Holding

The insurer was a bailee of the motor car and the repairer a sub‑bailee, and the insurer is liable for the loss because the sub‑bailee failed to exercise the requisite care.

Summary

The plaintiff's motor car was damaged in an accident and, under the terms of his insurance policy, was taken to a repair workshop where the insurer approved the repair estimate and agreed to pay the charges. While in the workshop the car was destroyed by fire. The plaintiff sued the insurer claiming that, by virtue of the insurance contract, the insurer became the bailee of the car and the repairer a sub‑bailee, thus making the insurer liable for the loss. The High Court held that the insurer was not a bailee because the car was handed over by the plaintiff's son without reference to the insurer, and dismissed the suit. The Supreme Court examined the insurance policy conditions, held that the insurer's duty to arrange removal and repair made it the bailee and the repairer a sub‑bailee, and that the burden of proving due care rested on them, which was not discharged. Consequently, the Court allowed the appeal, set aside the High Court judgment and restored the trial court decree awarding the plaintiff Rs 7,000.

Issues considered

Whether the insurer, by virtue of the insurance contract, became a bailee of the motor car once it was taken to a repairer.
Whether the repairer, as sub‑bailee, exercised the degree of care required of a prudent person under Section 151 of the Indian Contract Act.
Whether the insurer is liable for the loss of the car caused by fire in the repairer's workshop.

Legislation cited

General Insurance Business (Nationalisation) Act, 1972s. 16
Indian Contract Act, 1872s. 148, s. 149, s. 150, s. 151

Subjects

contract of insurancebailmentbaileesub‑baileeinsurer liabilityduty of carefire lossmotor vehicleindemnity

Judgment

•
N. R. SRINIVASA IYER
A
Vj

NEW INDIA ASSURANCE CO., LTD.

July 22, 1983
B
[D, A. DESAI AND 0. CHINNAP~A REDDY, JJ.J

Cpntract Act-S. 148 Contract of insurance-When custody of1notor car
da111aged in accident is entrusted to repairer by insured in accordance with tei·111s
of insufa11ce policy, does the i11Surer becon1e 'bailee' and repairer •sub-bailee' of
niotor ccir?
c
The appellant's. motor car, insured with the respondent ('insurer')
suffered damage in an acCident and was taken to and left in the custody of
a repairer. On receipt of intimation of the accident, the insurer entered into
correspondence with the rep:i.irer, accepted the estimate of repair charges and
advised the repairer to proceed witli the repairs. The motor car was, however,
destroyed in a fire which occurred in the repair_er's workshop. The appellant. D
filed a suit claiming from the insurer the value of the motor car on the footing
that the insurer was the bailee of the motor car while it was in the custody of
the repairer.

The trial court upheld the contention of the appellant and decreed the
suit but, in appeal, the High Court set aside the decree and diSmissed the suit
on a ground not related to the contention based on the contract of bailment.
E
In Civil Appeal No, 142 of 1965 decided on October 31, 1967 this Court allowed
the appeal of the appellant and remitted the same to the High Court requestina
it to deal with the following questions : (i) whether the insurer was a bailee of
the motor car; (ii) Whether the insurer failed to take as n1uch care of the car
as a person of ordinary prudence would in similar circumstances; and (iii) The
value of the destroyed car. 1he High Court held on the basis of the corres- F
pondence between the parties that the car was ~ntrusied to the repairer by the
apPellant's son on behalf of the appellant, that this was done without reference
to the insurer, that the insurer had only agreed to pay the repair charges and
that therefore the insurer was n.ot a bailee of the motor car.

