Case Study: Taj Mahal Hotel v. United India Insurance Company Limited and Others

By Mohd. Sahil Khan 10 Minutes Read

“Taj Mahal Hotel Case: Hotels Liable for Valet Parking Theft. The court established a bailor-bailee relationship between the hotel and the guest, reinforcing the importance of hotels taking reasonable care of the vehicles entrusted to them.”

Citation: (2020) 2 SCC 224.

Court: Supreme Court of India

Date of Judgment: 14^th November, 2019

Bench: Ajay Rastogi (J), M. Shantanagoudar (J).

Facts

• The guest (Respondent No.2) visited a hotel in his Maruti Zen car, which was insured by an insurance company (Respondent No.1). The hotel had a non-industrial risk insurance liability policy with another insurance company (Respondent No.3).
• Upon arrival, the guest handed over their car and keys to the hotel valet for parking. The valet provided a parking tag with a disclaimer stating that the hotel was not responsible for any vehicle loss, damage, or theft.
• Respondent No.2 later discovered that their car had been stolen. When the guest inquired with the security office, he was informed that three young boys had stolen the car after picking up the keys from the valet desk. Despite attempts to stop them, the thieves escaped.
• Respondent No. 1 settled the insurance claim for Respondent No. 2 and obtained a Power of Attorney and letter of subrogation. They then filed a complaint against the hotel with the State Commission, seeking compensation for the stolen car and deficient service.

Decision of the National Consumer Disputes Redressal Commission

The National Commission determined that a printed notice on the parking tag could not disclaim the hotel’s liability. Consequently, the appeal against the State Commission’s order was dismissed. Earlier, the State Commission rejected the complaint, citing that an insurance company acting as a subrogee does not meet the criteria to be classified as a consumer.

Decision of the Supreme Court

The Supreme Court ruled that hotels are liable for the theft of cars left with their valet parking services. This liability arises from the bailor-bailee relationship established when a hotel takes possession of a parking vehicle. The court emphasized that hotels cannot avoid this liability through contractual disclaimers, as such clauses would be inconsistent with the statutory duties imposed on bailees.

Key legal issues discussed

1. Is the hotel responsible for the theft of a car that was left with the hotel valet for parking under the laws of bailment?

Yes

The apex court observed that the existence of a bailor-bailee relationship depends on the level of control the potential bailee has over the property. If the hotel has full custody or possession of the vehicle (as in valet parking), the laws of bailment will apply. However, mere parking permission in the hotel premises will not constitute a bailment agreement.

In the 20^th para, the court remarked that “In a situation where the hotel actively undertakes to park the vehicle for the owner, keep it in safe custody and return it upon presentation of a parking slip in a manner such that the parking of the vehicle is beyond the control of the owner, a contract of bailment exists.” The court referred to Section 148 and Section 149 of the Indian Contract Act to emphasize the bailor-bailee relationship.

The court referred to New India Assurance Co. Ltd. v. Delhi Development Authority[1]. In this case, the insurance company (as a subrogee) filed a civil lawsuit to recover damages caused by the theft of a truck from a parking facility operated by the Delhi Development Authority. The Delhi High Court determined it was a bailment situation under Sections 148 and 149 of the Indian Contract Act. The court observed that possession is the essence of a bailment agreement.

The court, in the 20th para, remarked, “These services are covered by the exorbitant rates charged for renting of rooms, food, entry fee to lounges and clubs, and so on. It cannot be denied that valet parking service, even if offered gratuitously, benefits the hotel.” The court concluded this issue in the 20^th para by stating, “Applying this to the instant case, Respondent No. 2 had given up possession of his car by handing it over to the valet. Thus, the Appellant-hotel cannot refute the existence of bailment by contending that its valet parking service was purely complimentary in nature and that the consumer (bailor) had not paid for the same. In other words, the existence of a bailment relationship is clear.”

2. Can the hotel be excused from liability based on a contractual agreement?

No

The court relied upon Sheik Mahamad Ravuther v. The British Indian Steam Navigation Co. Ltd.[2] Court rules in 37^th para of the judgment that “Under Section 151 of the Act, the defendants, therefore, are bound to take as much care of the goods as a man of ordinary prudence would under similar circumstances. It is only the incident of any contract not inconsistent with its provisions that remains unaffected by the Contract Act (see Section 1 of the Contract Act). The incident of the contract before us that the bailee is exempt from taking the care required by Section 151 appears to me to be clearly inconsistent with that section.”

The court observed that guests usually park their cars in the hotel’s parking lot or nearby when they stay at a hotel. The hotel staff is in a good position to watch over the cars and ensure they are safe. While some hotels offer valet parking as a free service, many guests cannot leave their cars with the hotel. If hotels can use contracts to avoid responsibility for negligence, the safety rules for bailees in Section 151 would become useless. This would leave guests with no protection. We believe that the safety rules for hotels in Section 151 are very important and cannot be changed by contracts.

However, the court stated that the hotels can print clear notices telling guests that they are not responsible for lost or damaged cars if the damage is caused by someone else, the guest’s fault, or an unexpected event. However, the hotel must prove they followed the safety rules in Section 151. If the hotel or its employees were careless or did something wrong to protect the cars, the “owner’s risk” clauses on the parking ticket won’t help them.

The court concluded by remarking in 44^th para that “(i) the hotel-owner cannot contract out of liability for its negligence or that of its servants in respect of a vehicle of its guest in any circumstance. Once possession of the vehicle is handed to the hotel staff or valet, there is an implied contractual obligation to return the vehicle in a safe condition upon the direction of the owner. (ii) Even where there is a general or specific exemption clause, there remains a prima facie burden of proof on the hotel to explain that any loss or damage caused to the vehicles parked was not on account of its negligence or want of care per Sections 151 and 152 of the Contract Act. It is only after this burden of proof is discharged that the exemption clause can come into force. The burden of proving that such loss or damage was covered by the exemption clause will also be on the hotel.”

[1] AIR 1991 DELHI 298.

[2] 1IND. CAS.977.

Mohd. Sahil Khan