Hotels are liable for theft of guest’s vehicles

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Hotels

In a recent judgment, the Supreme Court held that in a case of theft of a vehicle given for valet parking, the hotel owner cannot contract out of liability for its negligence, or that of its staff, for 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.

In Taj Mahal Hotel v United India Insurance Company Ltd & Ors, on the night of 1 August 1998, respondent No. 2 (complainant No. 2) visited the Taj Mahal Hotel in his Maruti Zen car, which was insured with United India Insurance (respondent No. 1/complainant No. 1). 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 1am, 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. The insurance company settled the claim raised by the car owner in respect of the stolen car for ₹280,000 (US$3,924). Thereafter, respondent No. 2 executed a power of attorney (POA) and a letter of subrogation in favour of respondent No. 1, after which they both then approached the State Consumer Commission by filing a complaint against the hotel seeking payment of the value of the car and compensation for deficiency in service.

The State Consumer Commission dismissed the complaint on the ground that an insurance company acting as a subrogate cannot qualify as a consumer. Respondent No. 1 filed an appeal before the National Consumer Commission, which remanded the complaint back to the State Consumer Commission, observing that the car insurance company had locus standi to file the complaint. The State Consumer Commission allowed the complaint and directed the hotel to pay the insurance company a sum of ₹280,000 (the value of the car) with interest at 12% per annum and ₹50,000 as litigation costs.

In addition, it directed payment of ₹100,000 to respondent No. 2 for inconvenience and harassment faced by him. An appeal against this order was dismissed by the National Consumer Commission. In addition, it was held that the liability of a hotel cannot be precluded by a printed notice on the parking tag disclaiming liability. An appeal was then filed by the hotel before the Supreme Court.

The Supreme Court held that the consumer complaint is maintainable as it was filed by the insurer as a subrogate along with the original owner as a co-complainant. The court further held that a hotel owner cannot contract out of liability for its negligence, or that of its staff, in respect of a vehicle of its guest in any circumstance. 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. The court dismissed the appeal filed by hotel.

The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at [email protected]. Readers should not act on the basis of this information without seeking professional legal advice.