Allowing the appeal,
G
HELD: 1. A bare perusal of some of the conditions contained in the
contract of insurance would unmistakably lead to the conclusion that the
insurer was a bailee of the motor car. The custody of the repairer was that of.
a sub-bailee. The High Court went wrong in not making any reference to the
contract' of insurance between the parties. In a co9tract of in~urance, there
are mutual rights and obligations both of the insurer and the insured. If the H
motor car is damaged in an accident, a duty is cast on the insured not to leave
the damaged car unattended which of necessity would oblige the insured either
to keep a watchman or if the car is in a condition to be moved it o~ght to be
48() SUPREME COURT REPORTS
•
taken to a repairer, ind the insurer undertake:; an obligation to reitnburse tbc
A cost of removal to the insured. This would imply that from the scene of the
accident, it is the duty of the insurer to remove the car to the n·earest repairer
but this duty is to be performed by the insured on behcllf of the insurer.
Another important condition of the contract is that, once the car is damaged
in an accident, the insurer may, at its own option, either repair, reinstate or
replace the motor car. When the insurer has the option to replace the n1otor
car, it can take over tQe damaged car and the insured is bound to subn1it to the
B samt}. If the insurer, on ~he other hand, exercises the option of repairing the
car, it is entitled not merely to choose the repairer but also to detern1ine the
charges for repairs to be settled between the insurer and the repairer and the
insured has hardly anything to do with it. [486A, 487 C-D, 488. C-Dj

Moris v. C. W. Martin & Sons, Ltd., [1965] 2 All E.R. 725; and Gilchrist
c Watt and Sanderson Pty Ltd. v. York Products Ltd., [1970] 3 All E. R, 825;
referred to. .

In the instant case, when the appellant's son soon after the accid~nt took
the dan1agcd car to the nearest repairer, the car virtually can1e into the custody
of the insurer and the repairer took the cu5.tody for and on behalf of the
insurer. The obligation to get the car repaired was that of the insurer. The
D insurer formally took the car into its custody \Vhen it accepted the repairer to
whon1 the custody was given and ent.3red inlo negotiations about t4e repair
charges and finally agreed to pay the repair charges to the repairer. [487 E]

As a condition of contract of insurance the insurer has to take custody
of the damaged car, reserving the option to repair or replace it. The insured
E has to remo\,e the car to the nearest repairer on behalf of the insurer and is
entitled tO be reimbursed the cost of removal. Therefore, from tqe time of
accident, under the contract of insurance, the insurer would be the bailee. If
the option to repair is eXercised and the repairer is approved and paid, the
repairer becon1es the sub-bailee. {490 E-G]

2. When the car Was in the custody of the sub-bailee, it was destroyed
F by fire that occurred in the repairer's workshop. The sub-bailee was bound to
take the same care as a.man of ordinary prudence would take in regard to bis
own goods of the same quality and value as yras expected of the bailee. When
the cuslody is of the bailee or the sub-bailee, the burden is on them to show
how they handled the car. In the instant case the High Court did not touch

-
upon this aspect while reversing the decision of the trial court. There is no
G evidence on behalf of the insurer as to what amount of care had been taken
by the repairer. The appellant has led so1ne c.vidence in this behalf as to the
careless manner in which the car was kept in the workshop where inflamable
. material was kept. The burden being on the bailee and the sub-bailee and
the same having not been discharged, the trial judge was justified in accepting
the evidence of the appellant and in according the finding that the bailee and
H sub-bailee had not taken such care of the car as was expected of a prudent man
in respect of his own goods of the same quality and value. Therefore, the
bailee is liable for the loss suffered by the appellant, thC bailer.
491 A·B, 491 F-499 AJ
SRINIVASA IYER v. ! SSURANCE co. (Desai, J.) 481

C!Vi':. APPL,LATE JURISDIC1 ON : Civil Appeal No. 2202 of
!9W. A
Apped by Speci1! leave from the Judgment and Order dated
the 2nd Janu1fy, 196~ of the Kerala High Court in A.S. No. 838 of
1958.
B
G.B. Pai, D. I!. Misra, O.C. Mathur and Miss. Meer.a Mathur
for the Appellant.

