Taj Mahal Hotel v. United India Insurance Company Ltd. & Ors. - (Supreme Court) (14 Nov 2019)

In a case of theft of a vehicle given for valet parking, hotel cannot claim exemption from liability on basis that they are protected by an ‘owner’s risk’ clause

MANU/SC/1566/ 2019

Consumer

In the facts of present case, on the night of 1st August, 1998, Respondent No. 2 herein (Complainant No. 2) visited the Appellant-hotel in his Maruti Zen car. While the car was insured with Respondent No. 1 herein (Complainant No. 1), the Appellant-hotel had taken a non-industrial risk insurance/liability policy from Respondent No. 3. Upon reaching the hotel, Respondent No. 2 handed over his car and its keys to the hotel valet for parking, and then went inside the hotel.

When Respondent No. 2 came out of the hotel at about 1 a.m., he was informed that, his vehicle had been driven away by another person. A complaint was lodged with the police, but the car remained untraced. Respondent No. 1 (car insurer) settled the insurance claim raised by Respondent No. 2 (car owner) in respect of the stolen car for Rs. 2,80,000. Thereafter, Respondent No. 2 executed a Power of Attorney (‘POA’) and a letter of subrogation in favour of Respondent No. 1. They both then approached the State Commission by filing a complaint against the Appellant-Hotel seeking payment of the value of the car and compensation for deficiency in service. Relying upon present Court’s decision in Oberoi Forwarding Agency v. New India Assurance Company Limited, the State Commission dismissed the complaint on the ground that, an insurance company acting as a subrogee cannot qualify as a ‘consumer’. Hence, Respondent No. 1 filed an appeal before the National Commission.

Notably, Oberoi was partly overruled by a subsequent decision of a Constitution Bench of this Court in Transport Organisation v. Charan Spinning Mills (Pvt.) Ltd. 2 In light of change in law, National Commission in appeal remanded the complaint back to the State Commission, observing that Respondent No. 1 (car insurer) had locus standi to file the complaint.

The State Commission allowed the complaint and directed the Appellant-hotel to pay Respondent No. 1 a sum of Rs. 2,80,000 (the value of the car) with interest at 12% per annum and Rs. 50,000 as litigation costs. In addition to this, it directed payment of Rs. 1,00,000 to Respondent No. 2 for inconvenience and harassment faced by him. The State Commission also held that Respondent No. 3 (insurer of the hotel) would not be liable to indemnify the loss caused to the Appellant-hotel, as the theft of the car had not been notified to it within due time.

Relying on various decisions by foreign Courts on strict liability for property kept infra hospitium, the National Commission held that, the liability of a hotel cannot be precluded by a printed notice on the parking tag disclaiming liability. Consequently, the appeal against the order of the State Commission was dismissed, although the interest awarded was modified from 12% per annum to 9% per annum. Hence, the present appeal.

In a case of theft of a vehicle given for valet parking, the hotel cannot claim exemption from liability by arguing it was due to acts of third parties beyond their control, or that they are protected by an ‘owner’s risk’ clause, prior to fulfilling its burden as required under Section 151 and 152 of Contract Act, 1872. It is by now well established, that while a case of a robbery by force is visibly beyond a bailee’s control, in cases of private stealth, or simple theft where no force or violence is involved, the bailee still has the prima facie burden of explaining that the loss or disappearance of the goods in his custody is not attributable to his neglect or want of care.

In the instant case, given finding that the theft of the car of Respondent No. 2 was a result of the negligence of the Appellant-hotel, the exemption clause on the parking tag will not exclude the Appellant’s liability. Hence, the argument of the Appellant-hotel on this count fails.

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.

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.

The consumer complaint in consideration is maintainable as it was filed by the insurer as a subrogee, along with the original owner as a co-complainant. Further, strict liability cannot be imposed on hotel owners in respect of loss of or damage to 54 vehicles of their guests. Instead, the rule of prima facie negligence should be adopted. Applying this rule to the present case, it is clear that the Appellant has not explained why its failure to return the vehicle to Respondent No. 2 was not on account of fault or negligence on its part. Thus, liability should be affixed on the Appellant-hotel due to want of the requisite care towards the car bailed to it. The instant appeal is dismissed accordingly.

Tags : THEFT LIABILITY EXEMPTION