JUDGMENT

Srivastava, J.

1. This is a defendant's appeal. The facts which have led up to it are to a certain extent not disputed. The plaintiff Mathura Prasad pawned three ornaments in Kartika Sambat 1885. He pawned them through his agent, the defendant No. 2, to one Manni Ram for Rs. 1,000. The loan carried interest at Rs. 0-14-0 per cent, per mensem. Manni Ram in his own turn Sub-pledged the ornaments to the defendant No. 3. Subsequently, two of the three ornaments so Sub-pledged were redeemed and were again Sub-pledged with the defendant No. 4. The plaintiff paid two items of Rs. 800 and Rs. 500 to the original pawnee, Manni Ram.

As a portion of the debt remained unpaid he did not get back the ornaments. Then the Debt Redemption Act came into force and under it the amount of the loan got reduced because the plaintiff was an agriculturist. The debt got reduced to such an extent that the payment already made by the plaintiff satisfied it. The plaintiff, therefore, sued to recover possession of the three ornaments after redemption and contended that he was entitled to do so without the payment of any amount.

He said that he was not bound by the Sub-pledges made to the defendants Nos. 3 and 4 and as the original debt had been satisfied he was entitled to get the ornament No. 1 mentioned in the plaint from the defendant No. 3 and the other two ornaments from the defendant No. 4. The suit was contested by all the defendants but we are not concerned now with the defences put forward by the original pawnee, the agent through whom the pawn was made and the defendant No. 4.

The main defence raised by the present appellant, who was defendant No. 3, were that he was not a sub-pawnee but was a transferee in good faith, that the claim was barred by time and that the plaintiff was not entitled to get back the ornament that was lying with him because he was not the person who had really pawned it.

2. All these defences and those raised by the other defendants were negatived by the trial Court which accepted the plaintiff's case and decreed the suit. Defendants Nos. 3 and 4 went up in appeal, and the Civil Judge who heard the appeal dismissed it holding that the plaintiff had really made the pawn, that he was entitled to redeem, that the Suit was within time and that the defendants. Nos. 3 and 4 being sub-pawnees were bound to return the ornaments after the original debt had been satisfied. The plaintiff and the other defendants submitted to the decree, but the defendant No. 3 came up in second appeal.

In that appeal he raised only two contentions. One was that the plaintiff's suit should not have been decreed because it was not within time and the other was that the plaintiff could not in any case get back the ornament that was lying with the defendant No. 3 without paying the amount due to him for the Security of which ornament had been pledged to him. Both these contentions were negatived by the learned single Judge who dismissed the appeal but granted leave to appeal under the Letters Patent. This appeal is the result.

3. The plea of limitation has not been pressed before us and the decision of the learned single Judge about that plea must therefore be held to have become final. The only question which the learned counsel for the appellant has argued before us is that the appellant before us could have either of two capacities. Either he was a sub-pledgee of the ornament that was in his possession or he was transferee of the pledgee rights of the original pledgee, Manni Ram. In either case the plaintiff could not get the ornament that was lying with him (appellant) without paying the amount which he had advanced on its security.

4. The appellant's contention that he was a transferee of the rights of Manni Ram or that he was a transferee in good faith has been negatived by all the Courts consistently and they have further held that he was really a sub-pledgee. In view of this finding it is difficult to accept the appellant's contention that his position is not that of a Sub-pledgee and that he is really a transferee of the pawnee rights of Manni Ram in good faith. We must proceed on the footing that he is really a Sub-pledgee.

5. So far as a sub-pledgee is concerned, the law admits of no doubt. Section 179 of the Indian Contract Act makes it clear that if a person with a limited interest in goods pledges them, the pledge is valid to the extent of that interest only. The principle enacted in this section is a well-established principle of common law which has been stated by Judge Story in his book on 'Bailments', Sections 324-327 in these words:

"The pawnee may by the common law deliver over the pawn to a stranger for safe custody without consideration; or he may sell or assign all his interest in the pawn; or he may convey the same interest conditionally, by way of pawn, to another person, without in either case destroying or invalidating his security. But if the pawnee should undertake to pledge the property (not being negotiable securities) for a debt beyond his own, or to make a transfer thereof as if he were the actual owner, it is clear that in such case he would be guilty of a breach of trust, and his creditor would acquire no title beyond that held by the pawnee.