N. Sudhakaran for Respondent No. L

MRK Pillai for the Respondent No. 2. c
The Judgment of the Court was delivered by

DESAI, J. Plaintiff whose car was destroyed in fire way back in
July 1953 and claimed a paltry sum of Rs. 7,000 from the respondent
(Insurance Company for short) is knocking at the doors of Courts D
of Justice since last three decades and mirage of justice is still eluding
him, and in his chase presumably he must have spent double the
amount than prayed for in the plaint because this is the second round
when the matter has reached the apex. court.
E
Plaintiff, who is t'1e appellant was the owner of Austin 16 H.P.
Motor Car, which he had insured with the origina' first defendant
Vanguard Fire and General Insurance Company Ltd. ('Insurer' for
short) in respect of accident, loss or damage. The period covered
by the policy of insurance Ext. p. I dated March 4, 1952 was from
March I, 1952 to February 28, 1953. This car suffered damage in F
an accident which occurred on December 21, 1952. The car was
taken to car repairing workshop of P.S.N. Motors Ltd., Trichur and
left there and an intimation of the accident was sent to the Insurer
\
requesting it to discharge its obligation under the policy of insurance.
The repairer to whom the car was handed over prepared an estimate
of the repair charges in the amount of Rs. 2010 and forwarded the G
same to the Insurer. After some protracted correspondence, the
Insurer accepted the estimate of repair charges in the amount of
Rs. 1910 and the Insurer by its letter dated Ext. P-13 dated March
25, 1953 wrote to the plaintiff and the repairer as under: · H
We have pleasure to inform you. that the revised
estimate of M/s P.S.N. Motors Ltd., Trich\lr has bee11
482 SUPREME COURT REPORTS (1983) 3 s.c.R.

approved by our head office, and they have been advised
to proceed with the repairs and send us th~ir final bill
together with the discharge voucher duly filled in
and signed by you, for making the payment.

Assuring you of our best services always."
B
Since the· date of the accident the car was in the custody of the
repairer for the purpose ·or repairs. On July 10,1953, a fire occur·
red in the worshop of the repairer in .which the Motor Car of the
plaintiff was destroyed. The plaintiff called upon the Insurer to
idemnify him for the loss as per the terms of the policy of insu-
c rance alleging that the Motor Car was in the possession and (:us· .",.
tody of Mis P.S.N .. Motors Ltd· on behalf of the Insurer and was
being repaired at the sole. responsibility of the Insurer under its
instruction and since the Insurer bad entrusted the Motor Car for
repairs to a workshop in which several automobiles with inflammable
D materials like Oil, petrol, tyres etc. were lying without ascertaining
whether the workshop was insured against fire and other risks, the
Insurer was liable to make good the loss. The plaintiff claimed the
value of tho Motor Car on the footing that the respondent-company
was a bailee of the Motor Car and had failed to take such care
thereof as a person of ordinary prudence would under similar
E circumstances take of his property of the same quality and· value as
the Motor Car bailed. This last submission alleging a contract of
bailment 1s seriously disputed by the respondent-insurance
company.

J The Insurer contested the claim, inter a/ia, contending that the
suit is not maintainable in view Condition No. 7 of the policy of
insurance an aspect of the matter which ·is concluded against the
respondent-company and, therefore, it is not necessary to set out
in extenso the contention under this head. The contract of bailment
was seriously disputed and it was submitted that the car was ·handed '
over to the workshop by the plaintiff's son . and the insurance com.
pany had only . agreed to re-imburse the loss and the workshop
owner was not the agent of the Insurer nor was the insurance com-
pany a bailee; nor could it be said that the agent of the bailee was
in possession of the car.
H
The trial court held that the Motor Car was entrusted to the
repairer for and on behalf of the Insurer and the insurance company
SRJNIVASA IYER v. ASS URAHE co. (Desai, J.) 483

was liable for the loss of the Motor Car as it was in possession of
the agent of the insurance company. The suit was held to be A
maintainable, despite condition No. 7 of the policy of insurance.
Accordingly, the suit was decreed with costs.

An appeal was preferred to the High Court of· Kerala at the
insurance of the Insurer. The High Court held that condition No. 7
B
of the policy of insurance precluded the plaintiff from filing ·the suit
before obtaining the award and on the short ground allowed the
appeal of the Insurer and dismissed the suit.

