REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  8611  OF 2019 (Arising out of S.L.P. (Civil) No. 11213 of 2018)

Taj Mahal Hotel            ...Appellant  

Versus

United India Insurance Company Ltd.      & Ors.     …Respondents

J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.  

1. Leave granted.  

2. This appeal, by special leave, arises out of judgment dated

05.02.2018 passed by the National Consumer Disputes Redressal

Commission  (‘National  Commission’)  dismissing  the  appeal

against order dated 29.01.2016 passed by the State Consumer

Disputes Redressal Commission (‘State Commission’), New Delhi

in Complaint Case No. 198/1999.  

3. The following are the facts out of which this appeal arises:  

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3.1.   On the night of 01.08.1998, at around 11 p.m., Respondent

No. 2 herein (Complainant No. 2) visited the Appellant-hotel in his

Maruti Zen car. While the car was insured with Respondent No. 1

herein (Complainant No. 1), the Appellant-hotel had taken a non-

industrial  risk  insurance/liability  policy  from Respondent  No.  3.

Upon reaching the hotel, Respondent No. 2 handed over his car

and its keys to the hotel valet for parking, and then went inside

the hotel. The parking tag handed over to him read inter alia:

“IMPORTANT CONDITION: This vehicle is being parked at  the  request  of  the  guest  at  his  own  risk  and responsibility in or outside the Hotel premises. In the event of any loss,  theft or damage, the management shall  not  be  held  responsible  for  the  same  and  the guest  shall  have  no  claim  whatsoever  against  the management.”

When Respondent No. 2 came out of the hotel at about 1

a.m., he was informed that his vehicle had been driven away by

another person. Upon enquiry with the security officer, he found

that three young boys had come to the hotel in their separate car,

parked it, and gone inside the hotel. After some time, they came

out and asked the valet to bring their car to the porch. During this

process, one of the boys, one Deepak, picked up the keys of the

car of Respondent No. 2 from the desk, went to the car parking,

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and stole the Maruti Zen car. Though the security guard tried to

stop him, he sped away. A complaint was lodged with the police,

but the car remained untraced.  

3.2.   Respondent No. 1 (car insurer) settled the insurance claim

raised by Respondent No. 2 (car owner) in respect of the stolen

car for  Rs.  2,80,000.  Thereafter,  Respondent No.  2 executed a

Power of Attorney (‘POA’) and a letter of subrogation in favour of

Respondent  No.  1.  They  both  then  approached  the  State

Commission  by  filing  a  complaint  against  the  Appellant-Hotel

seeking payment of the value of the car and compensation for

deficiency in service.  

3.3.   Relying upon this Court’s decision in Oberoi Forwarding

Agency v. New India Assurance Company Limited,1 the State

Commission  dismissed  the  complaint  on  the  ground  that  an

insurance  company  acting  as  a  subrogee  cannot  qualify  as  a

‘consumer’. Hence, Respondent No. 1 filed an appeal before the

National Commission.

3.4.   Notably,  Oberoi  was  partly  overruled  by  a  subsequent

decision  of  a  Constitution  Bench  of  this  Court  in  Economic

1  (2000) 1 SCR 554.   

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Transport  Organisation  v. Charan  Spinning  Mills  (Pvt.)

Ltd.2 In light of this change in law, by order dated 20.09.2010,

the National Commission in appeal remanded the complaint back

to the State Commission, observing that Respondent No. 1 (car

insurer) had locus standi to file the complaint.  

3.5.   Deciding on merits,  the State Commission relied on the

decisions of the National Commission in  Bombay Brazzerie  v.

Mulchand  Agarwal3 and  B.  Dutta,  Senior  Advocate  v.

Management of State4 to hold that laws of bailment apply when

a customer  pays to park his car in a parking lot and it is then

stolen  or  damaged.  It  was  noted  that  the  price  paid  for  food

consumed in the hotel would include consideration for a contract

of  bailment  from  the  consumer  (bailor)  to  the  hotel  (bailee).

Applying  this  to  the  facts  of  this  case,  the  State  Commission

observed  that  though  the  Appellant-hotel  had  averred  that

Respondent No. 2 had not had dinner at the hotel that night, it

was improbable for him to have stayed inside the hotel from 11

p.m. to 1 a.m. without consuming any food or snacks or paying

2  (2010) 4 SCC 114. 3  (2002) NCDRC 42. 4  (2010) 1 CPC 319.  

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any kind of bill. Hence, the State Commission proceeded on the

assumption that Respondent No. 2 had paid consideration for the

contract.  

In light of this, the State Commission allowed the complaint

and directed the Appellant-hotel to pay Respondent No. 1 a sum

of Rs. 2,80,000 (the value of the car) with interest at 12% per

annum and Rs. 50,000 as litigation costs. In addition to this, it

directed  payment  of  Rs.  1,00,000  to  Respondent  No.  2  for

inconvenience  and  harassment  faced  by  him.  The  State

Commission also held that Respondent No. 3 (insurer of the hotel)

would not be liable to indemnify the loss caused to the Appellant-

hotel, as the theft of the car had not been notified to it within due

time.   

3.6.   Appeal filed against this order by the Appellant herein was

disposed  of  vide  the  impugned  judgment.  On  the  question  of

locus standi of Respondent No. 1 (subrogee) to file the complaint,

the  National  Commission  observed  that  its  earlier  order  dated

20.09.2010  (supra)  had  not  been  challenged,  and  had

consequently  attained  finality.  Hence,  it  was  held  that  the

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Appellant could not argue that Respondent No. 1 (car insurer) did

not have locus standi.  

The  National  Commission  further  applied  the  principle  of

infra hospitium (Latin for  ‘within  the hotel’)  and observed that

common law has historically imposed strict liability on a hotel for

the loss of a guest’s property if the guest and the property were

within  the  hotel  premises.  It  was  noted  that  once  the  guest

presents the car keys to the valet and possession of the car is

transferred from the guest to the hotel, a relationship of bailment

is established. Relying on various decisions by foreign Courts on

strict  liability  for  property  kept  infra  hospitium,  the  National

Commission held that the liability of a hotel cannot be precluded

by  a  printed  notice  on  the  parking  tag  disclaiming  liability.

Consequently,  the  appeal  against  the  order  of  the  State

Commission was dismissed,  although the interest awarded was

modified  from 12% per  annum to  9% per  annum.  Hence,  the

present appeal.  

4. Learned Senior Counsel for the Appellant made submissions

on two fronts. With respect to the locus standi of Respondent No.

1,  he  argued  that  Respondent  No.  1  does  not  qualify  as  a

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‘consumer’.  On  merits,  he  vehemently  submitted  that  the

decision of the National Commission is erroneous inasmuch the

principle of infra hospitium is not established under Indian law. He

further  relied  on  the  decisions  in  Bombay  Brazzerie  and  B.

Datta  to  argue  that  a  bailment  necessarily  exists  under  a

contract, the terms of which are encapsulated in the parking tag

in this case.  Since the liability for theft is specifically precluded

under the terms stated on the parking tag, he submitted that the

Appellant cannot be held liable.  

5. Per contra, Counsel for Respondent No. 1 submitted that it is

entitled to file a joint complaint with the original consumer in its

capacity  as  a  subrogee.  Further,  he  relied  on  Klaus

Mittelbachert  v. East  India  Hotels  Ltd.5 and  Hotel  Hyatt

Regency v. Atul Virmani,6 to argue that the duty of care owed

by 5-star hotels is higher, and the Appellant must therefore be

subject to the highest standard of insurer liability in case of theft

of goods from its premises.   

6. Heard learned Counsel for both parties.  

5  AIR 1997 Del 201.  6  III (2008) CPJ 281 (NC).  

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7. At this juncture, it is pertinent to note that the compensation

awarded by the State Commission (including interest) has already

been paid by the Appellant to Respondent Nos. 1 and 2. Thus, we

are  only  concerned  with  the  questions  of  law  involved  in  the

matter.  Based on a perusal  of  the record,  the following issues

arise for consideration in the present appeal:

First,  whether  the  insurer  had  locus  standi to  file  the

complaint as a subrogee?;

Second, whether the Appellant-hotel can be held liable for

the  theft  of  a  car  taken  for  valet  parking,  under  the  laws  of

bailment or otherwise?;

Third, if the second question is answered in the affirmative,

what is the degree of care required to be taken by the Appellant-

Hotel?; and

Fourth,  whether  the  Appellant-hotel  can  be  absolved  of

liability by virtue of a contract?

We will be adverting to each of these in turn.  

