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Such uncountable liability would also discourage banks to give such a facility which is currently utilized by countless people around the globe. This 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. 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 RBI lays down comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management. In view of the same, RBI was directed to issue suitable rules or regulations as aforesaid within six months from the date of this judgment. Until such Rules are issued, the principles stated in this judgment, in general and at para 13 in particular, shall remain binding upon the banks which are providing locker or safe deposit facilities. 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.
- Once a bailment ends, the bailee must return the property to the bailor or possibly be liable for conversion.
- In the instant case, it is impossible to know the quantity, quality or the value of the jewellery that was allegedly kept in the locker at the time when the robbery occurred.
- The goods which are to be delivered to the bailee and returned to the bailor when the purpose is fulfilled.
- The transfer of possession of the bailed goods from bailor to bailee for whatever is the purpose of bailment must be distinguished from mere custody.
- The Appellant had filed a consumer complaint before the District Consumer Forum calling upon return of the ornaments and claiming compensation towards recovery of the cost of jewelry.
Thus, as is evident from the rising demand for such services, lockers have become an essential service provided by banking institution. In case of any loss arising due to negligence of the bank or due to non performance of the duties attached to the bailee, the loss can be recovered from the bank. A civil suit may be filed for recovery of the loss arising due to any untoward incident. The Appellant filed a consumer complaint before the District Consumer Forum (‘District Forum’) calling upon Respondent to return the seven ornaments that were in the locker; or alternatively pay `3,00,000/- towards the cost of jewelry, and compensation for damages suffered by the Appellant. However, and the State Commission observed that the dispute on the contents of the locker can only be decided upon provision of elaborate evidence.
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This includes maintenance of a locker register and locker key register. This petition is filed against the judgment of the National Consumer Disputes Redressal Commission wherein the commission dismissed a revision petition filed against the judgment of the State Consumer Disputes Redressal Commission. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020. Person who is not a signatory to the cheque cannot be prosecuted under Section 138 of the NI Act, even if there is joint liability to pay the debt. SC dismisses Facebook India VP Ajit Mohan’s plea against summons by Assembly Panel And held that members and non-Members can equally be directed to appear.
It has basically laid down that the bailee must be made aware of the contents of anything he receives for safe custody so as to gauge the amount of any possible liability that may arise in the future. In this case, the bank had no knowledge of the quality, quantity, or nature of goods kept inside the locker. If the bailee does any act with regard to the goods bailed, which is inconsistent with the terms of bailment, the bailment maybe terminated by the bailor even though the term of bailment has not expired or the purpose of bailment has not been accomplished.
No mutual benefits will be acted upon by both parties in the contract. Example – Rajeev took a loan from the bank to start his own business by mortgaging his house for the purpose. So now the bank can retain the papers of Rajeev’s house till the time Rajeev does not return the amount of loan taken by him along with the interest on the loan. Section 172 of The Indian Contract Act,1872, defines The bailment of goods as security for payment of a debt or performance of a promise is called ‘pledge’.
However, Respondent Bank contends that only those two ornaments were found in the Appellant’s locker when it was broken open. That the same is evident from the inventory prepared by Respondent when the locker was broken open in the presence of an independent witness. The Chief Manager of Respondent Bank in the present appeal, responded to the communication and admitted to having inadvertently broken open the locker, though there were no outstanding dues to be paid, and apologized for the same. Further, that the locker had subsequently been reallocated to another customer. In 1970, the Appellant/Complainant was included as a joint holder of the locker. In the early 1950’s, the Appellant’s mother took a locker on rent bearing No.
In regard to this, SC stated that ” Present state of regulations on the subject of locker management is inadequate and muddled. 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 https://1investing.in/ highest Court of the country, we cannot allow the litigation between the bank and locker holders to continue in this vein. Secondly, the bank should have had a general sense of the fact that their lockers are used by customers to store very valuable goods, including jewellery. Not following the security guidelines and constructing a strong room made of wooden plies indicates that the bank was negligent in securing the strong room itself, let alone the safe deposit boxes and their contents.
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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. The custodian of the bank must additionally maintain a record of access to the lockers, containing details of all the parties who have accessed the lockers and the date and time on which they were opened and closed. 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. As far as accounting the articles and cash kept in locker is concerned, you faithfully and honestly list them out in your complaint.
