Are hotels liable for theft of car given to valet? Here’s what the Supreme Court says

If you have ever taken the valet parking service at a hotel, you may have come across a disclaimer in the tag given to you, saying, “The management is not responsible for the damage or loss of your vehicle.” But have you ever wondered what will happen if your vehicle is stolen? Can the hotel really wash its hands of the matter?

One such case filed by a car owner against the Taj Mahal Hotel in 1998 was recently heard by the Supreme Court. Before getting to the apex court’s ruling, let’s take a look at the case history.

Case history

On August 1, 1998, a man visited the Taj Mahal Hotel in his Maruti Zen car at around 11 PM. After reaching the hotel, he handed over the key to the valet parking staff and went inside the hotel. Later when he came out of the hotel at 1 am, he was informed by the hotel management that his car was stolen.

According to the hotel’s statement, three youths had visited the hotel the same night in a different car and parked it and went inside. After a while, they came out and asked the valet to bring their car from the parking. While the car was being brought, one of them took the keys of the Maruti Zen car and stole the vehicle. They drove away despite the security guard trying to stop the car.

On hearing this, the car owner filed a complaint with the police but the car was untraceable. The vehicle insurer settled the insurance claim with the man but the hotel refused to pay the value of the car and compensation for deficiency in services on the grounds that there was a clause in the parking coupon which said that it was at the “owner’s risk”.

Hence, both the insurer and the car owner filed a complaint against the hotel seeking payment of the value of the car and compensation.

On hearing the case, the State Commission first ordered the hotel to pay the value of the car – Rs 2,80,000 plus 12 per cent interest per annum and Rs 50,000 as the litigation cost to the insurer of the car. The commission further directed the hotel to pay Rs 1,00,000 to the owner of the car as compensation.

The hotel further went to the National Commission which dismissed its appeal. It then appealed to the Supreme Court. However, the top court has also dismissed the petition filed by the hotel.

What did the court rule? 

On hearing the case, the court said, “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 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. 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 hotel.”

The Supreme Court concluded saying the hotel has failed to explain why its failure to return the vehicle to the owner of the stolen car was not due to its fault or negligence. Star hotels which offer valet parking cannot escape responsibility if a guest’s vehicle is stolen or damaged even if the parking slip contains a non-liability clause, the top court said.

“In a situation where the hotel actively undertakes to park the vehicle for the owner, keep it in safe custody and return it upon presentation of a parking slip in a manner such that the parking of the vehicle is beyond the control of the owner, a contract of bailment exists. Thus, the hotel would be liable as a bailee for returning the vehicle in the condition in which it was delivered,” said the top court.

That said, the hotel will not be responsible for any damage caused to a customer’s vehicle by an event outside their control like a natural disaster, it concluded.