Whatever doubt may be indulged in, in the case of a mere factor, it has been decided in the case of a strict pledge, that if the pledgee transfers the same to his own creditor the latter may hold the pledge until the debt of the original owner is discharged."

If, therefore, Manni Ram Sub-pledged to the appellant the ornaments which the plaintiff had pledged to him, Manni Ram having only a limited interest in them the pledge was valid only to the extent of the interest which Manni Ram himself possessed in the ornament. In other words, Manni Ram could not give to the appellant rights superior to those of his own. The only right he had in the ornaments was to retain them as Security for the satisfaction of the loan which he had himself advanced.

If this right of his came to an end on the satisfaction of his debt, the appellant could not claim a higher right simply because he had advanced a larger amount to Manni Ram on the security of the ornaments. Once, therefore, the debt of Manni Ram was satisfied the plaintiff who was the original pawner became entitled to get back the ornaments without payment of any further amount. The appellant could not fix upon him the liability for the larger amount which he had himself advanced to Manni Ram.

6. The learned single Judge was, therefore, quite justified in rejecting the appellant's contention that the plaintiff was not entitled to get back the ornament in the appellant's possession without paying to him the amount which he had himself advanced to Manni Ram.

7. The learned counsel also urged that the decree in this case needed clarification because a joint decree had been passed against defendants Nos. 3 and 4. This does not appear to be correct. In the relief of the plaint it had been made clear that ornament No. 1 was being sought to be recovered from defendant No. 3 and the other two ornaments therein described were to be recovered from the defendant No. 4. This is the relief which has been granted to the plaintiff. In the circumstances no joint decree can be said to have been passed against respondents Nos. 3 and 4. No question of any clarification of the decree, therefore, arises.

8. The only point pressed in appeal being thus without force, the appeal must fail. It is dismissed with costs.

Define Bailment. What are the rights, duties, and liabilities of a bailee? When is he not responsible for loss, destruction, or deterioration of the things bailed? What are the various kinds of lien held by the bailee. Explain the rights of finder of goods.

Bailment is a kind of activity in which the property of one person temporarily goes into the possession of another. The ownership of the property remains with the giver, while only the possession goes to another. Several situations in day to day life such as giving a vehicle for repair, or parking a scooter in a parking lot, giving a cloth to a tailor for stitching, are examples of bailment. Section 148 of Indian Contract Act 1872, defines bailment as follows -

Section 148 -  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 and the person to whom they are delivered is called the bailee.Explanation -  If a person is already in possession of the goods of another contracts to hold them as a baliee, he thereby becomes the bailee and the bailor becomes the bailor of such goods although they may not have been delivered by way of bailment.

According to this definition the following are the essential elements of bailment -

1. Delivery of goods The possession of goods must transfer from one person to another. Delivery is not same as custody. For example, a servant holding his master's umbrella is not a bailee but only a custodian. The goods must be handed over to the bailee for whatever is the purpose of the bailment.

In Ultzen vs Nicols 1894, the plaintiff went to a restaurant for dining. When he entered the room, the waiter took his coat and hung it on a hook behind him. When the plaintiff arose to leave, the coat was gone. It was held that the waiter voluntarily took the responsibility of keeping the coat while the customer was dining and was thus a bailee. Therefore, he was liable to return it.

Contrasting this case with Kaliaperumal Pillai vs Visalakshmi AIR 1938, we can see the meaning of delivery. In this case, a woman gave some gold to a jeweler to make jewelery. Every evening she used to take the unfinished jewels, put it in a box, lock the box and take the keys of the box with her while leaving the box at the goldsmith. One morning, when the opened the box the gold was gone. It was held that, in the night, the possession of the gold was not with the jeweler but with the plaintiff because she locked the box and kept the keys with her.

As the explanation to section 148 says, even if a person already has the possession of goods that he does not own, he can become a bailee by entering into a contract with the bailor. In such a case, the actual act of delivery is not done but is considered to be valid for bailment.

Types of Delivery - As per section 149, 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.  This means that the delivery can be made to either the bailee or to any other person whom the baliee authorizes. This person can be the bailor himself. This gives us two types of delivery - Actual and Constructive.  In actual delivery, the physical possession of the goods is handed over to the bailee while in constructive delivery the possession of the goods remains with the bailor upon authorization of the bailee. In other words, the bailee authorizes the person to keep possession of the goods.In Bank of Chittor vs Narsimbulu AIR 1966, 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. AP HC held that this was constructive delivery because something was done that changed the legal possession of the projector. Even though the physical possession was with the person, the legal possession was with the bank.