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The Bank was directed to either return the contents of the locker misplaced by them, or alternatively pay the Appellant a sum towards the cost of the jewellery and an additional sum of INR 50,000 as compensation for mental agony, harassment, and cost of litigation. In 1995, the Appellant visited the Bank to operate the locker and deposit the locker rent. He was informed that the Bank had broken open his locker in 1994 for non-payment of rent dues for the period of 1993 to 1994. 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.
This is a bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailee. A bailment in which goods are delivered by the bailor to the bailee only for the exclusive benefit of the bailor himself. A finder of the goods is a person who finds the goods belonging to some other person and keeps them under his protection until the actual owner of the goods is found. When some action is taken to mean handing over of the physical possession of goods, though in fact no physical transfer of goods is made at that time. One of the requirements of bailment is the delivery of goods to the bailee. The goods have to be returned backed to the bailor or be disposed of per his instructions.
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In this case, the defendant was a Cinema theatre owner and he pledged his cinema projector and accessories with the Bank of Chittoor Limited. The Bank allowed the defendant to use the pledged cinema projector and accessories for filming the movies in his theatre but later the defendant, P. Narasimhulu Naidu sold the cinema 1projector and accessories to another person. It was held by the Court that there was a constructive delivery before the sale and hence the sake was subject to the existing pledge.
Banks act as service providers under the earlier Consumer Protection Act, 1986, as well as the newly enacted Consumer Protection Act, 2019, and thus, owe a separate duty of care to exercise due diligence in maintaining and operating their locker or safety deposit systems. Which also includes ensuring the proper functioning of the locker system, guarding against unauthorized access to the lockers and providing appropriate safeguards against theft and robbery. This duty of care is to be exercised irrespective is hiring of bank locker bailment of the application of the laws of bailment or any other legal liability regime to the contents of the locker. The banks as custodians of public property cannot leave the customers in the lurch merely by claiming ignorance of the contents of the lockers. 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.
The common thing in all of these cases I that the bank has refused to accept any responsibility for valuables lost from the locker. 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.
Contract of Bailment
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. 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. In order to have a valid bailment, the delivery of the goods and property must be done upon a contract mentioning that the goods will be returned when the purpose is accomplished. And if the goods are given without any contract, there is no bailment. Of UP, in which the jewelry of the plaintiffs was stolen and was later seized by police.
Banking institutions have acquired a significant role in both domestic and international economic transactions. However, in case the articles of the locker are lost or accessed by banks, its legality remains unanswered. This article discusses the scope of a bank’s legal responsibility when dealing with bank locker facilities and such customers who access the same. Pronouncing the decision, the court said that banks as service providers under the Consumer Protection Act, 1986, are under the obligation to exercise due diligence in maintaining and operating their locker systems. The Apex Court opined that such question requires factual findings on whether the bank had knowledge of the contents of the locker which cannot be adjudicated upon in the course of proceedings before the consumer fora. This aspect must be evaluated by a civil court, upon appreciation of evidence led by the parties.
Thus, the breaking open of the locker was in blatant disregard to the responsibilities that the bank owed to the customer as a service provider. 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. It was held that a person pledged cinema projector with the bank but the bank allowed him to keep the projector to keep the cinema hall functional. It was held that there was constructive delivery because action on part of the bailor had changed the legal character of the possession of the projector. Even though the actual and physical possession was with the person, the legal possession was with the bank, the bailee.
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. It is common industry practice for banks to disclaim liability for loss of articles placed inside the locker, though there are no uniform parameters or policies guiding the same. The Hon’ble Supreme Court stated that apparently, the present state of regulations on the subject of locker management is inadequate and muddled. 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. However, it was noted that in those judgments, what was commonly contested was whether delivery of possession or entrustment of valuables from the locker holder to the bank had taken place, for the purpose of Section148 of the Contract Act.
The custodian of the bank shall additionally maintain a record of access to the lockers, containing details of all the parties who have accessed the lockers and the date and time on which they were opened and closed. The bank shall 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 so wish. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. On appeal filed by the Bank, the State Commission (‘SC’) accepted the District Forum’s findings on the question of deficiency of service, though it reduced the compensation from Rs. 50,000/ to Rs. 30,000/. A contract of bailment only results in a change of possession, not ownership.