I.   COMPLAINT FILED BY INSURER AS A SUBROGEE   

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8. It has been settled by a Constitution Bench of this Court in

Economic Transport Organisation (supra) that even though a

consumer complaint filed by an insurer in its own name is not

maintainable,  a  complaint  filed  by  the  insurer  acting  as  a

subrogee is maintainable if it is filed by:

i) the insurer in the name of the assured, wherein the insurer

acts as the attorney holder of the assured; or  

ii) the insurer and the assured as co-complainants.  

9. In  the  instant  case,  Respondent  No.  2  (actual

consumer/assured)  had  executed  a  POA  and  a  letter  of

subrogation  in  favour  of  Respondent  No.  1  (car  insurer).

Consequently,  the complaint  before the State Commission was

filed by Respondent Nos. 1 and 2 as co-complainants. Hence, both

the  conditions  are  squarely  applicable  to  this  case  and  the

complaint is maintainable.  

10.  Having considered the maintainability of the complaint, we

now proceed to examine the liability  of  the Appellant-hotel  for

theft of the vehicle of Respondent No. 2.  

II.    LIABILITY OF HOTELS FOR THEFT OR LOSS OF VEHICLES OF   

GUESTS   

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11.  The liability of hotel  owners or  innkeepers (as they were

traditionally called) for the loss of, or damage to goods of their

guest has been a subject of judicial consideration for a long time.

Though the issue has come up before this Court for the first time

in this case, it has received ample judicial and academic attention

in other common law jurisdictions. Thus, we find it appropriate to

allude to this jurisprudence for a comparative context to the legal

issue  at  hand.  Though  other  jurisdictions  have  dealt  with  the

liability of innkeepers with respect to goods or property of the

guests in general, we will be confining our discussion to vehicles

of guests, as the present case is concerned with the same.  

12.  Broadly,  two  approaches  have  been  taken  towards  the

liability of an innkeeper for loss or damage to the vehicles of his

guest7 –  first, the common law rule of insurer’s liability wherein

the innkeeper is treated as an insurer and made responsible for

any loss or damage to the vehicle of its guest, regardless of the

presence or absence of negligence on his part (‘the common law

rule’); and second, the rule of prima facie negligence wherein the

innkeeper  is  presumed to  be  liable  for  loss  or  damage to  the

7  John E. H. Sherry,  The Laws of Innkeepers: For Hotels, Motels, and Restaurants (3rd edn, Cornell University Press 1993) 415-417.  

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vehicle of his guest, but can exclude his liability by proving that

the loss did not occur due to any fault or negligence on his part

(‘prima facie liability rule’).  

A. Common law Rule   

13.  At common law, innkeepers were held strictly liable for the

loss of or damage to a guest’s horse or carriage placed within the

confines of the inn, i.e.  infra hospitium. They were excused from

liability only if the loss or damage occurred by an act of God, an

act of the public enemy, or the fault or negligence of the guest

himself.8  

13.1.    The  earliest  recorded  opinion  discussing  this  rule  is

Dickerson  v.  Rogers,9 where the Supreme Court of Tennessee

State (USA) held the innkeeper liable for injury caused to a horse

brought by the guest and placed in the stable of the inn. Citing

English common law, the Court noted as follows:

“It is laid down by Chancellor Kent (2 Com. 593), upon the authority of the English cases, that an innkeeper is bound to keep safe the goods of his guest deposited within the inn, except where the loss is occasioned by inevitable  casualty,  or  by  superior  force,  as  robbery. And Mr. Justice Story says (Law of Bailments, 306, sec.

8  Joseph James Hemphling, ‘Innkeeper’s Liability at Common Law and Under the Statutes’ (1929) 4(7) Notre Dame Law Review 421, 422.   9  4 Humph 179 (1843).  

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470) that an innkeeper is bound to take, not ordinary care  only,  but  uncommon  care  of  the  goods  and baggage  of  his  guests.  If,  therefore,  the  goods  or baggage of his guest are damaged in his inn,  or are stolen  from  it  by  his  servants  or  domestics,  or  by another guest, he is bound to make restitution… …If  this  rule was not  inflexibly  enforced,  no traveller would be safe in entrusting his horse to the hands of the inn-keeper until he had first inspected his stables, and  selected  a  place  for  his  horse  to  be  kept,  an inconvenience which could not be endured.”  

13.2.    The imposition of such strict liability was dictated by the

conditions of the time. It emerged in a context where inns were

intended to provide a safe haven to travelers against bands of

marauders and robbers. However, the popular prejudice was that

innkeepers would collude with such persons to rob the guests of

their properties.10 Given the vulnerability of travelers to robbery

and violence in  such a setting,  the judges fashioned the strict

liability rule to allow travelers to recover from innkeepers without

the  need  to  prove  fault.  This  is  well-captured  in  the  following

observations made in Dickerson (supra):

“…rigorous  as  this  rule  may  seem,  and  hard  as  its operation may be in a few instances, it is founded on the great principle of public utility, to which all private considerations ought to yield. “For” as Sir William Jones

10  Wayne Quinton, ‘Liability for Automobile Parking at Hotels: The Tennessee  Case  Abstract’  (1992)  16(1)  Hospitality  Research  Journal  109,  110; Sylvan  H.  Hirsch,  ‘Limited  Liability  of  Innkeepers  Under  Statutory  Regulations’ (1928) 76 University of Pennsylvania Law Review 272.  

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justly  observes  (Bailments,  95),  “travellers  who  are most numerous in a rich and commercial country, are obliged to  rely  almost  implicitly  on the good faith of innkeepers,  whose education and morals  are none of the best, and who might have frequent opportunities of association with ruffians and pilferers, while the injured guest would seldom or never obtain legal proof of such combinations, or even of their negligence, if no actual fraud had been committed by them.””

13.3.    As  the  horse  and  buggy  gave  way  to  modern

transportation  including  automobiles  and  motor  vehicles,  the

common law rule of strict liability was extended to them. In Aria

v. Bridge House Hotel (Staines) Ltd.,11 it was further held that

the insurance liability of an innkeeper for the goods of his guest

also applied to automobiles parked in a space adjoining the hotel,

upon directions given by the porter. Since the car of the plaintiff

in that case had been parked in such a manner and was stolen

while he was dining at the hotel, the defendant hotel was held

liable.  

13.4.    English Courts as well as some jurisdictions in the United

States continued to apply the strict liability principle for vehicles

of guests through the first half of the 20th century.12 In England, 11  (1927)  137  LT  299.  See  John  H.  Sherry,  ‘The  Innkeeper’s Liability  for  Automobiles  and  Their  Contents’  (Aug  1964) <https://doi.org/10.1177/001088046400500202> accessed 2 November 2019.  12  See Park-O-Tell Co. v. Roskamp, 203 Okla. 493, 223, P.2d 375 (1950); Abercrombie v. Edwards, 62 Okla. 54, 161 P. 1084 (Okla. 1916).

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this was partly possible as the Innkeeper’s Liability Act of 1863

did not exclude or limit the innkeeper’s liability for motor vehicles.

The high point of English case law on this point came with the

decision  in  Williams  v.  Linnitt,13 where  the  Court  held  the

innkeeper strictly liable for theft of the car of a guest who had

parked it in an open lot provided free of charge. The Court noted

that the provision of free parking space was an invitation to the

guest to park there, which was sufficient to constitute the lot as

being  infra  hospitium.  Notably,  liability  was  imposed despite  a

notice in the car park stating that the innkeeper would not be

liable for  loss or  damage to any vehicle or  goods therein.  The

following observations of Asquith L.J. are noteworthy:

“The most material facts in this case are that the area, being an area contiguous to the inn, is one in which the guest with a motor car is invited to leave it; that there is  no  evidence  that  any  other  accommodation belonging  to  the  inn  is  provided  for  cars,  though  a garage was marked as being in the neighbourhood of the inn on a plan which was not agreed or proved; and that  it  is  part  of  the  innkeeper's  normal  business  to provide  for  guests  who  arrive  in  cars.  These circumstances are very strong evidence that the area is within the "hospitium", and, as I read the judgment, the judge has so found.

13  Williams v. Linnitt, 1 ALL E.R. 278 (Eng. 1951).  

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If  I  am  wrong  in  thinking  that  the  question  is substantially one of fact, I consider that the conclusion which the judge has reached on this point is the right legal inference from the circumstances referred to, and, if his conclusion is right, the strict liability attached and could not, in my view, be displaced by such notice as was put up in the car park, which, incidentally, would be quite invisible at  9 p.m.  on a February night.  For these reasons, and those given by my Lord, I agree that the appeal, though very attractively argued, should be dismissed.”

