TAJ MAHAL HOTEL VS. UNITED INDIA INSURANCE COMPANY LTD. & ORS., CIVIL APPEAL NO. 8611 OF 2019 ARISING OUT OF S.L.P. (CIVIL) NO. 112/13 OF 2018. – 14 November 2019.
The Hon’ble Supreme Court held that the Hotel- Owner is liable for the loss or theft of the vehicles of its guests and 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.
The bench constituting of Justice Mohan M. Shantanagoundar and Justice Ajay Rastogi delivered the judgment by special leave, arises out of judgment passed by the National Consumer Disputes Redressal Commission dismissing the appeal against the order passed by the State Consumer Disputes Redressal Commission.
The issues considered by the Honorable Supreme Court in the present case are ;
Whether the insurer had locus standi to file the complaint as a subrogee?
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?
If the second question is answered in the affirmative, what is the degree of care required to be taken by the Appellant- Hotel?
Whether the Appellant- hotel can be absolved of liability by virtue of contract?
The court discussed each issue in detail and stated various principles and provisions to reach the conclusion. The court adverted to each of these turns.
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 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 authority, as this would be similar to a case of theft by a third-party.
COMPLAINT FILED BY INSURER AS A SUBROGEE
The court relied upon Economic Transportation Organization vs. Charan Spinning Mills (Pvt.) Ltd. (2010) 4 SCC 114 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:
The insurer in the name of the assured, wherein the insurer acts as the attorney holder of the assured; or
The insurer and the assured as co- complainants.
In the instant case, the Respondent had executed a power of attorney and a letter of subrogation in favor of the insurer and also the complaint was filed by both as co- complainants. Therefore, both the conditions are squarely applicable to this case and the complaint is maintainable.
LIABILITY OF HOTELS FOR THEFT OR LOSS OF VEHICLES OF GUESTS
The court discussed two principles, firstly Common law rule i.e. infra hospitium where the innkeepers were held strictly liable for the loss of or damages to a guest’s property within the confines of the inn. Secondly, the Prima facie liability Rule which states that the hotel owners are 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 damages to the vehicle of the guest upon his failure to return the same.
The Indian courts have not 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. In order to balance the interest of hotel owners and guests, the court finds that the prima facie liability rule strikes this balance without placing undue burden on either of the parties. The burden will be on the bailee to show that he took a reasonable degree of care in respect of the bailed goods as stated in N.R Srinivasa Iyer vs. New India Assurance Co. Ltd AIR 1983 SC 899. Thus, the failure to return the vehicle strikes at the root of the bailment relationship and gives rise to a prima facie cases of negligence against the hotel making liable for the loss of the vehicle.
The crucial point to be noted in order to establish the bailment relationship is that whether the custody or possession of the vehicle is purposefully handed over to the hotel or whether the complainant is merely allowed to park his car in a parking space.
The Honorable Supreme Court referring to section 148 and 149 of the Indian Contract act, 1872 observed that 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.
THE REQUIRED DEGREE OF CARE UNDER BAILMENT
The failure of the appellant to deliver the car to the respondent No. 2 raises a prima facie case of negligence against it. Thus, the burden of proof is on the hotel to show that reasonable care was taken and the theft did not occur due to its neglect or misconduct. To ascertain the standard of reasonable care to be taken by the hotel for the vehicles parked within its premises are dealt with under sections 151 and 152 of the Contract Act, 1872. The court relies on Klaus Mittelbachert v. East India Hotels Ltd. 5 and Hotel Hyatt Regency v. Atul Virmani III (2008) CPJ 281 (NC) to state the required degree of care to be taken by a 5- star hotel.
In the present case, 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, the Supreme Court found that the theft of the car of Respondent No. 2 as a result of the negligence of the Appellant-hotel.
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.
EXCLUDING LIABILITY BY CONTRACT
The Supreme Court considered the issue that 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.
It is 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.
In Sheik Mahamad Ravuther v. The British Indian Steam Navigation Co. Ltd (1909) ILR 32 Mad 95 held 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.
In the instant case, the Supreme Court stated that;
If the hotel is allowed to exclude its liability for 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. 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.
The honorable Supreme Court dismissed the present appeal and concluded the case stating its observations;
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 in the hotel.
View/Download Judgment: Taj Mahal Hotel v. United India Insurance Company Ltd.
– Srutha R Elayidom