The plaintiff preferred Civil Appeal No. 142 of 1965 by special
leave to this Court. Shah, J. speaking for the Court in the judgment c
rendered on October 31, 1967 held that the High Court was· in error
in coming to the conclusion that condition No. 7 precluded the
plaintiff from filing the suit. This Court held that condition
No. 7 of the policy of insurance has no operation .in the cas.
since the difference between the Insured and Insurer arose not
out of the policy; but out of the cla,im of tlie plaintiff that the Motor D
j Car was delivered to the respondent-company for repairs.
· Accordingly, this Court reversed ·the decision of the High Court
and remitted the appeal to the High Court requesting the High Court
.to deal with the following questions which arise in the appeal :
E
"I. Whether tho respondent-Company was a bailee of
the motor car of the plaintiff as alleged by the
pl~intiff?

2. Whether the respondent-Company failed to take as F
much care of the.motor-car as a pe.rson of ord.inary
pmdence would' in similar circumstances _take of
bis own motor car of t]je same quality and value ?
and

3. the value of the motor car destroyed."

When the matter went back to the High Court,- the appeal was heard
by a Division Bench of the Kerala High Court. The Bench hearing
· the appeal had some doubt whether in view of the pleading the
plaintiff can claim any relief on the basis of a contract of bailment. H
After expressing this doubt, the High Court proceeded to observe that
in view of the scope of remand the High .Court has to decide the
question whether or not the Insurer was a bailee of the plaintiff 7
484 SUPREME COURT REPORTS [1983) 3 s.c.it

After referring to the correspondence" the High Court reached the
A conclusion that ihc Motor Car was entrusted to M/s P.S.N. Motors
Ltd. by the plaintiff's son on behalf of the plaintiff for repairs, that
it was done without reference to the defendant, that al! that
the defendant agreed was to pay to the plaintiff or to P.S.N. Motors
Ltd., on his behalf, the amount which was settled as the charges for
carrying out all the repairs." In this view of the matter, the High
B
Court held that the Insurer was not. a baile~ of the Motor Car of the
plaintiff and the plaintiff's.claim as founded on a contract of bailment.
cannot succeed. The High Court, accordingly, allowed the appeal
of the •insurance company and dismissed the suit of the plaintiff
directing the parties to bear their mpective cNts. Hrncc this appeal
c by the plaintiff by special leave.

By the time the appeal was filed in this Court, the General
Insurance Business (Nationalisatiorr) Act, 1972 was enacted and
brought ·into operation. The Central Government in exercire of the
powers conferred by sub-sec. (1) of sec. 16 of Nationalisation Act
D framed the scheme which was publi.shed in the Gazette of India
Extraordinary Part II - Sec. 3 · -- Sub-section (ii) . . · . dated
December 31, 1973. The First Schedule appended to tltc scheme·
shows that Vanguard Insurance Company Limited has been merged
with the New India Assurance Company Ltd. It may be notice<!
E that the name of the first respondent is fhown to be the Vanguard
Fire & General Insurance Co. Ltd. It is not made clear whether the
Vanguard Insurance Co. Ltd. set out in the First Schedule to the
schemJ is the same as the respondent in this appeal. That question
)
is kept open to be debated if the obligation to pay the plaintiff
under the policy of insurance is decreed in favour of the plaintiff
F by us.

Since the High Court had to de•:ide the appeal within the scope
of order of remand made by this Court, it is necessary to confine
attention only to the questions which this Court directed the High ·
G
Court to determine. We have already extracted the three questions
framed by this Court in its judgment rendered on October 31, 1967. ·.

The first question is whether the respondent-insurance Company
was a bailee of the Motor Car of the plaintiff as alleged by the
',H plaintiff?

