Case Summary: Taj Mahal Hotel vs United India Insurance Company Ltd. & Ors

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Before the Supreme Court of India

Appellant

Taj Mahal Hotel

Respondent

United India Insurance Company Ltd. & Ors

Date of Judgement

14 November, 2019

Bench

Mohan M. Shantanagoudar, Deepak Gupta

FACTS

On the date: 01.08.1998, the Respondent No. 2 (Complainant No.2) visited the Appellant’s hotel in his ‘Maruti Zen’ car at around 11 PM. Upon reaching the hotel, the car-owner (Respondent No. 2) handed over keys of his car to the hotel for valet parking, and then went inside the hotel. The car-owner came out of the hotel at around 1 AM on the same night and was informed by the security that his car had been driven away by some other person. Upon enquiry, it was known that during the stay of Respondent No.2 in the hotel, three boys had come in a separate car, and gone inside the hotel. After sometime they came out of the hotel and while the valet was bringing their car to them, one of the boys “Deepak” took the keys of the Respondent’s car from the desk and then stole it. The security guard tried to stop him but failed to succeed. Complaint was lodged to the police but the stolen car remained untraced.

Essential points:

  • The car was insured with an insurance company herein Respondent No.1 (Complainant No. 1).
  • The Appellant’s hotel had taken a nonindustrial risk insurance/liability policy from Respondent No. 3.
  • A parking tag was handed over to Respondent No.2 (car-owner) after the valet parked his car, which read:

“IMPORTANT CONDITION: This vehicle is being parked at the request of the guest at his own risk and responsibility in or outside the Hotel premises. In the event of any loss, theft or damage, the management shall not be held responsible for the same and the guest shall have no claim whatsoever against the management.”

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.

The State Consumer Disputes Redressal Commission (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.

On date 20.09.2010, the National Consumer Disputes Redressal Commission (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.

In light of this, 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.

The Appellant then filed an appeal on the National Commission. The appeal was then disposed of with the same judgement that the State Commission gave with a modification from 12% per annum to 9% per annum.

Thus, this appeal, by special leave, arises out of judgment dated 05.02.2018 passed by National Commission.

ISSUES

  1. Whether the insurer had locus standi to file the complaint as a subrogee?
  2. 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?
  3. Whether the Appellant-hotel can be absolved of liability by virtue of a contract?

STATUTES AND PROVISIONS DISCUSSED

Section 148 of the Indian Contract Act, 1872.

Section 149 of the Indian Contract Act, 1872.

Section 151 of the Indian Contract Act, 1872.

Section 152 of the Indian Contract Act, 1872.

ARGUMENT ADVANCED

ARGUMENTS OF THE APPELLANT:

The Appellant contended that as the insurer (Complainant No.1) was not a ‘consumer’ and hence the insurer had no stand in the case. He submitted that the decision of the National Commission is erroneous inasmuch the principle of ‘infra hospitium’ is not established under Indian law.

The Appellant further argued that there was no bailment as there was never a contract between the Appellant-hotel and the car owner. There was no good consideration to form a contract (no fee paid for car parking).

It was also contended that the Appellant was not liable for the loss as the hotel had already warned Respondent No.2 about the terms of valet parking. The parking tag clarifies that the hotel would not be liable for any loss, damage or whatsoever.

ARGUMENTS OF THE RESPONDENT:

Respondents contended that the insurer (Respondent No.1) was eligible to file a joint complaint with the original consumer in its capacity as ‘subrogee’.

It was further argued that the duty of care owed by 5-star hotels is higher, and the Appellant must therefore be subject to the highest standard of insurer liability in case of theft of goods from its premises.

JUDGEMENT

ISSUE NO.1:

The following principles were adapted by the court while solving the issue:

A complaint filed by the insurer acting as a subrogee is maintainable if it is filed by-

  1. i) The insurer in the name of the assured, wherein the insurer acts as the attorney holder of the assured; or, ii) the insurer and the assured as co-complainants.

The Respondent No. 2 (actual consumer/assured) had executed a POA and a letter of subrogation in favour of Respondent No. 1 (car insurer). Thus, the complaint before the State Commission was filed by Respondent Nos. 1 and 2 as co-complainants. Hence, the Court held that both the conditions are squarely applicable to this case and the complaint is maintainable.

ISSUE NO.2:

It was agreed upon 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[i] and 149[ii] of the Indian Contract Act, 1872. Consequently, a relationship of bailment was created in the instant case.

The court further contended “It cannot be denied that valet parking service, even if offered gratuitously, benefits the hotel”. Therefore, in the instant case, there existed an implied consideration for the contract of bailment created by virtue of the valet parking service. 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. Thus, the existence of bailment was established.

ISSUE NO.3:

The court observed 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[iii] of the Indian Contract Act, 1872.

In the instant case, given our 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.

RATIO DECINDENDI:

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 though there was a specific exemption clause, the Appellant cannot exempt itself from the obligation of section 151 and 152 of the Indian Contract Act, 1872. The Appellant-hotel would still had to prove that any loss or damage was not on account of its negligence.

Further, the Court hold that the consumer complaint in consideration is maintainable as it was filed by the insurer as a subrogee, along with the original owner as a co-complainant.

Moreover, the rule of prima facie negligence was adopted. It was clear that the Appellant had not explained why its failure to return the vehicle to Respondent No. 2 was not on account of fault or negligence on its part. Thus, the court ordered that liability should be affixed on the Appellant-hotel due to want of the requisite care towards the car bailed to it.

The instant appeal was dismissed accordingly.

References:

Indian Kanoon.org

https://indiankanoon.org/doc/135865865/

Indian Contract Act, 1872.

[i] Section 148 of the Indian Contract Act, 1872:

 ‘Bailment’, ‘bailor’ and ‘bailee’ defined.—A ‘bailment’ is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’. The person to whom they are delivered is called the ‘bailee’. —A ‘bailment’ is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’. The person to whom they are delivered is called the ‘bailee’.” Explanation.—If a person is already in possession of the goods of other Contract to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment.

[ii] Section 149 of the Indian Contract Act, 1872:

Delivery to bailee how made.—The delivery 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 authorised to hold them on his behalf. —The delivery 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 authorised to hold them on his behalf.”

[iii] Section 151 of the Indian Contract Act, 1872:

Care to be taken by bailee.—In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quantity and value as the goods bailed.

Section 152 of the Indian Contract Act, 1872:

Bailee when not liable for loss, etc., of thing bailed.—The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in section 151.

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