Taj Mahal Hotel vs. United India Insurance Co. Ltd. &Ors.

: A Case Analysis

Raj Jaiswal

Contents

• Introduction
• Facts of the Case
• Initial Proceedings
• Appeal to the National Commission
• Contentions of the Appellant
• Contentions of the Respondent
• Statutes and Provisions Involved
• Questions of Law Involved
• Judgement of the Supreme Court
▪ Issue No.1: Complaint filed by the Insurance company (insurer) as a subrogee
▪ Issue No.2: Hotel’s liability
▪ Issue No.3: The required degree of Hotel’s standard of care
▪ Issue No.4: Exclusion of Hotel’s Liability by Contract
• Conclusion

Introduction

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 they can 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.

Facts 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
carowner (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 carowner 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 author Raj Jaiswal is a law graduate from Amity Law School, Lucknow. [Authored on (15 August 2021)]

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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/-.

Initial Proceedings

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 Commissionfirst 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 Commissionobserved that the Insurance company (Respondent
No.1) had locus standi to file the complaint and sent the complaint back to theState Commission.

In the light of this, the State Commission allowed the complaint and heldthat laws of bailment will
apply and directed the hotel (Appellant) to pay a sum of two lakhs eighty thousand (INR2,80,000)
along with twelve percent (12%)interest per annum and fifty thousand (INR 50,000)towards the cost of
litigation. Also, the State Commission 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).

Appeal to the National Commission (National Consumer Disputes Redressal Commission)

The hotel (Appellant) then filed an appeal to the National Commission.

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 gave 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.

Contentions of the Appellant

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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
standin 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 onBombay Brazzerie v. Mulchand
Agarwal1and B. Dutta, Senior Advocate v. Management of State2and 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 or 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.

Contentions of the Respondent

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, theInsurance Company (Respondent No.1)relied on the cases on Klaus Mittelbachert v. East
India Hotels Ltd.3and Hotel Hyatt Regency v. Atul Virmani 4 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
standardof the insurer liability in case of theft of goods or any property from its premises.

Statutes and Provisions Involved

• 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.

Questions of Law Involved

1. Whether the insurance company (insurer) had locus standi to file a consumer complaint as a
subrogee?

2. 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?

3. If the second question is answered in the affirmative, what is the degree of care required to be
taken by the Hotel (Appellant)?

4. Whether the Hotel (Appellant) can be absolved of liability by virtue of a contract?

1
Bombay Brazzerie v. Mulchand Agarwal MANU/CF/0310/2002 : (2002) NCDRC 42
2
B. Dutta, Senior Advocate v. Management of State MANU/CF/0126/2009 : (2010) 1 CPC 319
3
Klaus Mittelbachert v. East India Hotels Ltd. MANU/DE/0465/1997 : AIR 1997 Del 201
4
Hotel Hyatt Regency v. Atul Virmani, III MANU/CF/0122/2008 : (2008) CPJ 281 (NC)

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Judgement of the Supreme Court

Issue No.1: Complaint filed by the Insurance company (insurer) as a subrogee

While solving the first issue the SupremeCourt relying on the case of Economic Transport
Organisation v. Charan Spinning Mills (Pvt.) Ltd.5 held that:

The owner of the car/assuredSapan 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-

i) Theinsurance company(insurer)in the name of the assured, wherein the insurance

company (insurer) acts as the attorney holder of the assured; or,
ii) The Insurance company(insurer) and Sapan Dhawan the car owner(assured) as co-
complainants.

Hence, the Court heldthe complaint maintainable.

Issue No.2: Hotel’s liability

The Supreme Court held that according to the scenario herea 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 the possession of the
keys of his vehicle to the hotel management or valet, it is the duty of the hotel managementto return
the vehicle in a safe condition upon the direction of the vehicle owner as thereautomatically 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 outsidersand 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.

5
Economic Transport Organisation v. Charan Spinning Mills (Pvt.) Ltd. MANU/SC/0113/2010 : (2010) 4 SCC 114

Published in Article section of www.manupatra.com

Also, the Supreme Court on relying on the case of Port Swettenham Authority v. T.W. Wu &
Co.6stated 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 gave 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 obligationunder 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 on the hotel (Appellant) due to want of
the requisite care towards the car bailed to them.

Consequently, the appeal filed by the hotel (Appellant) was dismissed accordingly.

Conclusion

The consumer complaint in consideration is maintainable before the Consumer Disputes Redressal
Commission if it is filed by the insurer as a subrogee 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 the future lawyers and judges. This case also guides the way of using foreign
judgements 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.

6
Port Swettenham Authority v. T.W. Wu & Co. MANU/UKPC/0002/1978 : [1979] A.C. 580

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