When you visit a hotel, you see many hotels provide a service for valet parking, you give them keys and they park your car. What if your car gets stolen in valet parking? Is it the responsibility of the hotel or can they absolve their liability by virtue of a contract?
To answer such questions, we will delve into a recent landmark decision where such questions were addressed for the first time by the Supreme Court dated 14 November 2019 in the landmark case of Taj Mahal Hotel vs United India Insurance Company Ltd. & Ors (Civil Appeal No 8611 of 2019). Let us first take a look at the history of the case.
On 1st August 1998, a person named Sapan Dhawan (Respondent no. 2) visited Taj Mahal Hotel (Appellant) around 11 PM in his car ‘Maruti Zen’. Upon reaching the hotel Sapan Dhawan, the car owner (Respondent no. 2) handed over his car keys to the Hotel valet for the purposes of parking, and then he went inside the hotel with a parking tag given by the hotel valet.
The parking tag contained a provision stating that the vehicle parked either inside or outside the Hotel premises is at the request of the guest at his own risk and responsibility and the hotel management will not be liable for any loss, theft, or damage that happens to the car.
After, around 1 AM when Sapan Dhawan the car owner came out of the hotel on the same night, the hotel management informed him that his car had been driven away by some other person. Upon making a further inquiry with the hotel management, it emerged that during the stay of Sapan Dhawan (Respondent No.2) in the hotel, three boys had entered the hotel in a separate car. After some time, the boys came out of the hotel and asked the valet to bring their car to them. While the valet was driving their car back to them, in the meantime one of the boys came to the valet desk and took the keys of the Respondent’s car and went to the parking and then stole it. They ran away with the car when the security guard tried to stop them.
A complaint was lodged at the police station, but the car remained untraced. Sapan Dhawan (Respondent No.2) has got his car ‘Maruti Zen’ insured with an insurance company ‘Respondent No.1). Thereafter, the surveyor was appointed by the Insurance Company and the insurance company (Respondent No.1) settled the insurance claim raised by Sapan Dhawan the car owner (Respondent No. 2) in respect of the stolen car for a value of Rs. 2,80,000/-.
Sapan Dhawan (Respondent No.2) executed a Power of Attorney (POA) and a letter of subrogation in favor of the insurance company (Respondent No.1). Thereafter, Sapan Dhawan (Respondent No.2) as a co-complainant with the insurance company (Respondent no.1) filed a complaint against the hotel (Appellant) at the State Commission. Respondent No. 1 and 2 claim was to seek compensation for the deficiency in service and the payment of the value of the car.
The State Commission first dismissed the complaint on the ground that an insurance company does not qualify as a consumer. Thereafter, the insurance company (Respondent No.1) filed an appeal before the National Commission.
On 20th September 2010, National Commission observed that the Insurance company (Respondent No.1) had locus standi to file the complaint and sent the complaint back to the State Commission.
In the light of this, the State Commission allowed the complaint and held that laws of bailment will apply and directed the hotel (Appellant) to pay a sum of two lakhs eighty thousand (INR 2,80,000) along with twelve percent (12%) interest per annum and fifty thousand (INR 50,000) towards the cost of litigation. Also, the State Commission was directed to pay a sum of one lakh (INR 1,00,000) to the insurance company (Respondent No.2) for inconvenience and harassment caused to him by the hotel (Appellant).
The hotel (Appellant) then filed an appeal to the National Commission. The National Commission held that the hotel management (Appellant) liability cannot be precluded just by a printed notice on the parking tag given to the car owner (Respondent No.2) disclaiming liability. The National Commission also said that once the guest gives their car keys to the valet for the purpose of parking their vehicle, and possession of the car is transferred from the hotel’s guest to the hotel valet, a relationship of bailment is established. Hence, the principle of bailment will apply.
The National Commission also relied on various decisions by the Foreign Courts and applied the principle of ‘infra hospitium’ which is a Latin word meaning ‘within the hotel’ and held that if the guest and the property were within the hotel premises and any loss occurs to the guest’s property, there will be a strict liability imposed on the hotel.
However, the National Commission modified the interest from twelve percent (12%) per annum to nine percent (9%). The hotel (Appellant) appealed before the Hon’ble Supreme Court against the order of the National Commission by way of a special leave petition.
The Hotel (Appellant) contended that with respect to the locus standi, the insurance company (Respondent No.1) does not qualify as a ‘consumer’ and, hence the insurance company had no stand in the case. The Hotel (Appellant) also submitted that the decision of the National Commission is erroneous inasmuch as the principle of ‘infra hospitium’ is not established under Indian law.
The Hotel (Appellant) further relied on the Supreme Court decision on Bombay Brazzerie v. Mulchand Agarwal and B. Dutta, Senior Advocate v. Management of State and argued that bailment necessarily exists under a contract and the terms were summarized in the valet parking tag given by the valet to the owner of the car in this case.
The Hotel (Appellant) also contended that they were not liable for any loss as the terms were specifically precluded under the terms stated on the valet parking tag and the parking tag clearly clarifies that the hotel management would not be liable for any loss, damage or, whatsoever.
The Insurance Company (Respondent No.1) contended that they were eligible to file a joint complaint with the original consumer (Sapan Dhawan, the car owner) in its capacity as ‘subrogee’.
Further, the Insurance Company (Respondent No.1) relied on the cases on Klaus Mittelbachert v. East India Hotels Ltd. and Hotel Hyatt Regency v. Atul Virmani and argued that the duty of care owed by the 5-star hotels is higher, and the hotel (Appellant) must therefore be subject to the highest standard of the insurer liability in case of theft of goods or any property from its premises.
