Supreme Court held that bank is responsible for loss of goods from locker as it is in the position of a bailee with respect to the goods placed inside the locker

The relevant rules under the Information Technology Act, 2000 will be applicable in this regard. The bank is supposed to notify the original locker holder prior to any changes in the allotment of the locker, and give them reasonable opportunity to withdraw the articles deposited by them if they wish to. Given that India is steadily moving towards a cashless economy, people are hesitant to keep their liquid assets at home as was the case earlier.

The strong room in which the locker was located was broken in and the contents thereof were stolen by miscreants. It was stated in the FIR that all other 43 lockers in the strong room were also broken in and contents were thereof stolen. In February 1989, all the 44 locker holders made representation to the bank by a registered acknowledgment duly pointing out the gross negligence and misconduct of the respondent in maintaining the lockers.

Modernization of the locker system:

Therefore, a combination of the bank’s key and the locker holder’s key is required for opening a locker, providing neither with complete access. Disputes between banks and locker holders, pertaining to loss of articles placed inside the locker, have been subject to judicial consideration for a while now. A bailment is ended when its purpose has been achieved when the parties agree that it is terminated, or when the bailed property is destroyed. A bailment created for an indefinite period is terminable at will by either party, as long as the other party receives due notice of the intended termination.

In the Indian context, it is a general legal standing that unless and until there exists a formal agreement, granting an exclusive and actual possession of the contents of the safe deposit case, no transfer of possession will be assumed to have taken place. In case of hiring a safe deposit box, the goods are in no manner, entrusted to the bank. The delivery of the goods is done to the premises of the bank and not to the bank itself. This legal relationship is hiring of bank locker bailment is analogous to the relationship between a landlord and a tenant. A landlord cannot be said to have a control over the personal property of the tenant, but merely provides the tenant with a place to store their property. Therefore, even though the landlord might be obligated to exercise ordinary care to protect the premises of the rented property, the landlord cannot be expected to extend this care to protecting the personal property of the tenant.

Supreme Court Instantly

And being a contract, all-natural requirements of the contract are applicable on bailment. Thus, it includes an act of delivering goods from one person to another for a specified purpose and for a specified period of time on trust. B) That the goods should be returned to the bailor or be taken care of as per the directions of the bailor.

The bank is a custodian and cannot be held responsible for articles going missing from a locked locker. Our responsibility is to keep the locker safe by seeing that the lock is not tampered with,’’ said chief manager of an Allahabad Bank branch, on the condition of anonymity. In conclusion the Supreme Court, observed that it is necessary that the RBI lays down comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management. The banks should not have the liberty to impose unilateral and unfair terms on the consumers, therefore, the Court directed the RBI to issue suitable rules or regulations as aforesaid within six months from the date of the judgment.. The Revision Petition against the order of the SC was dismissed and the National Commission (‘NC’) by its judgment accepted the SC holding. Further, looking to the facts and circumstances of the case, the Supreme Court deemed it appropriate to impose costs of Rs. 5,00,000/on the Bank which was to be paid to the Appellant as compensation.

Delivery of Goods i.e. Delivery of Possession:

A bailor can designate a bailee to oversee an funding portfolio for a selected time interval. While the bailee does not personal the portfolio, the bailor entrusts the chosen particular person to ensure that the portfolio is in good hands till such time that the bailor can or needs to resume the duties of managing the portfolio. A bailment is ended when its function has been achieved, when the parties agree that it is terminated, or when the bailed property is destroyed.

In bailment, the delivery of goods is upon a contract and once the purpose is done, such goods shall be returned to the bailor. This means there should be a contract between two parties for transaction of delivery and subsequent return. If there is no possession of goods obtained by someone other than contract, there should be no bailment.

Although a bailment relationship is ordinarily created by contract, there are circumstances the place lawful possession by the bailee creates a bailment relationship with out an ordinary contract, similar to an involuntary bailment. A bailment relationship between the bailor and bailee is usually less formal than a fiduciary relationship. A bailment is usually a contractual settlement between the bailor and the bailee that specifies the terms and function of the change in possession. A bailee who fails to do so could also be held responsible for any damages incurred from his or her negligence. Actual possession of or control over property have to be delivered to a bailee so as to create a bailment. The supply of actual possession of an merchandise allows the bailee to accomplish his or her duties toward the property with out the interference of others.

No consideration, no contract

Even though the physical possession was with the person, the legal possession was with the bank. If there may be an agreement to return the equal and never the identical items, it is not bailment. An agent who collects cash on behalf of his principal isn’t a bailee as a result of he is not liable to return the identical cash and cash.

