Difference between revisions of "SECTION 163, INDIAN CONTRACT ACT"

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The Indian Contract Act of 1872 is based on the principles of English Common law, it lays down the law pertaining to contracts. It establishes the condition under which promises made by any two parties qualifies as a legally binding contract.


Section 163 of the Indian Contract Act reads “In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed” Illustration If A leaves a dog in care of B and in that time the dog gives birth to puppies, A will be entitled to those puppies as well.

What is Bailment?

According to the Section 148 of the Indian Contract Act bailment is defined as “A ‘bailment’ is 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 directions of the person delivering them” In simple terms, bailment is a legal relationship between two parties where one transfers the custody of any physical entity to another while retaining the ownership of the good.

Who is a bailee?

Defined in the section 148 of the Indian Contract act “The person to whom they are delivered is called the ‘bailee’”. In other words, Bailee is the person who temporarily gains the custody (not ownership) of the goods delivered to him. The bailee can also be called a custodian.

Who is a bailor?

Bailor is the person who delivers his goods out of his custody (not ownership) temporarily. EXPLAINATION

When an individual enters into a legal relationship of bailment with another individual and delivers any good or physical entity belonging to him (balilor) out of his custody for a temporary period of time while retaining ownership of the same, and if in that temporary period of time as mentioned in the contract the goods or entity delivered to the other individual (bailee) happens to gain any profit or increase, then the bailor is entitled to such gain or profit on his goods.

A case is given below for a better understanding of the topic:

Motilal Hirabai v. Bai Mani

FACTS: The plaintiff was Mani daughter of one Girdharilal Dalpatram, who had dispute with one Achratal concerning forty eight shares in the Ahemdabad Ginning and Manufacturing Company. That dispute was settled by the means of arbitration. As a result of which twenty four shares were transferred to Achratal by Girdharilal, the remaining twenty four were to stay in possession of Girdharilal but he was only to retain Rs 1100 out of the dividends, the balance of the same was payable to Achratal and Gulab. In 1883 in remuneration for Rs 7,500 borrowed from Achratal, Girdharilal transferred five out of the twenty four shares retained by him. Achratal died in 1885 and subsequently Gridharilal not paid excess dividends over Rs 1100 to Gulab. Principal Issue: on what basis Plantiff will be allowed to redeem on the payment of principal debt. Judgement: The trail court judgement was to redeem on the payment of principal debt without interest and dividends. it is clear that the old shaves carried with them the right to the allotment of the new shares. For instance, it is difficult to hold that if the shares had not been mortgaged and transferred to Aohratlal and had continued in the name of Girdharlal, the now shares could have been or should have been issued to Achratlal as part of the profits of the old shares, and it is not suggest 1 on behalf of the defendants that in respect of the remaining 19 shares or such of them as continued in the name of Giirdburlal, the trustees of Achratlal have or could have claimed the sliuroa of the now capital B issued to Girdharlal as part of the dividends which wore claimable by them under the settlement. The right to be allotted the now shares wend with the old shares; and I find nothing on the record to support the view that the new shares formed part of the dividends in respect of the old shares. The evidence as to how the calls were received is not clear; but it seems to me to be a fair inference under the circumstances that the profits of the Company wore capitalised find that the new shares were allotted to the holders of the old shares a part of the capital and did not represent the dividends on the old shares. At any rate the trustees have produced no evidence to show that that is not the correct inference. On the contrary their own statement of the profits received shows that the new shares were not treated us part of the dividends received on the old shares. Their lordships concur generally with the conclusions arrived at by the High Court, and they will humbly advise His Majesty that this appeal should be dismissed with costs.