19 Ene Banks cannot wash off their hands and claim that they bear no liability towards their customers for operation of locker: Supreme Court of India

Surprisingly, the legal wordings of the bank locker contract actually vouch for this reality. The safe deposit memorandum of hiring the locker clearly states that the bank will not be responsible for any loss or damage of the contents of the safe deposit vault in the case of war, civil disorder, theft or burglary. The means unless the loss of valuables happens due to internal fraud or misappropriation, the banks will not undertake any responsibility for valuables in your locker. In fact, the bank locker agreement clearly stipulates that the valuables will remain in the safe deposit vault purely at the personal risk of the hirer who has hired the locker for storing the valuables. The contract also contains a very generic statement that the bank in question will take all measures and necessary precautions to ensure that the locker and its contents are protected. However, it is very clear from the agreement that in any eventuality, the bank does not assume any liability for the value of the items stored in the vault.

In a bailment, neither the property nor the ownership of goods is transferred at any point. This is to inform that, many instances were reported by general public where fraudsters are cheating general public by misusing our brand name Motilal Oswal. The fraudsters are luring the general public to transfer them money by falsely committing attractive brokerage / investment schemes of share market and/or Mutual Funds and/or personal loan facilities. Though we have filed complaint with police for the safety of your money we request you to not fall prey to such fraudsters.

• The loopholes that come with this stand taken by the courts can be grossly misused by the banks and the safe deposit box service providers.
• What needs to be kept in mind while talking about bailment is it can be only of goods and does not include services.
• Example – Rajeev took a loan from the bank to start his own business by mortgaging his house for the purpose.
• The facts of the case are, Appellant’s mother rented a locker and the appellant was added as a joint holder.
• It means that the delivery of the goods is not permanent and is based on a specific condition or a purpose after the accomplishment of which it has to be returned to be the actual owner.
• However, it is very clear from the agreement that in any eventuality, the bank does not assume any liability for the value of the items stored in the vault.

If the phrases usually are not met, the second party can promote the property to satisfy the debt. Any extra profit from the sale should be paid to the debtor, or first celebration. Banks shall also take necessary steps to ensure that the space in which the locker facility is located is adequately guarded at all times. Bank must undertake proper verification procedures to ensure that no unauthorized party gains access to the locker.

Gratuitous bailment is a kind of bailment during which the bailee receives no compensation. A gratuitous bailee is answerable for loss of the property only if the loss is caused by the bailee’s gross negligence. Therefore a lower commonplace of care is imposed upon the bailee in a gratuitous bailment. Gratuitous bailment is also known as bare bailment or bailment for sole advantage of bailor.

Bank Responsibility under Laws of Bailment

Due to the same, banks were likely to draft locker hiring agreements favourable to their interests and leave the locker operation at the consumers’ own risk. The Court observed that the regulatory vacuum had also led to the banks being under the mistaken impression that not having knowledge of the contents of the lockers exempts them from liability to secure the lockers in themselves as well. When the purpose of delivering the goods is completed, the bailee ought to return the products to its precise proprietor. Here the phrase items may embody all of the movable gadgets, however property and money do not come under the definition of goods.

Imposition of liability upon the bank with respect to the contents of the locker is dependent upon provision and appreciation of evidence in a civil suit for such purpose. Banks owe a separate duty of care to exercise due diligence in maintaining and operating their locker or safety deposit systems as service providers under the earlier Consumer Protection Act, 1986, and The Consumer Protection Act, 2019. In actual delivery, the physical possession of the goods is handed over to the bailee while in constructive delivery the possession of the goods remains with the bailor upon authorization of the bailee.

The terms of a bailment may be varied by a contract governing possession and possession of products passing between two authorized entities. However, if there is no clear term of bailment agreed upon, the goods cannot be thought of deserted except the bailee is given notice that the bailor needs to surrender possession of the products. Further, some jurisdictions make motels and motels strictly answerable for losses to property held as a part of the enterprise-consumer relationship . In a contract of pledge, any type of documents, goods, securities can be pledged. According to section 148 of The Indian Contract Act, 1872, Bailment means delivery of goods from one person to another person for some purpose. On the accomplishment of such purpose, the person receiving the goods returns or otherwise disposes of them as per the instructions of the person delivering them.

In a mutual profit bailment, the bailee generally should train reasonable care in caring for the bailed property. If the bailment is a unilateral benefit for the bailee, the bailee owes the next normal of care in carrying out her bailment duties. The standard of care is is hiring of bank locker bailment decrease if the bailment relationship is a unilateral profit for the bailor. Frequently, within the case of storage of goods, the bailee also acquires a contractual or statutory right to get rid of the goods to fulfill overdue lease; a lawful conversion of bailed goods.

The Circular is indeed a significant step in the right direction for protecting the interests of locker holders. Such guidelines also benefit the banks and protect them from unnecessary or frivolous claims. However, it is the limitation of liability provided in the Circular that may be subject to dispute in the future.

The Courts have maintained the position that exclusive possession is a sine qua non for bailment. This means that mere hiring of a locker would not be sufficient to constitute a contract of bailment as provided under Section 148 of the ICA. In order to constitute bailment, as provided under this Section, it is necessary to show that the actual exclusive possession of the property was given by the hirer of the locker to the bank. The following judgement clarified the applicability of the law of bailment in the relation between banks and their customers in terms of locker facility. It also established the duty of care, that the banks owe to their customers as service providers.