- Section 148 of the Indian Contract Act, 1872 – ‘Bailment’, ‘bailor’ and ‘bailee’ defined.
- Section 149 of the Indian Contract Act, 1872 – Delivery to bailee how made.
- Section 151 of the Indian Contract Act, 1872 – Care to be taken by bailee.
- Section 152 of the Indian Contract Act, 1872 – Bailee when not liable for loss, etc., of thing bailed.
- Whether the insurance company (insurer) had locus standi to file a consumer complaint as a subrogate?
- Whether the Hotel (Appellant) can be held liable for the theft of the car taken for valet parking by the hotel management, under the laws of bailment or otherwise?
- If the second question is answered in the affirmative, what is the degree of care required to be taken by the Hotel (Appellant)?
- Whether the Hotel (Appellant) can be absolved of liability by virtue of a contract?
Issue No.1: Complaint filed by the insurance company (insurer) as a subrogee
While discussing the first issue the Supreme Court relying on the case of Economic Transport Organisation v. Charan Spinning Mills (Pvt.) Ltd. held that:
The owner of the car/assured Sapan Dhawan (Respondent No.2) executed a Power of Attorney (POA) in the favor of the insurance company, he also executed a letter of subrogation in favor of the insurance company/insurer (Respondent No.1). Therefore, a consumer complaint filed by the insurance company (insurer) acting as a subrogee is maintainable as it was filed by-
- The insurance company (insurer) in the name of the assured, wherein the insurance company (insurer) acts as the attorney holder of the assured; or,
- The Insurance company (insurer) and Sapan Dhawan the car owner (assured) as co-complainants.
Hence, the Court held the complaint maintainable.
Issue No.2: Hotel’s liability
The Supreme Court held that according to the scenario where a vehicle possession is handed over to hotel management for the purpose of valet parking. Therefore, it can be said that ‘delivery’ of the vehicle has been made for the purposes of Section 148 and 149 of the Indian Contract Act, 1872. Hence, the laws of bailment would apply as the car was handed over by a guest of the hotel to the Hotel valet for the purpose of parking.
The Court contended that if 5-star hotels provide free parking services, such services cannot be denied, even if offered gratuitously, benefits the hotel”. Further, the Court held that exits an implied consideration for the bailment contract created by the virtue of valet parking service provided by the hotel.
Issue No.3: The required degree of the Hotel’s standard of care
The Court held that once the car owner who is also the guest of the hotel gave possession of the keys of his vehicle to the hotel management or valet, it is the duty of the hotel management to return the vehicle in a safe condition upon the direction of the vehicle owner as there automatically exists an implied contractual obligation on the hotel management upon getting the possession of the vehicle for the purpose of valet parking.
The Court held that the general rule under Chapter IX of the Indian Contract Act, 1872, bailment law is that in case goods are damaged or lost which is under the possession of a bailee (in this case the possession of the vehicle is under the hotel i.e., appellant), the bailee will be liable and the burden of proof is on the bailee and the bailee has to show that he had exercised reasonable care in respect of the bailed goods.
The Court further observed that the Hotel (Appellant) had not taken reasonable steps to ensure that the valet car keys which are in the possession of the hotel management were kept in a place out of the reach of third persons or outsiders and the cars were parked in a safe location or that there were adequate systems to verify the owner of the vehicle of a valet parked car. Hence, the Supreme Court held that the theft of the Sapan Dhawan’s (Respondent No.2) car was the result of the Hotel’s (Appellant) negligence.
Also, the Supreme Court relied on the case of Port Swettenham Authority v. T.W. Wu & Co. stated that Sections 151 and 152 of the Indian Contract Act 1872, do not distinguish between a gratuitous bailee and a bailee for reward.
Issue No.4: Exclusion of Hotel’s liability by contract
The court held that in a case of theft of a vehicle given by Respondent No.2 to the hotel (Appellant) for the purpose of valet parking, the hotel (Appellant) cannot be excluded from liability by arguing it was due to acts of third parties and it was beyond their control, or that they are protected by the exemption clause on the parking tag. Hence, the Supreme Court contended that the argument of the hotel (Appellant) on this count fails.
The Court further held that the hotel (Appellant) cannot contract out their liability for the negligence or that of its management/servants in respect of a vehicle of its guest in any circumstance. Once the hotel guest gives the possession of his vehicle to the hotel management or valet, there automatically exists an implied contractual obligation on the hotel to return the vehicle in a safe condition upon the direction of the vehicle owner.
The Court further held stated that even though there was a specific exemption clause mentioned on the parking tag, the hotel (Appellant) cannot exempt itself from its obligation under Section 151 and Section 152 of the Indian Contract Act, 1872. The hotel (Appellant) still had to prove that any loss or damage to the hotel’s guest property was not on account of its negligence.
Thus, the Apex Court ordered that the liability should be affixed to the hotel (Appellant) due to wanting of the requisite care towards the car bailed to them. Consequently, the appeal filed by the hotel (Appellant) was dismissed accordingly.
The consumer complaint in consideration is maintainable before the Consumer Disputes Redressal Commission if it is filed by the insurer as a surrogate and along with the original owner as a co-complainant.
There is no precedent available in Indian case laws, therefore, this case will guide and act as a precedent to future lawyers and judges. This case also guides the way of using foreign judgments from common law jurisdictions.
This landmark case puts the obligation on the Hotel owners and operators to ensure the safety of the vehicle of the hotel guests which are transferred to the hotel management for the purpose of valet parking and hotel management should carefully re-evaluate their systems, processes, and procedures which they have adopted in order to discharge the Hotel’s obligations and duty of care when the Hotel accepts the Hotel guests’ cars for the purpose of valet parking.
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