2. Delivery upon contractFor a valid bailment, the delivery must be done upon a contract that the goods will be returned when the purpose is accomplished. If the goods are given without any contract, there is no bailment. In Ram Gulam vs Govt. of UP AIR 1950, plaintiffs ornaments were seized by police on the suspicion that they were stolen. The ornaments were later on stolen from the custody or police and the plaintiff sued the govt. for returning the ornaments. It was held that the goods were not given to the police under any contract and thus there was no bailment.

However, this decision was criticized and finally, in State of Gujarat vs Menon Mohammad AIR 1967, SC held that bailment can happen even without an explicit contract. In this case, certain motor vehicles were seized by the State under Sea Customs Act, which were then damaged. SC held that the govt. was indeed the bailee and the State was responsible for proper care of the goods.

3. Conditional DeliveryThe delivery of goods is not permanent. The possession is given to the bailee only on the condition that he will either return the goods or dispose them according to the wishes of the bailer after the purpose for which the goods were given. For example, when the stitching is complete, the tailor is supposed to return the garment to the bailor. If the bailee is not bound to return the goods to the bailor, then the relationship between them is not of bailment. This is a key feature of bailment that distinguishes it from other type of relations such as agency. J Shetty of SC in U Co. Bank vs Hem Chandra Sarkar 1990, observed that the distinguishing feature between a bailment and an agency is that the bailee does not represent the bailor. He merely exercises some rights of the bailor over the bailed property. The bailee cannot bind the bailor by his acts. Thus, a banker who was holding the goods on behalf of its account holder for the purpose of delivering them to his customers against payment, was only a bailee and not an agent.

Duties of a BailorA bailor may give his property to the bailee either without any consideration or reward or for a consideration or reward. In the former case, he is called a gratuitous bailor, while in the latter, a bailor for reward. The duties in both the cases are slightly different. Section 150 specifies the duties for both kinds of bailor. It says that the bailor is bound to disclose any faults in the goods

bailed that the bailor is aware of, and which materially interfere with the use of them or which expose the bailee to extraordinary risk. This means that if there is a fault with the goods which may cause harm to the bailee, the bailor must tell it to the bailee. For example, if a person bails his scooter to his friend and if the person knows that the brakes are loose, then he must tell this to the friend. Otherwise, the bailor will be responsible for damages arising directly out of the faults to the bailee. But the bailor is not bound to tell the bailee about the fault if the bailor himself does not know about it.

Section 150 imposes a bigger responsibility to the non-gratuitous bailor since he is making a profit out of the bailment. A non gratuitous bailor is responsible for any damage that happens to the bailee directly because of the fault of the goods irrespective of whether the bailor knew about it or not.In Hyman and Wife vs Nye & Sons 1881,  the plaintiff hired a carriage from the defendant. During the journey, a bolt in the under part of carriage broke, causing an accident in which the plaintiff was injured. The defendants were held liable even though they did not know about the condition of the bolt.

Duties/Responsibilities of a Bailee

1. Duty to take reasonable careIn English law the duties of a gratuitous and non-gratuitous bailee are different. However, in Indian law, Section 151 treats all kinds of bailees the same with respect to the duty. It says that 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, quality, and value as the goods bailed. The bailee must treat the goods as his own in terms of care. However, this does not mean that if the bailor is generally careless about his own goods, he can be careless about the bailed goods as well. He must take care of the goods as any person of ordinary prudence would of his things.

In Blount vs War Office 1953, a house belonging to the plaintiff was requisitioned by the War Office. He was allowed to keep his certain articles in a room of the house, which he locked. The troops who occupied the house were not well controlled and broke into the room causing damage and theft of the articles. It was held that War office did not take care of the house as an owner would and held the War Office liable for the loss.

Bailee, when not liable for loss etc. for thing bailed - As per section 152, in absence of a special contract, the bailee is not responsible for loss, destruction, or deterioration of the thing bailed, if he has taken the amount of care as described in section 151. This means that if the bailee has taken as much care of the goods as any owner of ordinary prudence would take of his goods, then the bailee will not be liable for the loss, destruction, or deterioration of the goods. No fixed rule regarding how much care is sufficient can be laid down and the nature, quality, and bulk of goods will be taken into consideration to find out if proper care was taken or not. In Gopal Singh vs Punjab National Bank, AIR 1976, Delhi HC held that on the account of partition of the country, when a bank had to flee along with mass exodus from Pakistan to India, the bank was not liable for the goods bailed to it in Pakistan.