· Section 148 of the Indian Contract Act defines a contract of
bl\ilment as under :
SRINIVASAIYER v. ASSURAN.CE co. (Desai, J.) 4·ss
"A 'bailment' is the delivery of goods by one person
to another for some purpose, upon a contract that they · A
shall, when the purpose is accomplished, be returned .or
otherwise disposed of according to the directions of the·
person delivering them. The person io whom they are
delivered is called the "bailee"."
B
There is an explanation appended to the section which provides that
if a person already in possession of the goods of another contracts to
hold them as a bailee, he thereby becomes the bailee, and the ow~er
becomes the bailor of such goods, although they may not have been
delivered by way of bailment. Sec. 149 provides that the delivery
to the bailee may be made by doing anything which has J:he effect ,C
of putting the goods in_ the possesion of the intended bailee or of any
· person authorised to hold them on his behalf. Sec. 150 prescribes
bailor's duty to disclose to the bailee faults in the goods bailed. Sec.
151 provides that 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
D
-J of th.e same bulk, quality and value as the goods bailed.

The High Court came to the conclusion that it is clear from
the correspondence between the parties ending with Ext. P'i3 that
the car was entrusted to P.S.N. Motors Ltd. Trichur by the E
plaintiff's son on behalf of the plaintiff for the repairs and that it
was done without reference to the insurance Company and that all
.( that the defendent-insurance Company agreed was to pay to the
plaintiff or to P.S.N Motors Ltd. on his behalf, the amount which
was settled as the charges for carrying out all the repairs. Approach-
F
ing the matter·from this angle, the High Court held that the Insurer
was not a bailee of the Motor Car and the plaintiff cannot succeed
in his claim as founded on a contract of bailment. This conclusion
is not borne out by the record and is against the weight of
evidence.
G
The High Court did not make any reference to the terms of the
contract or'insurance between the parties before rejecting the plain-
tiff's case that the Insurer was the bailee and the repairer was the
sub-bailee who had custody of the Motor Car on the entrustment
H
of the custody for the avowed object nf repair by the bailee to the
sub-bailee. For us, it is a bit surprising that the High Court should
have rejected the plaintiff's case out of hand without sliehtest
486 SUPREME COURT REPORTS (1983) 3 S.C.R.

reference to the contract of insurance ovidenced by the· policy Ext.
.A P-1. A bare perusal of some of its conditions would unmistakably
lead to the conclusion that the Insurel' was ·a bailee of the- Motor
Car in question.

· The first condition which is the usual condition in such a
.B contract is that the contract of insurance is a contract of indemnity
and the Insurer undertake to indemnify the Insurer against loss of
or damage to the. Motor Car and/or its accessori~s whilst thereon by
accidental external means. The next important condition is that in
the event of the Motor Car being disabled by reason of loss or
damage covered under the policy of insura11co, the Insurer will bear
c the reasonabie· cost of protection and r.emoval to cht nearest repairers
;,d of redt/irery to the insured but not exceeding in all Rs., 150 in'
respect' of any one accident. One othor condition worth notina;
reads as under :

"The insured may authorise the repair of . the Motor
D Car necessitated by damage for which the Company may
be liable under this Policy'provided that : ·

(a} the estimated cost. of such repair- does not·
exceed Rs. 300
E -
(b) the company- is furnished forthwith with a
detailed estimate of the cost and

(c) the Insured shall give the Company !!Very assis- )
tance to see that such repair is necessary and
F the charge reasonable."

The next condition to which referen•:t may be made is conditioit
No. 4 which reads as under :

G "Notice shall be given in writing to the company
. immediately upon the occurrence of any accident or ioss
or damage and in the event of any claiin and thereafter ·
the Insured shali' give all such information and assistance -~ -
'as the Company shall require."
H
A further condition is that 'the Company may at its own option
repair, reinstate or replace the Motor Car or part thereof and/or its
i\~~essories Of mar par in cash the 1'1ll01JDt Of. the joss QI damage
SRINIVAsA IYER v. ASSURANCE co. (Desai, J.) 487

and the liability of the Company ;hall not exceed the actual value .... '
There is the further condition which may be noticed. 'In the A
event of any accident or breakdown the Motor Car shall not be left
Ji. unattended without proper precautions being taken to prevent further
r
damage or loss and if the Motor Car .be driven before the necessary
;/ repairs are effected· 'any extension of the damage or any further
damage to the Motor Car shall be entirely at the Insured's own
· risk.' B