It is an activity or a process in which the property of one person temporarily goes into the possession of another. For future references, the Court reiterated that banks cannot be exempted from liability in such cases. The very purpose of the locker facility is to assure the customers that their assets are safe and being taken care of in a proper manner. Bailment is distinguished from a contract of sale or a present of property, because it solely includes the transfer of possession and never its possession. To create a bailment, the bailee must both intend to possess, and really bodily possess, the bailable chattel.

Copy of locker hiring agreement, containing relevant terms and conditions to be given to the customer at the time of allotment. Bailment is a process where the owner of certain goods places them in temporary possession of another person. It also means as that a person delivers his goods to another person for a specific purpose and there is an express or implied understanding between the people that once the purpose is over, the goods would be returned to its owner. From Section 170 of the Indian Contract Act, 1872, the bailee has a lien on the goods that he receives under the contract of bailment. When the bailor bails the goods to the bailee for a particular purpose and the bailee expands skill and labor on these goods, he has a right to retain the goods until the bailor pays him his charges in respect of skill and labor.

The lower courts have also relied on this judgment and the present court has established that there is no error in doing so. In another case over 40 lockers of Central Bank branch UP were completely emptied out. In IOB in Chennai account holders were so shocked by a daring daylight robbery that there was a literal clamor to withdraw their savings and empty their lockers in the branch. The common thing in all of these cases I that the bank has refused to accept any responsibility for valuables lost from the locker. The concept of bailment is also different from that of sale which includes the intentional transfer of ownership of goods or personal property in exchange for a monetary value. On the contrary, bailment does not transfer ownership of goods or property and only transfers possession or custody for a specific period of time.

Banking Regulation Act , S.6— Evidence Act , S.114— The exclusive possession is sine qua non for bailment. Therefore, mere hiring of a locker would not be sufficient to constitute a contract of bailment as provided under S.148. 148 it is further necessary to show that the actual exclusive possession of the property was given by the hirer of the locker to the bank. It is only thereafter that the question of reasonable care and quantum of damages would arise.

Second, the limitation of liability clause in the Circular would equally apply to claims both in consumer proceedings and in civil suits . Such claims in civil suits as explained earlier seek the value of the contents of the locker on the strength of the relationship of bailment or the like under any other law. Therefore, the reliefs sought in such a suit are independent of the duty of care of the banks and are tied to the actual proven loss suffered by the locker holder. However, even if such actual loss is proven, the civil court may be unable to grant the same if it exceeds the limitation of liability clause in the circular.

Surprisingly, the legal rules and procedures 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. This is a key feature of bailment that distinguishes it from other types of relations such as agency.

Therefore, when you take a locker in a bank, you can start off by ensuring that your valuables are insured. Additionally, to protect your own interest you can insist on the following measures… This article is written by Dewesh Kumar Vinod, a student of NLSIU, Bangalore. In this article, the author explains what are safe deposit boxes and whether renting them is bailment or not. The customers’ personal data, including their biometric data, cannot be shared with third parties without their consent.

• It is an activity or a process in which the property of one person temporarily goes into the possession of another.
• Even though the precise and physical possession was with the particular person, the legal possession was with the bank, the bailee.
• It was noted that the money deposited can never be said to have been “bailed” as money does not qualify as a “good” and the money given back to the client is not the same that had been deposited by the client.
• This legal relationship is analogous to the relationship between a landlord and a tenant.
• In the initial example, you would profit from the bailment of your possessions.

Bailment is a term which is derived from the French word bailor which means to deliver. It is generally considered to be a contractual relationship between the two parties i.e. the bailor and the bailee , bind themselves in a contract either expressly or impliedly to act according to particular terms. The control or possession of the property is transferred to the bailee along with the goods, while the ownership and its interest are retained with the Bailor only. Some of the important guidelines were – maintenance of locker register, notice to locker holder if any changes, using modern technologies for digitisation, maintaining a record of access to lockers, undertaking locker verification procedures, etc. Firstly, the Supreme Court held that clearly, the relationship between the bank and locker holder is in the nature of the bailor and bailee, even though the bank was not privy to the contents of the locker.

In other words, the bailee authorizes the person to keep possession of the goods. In 1966 there was a case by the name Bank of Chittor v. Narsimbulu AIR 1966, in which a person pledged cinema projector with the bank but the bank allowed him to keep the projector so as to keep the cinema hall running. In this case, the court held that this was constructive delivery because something was done that changed the legal possession of the projector.

This auspicious judgment was passed by the Supreme Court of India in the matter of AMITABHA DASGUPTA V. UNITED BANK OF INDIA & ORS. For a contract of bailment to come into existence, there should be an intention on the part of the bailor, to deliver the “control” or the “possession” of the bailed goods to the bailee. Having the mere custody of goods does not amount to a delivery of possession. Due to modernization of the locker system, banks now provide customers with partial access to the lockers.