13.5.    However, with increasing commercial development, the

conditions  in  which  the  common  law  liability  of  innkeepers

originated began fading away. Mindful of these changes, in 1954,

the Law Reform Commission in England recommended that the

extent of absolute liability of innkeepers be reduced. It observed

that  the  most  serious  hardships  due  to  the  strict  liability  rule

occurred with respect to motor vehicles, since these cases were

often a battle between two insurance companies. Recognising the

increasing  burden of  liability  as  in  cases  such  as  Williams  v.

Linnitt (supra), the Committee recommended that liability should

only be imposed when the innkeeper is negligent.14

14  L.J. Blom-Cooper, ‘Second Report of the Law Reform Committee on  the  Law  of  Innkeepers’  Liabilities  for  Property  of  Travellers,  Guests,  and Residents (May 1954)’ (Jul 1955) 18(4) The Modern Law Review 374, 376.

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13.6.    These recommendations were eventually given effect with

the  introduction  of  the  Hotel  Proprietors  Act,  1956,  which

continues to remain in force in the United Kingdom till date. The

Act is significant, as it was the first time that the strict liability of

hotels in relation to vehicles of their guests was considered. While

it retains strict liability of hotel proprietors in respect of guest’s

property  in  certain  circumstances,  it  specifically  excludes

motorcars and other vehicles of any kind as well as property left

in  them.15 In  effect,  the  application  of  the  common  law  strict

liability has been limited by this legislation, in recognition of the

unfair burden placed on the innkeepers.  

13.7.    A study of the law in other jurisdictions reveals that the

unlimited  common  law  liability  of  innkeepers  with  respect  to

vehicles has been similarly restricted by legislation. In Singapore,

the  Innkeeper’s  Act  of  1921  specifically  excludes  horse,  live

animals,  a  car  or  carriage  from  the  purview  of  strict  liability.

Likewise, several states in Australia (including Victoria and New

South Wales) have excluded motor  vehicles and their  contents

from the liability of innkeepers,  recognizing that this  is  a  well-

15  Hotel Proprietors Act 1956, s 2(2) (United Kingdom).

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established exception to the innkeeper’s liability.16 Arguably, this

limitation  has  been  on  the  basis  of  the  availability  of  travel

insurance  for  motor  vehicles,  and  the  absence  of  any  undue

burden  thereby  falling  on  the  guest.  This  exception  is  also

recognized  in  the  Convention  on  the  Liability  of  Hotel-keepers

concerning the Property of their Guests, which applies to several

members of the European Union. Under the Convention, no form

of strict liability has been fastened with respect to vehicles, any

property left in vehicles, or to live animals.17  

13.8.    While the exception has increasingly been adopted in

these  jurisdictions,  some  states  in  the  United  States,  such  as

Oklahoma and Utah, continue to apply the strict rule of insurance

liability  to  an  innkeeper  with  respect  to  goods  kept  infra

hospitium.18 At the same time, other States have attempted to

balance the interests of hotel owners and guests by adopting the

relatively moderate prima facie liability rule, which we will  now

discuss.  

B.   Prima facie liability Rule

16  Innkeepers Act 1968, s 6(a) (New South Wales); Carriers and Innkeepers Act 1958, s 29(a) (Victoria). 17  Annex  to  the  Convention  on  the  Liability  of  Hotel-Keepers concerning the Property of their Guests, Article 7 (Paris, 1962).  18  Sherry, supra note 11.  

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14.   Though there has been a shift away from the common law

insurer’s  rule  with  respect  to  vehicles  of  guests,  this  has  not

meant that legislatures have completely absolved hotel owners of

liability. Instead, they have adopted an approach where the hotel

owner/proprietor  is  held  responsible  only  for  those  losses  that

occur  as  a  result  of  his  negligence.  Under  this  rule,  the  hotel

owner is presumed to be liable for loss or damage to the vehicle

of the guest upon his failure to return the same. However, he has

an opportunity to exonerate himself by proving that the loss did

not  arise  due to  negligence or  fault  on his  part  or  that  of  his

servants.  The  rationale  for  adopting  this  approach  is  well-

explained in Laird v. Eichold:19

“Innkeepers, on grounds of public policy, are held to a strict accountability for the goods of their guests. The interests  of  the  public,  we  think,  are  sufficiently subserved, by holding the innkeeper  prima facie  liable for the loss or  injury of the goods of his  guest;  thus throwing the burden of proof upon him, to show that the  injury  or  loss  happened  without  any  default whatever  on  his  part,  and  that  he  exercised  the strictest  care  and  diligence.  And  it  is  more  in accordance  with  the  principles  of  natural  justice,  to permit him to exonerate himself by making such proof, than  to  shut  the  door  against  him,  and  hold  him responsible for an accident happening entirely without

19  10 Ind. 212 (1858).  

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his default, and against which strict care and prudence would not guard.”  

(emphasis supplied)

14.1.    Today, this rule is prevalent in several jurisdictions in the

United  States  including  Indiana,  Illinois,  Kentucky,  Maryland,

Texas,  and  Vermont,20 as  well  as  in  other  common  law

jurisdictions where strict liability for vehicles has been excluded

by statute.  

14.2.    In most States, the liability is predicated on the existence

of  a  bailment  relationship  between  the  guest  and  the  hotel

owner.21 Where a contract of bailment can be said to exist, the

mere failure to deliver the vehicle, or its redelivery in a damaged

condition, constitutes a prima facie case against the bailee (hotel

owner). He must then bring forth evidence to show that the loss

was not caused by his negligence.   

C.   Position in India

15.   In  the  backdrop of  the  aforementioned two approaches

adopted in other jurisdictions, we will now examine the relevant

provisions  under  Indian  law  and  the  approach  that  should  be

20  Sherry, supra note 7, at 417. 21  Sherry, supra note 11.   

19

adopted in the Indian context in respect of liability of hotel owners

for loss of or damage to vehicles of their guests.

15.1.    Notably, we have not found any instances where Indian

courts  have  applied  the  common  law  rule  of  insurer’s  strict

liability  upon  a  hotel  owner.  It  appears  that  the  impugned

judgment of the National  Commission is  the first time that the

principle of strict liability for vehicles infra hospitium was read in

and applied in the Indian context.  

15.2.    From an examination of the underlying rationales for each

of the approaches, we find that the imposition of strict liability for

loss  or  damage to  vehicles  of  guests  is  overly  burdensome in

today’s context. The strict liability rule had emerged in an age

and time where travel was rare and tourism was virtually non-

existent, thereby prompting Courts to hold hotel owners liable so

as  to  protect  the  interests  of  the  guests.  However,  in  today’s

context of economies with well-established hotel industries and

mandatory insurance of vehicles owned by guests, there has been

a trend across jurisdictions of moving away from the strict liability

of innkeepers in respect of vehicles of guests.  

20

15.3.    Keeping in view the change in socio-economic conditions

in India, we do not think it proper to impose a standard of strict

liability upon hotel owners. Due to the growing population and the

parallel  economic  expansion  in  the  country,  hotels  and similar

establishments are much more accessible to the public than they

may have been a few decades ago. Hotels have also launched

diversified services to keep up with changing times and to meet

growing competition from alternate hospitality ventures. Hence, a

person  may  frequent  hotels  for  limited  periods  of  time  for

purposes  other  than  residing  as  a  guest  in  the  rooms.  For

example,  a  person  may  visit  a  hotel  for  business  meetings,

conferences,  weddings,  dinner  outings,  and  so  on.  In  all  such

situations,  if  the  hotel  is  made strictly  liable  for  the  safety  of

vehicles of these persons without proof of negligence on its part,

it  may  lead  to  grave  injustice.  Given  the  growing  number  of

visitors,  hotels  cannot  be  expected  to  maintain  surveillance of

each and every vehicle parked on their premises at all times.  

16.   At the same time, it is true that persons visiting hotels and

parking their cars in their premises or under valet parking, cannot

be left at the mercy of hotel owners. It is essential to balance the

21

interests of hotel owners and guests, and we find that the prima

facie  liability  rule  strikes  this  balance  without  placing  undue

burden on either of the parties. The fact that guests are already

protected by virtue of insurance of their vehicles tips the scale in

favour of adopting a relatively moderate approach. Thus, given

that the prima facie liability rule is premised on the existence of a

bailment relationship, in cases where such a relationship is found

to  exist  between  the  hotel  and  its  guest,  the  rule  should  be

applied in respect of vehicles so bailed to the hotel.  

