LAW OF CONTRACTS -II
TOPIC: STATE OF GUJARAT V. MEMON MAHOMED HAJI HASAN
FACTS OF THE CASE:
Two trucks of the respondent were seized by the appellant state for alleged smuggling; they
were kept outside in open where they were totally uncared for so much so that a greater part of
their machinery was pilfered away leaving only their skeletons. They were afterwards
auctioned as unclaimed property under the orders of Magistrate. In the meantime, respondent,
in appeal, obtained decree for return of the vehicles as against the order of confiscation of
Customs Authority. However, when he was informed of such auction, he sued government for
the return of the vehicles or in alternative value for them.
ISSUES RAISED:
1. The contention urged was that though the seizure might be lawful and under the
authority of the Statute, the State Government was from the time that the said goods
were seized until the decision of the appeal, in a position of a Bailee and was, therefore,
bound to take reasonable care of the said vehicles.
2. The other contention urged was that bailment can happen even when there is no actual
delivery of goods.
3. The issue that has been raised is whether the state was liable to compensate the
respondent?
LEGAL PROVISIONS:
Chapter IX of the Indian Contract Act, 1872 deals with the ‘Contract of Bailment’.
Section 148 defines ‘bailment’ as the delivery of goods by one person to another for some
purpose, upon a contract that they shall, when the purpose is accomplished, be returned or
otherwise disposed of according to the direction of the person delivering them.
Essential elements of bailment:
Delivery by possession
Delivery should be upon contract
Delivery should be upon some purpose
Specific movable property
Return of goods
Section 151 talks about the standard of care to be adopted by the Bailee. In all cases of
Bailment, the Bailee is bound to take as much care of the goods bailed to him as a man of
ordinary prudence would, under similar circumstances take, of his own goods of the same bulk,
quality and value as the goods bailed.
Section 523 of CrPC, the seizure by any police-officer of property taken under section 51, or
alleged or suspected to have been stolen, or found under circumstances which create suspicion
of the commission of any offence, shall be forthwith reported to a Magistrate, who shall make
such order as he thinks fit respecting the disposal of such property to the person entitled to the
possession thereof, or, if such person cannot be ascertained, respecting the custody and
production of such property.
RELATED CASE LAWS:
Lasalgaon Merchants Coop Bank Ltd v Prabhudas Hathibabu1
Certain goods belonging to an individual are seized by the government and later they were
destroyed due to heavy rains. In this case the court has taken the lead in imposing the obligation
of a Bailee without a contract. Even though if there is no suggestion of a contract between the
government and individual, here the government is in position of a Bailee. Therefore, it was
the duty of government officers to take such care ass every prudent man would take of his own
goods. And they have to prove even by taking reasonable care also the goods were damaged
beyond their control.
Ram Gulam v State of Uttar Pradesh2
The plaintiff’s ornaments were stolen and recovered by police and while, in police custody they
were stolen again. The plaintiff’s action against the state for the loss was dismissed. Court held
that the obligation of a Bailee is a contractual obligation and springs only from the contract of
bailment. It cannot arise independently of a contract. The government, therefore, never
occupied the position of Bailee and is not liable as such to indemnify the plaintiff’s. But after
the decision of the above case law and the main case dealing this project the court has overruled
1
AIR 1966 Bom 134
2
AIR 1950 All 206
this judgement by saying that the state was held liable to pay the value of the ornaments to the
victim of the theft.
JUDGEMENT:
As the seizure of trucks was carried out with jurisdiction and as they were sold pursuant to a
judicial order, no liability can be attached on the State Government for their disposal by public
auction.
But between their seizure and the auction there was a statutory duty implicit to take reasonable
care of the property seized. This is so because the order of confiscation was not final and was
subject to an appeal and a revision, with the State being aware of the same. The state was also
aware that if the said order was set aside, the property would have to be returned to the owner
thereof in the same state in which it was seized except as to normal depreciation. In spite of
this clear position, while the appeal was still pending State allowed its police authorities to
have trucks disposed of as unclaimed property.
“There being thus a legal obligation to preserve the property intact and also the obligation to
take reasonable care of it so as to enable the Government to return it in the same condition in
which it was seized (let apart the natural depreciation), the position of the State Government
until the order became final was that of a Bailee.” The contention of the State that there can be
no bailment without any contract is not well for “Bailment is dealt with by the Contract Act
only in cases where it arises from a contract but it is not correct to say that there cannot be a
bailment without an enforceable contract.” In fact, a finder of goods is also obliged by law to
take reasonable care of the goods till the owner such that his rights and obligations are similar
to that of Bailee without any contract to that effect. Similarly, State was also obliged by the
law in pari materia as Bailee to take reasonable care of the trucks. Therefore, State would be
liable to the value of the trucks.
CONCLUSION:
From the facts of the case, issues, legal provisions and with the help of case laws we can clearly
come to a conclusion that bailment can happen even without the actual delivery of the goods.
Bailment is dealt with by the Contract Act only in cases where it arises from a contract but it
is not correct to say that there cannot be a bailment without an enforceable contract.