More Commercial Laws Questions

Generally, a bailment happens so as to either provide a benefit to the bailor or the bailee, though generally a benefit is provided to both parties. In the initial example, you would profit from the bailment of your possessions. Bailment has wide business and private implications and can create liabilities for any celebration who takes one other party’s items into possession temporarily, the place authorized title has not passed in legislation. A duty of care could be imposed even outside of formal contracts and whether or not or not the owner is conscious of what has occurred to its goods.

Each bank is following its own set of procedures and there is no uniformity in the rules. Further, going by their stand before the consumer forum, it seems that the banks are under the mistaken impression that not having knowledge of the contents of the locker exempts them from liability for failing to secure the lockers in themselves as well. In as much as we are the highest Court of the country, we cannot allow the litigation between the bank and locker holders to continue in this vein. Lastly, this proposition held by the courts might provide an escape to the banks who are generally the drafters of such agreements. There is, however, no substantive domestic legislation or sector specific regulation, which may throw light upon the issue of whether banks are responsible under the laws of bailment for the loss of articles placed inside the locker. In 2006, the Reserve Bank of India had issued a Draft Circular on Safe-deposit Lockers .

In any unforeseen circumstance like theft, burglary, war or civil strife, the bank is absolved of any responsibility pertaining to the contents of the locker. In recent times there have been a number of such cases where the liability of the banker in the event of loss to locker valuables comes into question. A group of burglars, in a daring robbery attempt, dug a 125 feet long tunnel and decamped with valuables from more than 75 lockers at the PNB, Sonepat branch.

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In a contract of Bailment where the goods are delivered from one person to the another, on some purpose. Once the purpose of bailment has been completed it is mandatory for a bailee to return the property to the bailor, or be disposed of as per bailor’s instructions depending upon the terms and conditions of the contract. If through no fault of bailee own, the return of the property is delayed or become impossible to return for example if the property is lost during bailment or get destroyed by natural calamities- the bailee will not be held liable for non-delivery on demand.

They have contended that the alleged strong room was made up the affair and it was made only of plywood, whereas it ought to have been made of iron and concrete. It means that the delivery of the goods is not permanent and is based on a specific condition or a purpose after the accomplishment of which it has to be returned to be the actual owner. The possession is given to the bailee only on the condition that he will either return the goods or dispose of them according to the wishes of the bailer after the purpose for which the goods were given. For instance, when we give a electronic gadget for repair, the shopkeeper is supposed to return it after repairing it.

Bailment

Since the bank was not aware of the contents of the locker, hence it was impossible to know the quantity, quality, or value of the jewelry that was allegedly kept in the locker at the time when the robbery occurred. The dominant view of courts around the globe has been that the bank is in the position of a bailee with respect to the goods placed inside the locker by the locker holder. In Roberts v. Stuyvesant Safe Deposit Co., the Courts held that legal relationship between a person who deposits something for safekeeping in the custody of another, was that of a bailee or depositary for hire. Therefore, if someone keeps money for safekeeping in a bank locker, and the bank loses the said money, they will be held liable under the laws of bailment. The Supreme Court noted that though there existed a service provider – consumer relationship between the bank and the locker holder, the RBI guidelines / circulars covering the field were inadequate. This was because there was neither any uniformity nor clarity on the precise requirements of the duty of care to be exercised by the banks.

For instance, a guest, having the “physical custody” of a glass during a party, cannot be said to have “possession” of the same, and hence, a bailor-bailee relationship does not exist between the guest and the host. This distinction becomes significant in answering the questions regarding the legal status of the relationships between the customers of the safe deposit box services and these service providers. Therefore, mere leasing out of the locker would not establish a relationship of bailment between the bank and the locker holder. In order to establish exclusive possession, the claimant must prove that the bank had knowledge of the contents of the locker. Alternatively, where the locker holder alone has knowledge of the contents, they must lead independent evidence to prove that their articles or valuables were actually inside the locker, and the valuation of the same.

A bailment involves solely a switch of possession or custody, not of possession. A rental or lease of personal property could be a bailment, depending upon the agreement of the events. A bailment is created when a parking storage attendant, the bailee, is given the keys to a motorized vehicle by its proprietor, the bailor. A financial institution cannot be presumed to know what items are stored in any given locker in any respect the occasions. If a financial institution is given precise and unique possession of the property inside a locker by the one that hired the locker, solely then can bailment underneath Section 148 may be presumed. In the contract of bailment, the ownership of the goods stays with the Bailor and solely the possession transfers to the bailee.

As we analyzed the case of Atul Mehra v Bank of Maharastra, we observed that the whole decision relies on a previous judgment by the same court which relates to the same incident of robbery of Bank of Maharashtras 44 lockers. This judgment has laid down a crucial principle in the context of the delivery of possession of goods in a contract of bailment. The judge, in this case, has also referred to Mohinder Singh Nandas case which refers to the same incident of the robbery of 44 lockers. The judge had held that it is not per incuriam hence the same will be binding on this court. In this case, it was held that there was no exclusive possession to the bank hence no compensation was allowed to the plaintiff.