We are constrained to reproduce all these very relevant con-
ditions which have a tell tale effect on the question whether the
. Insurer was the bailee of the Motor Car because the High Court
wholly ignored them. · .
c
. In a contract of insurance, there are mutual rights and obliga-
tions both of the Insurer and the Insured. If the Motor Car is
damaged in an accident, a duty is cast on the Insured not to leave
the damaged car unattended which of necessity would oblige the
Insured either to keep a watchman or if the car is in a condition D
to be moved it ought to be taken to a repairer. From the scene of
accident when the car is taken to the nearest repairer, the Insurer
------~· undertakes an obligation to reimburse the cost of· removal to the
Insured. This would imply that from· the scene of accident, it is
the duty of the Insurer to remove the car to the nearest repairer but
E
this duty is to be performed by the Insured on behalf of the Insurer
and the Insured is entitled to be reimbursed for the expenses incurred
by him. Therefore, it was obligatory upon the Insured to remove
the car to the nearest repairer. Thirs obligation arose. under the
contract of insurance. The High Court rejected the contention of
the plaintiff that the Insurer was a bailee on the short ground that · F
· the car was entrusted to the repairer by the plaintiff's son on behalf
of the plaintiff for repair and that it was done without reference to
the Insurer and th~t all that the defendant agreed was to pay the
plaintiff or to P.S.N. Motors Ltd .. on his behalf the amount which
was settled as the charges for carrying out all the repairs. When
the plaintiff's son soon after th~ accident took the damaged car to
G
the nearest repairer, the plaintiff was discharging an obligation under
the contract of insurance, for and on behalf of the Insured because
he could have iegitimately claimed the cost of removal not exceeding
Rs. I SO from the Insurer. This would imply that the Insurer took H
charge of the damaged car from the scene of accident and got it
moved to the nearest repairer. The car virtually came into the
custody of the Insurer and the repairer took the custody for and on
488 SUPREME COURT REPORTS it983] 3 s.c.R.

, behalf of the Insurer. The material aspect has been wholly
A overlooked by the High Court.

· Secondly, the High Court observed th.at the Insurer merely .A.
agreed to pay to the plaintiff-Insurered or to the repairer on his behalf~
the am\lunt which was settled as the charges for carrying out · all the J \
B repairers. At this stage High Court overlooked another important
condition of the contract of immrance which has been extracted
hereinabove. The Insurer may at its own option either· can · repair,
reinstate or replace the Motor Ca:r, once the car was damaged in
accident. · The obligation to repair the damaged car arose u~d'er the·
contract of insurance. The Im:urer had an absolute discretion
c either to repair, reinstate or replace the Motor Car. When· the
In,surer has the option to replace the Motor Car, it· can take
over the damaged car and the Insured is bound to submit to the
same. If the Insurer on the other hand, eAercised the option of
repairing the car, it is entitled not merely to choose the repairer but
D also to determine the charges for repairs to be negotiated and settled
between the Insurer and the repairer and the Insured has hardly
anything to do with it. When these three conditions are read
together and the evidence is appreciated the inescapable outcome is
that the plaintiff through his son sent the Motor Car socinafter the -~
E accident to the nearest repairer in discharge of an obligation under
the contract of insurance and that too for and on behalf of the
Insurer. In this state of unimpeachable evidence emanates from the
binding contract, between the parties, the High Court was clearly
in error in holding that the plaintitf's son took the car to work~hop )

