How delivery to bailee is made under the Indian Contract Act, 1872: Lawcirca

How delivery to bailee is made under the Indian Contract Act, 1872

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Bailment implies a sort of relationship in which the personal property of one person temporarily goes into the possession of another in return of fulfilment of some specific purpose. Section 148 of the Indian Contract Act, 1872[1] defines the terms ‘bailment’, ‘bailor’ and ‘bailee’ respectively. Accordingly, bailment is the delivery of goods by one party to another for some specific purpose, upon an agreement that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. In this scenario, the bailor is the person delivering the goods and bailee is the person or party to whom the goods are being delivered to.

DELIVERY: THE ESSENCE OF BAILMENT

The very essence of a contract of bailment lies upon the delivery of the possession over the goods to the bailee and is necessary to constitute bailment.

Atul Mehra v. Bank of Maharashtra[ii]

 This very peculiar case discusses the principle of delivery of possession for bailment.

It is known under this very principle, the hiring of a bank’s locker and storing things in it would not constitute a bailment. Things kept there are in a way put in a hired portion of the premises and not entrusted to the bank. The court also found that there was no proof of the fact that at the time when the bank locker was robbed the customer had some items of jewellery in the locker. The court further said that it could not be inferred without proof that the strong room and lockers were not built according to specifications. The customer was not allowed to claim any damages.

The court said that in order to constitute bailment within the meaning of section 148 it is necessary to show that actual and exclusive possession of the property was given by the hirer of the locker to the bank. It is only then that the question of reasonable care and damages would arise. As it was, it was impossible to know the quantity, quality or the value of the jewellery that was there in the locker. It is also not a relationship of landlord and tenant. The locker-holder has no direct access to his locker, nor can he operate it of his own. He can do so only with the assistance of a bank.

TYPES OF DELIVERY OF POSSESSION: ACTUAL AND CONSTRUCTIVE POSSESSION

In order the understand the delivery of possession under bailment in detail we must understand section 149[iii] of the contract act.

As per section 149, the delivery to be made 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.

It must be noted that a person may exercise actual or constructive possession over a property i.e. he may not have direct control over the property but holds the necessary title over it to prevent the claim of another.

ACTUAL POSSESSION

In the case of the first type of transfer of possession, it is the physical possession of the goods that the bailor passes on to the bailee and hence it is called to be an actual possession.  It is the most common form of transfer of property and is as easy as handing over a pen to your friend for use.

CONSTRUCTIVE POSSESSION

The second type of transfer of possession takes place when there is no change of physical possession, with good remaining where they are, but something is done which has the effect of putting them in possession.

EXAMPLE

A classic example of constructive transfer of possession could be the title deeds of the mortgaged property surrendered to the bank for the purpose of obtaining a loan. The owner remaining the borrower and the property remaining where it exists, however, the mere act of surrendering the title deeds allows the bank to enjoy the possession over it and prevents the borrower from selling it until and unless the loan has been returned. Another example of this might be the delivery of railway receipt as a proof of delivery of goods in the case of Morvi Mercantile Bank Ltd v Union of India[iv].

Bank of Chittoor v Narasimbulu [v]. 

We might consider another aspect of this principle as well in this case. Under this case, a person pledged the projector machinery of his cinema under an agreement which allowed him to retain the machinery for the use of the cinema; the Andhra Pradesh High Court observed that there was a constructive delivery to the bank or delivery by attornment to the bank. As a result, there was a change in the legal character of the possession of the goods in question i.e. the projector, even though such delivery was not actual and physical custody over it did not change. And therefore, even though the bailor continued to remain in possession of the bailor it was actually in fact under the possession of the bailee.

Faizal v Salamat Rai[vi]. 

It is another case which must be considered while looking into constructive delivery. Under this case, the defendant was holding the plaintiff’s mare under the execution of a decree. The plaintiff satisfied the decree and the court-ordered redelivery of the mare to the plaintiff. The defendant, however, refused to do so unless his maintenance charges were also paid. The mare was stolen from his custody.

The court held him liable, it said that after the delivery order had been passed, the relation of bailor and bailee was established by virtue of the explanation to section 148.

DELIVERY SHOULD BE ONLY UPON CONTRACT 

Delivery of the goods is necessary to be made for some purpose and under the agreement than when the purpose is accomplished the goods shall be returned to the bailor. When a person’s goods go into the possession of another without any contract, there is no bailment within the meaning of its definition in section 148.

Ram Gulam v Govt. of U.P.[vii] 

A very peculiar situation regarding the same principle arose in this case of wherein the plaintiff’s ornaments had been stolen but were recovered by the police, however, were lost again as they were stolen while in police custody. The plaintiff as a consequence filed a case against the state for the loss suffered by him. The court dismissed the petition claiming that the obligation of a bailee arises from a contract of bailment only and hence cannot arise independently of a contract. As the possession over ornaments had not passed over to the government under any contract whatsoever, hence the government never occupied the position of bailee and is not liable as such to indemnify the plaintiffs.

Non-contractual bailments

Under English law, the obligations of a contract may arise without a contract. An example of this may be situations wherein goods are lent or hired or deposited for sale custody, or as security for a debt, the delivery will be the result of a contract, however, this ingredient, though usual, in not essential.

In the case of Lasalgaon Merchants Coop Bank Ltd v Prabhudas Hathibhai[viii] wherein Bombay High Court took the lead in imposing the obligations of bailee without a contract. 

Contract may be expressed or implied

The contract may be expressed or implied under a contract of bailment as well as the obligations arising from such a contract.

DELIVERY SHOULD BE UPON SOME PURPOSE

It is time and again made clear the contract of bailment arises for fulfilment of some purpose and therefore, the delivery of the goods shall also be in regards for the completion of that purpose. Consequently, 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 will not be that of bailor and bailee. 

The contract of bailment, therefore, revolves around completely around the delivery of the possession of the goods and forms the very crust of the contract of bailment and is of utmost importance.

ENDNOTES

[i] Section 148 of the Indian Contract Act

[ii] AIR 2003 P&H 11

[iii] Section 149 of the Indian Contract Act

[iv] AIR 1965 SC 1954

[v] AIR 1966 AP 163

[vi] (1928) 120 IC 421

[vii] AIR 1950All 206

[viii] AIR 1966 Bom 134


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Shaina is a very hard-working and diligent writer. She does her work fervently and makes sure that whatever task she takes is completed in given time and is qualitative. She is an avid reader and also has been a writer for school magazine. Besides these, her hobbies include poetry and sketching.

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