Introduction
Each there, there are so many cases of bailment then whether it’s one small matter or a big matter. The word ‘bailment’ has been originated from the French word ‘bailler’ which means ‘to deliver’. The term has been described in Section 148 of the Indian Contract Act, 1872. According to the section, bailment includes the delivery of products from one person to another for a particular objective and upon a contract, when the objective is fulfilled, the product has to be returned or handled as per the direction of the person, to whom the products are supposed to be delivered.
To understand this with a simple example, let’s take the case of laundry, where we give our clothes for washing and upon them being washed, they are returned back to us. Hence, we place another person in interim possession of our clothes for a particular objective, which in this case is, washing clothes and there is an implied or express accord between the two regarding returning of products upon the completion of the purpose.
So as explained by the example and terminology itself, bailment will be a contract between two parties, and those two parties are called bailor and the bailee. The person who delivers the products or goods to another person under contract or for some different reason is called the “Bailor” and the person who is on the receiving end i.e., to whom the goods or products are being delivered is called the Bailee.
Bailment is another kind of special contract but since it is still regarded as a ‘contract’, the key essential of the contract will be applicable to it too. In bailment, possession of products or goods is transferred or delivered, but property i.e., ownership of goods is not transferred. Bailment is restricted to tangible goods only and cannot be practiced upon immovable goods such as land, lake, building, factory, etc since the delivery of goods is an essential of bailment and immovable goods cannot be delivered or transferred.
The delivery of goods should be done for some objective and in a contract that when the objective of delivery is achieved, the goods come back to the bailor or can be disposed of as per the bailor’s direction. When a person’s goods go to the other person, in absence of a purpose or without the thought of retrieving the goods, then the concept of bailment is not attracted.
Since we have understood the basic concept of bailment, bailor, and bailee, in this article we will focus on an in-depth study of bailee and its rights with the help of various case law and judicial analyse them and understand the prominence of the rights established in the legislature for the bailee in the contract of a bailment.
Who is Bailee?
As mentioned above, a bailee is a person who gets interim possession of the goods or property but not the ownership. The bailee is also called the custodian, as he gets the possession of the property or goods by some other person (bailor).
The bailee’s connection with the bailor is incorporated entirely upon bailment.
The bailment specifies the purpose and reason of the change in custody of the goods and product and is outlined in writing such as a receipt or a chit. The bailment determines the objective and the reason for the transfer of the property, goods or products and is highlighted in writing in the form of a receipt, written statement, document or even a chit.
Rights of Bailee
The rights of bailee are discussed within Sections 166, 167, 170, 171 and 180 of the Indian Contract Act, 1872 which are further been discussed in detail.
1. Bailee’s right to lien
This is one of the most effective rights held by the bailee. But to under this right, we have to take a closer look at the term “lien” for those not familiar with the same.
Lien basically means the right to retain goods or property until some charges are due upon it or services executed for its enhancement, are paid. It is easily a right to retain things and does not provide any right of ownership or property to the bailee. But if the bailee had performed some service with his labour or skill in regards to the goods then he holds the right to retain the goods until he gets the remuneration for the services he provided.
Lien in its basic sense is a right exercised by one person to retain the property or goods which are constantly and rightfully in possession, whose ownership is held by some other person and the possession can be retained till the debt of the liability is disposed of off, as held in the case, Pollock and Mulla.
If described in legal terms, a lien is a legal right or claim assets that are strictly used as collateral to fulfill a debt. A lien serves to assure an underlying liability, like repayment of a loan. If the underlying liability is not fulfilled, then the person is allowed to seize the asset that is related to the lien. There are different types of liens that are used to safeguard assets such as bank lien, real estate lien, but here we are going to specifically focus on particular lien and general lien.
Section 170 of the Indian Contract Act talks about Particular Lien, which usually expresses a very basic principle that in case of a person has some goods to be delivered to the other person, then that person can retain the goods until the bailee receives the remuneration for the services performed. It is not possible to enjoy the right if the person claiming to have the right, is not in the possession of subject goods or property. The right to retain the possession is in regards to only those goods, which dues have been charged, and not against other goods. For example, X is a person who gave a diamond in a rough state to a jeweller, Y and asked him to polish and cut the diamond.
Now here, B holds the right to a particular lien to retain the good, in this case, a diamond, and he can do so until he has received the payment for the services he performed. Furthermore, this right can only be held in respect of the goods on which skills or labour has been performed by the bailee. But it is an established principle that the right to lien may be exempted if there exists a contract against it. Also, the right to lien apprehends to exist if the bailee continues the goods bailed for more than the decided time period, or the reasonable time, for the completion of the work and ultimately failed to do so.