Notably,  this is also the approach that has found mention

under Indian law. The general rule has been that in a contract of

bailment, if goods are lost or damaged while in the possession of

the bailee, he will be liable. The burden of proof will be on the

bailee to show that he took a reasonable degree of care in respect

of  the  bailed  goods  (See N.R.  Srinivasa  Iyer  v. New India

Assurance  Co.  Ltd.22).  This  is  because  there  is  an  implicit

expectation between the hotel and the guest when a vehicle is

handed over for  valet parking that the vehicle would be taken

reasonable care of, and returned in a proper condition. Thus, the

22  AIR 1983 SC 899.

22

failure to return the vehicle strikes at the root of the bailment

relationship and gives rise to a prima facie case of negligence

against the hotel. In our considered opinion, the strict liability rule

under common law is a relic of the past and should not be given

effect  in  the  Indian  context.  To  this  extent,  we  find  that  the

National Commission has erred in adopting the common law rule

without justifying its choice or without noting the well-recognised

exception in respect of the vehicles of guests.

17. In light of this exposition on the applicability of the prima

facie  liability  rule  in  India,  we  will  now  examine  whether  a

bailment relationship exists in the present case for such liability

to be affixed on the Appellant-hotel.  

D.  Existence of bailment relationship

18.  The existence of a contract of bailment often turns on the

degree of  control  exercised by the prospective bailee over  the

property or good in question. In other words, the crucial point to

be considered is whether the custody or possession of the vehicle

is purposefully handed over to the hotel (as is the case with valet

parking) or whether the complainant is merely allowed to park his

car in a parking space or facility. While the laws of bailment apply

23

in  the  former  case,  the  latter  is  only  a  licensor-licensee

relationship where laws of bailment or the prima facie liability rule

cannot be applied.  

18.1.    In a number of decisions, the National Commission has

held that the manager of a parking facility cannot be held liable

as  a  ‘bailee’  for  loss  of  vehicles  parked  therein.  In

Commissioner, Corporation of Madras  v. S. Alagraj,23 a 3-

member Bench held that a person who provides parking facility

for a nominal fee does not undertake to ensure the safety of the

vehicle. Later, a 5-member Bench in Rohini Group of Theatres

v. V.  Gopalakrishnan24 relied upon  Alagraj (supra)  and held

that an attendant in a theatre parking lot who collects a nominal

fee for parking of the vehicle cannot be said to be a bailee, as in

such cases, it cannot be said that the vehicle was ‘delivered’ for

some ‘purpose.’ Hence, the operators of the parking lot would not

be liable for the vehicle going missing.  

18.2.    However, in our opinion, these decisions do not support

the case of the Appellant, as they relate to situations where the

possession of the vehicle was not purposefully handed over to the

23  I (1996) CPJ 54 (NC) 24  II (1996) CPJ 1 (NC)

24

hotel or management of the parking facility, or their servants. In

the aforementioned cases decided by the National Commission,

the  concerned  facility  had  only  licensed  out  its  premises  for

parking, and left it to the discretion of the vehicle owner as to

where  to  park  the  car.  In  such  instances,  the manager  of  the

premises does not undertake the safe return of the vehicle and

there  is  no  ‘parking  service’  rendered  by  the  parking  facility

operator as such. Rather, it is the owner’s responsibility to find a

suitable parking spot, park the vehicle correctly, return, and take

out the vehicle upon display of the parking token/slip. Hence, in

such situations, it cannot be considered that possession has been

handed over or that a relationship of bailment has been created.

18.3.    On the other hand, in a situation where the hotel actively

undertakes  to  park  the  vehicle  for  the  owner,  keep  it  in  safe

custody and return it  upon presentation of  a  parking slip  in  a

manner such that the parking of the vehicle is beyond the control

of the owner, a contract of bailment exists. Thus, the hotel would

be liable as a bailee for returning the vehicle in the condition in

which it was delivered. To further elaborate upon this point, we

25

may refer to the following provisions of the Indian Contract Act,

1872 (‘Contract Act’):

“148. ‘Bailment’, ‘bailor’ and ‘bailee’ defined.—A ‘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 they are delivered is called the ‘bailee’…

149. Delivery to bailee how made.—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  authorised  to  hold them on his behalf.”  

(emphasis supplied)

In  view  of  these  provisions,  it  is  clear  that  in  a  scenario

where  possession  of  the  vehicle  is  handed  over  to  a  hotel

employee for valet parking, it can be said that ‘delivery’ of the

vehicle has been made for the purposes of Section 148 and 149.

Consequently, a relationship of bailment is created. The parking

token so handed over to the bailor is evidence of a contract, by

which the bailee (hotel) undertakes to park the car and return it in

a suitable condition when the vehicle owner so directs.  

18.4.    The distinction between a person who leaves his vehicle in

a  car  park,  and  a  person  making  delivery  of  a  vehicle  for

26

safekeeping  has  been  well-established  in  common  law  by  the

Court of Appeal in Ashby v. Tolhurst.25 In this case, the plaintiff

parked  his  car  in  a  car  park  owned  by  the  defendants  and

received a parking ticket with an “owner’s risk” clause. The car

park  attendant  allowed  another  person  to  take  away  the  car

based upon a mistaken impression that  the thief  was the true

owner of the car. The Court of Appeal held that no relationship of

bailment  was  established,  and  the  defendant  was  under  no

contractual liability to the plaintiffs as:

“It seems to me that reading the document as a whole, including its own description of itself, namely “Car park ticket,” it really means no more than this: the holder of this ticket is entitled to park his car in the Seaway Car Park, but this does not mean that the proprietors are going to be responsible for it…If that be the true view, the  relationship  was  a  relationship  of  licensor  and licensee  alone,  and  that  relationship  in  itself  would carry no obligations on the part of the licensor towards the  licensee  in  relation  to  the  chattel  left  there,  no obligation to provide anybody to look after it, no liability for any negligent act of any person in the employment of the licensor who happened to be there.

The  word  “give”  in  the  context  quite  clearly  is  not accurately  used.  The car  is  placed upon the  ground, and if the owner came for it he would get into it and drive  it  away.  There  is  no  question  of  giving,  no question of physical delivery coming into it at all. It is not like articles in a railway cloak-room which have to

25  [1937] 2 K.B. 242.

27

be handed out by the cloak-room attendant before the person  claiming  them  can  get  them.  This  is  a  case where any one can walk on to the land and get into a car,  and  I  cannot  myself  read  that  one  phrase  as evidence of any such delivery as Mr. Cloutman admits is essential for the success of his case.”

(emphasis supplied)

18.5.    Similarly, in Tinsley v. Dudley,26 the plaintiff went to a

public inn and parked his motorcycle in the premises. No parking

fee was charged, nor was there any attendant to look after the

vehicles. Relying upon  Ashby  (supra), the Court of Appeal held

that the inn would not be liable:  

“But, apart altogether from that point, it seems quite plain that the decision in this court proceeded upon the view that one who parks his car in a car park does not thereby deliver over the possession or custody of the motor car to the keeper of the park — at any rate in the absence  of  some  unusual  or  special  circumstances which did not  exist  in  that  case and were not  to  be imported by the giving or the terms of the ticket.

It seems to me clear, therefore, that there is no basis for  saying  that  there  was  any  delivery  over  to  the defendant, or to any agent of his, of the possession or custody of the motor-bicycle. There was nobody about, and it is not suggested that access to the yard was not available to any who liked to walk in…

…As Romer, L.J.,  said in  Scarborough  v. Cosgrove, all these cases must depend upon their own facts; and  it should  not  be  assumed that  in  every  case  in  which, adjoining a public house there is a place provided for

26  [1951] 2 K.B. 19.

28

the leaving or storage of motor cars by patrons of the house  it  will  follow  that  the  publican  is  under  no liability. That question will depend on whether, in the particular  case,  a  contract  of  bailment  comes  into existence or not.”  

