BAILMENT

The term bailment is derived from French word ‘ballier’ which means to deliver. Bailment is a
delivery of goods on condition that the recipient shall ultimately restore them to the bailor or
dispose of them according to the direction of the Bailee or dispose of them according to the
direction of the Bailor. Bailment implies a sort of relationship in which the personal property of
one person temporarily goes into the possession of another. The ownership of the articles or
goods is in one person and the possession in another.
Contract of bailment,
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. The person who delivers the goods is known as bailor. The person to
whom such goods are delivered is known as bailee.
Bailment is a delivery of goods for some purpose on an understanding that they are to be
returned after the achievement of such purpose. In case of a contract of bailment, there is only
the change of possession and not ownership.
Bailor remains the owner of the goods; bailee only gets the possession of such goods. There may
be actual delivery or constructive delivery of goods.
ESSENTIAL FEATURES
1. Delivery of Possession
The important characteristic of bailment is the delivery of possession by one person to another.
Delivery of possession should be different from a mere custody. One who has custody without
possession, like a servant, or a guest using his host’s goods is not a bailee. The goods must be
handed over to bailee for whatever is the purpose of bailment.
An old customer went to a restaurant for the purpose of dining there. When he entered the room,
a waiter took his coat, without being asked, and hung it on a hook behind him. When the
customer rose to leave the coat was lost. The waiter took the coat in his possession had relieved
the plaintiff of its care and had thus assumed the responsibility of a bailee. It was he who
selected the place where the coat should be put.
A lady handed over her old jewelry to a jeweler for melting and making it into a new one. Every
evening, she used to collect the half-made jewelry and put in into a box kept in the shop of the
jeweler. She used to keep the key of the box with her.
One day the box was stolen. Held, the jeweler was not liable as the jeweler had re-delivered the
jewelry to the lady and as such, the jeweler could not anymore be regarded as a bailee. The lady
must bear the loss herself.
It should be noted that in bailment, only the possession of the goods is transferred not the
ownership. Again, only movable goods can be bailed as immovable goods cannot be delivered.
in the case Atul Mehra v Bank of Maharashtra, the hiring of a bank’s locker and storing things in
it would not constitute a bailment. Things kept there are in a way put in a hired portion of the
premises and not entrusted to the bank. The court also found that there was no proof of the fact
that at the time when bank locker was robbed the customer had some items of jewellery in the
locker. The court further said that it could not be inferred without proof that the strong room and
lockers were not built according to specifications. The customer was not allowed to claim any
damages. The court held that in order to constitute bailment within the meaning of section 148 it
is necessary to show that actual and exclusive possession of the property was given by the hirer
of the locker to the bank.
Actual or constructive delivery
Section 149 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 authorized to hold them on his behalf.
Section 148 provides that if “a person already in possession of the goods of other contracts to
hold them as a bailee, he thereby becomes the bailee and the owner becomes the bailor although
they may not have been delivered by way of bailment.”
Delivery of possession is thus of two kinds, namely:
1. Actual delivery,
2. Constructive delivery
When the bailor hands over the physical possession of the goods to the bailee is the actual
delivery. Constructive delivery takes place when there is no change of physical possession,
goods remaining where they are, but something is done which has the effect of putting them in
possession of the bailee. For example, delivery of a railway receipt amounts to delivery of the
goods. Similarly, where a person pledged the projector machinery of his cinema under an
agreement which allowed him to retain the machinery for the use of the cinema.
In the case Bank of Chittoor v Narasimbulu the Andhra Pradesh High Court held that “ it must be
held that there was a constructive delivery, or delivery by attornment to the bank. Since then
there was a change in the legal character of the possession of goods, though not in the actual and
physical custody. Even though the bailor continued to remain in possession, it was the possession
of the bailee.
In a case before the Supreme Court the owner of a car involved in an accident delivered it under
the policy in behalf of the insurer to the nearest garage for repairs. The delivery was regarded as
sufficient to constitute the insurance company as a bailee and the garage as a sub bailee. They
became responsible for the loss of the car in a fire on the premises.1