If the bailee has taken sufficient care in the security of the goods, then he will not be liable if they are stolen. However, negligence in security, for example leaving a bicycle unlocked on the street, would cause the bailee to be liable. In Join & Son vs Comeron 1922, the plaintiff stayed in a hotel and kept his belonging in his room, which were stolen. The hotel was held liable because they did not take care of its security as an owner would.

If loss is caused due to the servant of the bailee, the bailee would be liable if the servant's act is within the scope of his employment.

Special ContractThe extent of this responsibility can be changed by a contract between the bailor and the bailee. However, it is still debatable whether the responsibility can be reduce or it can be increased by a contract.  Section 152 opens with, "In absence of special contract", which is interpreted by Punjab and Haryana HC, as the bailee can escape his responsibility by way of a contract with the bailor. However, in another case Gujarat HC held that the bank was liable for loss of bales of cotton kept in its custody irrespective of the clause that absolved the bank of all liability. This seems to be fair because no one can get a license to be negligent and a minimum standard of care is expected from everybody.

2. Duty not to make unauthorized use (Section 154)Section 154 says that if the bailee makes any use of the goods bailed which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them. Illustration - A lends horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care but the horse is injured. B is liable to compensate A for the injury to the horse. A hires a horse in Calcutta from B expressly to march to Benares. A rides with care but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B.

Thus, we can see that bailee is supposed to use the goods only as per the purpose of the bailment. If the bailee makes any unauthorized use of the goods, he will be held absolutely liable for any damages.

3. Duty not to mix (Section 155-157)The bailee should maintain the separate identity of the bailor's goods. He should not mix his goods with bailor's good without bailor's consent. If he does so, and if the goods are separable, he is responsible for separating them and if they are not separable, he will be liable to compensate the bailor for his loss.  For example, A bails 100 bales of cotton with a particular mark to B. B, without A's consent, mixes them with his own. A is entitled to have his 100 bales returned and B is bound to bear all expenses for separation. But if A bails a barrel of Cape flour worth Rs 45 to B and B mixes it with country flour worth Rs 25, B is liable to A for the loss of his flour.

4. Duty to return (Section 160)Section 160 - It is the duty of the bailee to return or deliver according to the bailor's directions,

the goods bailed, without demand, as soon as the time for which they were bailed has expired or the purpose for which they were bailed has been accomplished.

If the bailee keeps the goods after the expiry of the time for which they were bailed or after the purpose for which they were bailed has been accomplished, it will be at bailee's risk and he will be responsible for any loss or damage to the goods arising howsoever.In Shaw & Co vs Symmons & Sons 1971, the plaintiff gave certain books to the defendant to be bound. The defendant bound them but did not return them within reasonable time. Subsequently, the books were burnt in an accidental file. The defendants were held liable for the loss of books.

5. Duty to return increase (Section 163)As per Section 163, in absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase of profit which may have accrued from the goods bailed.Illustration - A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to B.

6. Duty not to set up jus tertii (Section 166)As per Section 166 if the bailor has no title and the bailee, in good faith returns the goods back to the bailor or as per the directions of the bailor, he is not responsible to the owner in respect of such delivery.  Thus, once the bailee takes the goods from the bailor, he agrees that the goods belong to the bailor and he must return them only to the bailor. He cannot deny redelivery to the bailor on the ground that the bailor is not the owner.

If there is true owner of the goods, he can apply to the court to stop the delivery of the goods from the bailee to the bailor. This right is given to the true owner in section 167.

Rights of a Bailee

1. Right to necessary expenses (Section 158)The bailee is entitled to lawful charges for providing his service. As per Section 158 says that where by conditions of the bailment, the goods are to be kept or to be carried or to have work done upon them by the bailee for the bailor and the bailee is to receive no remuneration, the bailor shall repay to the bailee the necessary expenses incurred by him for the purpose of bailment. Thus, a bailee is entitled to recover the charges as agreed upon, or if there is no such agreement, the bailee is entitled to all lawful expenses according to this section.

In Surya Investment Co vs STC AIR 1987, STC hired a storage tank from the plaintiff. On account of a dispute, STC appointed a special officer to take charge of the tank, who delivered the contents as per directions of STC. Thus, the plaintiff lost his possession and with it, his right of lien. SC held that the plaintiff is entitled to the charges even if he loses his right of lien because the bailor has enjoyed bailee's services.

