Author: Hansie Singh Nagpal, 4th year student at VIPS affiliated to Indraprastha University, Delhi.
Citation: (2020) 2 SCC 224
Date of Decision: 14th November, 2019
Bench: Mohan M. Shantanagoudar and Ajay Rastogi
Issue in question:
- Whether Insurer has locus standi to file a complaint as a subrogee?
- Whether the Appellant Hotel shall be held liable for theft of a car from valet parking under the contract of bailment or otherwise?
- If the above question is answered in affirmative, what is the degree of care that should be taken by the hotel to protect the interests of the customer?
- Whether or not the Appellant Hotel can claim exemption from liability?
Background of the case:
- Respondent 2 (the car owner) visited the Appellant hotel and had his car valet-parked at around 11AM. In the meanwhile, three boys parked their car inside the lot, visited the hotel, came back and asked the valet to bring their car to the porch. During the course, one of them took the Respondent’s car’s key from the desk and stole the car.
- Respondent 2 (car owner) filed a complaint in the State Commission after settlement of the claim was reached with Respondent 1 (insurer). Respondent 2 claimed the capacity of subrogee. The complaint was dismissed by the State Commission on grounds of lack of standi w.r.t. Respondent 1. An appeal was filed before the National Commission which remanded the matter to the state Commission. Now, the state forum rejected Appellant’s contention for want of bailment contract and disposed of the matter directing them to pay insurance amount and compensation on account of harassment.
- The Appellant appealed before the National Commission, which dismissed their appeal on ground of “infra hospitium” or strict liability. They also rejected the contention that parking tokens issued to Respondent 1, disclaiming liability and, thereby, shifting the risk from hotel to guest does not preclude their statutory liability.
Judgment of the court:
- The court with regard to first issue reiterated the principle laid down in previous cases. It said that for an insurer to file a consumer complaint in capacity of a subrogee, two conditions needed to be met, namely
- Where the insurer acts as an attorney holder of the assured or;
- Where the insurer and the assured are co-complainants;
Only on fulfillment of either of the conditions, will the suit be maintainable. In the present case, the second condition was fulfilled. Therefore, the said suit was allowed.
- The court with respect to the second issue observed that there are essentially two doctrines governing the liability of the Appellant hotel for the loss caused to the interests of the guest. One is the traditional ‘strict liability doctrine’ and the other, the ‘prima facie liability doctrine’. The first one held the hotel liable for any damage caused to the guest’s property/interests, as the hotel was deemed to be an insurer for the damage, unless the such damage was caused due to acts or events outside the scope of its control, commonly being Act of good or any other superior force. This continued till the second half of the 19th century. It was considered acceptable yet harsh on the hotel/innkeeper since liability was imposed regardless of the fact that the hotel took due care and caution and no degree of negligence could be attributed to the hotel in safekeeping the possession in their custody. Another reason for its acceptance was the fear among travelers of being exploited by marauders and ruffians who were likely to be in collusion with the innkeepers which was further compounded by their inability to produce any evidence to disprove the innocence of these innkeepers who were often accomplices in these crimes and got away with it. The courts, therefore, reversed the burden of proof on the innkeepers to prove its innocence by presuming fault on their part.
- The other doctrine gained widespread acceptance since the boom in commercialization, globalization and the coming of the hotel culture in various first world countries. Principles of natural justice found flavour with courts around the world and the unfair burden put on hotel owners was reduced with the view to providing the owners a chance to shun his default on producing sufficient proof of his diligence and duty. Its was now argued that they would be held accountable only on grounds of negligence on their part. Thus, the presumption of prima facie liability could be disproved by the hotel owners.
- As per sec 148 of Indian Contract Act, 1872, the relationship between Hotel and the guest fall under Contract of Bailment when the bailee (parking attendant) issues a token to the Bailor as the evidence of contract and agrees to park, safekeep and return the car to the custody of the guest as and when he directs. The contention of the Appellant was that it was only a gratuitous bailment i.e. the bailor never paid (consideration) for the service. Therefore, to impute the same with any liability for the loss is unfounded. For one, the court held that section 148 does not distinguish between a gratuitous and one by reward. And for two, the Hotel of such a class and grandeur charge exorbitantly for every service rendered. The court explained, at first sight, each such minute service may seem negligible in cost or even a complimentary one but these exclusive services are always covered within hidden costs. They pitch in such value addition services to enhance the experience of a guest, which in turn monetarily benefits the hotel. For third, crowded metropolitans where there are not enough spaces for car parking, these lavish hotels provide secure accommodation monitored by CCTV and extra layers of security from any risk of theft by providing valet parking services. This in turn provides them an edge over other establishments and generates trust amongst the visitors with respect to security and convenience. Therefore, it logically flows from the benefits conferred by 5-star hotels that valet parking services comes at a consideration which is a part of a contract of bailment.
- As for the third issue, the standard of reasonable care in bailment contracts is covered by sections 151 and 152. The court observed that “the standard of care required to be taken under Section 151 is sacrosanct and cannot be contracted out of” and any clause in the contract suggesting exemption of liability cannot override it. The court also found it necessary to differentiate the scope of both relevant sections. It held that the presence of a “special clause” in section 152 does not give a pass to bailee to underperform the obligations he is obliged to perform under section 151. The degree of reasonable care remains the same under section 151 even when there is a “special clause” under section 152 indicating a higher degree of care and caution to be undertaken by the bailee.
- Again, the Hotel has to prove its innocence by showing that it exercised due care and caution and avoided any act which otherwise would qualify as a wantonly negligent act or connivance, which is the gist of section 151. This is because no one except the bailee is in a position to explain the fate of the goods so delivered to him.
- As for the last issue, the court holds the view that ‘tokens’ issued by bailee containing disclaimers such as ‘at owner’s risk’ would not relinquish bailee’s liability to act with ‘reasonable care’ unless third party events cause damage, for example-Force majeure events, unforeseen events, contributory negligence, defects in the goods or bailee’s own default etc.
- In the present case, the bailee showed negligence in allowing the alleged thieves to slip inside the valet parking, steal the keys from the safe and drive it away. The guards did attempt to prevent the theft but that cannot preclude the default of the hotel owner of maintaining poor supervision of the servants entrusted with the duty to safeguard customer’s interests.
- However, the hotel would not be vicariously liable in a situation where despite due diligence, an employee not entrusted with the duty of valet parking were to, on his own accord, take the property without authority. That would fall under “theft by a third party”.
- There is a crucial difference between license and bailment. An attendant at a parking lot of a film theatre issuing a parking receipt at nominal fee is not making a bailment contract with the car owner. In this case, the attendant (licensor) has licensed the premises to the car owner (licensee). It is the car owner’s discretion to search for an empty and suitable spot. Neither does the licensor undertake any responsibility for the safe return of the car nor does the licensee handover the possession to the attendant. Such a legal relationship contrasts with the one in the above case.