1
N.R. Srinivasa Iyer v New India Assurance Co. Ltd.(1983) 3 SCC 458: AIR 1968 Mad 319.
 2. Delivery should be upon contract
Delivery of goods should be made for some purpose and upon a contract that when the purpose
is accomplished the goods shall be returned to the bailor. When a person’s goods go into the
possession of another without any contract, there is no bailment within the meaning of its
definition in section 148.
A well-known case of Allahabad High Court Ram Gulam v Govt. of U.P. “In the present case,
certain ornaments of the plaintiff were stolen. When police made a search then ornaments were
found in another house and it seized the ornaments as stolen property as per the powers conferred
by the code of civil procedure. The seized property was produced as evidence at the time of the
trial of the person who was alleged to be a thief. Then the property was kept in collectorate
Malkhana but from there also the ornaments got stolen and were untraceable. A suit was
instituted by the plaintiff against the government of U.P for the restoration of the ornaments and
an alternative remedy as compensation.
The suit was dismissed on the ground that government is not liable to compensate for the loss of
the ornaments. The government was holding the property not as a bailee, but for the fulfillment
of the duty imposed by law. The duty of bailee is a contractual duty but there was no such
contract between the parties. Hence the government is not liable to indemnify the plaintiff for the
loss caused.
The case of Lasalgoan Merchants Bank vs. Prabhudas Hathibhai is one the first where the Courts
started imposing the obligations of a bailee even without a contract.
Lasalgaon Merchants Co-op Bank vs. Prabhudas Hathibhai [AIR 1966 Bom 134]
Facts: Some packages of tobacco were kept in a godown of a partnership firm. The packages
were pledged to the plaintiff bank. Some of the partners in the firm had failed to clear their
income tax dues. Accordingly, the Income Tax Officer ordered the seizure of the goods
belonging to them and the godown was locked by the officials of the Income Tax Deptt. The key
of the godown was handed over to the police. Then came some heavy rains. The roof of the
godown leaked and the tobacco packages were damaged.
Held: It was the duty of the government officials to take the steps that any prudent manager
would take of the goods under him. It was held that the government did indeed stand in the
position of bailee and it had to prove that reasonable care was taken and the damage was due to
reasons or forces beyond their control. In this case, heavy rains were not necessarily amount to
an act of God and the government was held liable.
State of Gujarat vs. Memon Mahomed [AIR 1967 SC 1885]
Facts: Certain goods and motor vehicles of A were seized by the customs authority in India on
the grounds of non-payment of custom duty. After the case was dealt with, A came to take
delivery of the seized goods but the customs department could not return the goods. A filed a suit
claiming that the government was a bailee in this case and liable to make good the loss to him.
Held: The Indian Contract Act, 1872 deals with bailment arising out of a contract. But there can
be bailment without contract too. In case of non-contractual bailment, even the government can
be held liable for not taking reasonable care. Citing the example of how finder of lost goods is
treated as a bailee in certain cases, the learned Judge in the case stated that consent is not
indispensable for the relationship of bailment to arise. Section 148 did not apply here but
government was still held liable due to judicial interpretation. The Court also cited from Pollock
and Wright that “Bailment is a relationship sui generis and unless it is sought to increase or
diminish the burdens imposed upon the bailee by the very act of bailment it is not necessary to
incorporate it into the law of contract and to prove a consideration”
The contract may be implied or expressed. Thus, where with the consent of the station-master
goods were stored on a railway company’s platform, wagons being not available, the company
was held liable when they were damaged by fire caused by a spark emitted by a passing engine.
3. Delivery should be upon some purpose
Bailment of goods is always made for some purpose and is subject to the condition that when the
purpose is accomplished the goods will be returned to the bailor or disposed of according to his
mandate.2 If the person to whom the goods are delivered is not bound to restore them to the
person delivering them or to deal with them according to his direction, their relationship will not
be that of bailor and bailee.
In the case Secy of State v Sheo Singh Rai, the plaintiff delivered nine government promissory
notes for cancellation and consolidated into a single note of Rs. 48000 to the Treasury Officer at
Meerut. The defendant’s servants misappropriated the notes. The plaintiff sued the State to hold
them responsible as bailees.
But his action failed. There can be no bailment unless there is a delivery of goods and a promise
to return. The government was not bound to return the same notes, nor was it bound to dispose of
the surrendered notes in accordance with the plaintiff’s direction.

2
Gangaram v. Crown, AIR 1943 Nag 436