It is pertinent to mention the extent of the right to lien, and for that, some emphasis can be put on the 1990 judgement in which the Allahabad High Court analyzed the term labour or skill which is given under Section 170 of the Indian Contract Act. The court put forward their explanation as, that, the labour or skill should be:
- First spent is according to the particular purpose of bailment;
- Secondly, that labour or skill must have been spent so as to provide some enhancement in the bailed goods or property;
- The application of the right of lien is only one of those goods over which the bailee has rendered his expense and labour or skill and not on any other good or property, the reason for this is that it is a particular lien.[1]
Furthermore, these explanations are applicable only when there is an absence of a contract to the contrary i.e., no contract against the holding of this right. For example, if goods are contained in a godown for payment and if it is not yet received, then it cannot attract Section 170 of the act, since the goods are just stored in the godown and no enhancement of goods, nor any labour or skill is rendered with regards of the goods.
General Lien: A general lien is different from a particular lien, which means that a bailee holds a right to retain goods or property bailed to him as security for a normal balance of accounts. General Lien contains many kinds of liens but banker’s lien is its most usual kind[2]. A general lien only grants the right to retain the goods and does not grant the right to sell the goods to the person holding the lien. But a banker’s lien is a unique kind of general lien that even contains a right of sale after decided or reasonable notice has been provided to the customer but in the English Law. A banker’s lien is the rights of a bailee i.e., the bank, to fulfill a charged debt of a customer by taking over the property of the customer or their money and holding it in the bank’s possession. A banker’s lien is commonly known as an implied pledge as well.
The major difference between a pledge and a lien is the right to sell. Pledge grants an implied power to sell, whole a lien grants just a simple tight to retain. It is an implied pledge since, in the case of default appearing by the customer, the bank possesses the authority to sell the property without turning to the court.
Case: Mercantile Bank of India Ltd. v. Rochaldas Gidumal & Co.
In this case, a bank received money from his customer with direction to transfer it telegraphically to his own firm which was at another place. Here, it was laid down that the bank could not retain it as it was not provided to it for the objective of bailment.
2. Right to Sue Wrongdoer
Section 180 describes the rights on the bailee to sue the wrongdoers. It describes that in case a 3rd person wrongfully deprives the bailee of the possession or usage of the goods in bailment, or causes them any harm, then the bailee is authorized to have such remedies as the owner may have used in the if there was no bailment done. It also provides that a bailee or bailor can also file a suit against a third party if such deprivation or harm is caused by the third party.
In the case of State of Bihar v. Bank of Bihar, a sugar company pledged the whole stock of sugar produced for advances made by the bank to the company. The stock was taken over by the government. It was laid down that there was an absence of wrongful deprivation in the case, firstly since the taking over or seizure was lawful and secondly since the Cane commissioner retrieved money legally.
3. Bailee’s Rights where Bailor is not entitled to make a Bailment
As per Section 164 of the Indian Contract Act, the bailor is obligated to the bailee for any loss which the bailee may suffer by the reason that the bailor was not allowed to make the bailment or to transfer back the goods or to give instructions regarding the goods.
Conclusion
We can now understand how bailment is a very critical part of the Indian Contract Act and its growth with the coming of time has been crucial since bailment is something people might enter into on a regular basis, and even without realizing, and hence such laws which are dynamic in nature and made to safeguard the parties from any kind of injustice, exploitation during a bailment. Specifically, the bailee is usually at the end where he is held liable for any wrong things that happened during the bailment since he is not the owner but only holds the possession of the good or property. Thus, making the rights of the bailee even more essential to be understood with the help of judicial analysis of the sections which hold those rights.
References:
[1]Kalloomal Tapeshwari Prasad & Co. v. Rashtriya Chemicals & Fertilizers ltd., AIR 1990 All 214
[2]Alliance Bank of Simla Ltd. v. Ghamandi Lal Jaini Lal, AIR 1927 Lah 408.
[4] Rights and Duties of Bailor and Bailee, Lien, https://legalpaathshala.com/bailor-and-bailee/
[5] Right To Lien And Bailment: Judicial Interpretation,https://www.legalserviceindia.com/legal/article-1891-right-to-lien-and-bailment-judicial-interpretation.html
[6] Bailment- Meaning and Introduction, https://blog.ipleaders.in/bailment-meaning-introduction/#Rights of Bailee
This Article has been written by Parul Sharma, 4th year B.B.A LL.B student at Gitarattan International Business School.
