How Safe Is Valet Parking? Who Is Responsible For Your Car's Safety?

Through a recent judgment in the case - Taj Mahal Hotel v. United India Insurance Company Ltd. & Others, delivered on November 14, 2019, Justice Mohan M. Shantanagoudar and Justice Ajay Rastogi, at the Supreme Court have held that 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 sections 151 and 152 of the Indian Contract Act, 1872.

According to the Court, by now it is well established, that while a case of 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.

The Court has stated that, in short, 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 the 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 which applies the ‘reasonable care’ and ‘prudent man’s test’ to a condition where goods are bailed. 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 hotels.

The appeal by special leave arose in this case from the judgment passed by the National Consumer Disputes Redressal Commission on February 5, 2018, dismissing the appeal against the order of January 29, 2016, passed by the State Consumer Disputes Redressal Commission in a complaint case.

On the night of August 1, 1998, at around 11 pm, the second complainant visited the appellant-hotel in his Maruti Zen car. While the car was insured with the respondent-complainant No. 1, the appellant-hotel had taken a non-industrial risk insurance/liability policy from the respondent-3. Upon reaching the hotel, the respondent-2 handed over his car and its keys to the hotel valet for parking, and then went inside the hotel. The Parking tag handed over to him read as under:

'IMPORTANT CONDITION: This vehicle is being parked at the request of the guest at his own risk and responsibility in or outside the hotel premises. In the event of any loss, theft or damage, the management shall not be held responsible for the same and the guest shall have no claim whatsoever against the management.”

When the respondent-2 came out of the hotel at about 1 am, he was informed that his vehicle had been driven away by another person. Upon enquiry with the security officer, he found that three young boys had come to the hotel in their separate car, parked it and gone inside the hotel. After some time, they came out and asked the valet to bring their car to the porch. During this process, one of the boys, one Deepak, picked up the keys of the car of respondent-2 from the desk, went to the car parking, and stole the Maruti Zen car. Though the security guard tried to stop him, he sped away. A complaint was lodged with the police, but the car remained untraced.

The respondent-car insurer settled the claim raised by the car owner in respect of the stolen car for Rs.2,80,000/-.Thereafter, the car owner executed a Power of Attorney and a Letter of Subrogation in favour of the car insurer. 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.

The State Commission relied upon the Supreme Court's decision in the case- Oberoi Forwarding Agency v. New India Assurance Company Ltd. - (2000) 1 SCR 554 and dismissed the complaint on the ground that an insurance company acting as a subrogee (subrogate) cannot qualify as a ‘consumer'. Hence, the car insurer filed an appeal before the National Commission.

As Oberoi decision was overruled by a subsequent decision of a Constitution Bench of the Apex-Court in the case - Economic Transport Organization v. Charan Spinning Mills (Pvt.) Ltd. - (2010) 4 SCC 114, the National Commission, on September 20, 2010, remanded the case in appeal to the State Commission observing that the car insurer had locus standi in the case.

The State Commission relied upon two decisions of the National Commission in the cases - Bombay Brazzerie Vs. Mulchand Agarwal - (2002) NCDRC 42 and B. Dutta, Senior Advocate v. Management of State - (2010) 1 CPC 319 and held that laws of bailment apply when a customer pays to park his car in a parking lot and it is then stolen or damaged. It was noted that the price paid for food consumed in the hotel would include consideration for a contract of bailment from the consumer to the hotel. Hence, the State Commission proceeded on the assumption that the respondent-car owner had paid consideration for the contract. In light of this, the State Commission allowed the complaint.

In appeal, the National Commission observed on the question of locus standi of the car insurer to file complaint, that its order of September 20, 2010 has attained finality.

The Supreme Court has held in the appeal that 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, the court found that strict liability cannot be imposed on hotel owners in respect of loss or damage to 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 as to why its failure to return the vehicle to the car owner 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 court has dismissed the appeal affirming the impugned order passed by the National Commission.