(emphasis supplied)

18.6.    Indian courts have also followed this distinction. In New

India Assurance Co. Ltd. v. Delhi Development Authority,27

the insurer had filed a civil suit (as subrogee) to recover damages

on account of theft of a truck from the parking facility maintained

by the defendant-authority. While holding that this was a case of

bailment under Sections 148 and 149, the Delhi High Court made

the following pertinent observations:

“6…There is nothing on the record to show that the Idle Truck Parking Centre was only an open space of land where licence was being granted to the truck owners to park  their  trucks  on  payment  of  certain  fee  without their being any obligation on the part of the defendants to look after the safety of the vehicles parked therein…

7…If I may apply the principle of law as laid above, it is a clear case of bailment and the defendants as bailee having failed to show having exercised reasonable care as man of ordinary prudence are liable for the loss of the truck…

10.  Essence of bailment is possession. The possession of the truck was handed over to the defendants when the  truck  was  parked  in  the  Parking  Centre  of  the defendants.  The defendants had issued a receipt and

27  AIR 1991 Del 298.

29

charged Rs. 3/- for the safe keeping of the vehicle for a period of 24 hours. Immediately at that time a contract of bailment came into being. The defendants as bailee having failed to deliver the vehicle back to the second plaintiff within  the  contracted  period  and  not  having shown  to  have  exercised  any  prudent  care  for  the safetly  of  the  truck,  are  liable  for  its  loss.  It  is immaterial if the driver of the truck was also sleeping in the vehicle. The vehicle could not have been taken out of the Parking Centre without surrendering the receipt.

This  is  particularly,  so  when  the  plaintiffs  have submitted  that  the  truck  was  under  the  charge, custody,  control  and  possession  of  the  defendants.  I would  have  certainly  agreed  with  Mr.  Amit  Chadha, learned  counsel  for  the  defendants,  if  there  was anything  on  the  record  to  show that  the  defendants were merely collecting a fee for parking and were not to guard or watch the vehicles parked generally in the Idel Parking Centre…

…I find, in the present case, the vehicles was parked in the Truck Parking Centre against a receipt and it was the duty of the defendants to guard the truck for 24 hours and to deliver the same back to the plaintiff No. 2 within this period.  It was not that the defendants had merely  granted  a  licence to  the  plaintiff to  park  the truck at any open space on a certain fee without there being any liability on the part of the defendants to look after the truck for its safe keeping.”  

(emphasis supplied)

18.7.    In  view of  the  foregoing  discussion,  we find that  the

decision in  Bombay Brazzerie (supra) is wrong insofar as the

National Commission observed that the laws of bailment would

apply only when a customer makes a separate payment to park

30

the  car  in  a  parking  lot.  It  is  not  disputed  that  a  contract  of

bailment under Section 148 may be gratuitous. In any case, it is

common knowledge that ‘complimentary’ services provided by 5-

star  hotels  are  not  actually  free-of-cost.  These  services  are

covered by  the  exorbitant  rates  charged for  renting  of  rooms,

food,  entry  fee  to  lounges and clubs,  and so  on.  It  cannot  be

denied  that  valet  parking  service,  even  if  offered  gratuitously,

benefits  the  hotel.  A  hotel  holding  itself  out  to  the  public  as

providing such a service seeks to pitch it as a value addition to

the experience of a guest and incentives greater foot fall. In fact,

many luxury hotels are located in central urban areas which are

prone  to  congestion,  thereby  necessitating  valet  parking  to

protect  guests  from  overcrowding  and  pollution  caused  by

haphazard parking of vehicles. In such a setting, the provision of

valet parking offers the hotel an edge over others, as visitors are

generally inclined to accept the invitation of greater convenience

furnished by  the  hotel,  i.e.  of  having  someone else  park  their

vehicles in a secure place. Therefore, for such cases, there exists

an implied consideration for the contract of bailment created by

virtue of the valet parking service.   

31

18.8.   Applying this to the instant case, Respondent No. 2 had

given up possession of his car by handing it over to the valet.

Thus, the Appellant-hotel cannot refute the existence of bailment

by  contending  that  its  valet  parking  service  was  purely

complimentary in nature and that the consumer (bailor) had not

paid for the same. In other words, the existence of a bailment

relationship is clear. In view of this finding, the requisite standard

of care under such a bailment contract merits examination.  

III.    THE REQUIRED DEGREE OF CARE UNDER BAILMENT   

19. Given the existence of a bailment relationship, the failure of

the Appellant to deliver the car to Respondent No. 2 (car-owner),

raises  a  prima  facie case  of  negligence  against  it.  Thus,  the

burden of proof is on the hotel (bailee) to show that efforts were

undertaken by it to take reasonable care of the vehicle bailed,

and that the theft did not occur due to its neglect or misconduct.  

20. To ascertain the standard of reasonable care to be taken by

the bailee (hotel) for vehicles parked within its premises, Sections

151 and 152 of the Contract Act are relevant:

“151. Care to be taken by bailee.—In all  cases of bailment the bailee is bound to take as much care of

32

the goods bailed to him as a man of ordinary prudence would,  under  similar  circumstances,  take  of  his  own goods  of  the  same  bulk,  quantity  and  value  as  the goods bailed.

152. Bailee when not liable for loss, etc., of thing bailed.—The  bailee,  in  the  absence  of  any  special contract, is not responsible for the loss, destruction or deterioration of  the thing bailed,  if  he has taken the amount of care of it described in section 151.”

20.1.   Under Sections 151 and 152, the bailee has a duty to keep

its premises in a condition of safety that would be reasonable to

prevent loss, damage, or theft of the goods of its guests.  With

respect to 5-star hotels specifically, we find that the responsibility

to take such measures is higher. Counsel for Respondent No. 1

sought  to  rely  on  Klaus  Mittelbachert and  Hotel  Hyatt

Regency (supra) to argue that 5-star hotels should be subject to

the strict liability standard of insurers under common law. Here, it

is  crucial  to  note that  Klaus Mittelbachert was in  respect  of

personal injury caused to the guests on account of negligence by

the hotel. As mentioned supra, such standard cannot be applied

in the context of liability for vehicles of guests. However, we do

agree with the observations of Lahoti J. in Klaus Mittelbachert

that  the high prices  charged by  such  hotels  imply  a  relatively

33

higher  degree  of  care  as  a  reasonable  person  would  normally

expect higher quality and safety of the services made available

by such hotels. This is also in consonance with the observations of

the National Commission in  Hotel Hyatt Regency  (supra)  that

five star hotels have a high duty of care for cars parked in their

premises.  

20.2.  This would mean that it is not sufficient for the hotel to

merely  appoint  an  attendant  or  security  guard  who  takes  the

responsibility of parking the vehicle and keeping the car keys in

his custody until the vehicle owner is inside the hotel premises.

The hotel must take additional steps to guard against situations

which  may result  in  wrongful  loss  or  damage to  the  car.  This

includes, for example, ensuring that the car keys are kept out of

reach of outsiders, that the valet parks the car in a safe location,

that parking spaces which are in the vicinity of the hotel are well-

guarded,  that  parking  spaces  inside  the  hotel  (if  any)  are

reasonably well-maintained and CCTV cameras are installed there

for detecting any suspicious activity, that the car is handed over

only to those who present the parking slip and so on. Needless to

say this is only an illustrative, and not an exhaustive list.  

34

20.3.    Further, it is relevant to note that Sections 151 and 152 of

the Contract Act do not distinguish between a gratuitous bailee

and  a  bailee  for  reward.  In  Port  Swettenham Authority  v.

T.W. Wu & Co,28 the Privy Council commented on Sections 104

and 105 of the Contracts (Malay States) Ordinance of 1950, which

are in pari materia with Sections 151 and 152 of the Contract Act,

as follows:

“It  will  be  observed  that  these  sections  apply  to  all bailments and make no distinction between bailments for reward and gratuitous bailments… …There  is  no  compelling  authority  that  a  gratuitous bailee who fails to return the goods left in his custody is not obliged to explain why he is not able to return them and to show that their loss is not due to his failure to have taken as  much care  of  the goods as  a  man of ordinary prudence would have taken of his own goods in similar circumstances. In any event,  a bank, which offers its customers, in the ordinary course of business, the service of looking after goods deposited with it, can hardly be described as a gratuitous bailee.  The bank must realise that were it to refuse a customer such a service it would probably lose the customer who would have no difficulty in finding another bank which would be  happy  to  render  the  service  which  is  normally offered by banks to their customers.

However, this may be, in their Lordships' view the onus is always upon the bailee, whether he be a bailee for reward or a gratuitous bailee, to prove that the loss of any goods bailed to him was not caused by any fault of his or of any of his servants or agents to whom he entrusted the goods for safe keeping.”

28  [1979] A.C. 580

35

Therefore, it is irrelevant as to how much parking fee was

paid by the consumer, or whether any parking fee was paid at all,

as the duty of care required to be taken by the hotel will be the

same in all  circumstances. However,  this is not a strict liability

standard insofar as Section 152 excludes the liability of a bailee

for loss or damage of the bailed goods if he is able to show that

he fulfilled the standard of reasonable care under Section 151.