F on his own without reference to Insurer. The Insurer. decided to
get the car repaired and not to reinstate or replace the car. Having
exercised this option, t.he Insurer entered into negotiations with the
repairer and between them by Ext. P-13 worked out the rights and
obligations. The obligation to pay repair charges arose out of
contract of insurance. The Insurer wanted the repairer to repair the
G car and recover the charges from the Insurer. The custody of the
repairer would be that of a sub-ba.ilee because the· Insurer was the
bailee as pointed out earlier from the time of accident. Since the
accident, the Insured dealt with vehicle strictly as provided under the
contract of insurance and that necessitated taking the car to the
H nearest repairer for and on behalf of the Insurer; The Insurer became
the bailee and the repairer may have been initially pointed out by the
bailor but with whom the Insurer entered negotiation arrived at a
~Qgtract and a~eed to $el the car repaim;I iµ <;li~cha1ge 6f an obli-
SRiNiVASA IYER v. ASSURANCE co. (Desai, J.) 48~

gation under the contract of insurance. Therefore, for this additional
reason the custody of the repairer is that of a sub-bailee. A
,
A reference to .some decisions·in this context would bear out
the conclusion. In Morris v. C. W. Martin & Sons Ltd.(I) plaintiff
sent her mink stole to a furrier for cleaning. The ' furrier, contract-
ing as principal not agent, arranged with the defendants for them to B
clean the plaintiff's fur on the current trade conditions, of which the
furrier knew. The defendants knew that the fur belonged to a.
customer of the furier, but did not know to whom it belonged.
, M, an employee of the defendants, was given the task of cleaning
· the fur. While the fur was in M's custody, he stole it. The plaintiff
sued the defendants for damages. The suit was dismissed. In an c
appeal by the plaintiff, the Court of Appeal reversed the decision
·and decreed tb.e plaintiff's suit. Lord Denning quoted 1Yith approval
the following passage from Pollock.and Wright on Possession :

"If the bailee of a thing'sub·bails it by authority ....
and there is no direct privity of contract between the third
person and the owner it would seem that both the owner
and the first bailee have concurrently the rights of a bailor
against the third person according to the nature of the
sub,bailnient."
E
It was accordingly held that if the sub-bailment is· for reward, the
sub-bailee owes to the owner all the duties of a bailee for reward;
and the owner can sue the sub-bailee direct for ·loss of or damages
to the goods; and tl\e sub-bailee is liable unless he can prove that
th~ loss or damage occurred without his fault or that by his
servant. F

In Gilchrist Watt & Sanderson Pty Ltd. v. York Products Pty
Ltd.('); the Shipowners carried two cases of c'ocks, belonging to the
plaintiffs in their vessel from Hamburg to Sydeny, where the
defendants carried on the business of stevedores and ship's agents.
G
The bill of lad in~ provided; inter a/ia, : "When the goods are dis-
charged from the vessel, they shall be at their own risk and expense;
such discharge shall constitute complete delivery and performance
under this contract .and the shipowners shall be freed from any
further responsibility". The defendants unloaded the two cases from H
(I) [1965] ~ All E.R. 725.
(2) [1970] 3 All E.R. 825 at 829.
490 SUPREME COURT REPORTS (19831 3s.c.R.
the vessel. When the plaintiff sought to take delivery of the two
A cases, one o(them was missing and was not recovered: The plaintiffs
sued the defendants on the ground that they were sub-bailee and
are answerable to the plaintiffs to the same extent as the bailee. The
PrivY Council affirming the decision in Morris's case held that the
bailment to the shipowners continued till the goods were delivered
to the plaintiff, but in the meantime there was a sub-bailment from
B
the shipowners to the ·defendants. The . defendants as sub-bailee
were given and took. possession of the goods for the purpose of
looking after them and· delivering them to the holders of the bill of
Jading who were .the plaintiffs, thereby the defendants took on this
·obligation from the plaintiff to exercise due care for the safety of the
c goods, although there. was no contractual relations between the
plaintiffs and the defendants. For this proposition Morris's case
was held to be the principal authority and it was virtually
followed.

. D It is not necessary to multiply the decisions 'further..

