In Taj Mahal Hotel v. United India Insurance Company Ltd. & Ors., Civil Appeal No. 8611 of 2019, 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.
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. A complaint was lodged with the police, but the car remained untraced. 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. Relying upon present Court’s decision in Oberoi Forwarding Agency v. New India Assurance Company Limited, 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.
Notably, Oberoi was partly overruled by a subsequent decision of a Constitution Bench of this Court in Transport Organisation v. Charan Spinning Mills (Pvt.) Ltd. 2 In light of change in law, 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.
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.
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.
The Supreme Court observed that the issue of liability of hotel owners or innkeepers for the loss of, or damage to goods of their guest, has come up before the Indian Supreme Court for the first time but there is ample examples of such issues in courts of other countries. The Supreme Court went at length into the whole concept of this type of liability by referencing major international judgments and observed that broadly, two approaches have been taken towards the liability of an innkeeper for loss or damage to the vehicles of his guest - 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 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').
Looking at the order of the NCDRC, the Supreme Court observed that the same is based on the common law rule and is therefore too harsh for the modern world and the Rule of prima facie negligence should apply which is premised on the existence of a bailment relationship.
The Supreme Court held that 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 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.
The court observed that in case of 'Parking Facilities', the manager cannot be termed as a 'bailee' as 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. 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. As per the definition of 'Bailment', 'bailor' and 'bailee' and Delivery to bailee how made, 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.
Referring to the decisions of the UK court in Ashby v. Tolhurst. [1937] 2 K.B. 242 & Tinsley v. Dudley, [1951] 2 K.B. 19, and New India Assurance Co. Ltd. v. Delhi Development Authority, AIR 1991 Del 298, held that the of the National Commission in Bombay Brazzerie v. Mulchand Agarwal, NCDRC 42, 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 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.
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. 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.
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. 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. 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.
Finally, the Supreme Court decided that 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 of Contract Act, 1872. 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.
In the instant case, given 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.
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.
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 and the hotel could not explain 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.
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