Whether or not such standard of reasonable care was fulfilled will

depend upon the facts and circumstances of each case.  

21. Coming to the facts of the instant case, the records show

that the car of Respondent No. 2 was stolen when three young

boys who had parked their car in the Appellant-hotel came out of

the hotel, asked the valet driver to bring their car to the porch,

and one of them then picked up the keys of the car of Respondent

No. 2 from the desk, went to the parking area and stole the car. It

has been stated in the complaint that the thief escaped despite

an attempt by the hotel guard to stop him. Notably, in the written

statement filed by the Appellant-hotel, it has denied negligence

by stating that the guest was aware of the risk of valet parking,

36

which was not a service for safe custody of the vehicle, especially

given the terms printed on the parking tag. Its entire case has

been premised on the exclusion clause in the notice, and not on

the absence of negligent conduct on its part. In fact, there has

been an admission of the fact that one of the three young boys

who had visited the hotel stole the car of Respondent No. 2, while

its keys were under the watch of the valet driver.  

As mentioned supra, to meet the requisite standard of care,

the  hotel  must  go beyond appointing an attendant  or  security

guard and take additional measures to guard against situations

that may result in wrongful loss of or damage to the car of its

guest. Here, the manner in which the car was stolen manifests

that no steps had been taken by the Appellant-hotel to ensure

that car keys were kept outside the reach of outsiders or that the

cars  were  parked  in  a  safe  location  with  adequate  barriers  to

verify  their  owners.  In  the  absence  of  such  measures,  the

Appellant  has  failed  to  discharge  its  burden  of  disproving  the

prima facie case of negligence against it. Thus, we find that the

theft  of  the  car  of  Respondent  No.  2  was  a  result  of  the

negligence of the Appellant-hotel.  

37

IV.    EXCLUDING LIABILITY BY CONTRACT   

22. Since the parking tag given to Respondent No. 2 stated that

the  parking  would  be  at  the  guest’s  own  risk,  it  is  to  be

considered whether it is open to the Appellant-hotel (bailee) to

contract out his liability  for  negligence beyond what is  already

provided under Section 152 of the Contract Act. In other words,

can the bailee contractually exclude liability for his negligence or

that of his servants?  

23. Under Indian law, the seminal decision on this point is that of

a  Full  Bench  of  the  Madras  High  Court  in  Sheik  Mahamad

Ravuther v. The British Indian Steam Navigation Co. Ltd.29

In that case, the plaintiffs alleged that their goods were damaged

on account of the negligence of the defendant shipping company.

The trial court and the lower Appellate Court found that there had

been no negligence on the part of the defendants. However, in

second  appeal,  though  the  Division  Bench  of  the  High  Court

agreed  that  the  defendants  were  negligent,  they  differed  on

whether  the  terms  of  the  bill  of  lading  excluded  liability  for

29  (1909) ILR 32 Mad 95.

38

negligence. Consequently, the case came before the Full Bench

by way of a Letters Patent Appeal.  

On facts, Sir Arnold White C.J. and Sankaran Nair J. of the Full

Bench found that the defendant had been negligent and allowed

the appeal, whereas Wallis J. dissented. However, with respect to

the question of  whether  the bill  of  lading excluded liability  for

negligence, White C.J.,  and Wallis J.  were of the opinion that a

carrier is not exempted from liability for his negligence or that of

his servants, unless such an exemption is made in express terms

through  a  ‘specific  negligence  clause’.  While  holding  so,  they

noted that such a contractual exemption, if properly made, would

not  be contrary  to  public  policy.  However,  on facts,  White  C.J.

found  that  such  a  specific  negligence  clause  had  not  been

inserted in the bill of lading. Thus, he allowed the appeal. Placing

significant reliance upon the decision of the King’s Bench in Price

& Co v.  Union Lighterage Company, (1903) 1 K.B. 750 while

arriving at this conclusion, he observed that:

“…The view which I take appears to be in accordance with the decision of the Court of Appeal in  Rathbone Brothers & Co.  v. David MacIver Sons & Co. where the Court  holding  that  the  carriers  were  unable,  on  the facts, to claim the benefit of a special proviso relating

39

to  unseaworthiness,  the  carriers  were  held  liable notwithstanding  general  words  in  the  bill  of  lading which exempted them in the case of injury or default…

…The  words  “in  all  cases  and  under  all circumstances”  in  the  present  bill  of  lading  are  no doubt  as  wide  and  as  general  as  possible,  but  the reiterated  use  of  general  words  does  not  of  course exclude  the  application  of  the  special  canons  of construction which a long course of  Judicial  decisions has  held  applicable  to  the  construction  of  contracts which  purport  to  relieve  a  carrier  from  liability  for negligence. The authorities were discussed by Walton, J., in  Price & Co. v. Union Lighterage Company. In that case goods were loaded on a barge under a contract for carriage by which the barge owner was exempt from liability “for any loss of or damage to goods which can be covered by insurance.” The barge was sunk owing to the negligence of the servants of the barge owner, and the goods were lost. The learned Judge held that the barge  owner  was  not  protected  from liability  by  the contract.  In  the  course  of  his  judgment  the  learned Judge observed: “...If it were right or permissible to deal with  this  case  without  regard  to  the  rules  of construction which have been laid down in a well-known series of cases and looking only at the language used, it might very well be said that its meaning was that the defendants  wore  to  be  exempt  from  liability  for insurable losses whether caused by negligence or not. But  there  is,  I  think,  a  well-established  rule  of construction applicable to the present case. The law of England,  unlike in  this  respect  the law of  the United States of America, does not forbid the carrier to exempt himself by contract from liability for the negligence of himself and his servants; but if the carrier desires so to exempt  himself,  it  requires  that  he  shall  do  so  in express, plain, and unambiguous terms.”  

After  discussing  the  authorities  Walton,  J., summarises their effect in these words: “it really comes to this,  that if a carrier wishes to exempt himself from

40

liability  for  the  negligence  of  his  servants  he  must insert in his contract, in one form or another, something equivalent  to  what  is  well-known  as  a  negligence clause.” Now I understand a negligence clause to be a provision  which  in  express  terms  exempts  a  carrier from liability  for  the  negligence  of  his  servants.  The specific  condition  in  the  bill  of  lading  in  the  present case contains no such provision… … It is no doubt true that the bill of lading in the present case  does  not  contain  contradictory  terms  and,  in  a sense, it is not ambiguous, but the portion of the bill of lading which deals with the liability of the carrier at the particular stage of the adventure when the negligence occurred, is not express with reference to the question of  negligence,  and  this  being  so  I  do  not  think  the carrier is protected… …   As  in  my  view  of  the  law  a  shipowner  is  not exempted  from  liability  for  negligence  unless  the contract which exempts him is both clear and express, and as the contract in the present case, though it may perhaps be said to be clear is certainly not express, I am of opinion that the defendants are not protected by their  bill  of  lading. Two  other  questions  remain  for consideration. I can deal with them shortly. Mr. Sundara Ayyar  contended  that  a  contract  which  purported  to relieve  a  shipowner  from his  liability  as  a  carrier  for negligence was contrary to public policy and should not be enforced. As pointed out by Walton, J., in   Price & Co.   v.   Union  Lighterage  Company  ,  the  law of  the  United   States of America forbids a carrier to exempt himself by contract from liability for negligence, whilst the law of England does not. I am of opinion that on a question of this character Courts in India ought to follow the law of England.”  

(emphasis supplied)

Wallis J. in his dissent, similarly relied upon Walton J.’s decision in

Union Lighterage Company (supra) and observed that:

41

“As regards the second point I am of opinion that  it is not  open  to  us  to  hold  that  contracts  exempting  a carrier from liability for the negligence of his servants are void as opposed to public policy. As pointed out by Walton, J., in Price & Co. v. Union Lighterage Company “the law of England, unlike the law of the United States of  America,  does  not  forbid  the  carrier  to  exempt himself by contract from liability for the negligence of himself and his servants; but, if the carrier desires so to exempt  himself,  it  requires  that  he  shall  do  so  in express, plain, and unambiguous terms.” So far as the general question goes this is the law which has been received and applied by the Indian Courts, [Jellicoe  v. The  British,  India  Steam  Navigation.  Co. and  Hajee Ismail  Sait  v. The  Company  of  the  Messageries Maritimes of France].  Contracts have been made and business has been carried on for many years in India on this footing, and if the law is to be altered now it must be by the legislature.”  

