On the night of 01.08.1998, Sapan Dhawan handed over his Maruti Zen and its keys to Taj Mahal Hotel. The Maruti Zen was stolen. United India Insurance [Vehicle-Insurer/Subsequent Subrogee] and Sapan Dhawan [Vehicle-Owner/Subsequent Subrogor] sought compensation for ‘deficiency in service’. The manner in which the Maruti Zen was stolen revealed Taj Mahal Hotel was responsible for the same, with or without the exemption clause. 

“The liability of hotel owners for the loss of, or damage to goods of their guest has come up before this Court for the first time. We will be confining our discussion to liability of hotels for vehicles of guests handed over to them for valet parking.

We find that the imposition of strict liability for loss or damage to vehicles of guests is overly burdensome in today’s context. If the hotel is made strictly liable without proof of negligence on its part, it may lead to grave injustice. The hotel owner is presumed to be liable for loss or damage to the vehicle of the guest upon his failure to return the same. However, he has an opportunity to exonerate himself by proving that the loss did not arise due to negligence or fault on his part or that of his servants.

Taj Mahal Hotel has failed to discharge its burden of disproving the prima facie case of negligence against it. It has not explained why its failure to return the Maruti Zen to Sapan Dhawan was not on account on account of fault or negligence on its part. Thus, liability should be affixed due to want of requisite care.”

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“It is clear that in a scenario where possession of the vehicle is handed over to a hotel employee a relationship of bailment is created. Taj Mahal Hotel cannot refute the existence of bailment by contending that its valet parking service was purely complimentary in nature and that Sapan Dhawan had not paid for the same. It is not disputed that a contract of bailment under Section 148 of The Indian Contract Act, 1872 may be gratuitous.

It is relevant to note that Sections 151 and 152 do not distinguish between a gratuitous bailee and a bailee for reward. Section 152 excludes the liability of a bailee for loss or damage of the bailed goods if he is able to show that he fulfilled the standard of reasonable care under Section 151. Whether or not such standard of reasonable care was fulfilled will depend upon the facts and circumstances of each case. 

The Indian Contract Act, 1872 does not prohibit a party from contracting out of its duty of care under Section 151. Notably, academic opinion has also supported the view. There is an implicit expectation that the repute and standards of 5-star hotels would entail adequate safety of the vehicles handed over for valet parking. Thus, in such a scenario, if the hotel is allowed to exclude its liability for negligence by way of a contract, the standard of care imposed under Section 151 will become illusory and virtually redundant. In our view, the standard of care required to be taken by the hotel as a bailee under Section 151 is sacrosanct and cannot be contracted out of.

However, this does not mean that the hotel would be liable in all scenarios or that it cannot impose any exemption clause through a contract; hotels are at liberty to print clear contractual disclaimers notifying their guests that their liability is excluded for loss or damage to vehicles taken for valet parking which are occasioned by acts of a third party, contributory negligence or by force majeure events. However, this would always be subject to the hotel discharging its initial burden of proving that it fulfilled the standard of care imposed under Section 151. Where the hotel or its servants have actively connived against or acted negligently in safeguarding the vehicles delivered for valet parking, ‘owner’s risk’ clauses in the parking token will not come to their rescue. 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. This is because no one apart from the bailee is in a position to explain the fate of the goods.”

– Hon’ble Justice Mohan M. Shantanagoudar, Taj Mahal Hotel v. United India Insurance Company Ltd., [Civil Appeal No. 8611 of 2019].