposing the obligations of a Bailee even without a contract. In State of Gujarat vs. Memom
Mahomed, the Supreme Court of India accepted this view and stated that Bailment is dealt with by
the Contract Act only in cases where it arises from a contract, but it is not correct to say that there
cannot be bailment without an enforceable contract.”
There has been a shift in position from Ram Gulam case to Memom Mehmood case and also other
cases where honourable Supreme Court of India realized the need for including contract without
proper contract also to be covered under bailment. It was a very great move by our apex court as
it preserved the rights and interests of the parties who relied on implied contracts.

Even developed legislatures and judicial authorities of foreign nation like USA and Great Britain
have recognised non-contractual bailment as valid. Hence our judiciary to correctly interpreted the
correct decision but to the dismay at hard note the legislature has not made any concrete step to
include this provision in Indian Contract act, 1872. There is a need to include this provision in our
Act governing bailment too so that our act is adapted to changing need of time and judiciary also
gets an aid from legislature from settling issues regarding it.

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  BIBLIOGRAPHY

Cases
 Ichha dhanji v Natha (1888) 13 Bom 338
 Jagdish Chandra Trikha v Punjab National Bank AIR 1998 Delhi 288.
 L.M. Co-Operative Bank v Prabhudas Hathibhai A.I.R. (1966) Bom 34.
 Lloyd Bituman Products (P) Ltd. Ambattur Estate v Union of India, 1980 SCC OnLine
Mad 73
 Lloyd Bituman Products (P) Ltd. Ambattur Estate v Union of India, 1980 SCC OnLine
Mad 73.
 Mysore Sales International Limited v United India Insurance Company Limited, 2009
SCC OnLine Kar 116
 Mysore Sales International Limited v United India Insurance Company Limited, 2009
SCC OnLine Kar 116.
 Queen v McDonald, 13 QB 323;
 Ram Gulam v Govt of UP A.I.R. (1950) All. 106.
 State of Gujarat v Memon Mahomed A.I.R. (1967) S.C. 1685.
 Ultzen v Nicols (1894) 1 QB 92

Statutes
 Railways Act, 1980 s 77(2).
 Section 160, the Indian Contract Act.
 Section 161, the Indian Contract Act.

Other Authorities
 Law Commission of India — Report No. 38 (February, 1968).
 Law Commission of India, 13th Report, The Indian Contract Act, 1872, p.58.

BOOKS
 Avtar Singh, Contract and Specific Relief (12th edn, Eastern Book Company) 673, 676.
 LAW OF CONTRACT (6th Edn, 1964) 73

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