2. Right to compensation (Section 164)

As per section 164, the bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them. This means that if the bailor had no right to bail the goods and if still bails them, he will be responsible for any loss that the bailee may incur because of this.

3. Right of Lien (Section 170-171)In general, Lien means the right to keep the possession of the property of a person until that person clear the debts. In case of bailment, the bailee has the right to keep the possession of the property of the bailor until the bailor pays lawful charges to the bailee. Thus, right of Lien is probably the most important of rights of a bailee because it gives the bailee the power to get paid for his services.

Lien is of two kinds -  Particular and General.

Particular LienThis means that the lien holder has a right to keep possession of only that particular property for which the charges are owed. For example, A gives a horse and a bicycle to B. A agrees to pay B charges for training the horse and no charges for keeping the bicycle. Now, if A fails to pay charges for the horse, B is entitled to keep possession only of the horse and not of the bicycle. He must return the bicycle. Section 170 gives this right to the bailee. It says that where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labor or skill in respect of the goods bailed, he has, in absense of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them.

Illustrations - A delivers a rough diamond to B to be cut and polished, which is accordingly done. B is entitled to keep the diamond until charges for his services are paid.A gives cloth to B, a tailor, to make into a cloth. B promises to deliver the coat as soon as it is done and also to give 3 months credit for the price. B is not entitled to keep the coat until he is paid. Conditions for Particular Lien -

1. Exercise of labor or skill -  This right is subject to the condition that the bailee has exercised labor or skill in respect of the goods. Further, it has been frequently pointed out that the labor or skill must be such as improves the goods. This, in Hutton vs Car Maintenance Co 1915, it was held that a job master has no lien for feeding and keeping the horse in his stable but a horse trainer does get a lien upon the horse.

2. Labor or skill exercised must be for the purpose of the bailment - Any services rendered that are beyond the purpose of the bailment do not give a right of lien. For example, A bails his car to B to repair Engine. But B repairs tires instead. B will not get the right of lien.

3. Labor or skill exercised must be in respect of the goods - As mentioned before, the bailee gets a right of lien only upon the goods upon which the service was performed.

General Lien - As opposed to Particular Lien, General Lien gives a right to the bailee to keep the possession of any goods for any amount due in respect of any goods. Section 171 says that, bankers, factors, wharfingers, attorneys of a High Court, and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.Thus, this right is only available to bankers, factors, wharfingers, attorneys of high court, and policy brokers. However, this right can be given to the bailee by making an express contract between the bailor and the bailee.

4. Right to Sue (Section 180-181)Section 180 enables a bailee to sue any person who has wrongfully deprived him of the use or possession of the goods bailed or has done them any injury. The bailee's rights and remedies against the wrong doer are same as those of the owner. An action may be brought either by the bailor or the bailee.

Thus, in Umarani Sen vs Sudhir Kumar AIR 1984, a firm which had consigned the goods, of which it was a bailee, with a carrier, was allowed to sue the carrier for loss of the goods.

Rights of finder of goodsIf a person finds something, he does not automatically become the owner of that thing. He, in fact, becomes a special kind of a baliee in the sense that he has to keep the thing until the owner is found. He should take care of the thing just like a bailee. Section 168 and 169 describe the rights of such finder of goods.

Section 168 -  The finder of goods has no right to sue the owner for compensation for trouble and expense voluntarily incurred by him to preserve the goods and to find out the owner; but he may retain the goods against the owner until he receives such compensation; and where the owner has offered a specific reward for the return of goods lost, the finder may sue for such reward, and may retain the goods until he receives it.

Thus, if the finder has incurred expenses in finding the owner and/or in maintaining the goods voluntarily, he can retain the possession of the goods until the owner pays the expense to him, though the finder cannot sue the owner for the expense. His only remedy is to keep the goods. Further, if the owner has promised a reward for the return of the goods, the finder is entitled to the rewards, and he can even sue the owner for the reward. He can retain the goods as well until the reward is received.

As per Section 169, the finder of the goods can even sell the goods if they are of common objects of sale, in the following conditions -

1. the finder of goods was not able to find the owner after good faith efforts.2. the owner is found but the owner refuses to pay lawful expenses and

1. either the goods are in danger of perishing or of losing greater part of the value

2. or the lawful charges of the finder amount to two third of the value of the goods.