(emphasis supplied)

24. Notably,  neither  White  C.J.  nor  Wallis  J.  adverted  to  the

provisions of the Contract Act, which was in force in India at that

time,  in  their  opinions  on  the  enforceability  of  contractual

‘negligence clauses’. Rather, they primarily placed reliance upon

the common law in England which governed the issue at the time.

On the other hand, Sankaran Nair J. in his concurring judgment,

upon a detailed consideration of the provisions of the Contract

Act, particularly the provisions relating to bailment, opined that it

is not open to a bailee to contract out of the minimum standard of

42

liability under Section 151. He noted that while the rule of law in

England  allowed  shipowners  to  contractually  exclude  their

responsibility for the negligence of their servants, the validity of

the exemption clause under Indian law would necessarily have to

be tested on the touchstone of the provisions of the Contract Act.

The following portions of his opinion are important for deciding

this issue:

“Under  Section  151  of  the  Act,  the  defendants, therefore, are bound to take as much care of the goods as  a  man  of  ordinary  prudence  would  under  similar circumstances. It is only the incident of any contract not inconsistent with its provisions that remains unaffected by the Contract Act (see Section 1 of the Contract Act). The incident of the contract before us that the bailee is exempt from taking the care required by Section 151 appears  to  me  to  be  clearly  inconsistent  with  that section.  Section  152  seems  to  make  this  clear.  It declares that the bailee's liability is limited as declared by  Section  151,  “in  the  absence  of  any  special contract,”  or  in  other  words  he  may  by  contract undertake a higher responsibility, for instance, that of an insurer.  The provision in Section 152 that a bailee may undertake a higher responsibility, the absence of a similar provision that he may limit the liability imposed by Section  151,  and the  fact  that,  in  the  chapter  IX relating to Bailment, whenever a rule of law is intended to  operate  only  in  the  absence  of  a  contract  to  the contrary it is expressly so stated - (see Sections 163, 165, 170, 171 and 174) leave no doubt in my mind that a bailee's liability cannot be reduced by contract below the limit prescribed by Section 151. In fact, throughout the  Act,  whenever  the  legislature  intended  that  the

43

provisions  of  the  Act  should  be  enforced only  in  the absence of a contract between the parties they have said so. (See Sections 109, 113, 116, 121, 93, 94, 95, 202, 219, 221, 230, 241, 253, 256, 261, 265) The  obligation  imposed  by  Section  151  applies  to bailees as well as to their servants in the discharge of their duty. The agent represents the bailee under the Act.  The  Contract  Act  thus  sweeps  away  all  the distinctions between the degrees of care required of the bailees. In the English law the amount of care required seems  to  depend  upon  the  benefit  accruing  to  the bailee.  Under  the  Contract  Act  the  obligation  arises from the simple fact of accepting delivery or receiving property for a certain purpose, and the care to be taken is the same in all cases… …The relations between parties may well be left to be regulated by contract when the degree of care required is  dependent  upon  the  benefit  derived  from  the bailment,  but  when  the  same  amount  of  care  is required independent of any benefit to the bailee then it may well be that the legislature did not think it right to allow the bailee to reduce his liability. Assuming then that the rule of English law that a common carrier can get rid of his liability by contract has been accepted in India, the contract itself must be obviously one which will be recognized in the Indian Courts, and, if I am right in the view above set forth, it necessarily follows that while a common carrier may exempt himself from the liability  of  an  insurer  by  contract,  he  cannot  exempt himself from the liability of an ordinary carrier imposed by Section 151 of the Indian Contract Act. …The reason why a common carrier is bound to receive goods  tendered  and  the  great  responsibility  of  an insurer is imposed upon him is that necessity compels the owners of goods to trust him…As Best, C.J., puts it in  Riley  v. Horne,  “When  goods  are  delivered  to  a carrier, they are usually no longer under the eye of the owner....  If  they  should  be  lost  or  injured  by  the grossest  negligence of  the carrier  or  his  servants,  or

44

stolen by them, the owner would be unable to prove either of these causes of loss; his witnesses must be the  carrier's  servants,  and  they,  knowing  that  they could not be contradicted, would excuse their masters and themselves.” For the above reasons it is essential that common carriers must in India also be subject to the English common liability, and the Privy Council have now  placed  the  matter  beyond  dispute.  Where  the obligation is imposed upon the common carrier for the benefit of the public he cannot get rid of that obligation by agreement, if it is not reasonable.

The  reasons  given  above  by  Lord  Holt,  Lord Mansfield  and  Abbot,  C.J.,  are,  it  appears  to  me, conclusive  to  show that  it  is  against  public  policy  to allow  a  claim  for  exemption  as  the  one  now  put forward. There is practically no freedom of choice, and persons when entrusting shipowners with their property are  obliged  to  accept  any  condition  that  may  be imposed upon them by the steamship companies. The cargo-owners have no control over the servants, and it is only right that the master and not the cargo-owner should  suffer  for  the  misuse  of  his  powers  by  the servant as he has armed him with those powers.  The law which requires care and diligence on the part of a carrier  will,  otherwise,  to  illusory  in  the  case  of steamship  companies,  as  everything  is  left  to  the servants.  There will  be a tendency to lax supervision over  the  servants,  and  to  make  their  selection dependent more upon cheapness than on efficiency… Nothing is more easy than for the carriers to call their servants as witnesses and to prove prima facie that the goods were protected in the usual way. It would then be impossible  for  the  plaintiff to  bring  negligence  or criminality  home  to  the  carriers  although  the  goods may not be forth coming and no explanation given how the loss occurred.”

(emphasis supplied)

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Sankaran  Nair  J.  was  firmly  of  the  opinion  that  any

exemption clause with regard to negligence would be against the

interests  of  the  mercantile  community  and  shipowners,  and

thereby void as opposed to public policy. This would be true even

in a case where the bailor agreed to pay lower remuneration to

the bailee on the condition that the latter would not be liable for

their servant’s negligence.  

25. Admittedly, the opinion of Sankaran Nair J. forms part of one

school of thought on the point of contractual exclusion of liability

for negligence. However, in India, the opinion of White C.J.  and

Wallis  J.  in  Sheik Mahamad (supra)  on  this  point  has  largely

been  followed  in  subsequent  decisions  of  various  High  Courts.

These decisions have held that a bailee would be liable for the

negligence  of  its  servants,  except  in  cases  where  a  specific

negligence clause is inserted in the contract. They have all noted

that the Contract Act does not prohibit a party from contracting

out of its duty of care under Section 151.30  

30  See Kariadan Kumber v. British India Steam Navigation (1913) 38 Mad. 941;  Hollandia Pinmen v. H. Oppenheiner  AIR 1924 Rang 356;  Bombay Steam Navigation Ltd v. Vasudev Baburao Kamat ILR (1928) 52 Bom 37;  Lakhaji Dollaji  &  Co.  v.  Boorugu  Mahadeo  Rajanna 41  Bom  LR  6;  Indian  Air  Lines Corporation v. Jothaji Maniram AIR 1959 Mad 285; State Bank of India v. M/s Quality Bread Factory,  Batala AIR 1983 P&H 244;  Central  Bank of India v. M/s Grains & Gunny Agencies AIR 1989 MP 28.  

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26. Notably, academic opinion has also supported the view that

a bailee may contract out of his liability under Section 151. The

Law Commission of India has opined that the view of White C.J.

and Wallis J. in  Sheik Mahamad (supra) is correct and that the

words “in the absence of any special contract” ought to be added

to Section 151 of the Contract Act to resolve the controversy.31

Similarly, in their commentary on the Contract Act,  Pollock and

Mulla have  noted  that  though  a  bare  reading  of  Section  152

indicates  that  a  bailee  may  make  a  contract  to  increase his

responsibility over and above the standard under Section 151, the

provision  has  been  interpreted  to  mean  that  the  duty  of  care

enjoined  on  a  bailee  under  Section  151  may  be  subject  to  a

contract  excluding  such  responsibility.   Hence,  a  contract  of

exemption from liability for any loss or damage due to the fault,

carelessness or negligence of  the bailee’s  staff would bind the

parties and not be void as opposed to public policy.32

27. On  a  closer  reading,  we  find  that  the  decision  in  Sheik

Mahamad  (supra)  and  the  subsequent  High  Court  decisions

31  Law Commission of India,  Contract Act, 1872 (LawCom No 13, 1958) para 125.  32  Pollock and Mulla,  The Indian Contract and Specific Relief Acts (Nilima Bhadbhade ed, updated 14th edn, 2013) 1505, 1522.

