Imagine a scenario, when you decide to go for a nice meal to a hotel and chose to give the car to the valet for parking. Post a good satiating meal, you requested the valet to get the car. To your horror, the car was stolen from the car parking lot. Who would be liable for this? The scenario being described above is an actual incident that occurred in Delhi. This matter which was appealed right up to the Supreme Court, considered a hotel’s liability for a guest’s car which was stolen from its parking lot.
By way of background, the guest was handed a parking tag (which indicated that the car was being parked at his own risk and that the management would not be responsible for any loss, theft or damage to the car). Later, when the guest called for his car, he was informed that his car was driven away by another person. This person, who was also a visitor at the hotel, picked the guest’s car keys from the desk, went to the car park and stole the guest’s car. The guest and the insurance company with whom he had insured his car, filed a consumer complaint against the hotel for deficiency in service.
Applying the principle of strict liability for the property kept
infra hospitium (within the hotel), the National Consumer Disputes Redressal Commission (NCDRC) held that the hotel was liable to make good the loss on account of the stolen car. The NCDRC held that the hotel had failed to exercise the ‘duty of care’ and mere printing of ‘owner’s risk’ on the parking tag did not absolve the hotel of its liability as the loss of the car from its parking space was on account of its negligence. Aggrieved by the order of the NCDRC, the hotel filed an appeal before the Supreme Court. The Supreme Court’s decision
The Supreme Court held that the failure of a hotel to return a guest’s vehicle strikes at the root of the bailment relationship (i.e. a delivery of goods for a specific purpose with the understanding that the goods are to be returned upon completion of that purpose) between the hotel and the guest and gives rise to a prima facie case of negligence against the hotel. However, in such a case it is open for the hotel to exclude its liability by proving that the loss did not occur due to any fault or negligence on its part. Thus, the Supreme Court deferred from the strict liability rule adopted by the NCDRC. In the Supreme Court’s view, making the hotel strictly liable for the safety of vehicles of guests without proof of negligence on the hotel’s part would lead to grave injustice.
Though the Supreme Court held that the strict liability rule should not be enforced in such cases, it opined that a contract of bailment exists between a hotel and its guests in respect of the parking of the guest’s cars by the hotel. Accordingly, the hotel would be liable as a bailee for returning the car in the condition it was delivered in accordance with the duties of a bailee under the Indian Contract Act, 1872 (Contract Act). The Supreme Court was also of the view that the fact that the parking facility was a complimentary service would not obviate the bailment relationship as services offered gratuitously also benefit hotels. Hence, it would not be open for hotels to absolve themselves from liabilities owing to their negligence by contending that the service was a complimentary service.
On another point, where the hotel had claimed the exclusion of liability, the Supreme Court observed that it was not open for the hotel to contract out of the standard of care required to be taken by it as a bailee under the Contract Act. Hotels could, however, disclaim liability towards vehicles of guests on account of a loss occasioned by a third party, contributory negligence or unforeseen circumstances. Noting that the hotel had failed to prove that the loss of the guest’s car was not on account of fault or negligence on its part, the Supreme Court held that it should be liable due to want of requisite care towards the car bailed to it. The Supreme Court was of the view that the responsibility of 5-star hotels to take reasonable measures is greater as higher prices imply a higher degree of care.
This decision of imposing liability on the hotel (though absolving the hotel from the strict liability rule), indicates how the service industry now needs to be particularly vigilant and ensure that they have checks and balances in place to meet the requisite duty of care. For the hospitality industry, or any service industry for that matter, it would be prudent to verify with their insurance advisors regarding other measures that could be taken so as to ensure that such liabilities are picked up by insurance companies.
The heightened sensitivity of consumer awareness in India has only just begun – and this case will be just one amongst the potential many more to follow. More importantly, any negative feedback immediately feeds into the brand perception. It is imperative for service providers to ensure that adequate systems and procedures are in place to safeguard the interests of the consumer at all costs. From the perspective of mitigating potential liabilities, in addition to insurance, service providers could consider entering into water-tight agreements with their employees, sub-consultants and agents. The consumer is not only king now but he is your biggest marketeer.
Megha Agarwal is a Senior Associate at ELP .