Turning to the facts cif this case as pointed out earlier, the
contract of insurance as evidenced by the insurance policy clearly
spelt-out a duty and 'an obligation to remove the damaged· car
covered by the policy to the nearest repairer as soou as the accident
E· occurred. This was an obligation cast on the Insured to be carried
out on behalf of the Insurer, and this was to be done for the benefit
of the. Insurer because the Insurer had the option to repair or to
replace the car. In the background of these facts, the handing over
. of the car by son of the plaintiff to the repairer would constitute .a )

F ·delivery on behalf of the Insurer who would be the bailee and the
repairer would be the sub-bailee. This inference is further streng-
thened by the correspondence that ensued between the Insurer and .
the repairer. The obligation to get the car repaired was of the
IIi.surer. It had a right to take the car into its custody. It did·
formally take the car into the custody when it expected the repairer
G' to whom the custody was given as the one acceptable to them and
_ ente~ed into negotiations about the repair :charges and· finally agreed
•to pay the repair charges to the repairer. Unquestionably; the
Insurer would be the bailee and the repairer would be the sub·bailee.
H
The second point which this Court directed the ~I;gh Court
to decide was. whether the respondent-company failed to take as
much care of the Motor Car as a person of ordinary pr~dence would

.
. SRINIVASA IYER v. ASSURANCE co. (bevai, J.) 491
in similary circumstances take of his own Motor Car of the same
quality and value? When the car was iJ!. the custody of the ~ub A
bailee, it was destroyed by fire .that occurred iii the repairer's
workshop. 'The sub-bailee was bouncl to take the same care a·s a
man of ordinary prudence would take in regard to his own goods
of the same quality and value· as was expected of the bailee. Now
no evidence has been.led by· the defendants to explain what amount
B
of care the bailee or the sub-bailee took in respect of the car. When
the custody is of the bailee o·r the sub-bailee, the burden is on ·them
to show how they handled the car. This is well-established and
need no authority. In Morris's case, the question of burden of proof
·was examined by the Court of Appeal ancl the law was stated as
under: c
"Once a m1n has taken charge of goods as a bailee
for reward, it is his.duty to take reasonable care to keep
them safe; and he cannot escape that dut~ by delegating
it to his servant. If the goods are lost or damaged,
whilst they are in his possession, he is liable unless he can
show-and the burden is on him to show-that the Joss or
damage occurred without any negleci or default or
misconduct of himself or of any of the servants to whom.
he delegated bis duty.".
E
In the present case, the trial Court held that the repairer the
sub-bailee failed to take that much care as a prudent man would
take of his own thing in respect of the car. The High Court has
not touched this aspect while reversing the decision- of the trial
Court. There is no evidence on behalf of the Insurer on the· question F
as to what amount uf care has been taken by the repairer the
sub-bailee. One R. Rajaram D.W. I was examined on behalf of the
Insurer, and there is not one word .in his examination-in-chief as
to what degree of care was taken.to keep the car in safe custody
by the sub-bailee. No one was examined on behalf of the sub-bailee.
The byrden was on them to establish to the satisfaction of the Court G
as to what degree of care was taken in respect of the damaged car.
Plaintiff has led some evidence in this behalf as to the careless
manner in which the c~r was kept in the workshop where inflamma-
ble material· was kept. Without doubt the burden being on the
bailee a"!d the sub-bailee and the same having n~t been discharged, H
the learned trial Judge was perfectly justiijed in accepting the evidence
of the plaintiff and in recording the· finding that bailee. and the

•
49i SUPREME COURT REPORTS [1983] ~ s. c.R.
sub-bailee-had not taken such care. of the car as was expected of the
A prudent man in reepect of his own goods of the same quality and
value. Therefore, .the bailee is laible for the loss suffered by the
plaintiff the bailor.

The last ponit which this Court directed the High Court to.
B determine was about the value of the destroyed car. The 'plaintiff
has given the value of the Motor Car at the time of its loss at
Rs. 7,000, and that is the measure of the loss suffered by the plaintiff
on account of the loss of the car. The trial Court had decreed
plaintiff's snit to the extent of Rs. 7,000. The finding is confirmed.

c For the reasons herein mentioned, this appeal must succeed
and it is accordingly allowed. The Judgment and decree of the
High Court are set aside and the one passed by the trial Court is
restored with .costs throughout.

H.L.C. Appeal allowed.
D

I