47

which  followed  it  were  in  the  context  of  common  carriers  as

bailees. With respect to liability of common carriers, it is settled

that the opinon of Sankaran Nair J now holds the field. A Division

Bench  of  this  Court  has  clarified  in  Nath  Bros.  Exim

International Ltd.  v. Best Roadways Ltd.33 that their liability

is equivalent to that of an insurer and is absolute. Further, it has

been observed that such liability is governed by the Carriers Act

of 1865 and not by Sections 151 and 152 of the Contract Act, and

can therefore not be excluded by way of a special “owner’s risk”

clause  in  a  contract.  However,  given  that  the  present  case

concerns with liability of a hotel for loss of vehicles of its guest

due  to  negligence,  the  question  arises  whether  White  C.J.’s

opinion in  Sheik Mahamad holds good with respect to Section

151 and 152 and the prima facie liability standard which we have

laid down supra.  

28. Upon perusal of the relevant decisions on this point, we find

that White C.J. and Wallis J’s opinion in Sheik Mahamad (supra)

was peculiar  to the facts of that case.  The case of  a  common

carrier at sea is different from a hotel which undertakes to park

33  (2000) 4 SCC 553.  

48

vehicles for its guests on ground. In the former case, given the

unpredictable conditions at sea, and the fact that the shipowner

may be unable to supervise the conduct of his servants during an

overseas voyage, it can be argued that carriers should have the

liberty to contract out of liability for their servants’ negligence.  

However,  with  respect  to  liability  for  vehicles  bailed  to  a

hotel as is the case with valet parking, we are of the considered

opinion that Sankaran Nair J.’s opinion in Sheik Mahamad should

be adopted. Given that such vehicles would normally be parked in

the hotel’s own parking facility, or in the vicinity of the hotel, the

hotel staff is well-placed to ensure safe custody of the vehicle and

monitor its condition. Though valet parking may be offered as an

optional  complimentary  service  in  some instances,  more  often

than not,  guests visiting the hotel have no other option but to

entrust their vehicles to the hotel’s custody, especially given the

congested  urban  areas  where  such  hotels  are  located.  As

emphasized earlier, the guest has an implicit expectation that the

repute  and  standards  of  5-star  hotels  would  entail  adequate

safety of the vehicles handed over for valet parking. Thus, in such

a  scenario,  if  the  hotel  is  allowed  to  exclude  its  liability  for

49

negligence by way of a contract, the standard of care imposed

under Section 151 will  become illusory and virtually redundant,

rendering consumers vulnerable without any remedy. In our view,

the standard of care required to be taken by the hotel as a bailee

under Section 151 is sacrosanct and cannot be contracted out of.

It  is  important  to  clarify  that  though  courts  may  have

construed the phrase ‘in the absence of any special contract’ in

Section 152 to mean that a bailee can reduce his liability under

Section 151, such an interpretation is incorrect. The words ‘in the

absence of any special contract’ in Section 152 clearly indicate

that it is open to the bailee to accept a higher standard of liability

than Section 151 under contract, and not otherwise.  

However, this does not mean that the hotel would be liable

in all  scenarios or that it  cannot impose any exemption clause

through a contract.  There may be situations where the loss or

damage may be caused due to the negligence of third parties, the

bailor’s own negligence or unforeseen circumstances beyond the

bailee’s  control,  which  could  not  have  been  foreseen  with

ordinary diligence. This would include, for example, acts of God,

seizure of the vehicle under legal process or by public authorities,

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damage  due  to  natural  causes  such  as  unforeseen  weather

conditions,  presence of inherent defects in the vehicle,  acts  of

loss or damage caused by the guest’s own negligence and so on.

A joint reading of Sections 151 and 152 shows that, in such cases,

the Contract Act intended that the bailee should not be liable for

the loss or damage of the goods bailed on  all  occasions. To re-

iterate,  Section  152  expressly  states  that  the  bailee,  in  the

absence of  any  special  contract,  is not responsible  for  loss  or

damage of the thing bailed,  if he is able to prove that he has

taken the amount of care required under Section 151.  

Therefore,  hotels  are  at  liberty  to  print  clear  contractual

disclaimers notifying their guests that their liability is excluded for

loss  or  damage  to  vehicles  taken  for  valet  parking  which  are

occasioned by acts of a third party, contributory negligence or by

force majeure events. However, as mentioned supra, this would

always be subject  to  the hotel  discharging its  initial  burden of

proving  that  it  fulfilled  the  standard  of  care  imposed  under

Section 151 of the Contract Act. Where the hotel or its servants

have  actively  connived  against  or  acted  negligently  in

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safeguarding  the  vehicles  delivered  for  valet  parking,  ‘owner’s

risk’ clauses in the parking token will not come to their rescue.  

In this regard, it is relevant to note where a valet or servant

has been handed custody of the vehicle, and such a servant takes

away the vehicle without authority, the hotel will be liable. This is

because there will still be a prima facie assumption that the hotel

has  exercised  laxity  in  supervising  the  actions  of  its  servants.

However, the hotel will not liable where, in spite of due diligence,

a servant or employee who was not entrusted with custody of the

vehicle takes it without authority34, as this would be similar to a

case of theft by a third-party.

At this juncture, we would like to emphasize that the above

observations are limited to the issue for consideration before us,

that is, the liability of hotels as bailees for vehicles handed over to

them for valet parking. We are not commenting on whether the

rule as laid down by White C.J. and Wallis J. in Sheik Mahamad,

and followed in subsequent High Court decisions, holds good in

other kinds of contracts, and we desist from commenting further

on this aspect.  

34  See Pollock and Mulla (n 32) 1505.  

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29. In light of the above discussion, in a case of theft of a vehicle

given for valet parking, the hotel cannot claim exemption from

liability by arguing it was due to acts of third parties beyond their

control,  or  that they are protected by an ‘owner’s risk’  clause,

prior  to fulfilling its  burden as required under Section 151 and

152. It is by now well established, that while a case of a robbery

by force is visibly beyond a bailee’s control, in cases of private

stealth, or simple theft where no force or violence is involved, the

bailee still has the prima facie burden of explaining that the loss

or disappearance of the goods in his custody is not attributable to

his neglect or want of care. This is because no one apart from the

bailee is in a position to explain the fate of the goods.  

In the instant case, given our finding that the theft of the car

of  Respondent  No.  2  was  a  result  of  the  negligence  of  the

Appellant-hotel, the exemption clause on the parking tag will not

exclude  the  Appellant’s  liability.  Hence,  the  argument  of  the

Appellant-hotel on this count fails.

30. In conclusion, we would summarize our observations on this

point as follows:

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(i)  the  hotel-owner  cannot  contract  out  of  liability  for  its

negligence or that of its servants in respect of a vehicle of its

guest in any circumstance. Once possession of the vehicle is

handed  to  the  hotel  staff or  valet,  there  is  an  implied

contractual  obligation  to  return  the  vehicle  in  a  safe

condition upon the direction of the owner.

(ii)  Even  where  there  is  a  general  or  specific  exemption

clause, there remains a  prima facie burden of proof on the

hotel  to  explain  that  any  loss  or  damage  caused  to  the

vehicles parked was not on account of its negligence or want

of care per Sections 151 and 152 of the Contract Act. It is

only  after  this  burden  of  proof  is  discharged  that  the

exemption  clause  can  come  into  force.  The  burden  of

proving  that  such  loss  or  damage  was  covered  by  the

exemption clause will also be on the hotel.  

31. In  view  of  the  foregoing  discussion,  we  hold  that  the

consumer  complaint  in  consideration  is  maintainable  as  it  was

filed by the insurer as a subrogee, along with the original owner

as a co-complainant. Further, we find that strict liability cannot be

imposed  on  hotel  owners  in  respect  of  loss  of  or  damage  to

54

vehicles  of  their  guests.  Instead,  the  rule  of  prima  facie

negligence should be adopted. Applying this rule to the present

case,  it  is  clear  that  the  Appellant  has  not  explained  why  its

failure  to  return  the  vehicle  to  Respondent  No.  2  was  not  on

account of fault or negligence on its part. Thus, liability should be

affixed on the Appellant-hotel due to want of the requisite care

towards  the  car  bailed  to  it.  The  instant  appeal  is  dismissed

accordingly.  

...........................................J. (Mohan M. Shantanagoudar)  

...........................................J. (Ajay Rastogi)

New Delhi; November 14, 2019

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