State of Bombay (now Gujarat) v Memon Mahomed Haji Hasam (1967)

Two years after Kasturi Lal (1965) held the State not liable when police negligently lost gold seized from a suspect, the same kind of loss came before the Court again — vehicles seized by customs and left to rot outside a police station. This time the owner won, and the State's reliance on Kasturi Lal and Vidhyawati was brushed aside as irrelevant.

The route was not tort at all. The Court held that a State which seizes goods under a statute, while its order is still open to appeal, holds them as a bailee: bound to preserve them and to return them, or pay their value, if the seizure is set aside. Because the claim was for return of the goods or their value, the question of sovereign immunity for torts of servants never arose. This is why the case is taught alongside Kasturi Lal and Nagendra Rao: it shows how the immunity plea can be sidestepped.

The respondent carried on business as a fish exporter in the State of Junagadh. In 1947 the Junagadh customs authorities seized two motor trucks, a station wagon and other goods of his under the Junagadh State Sea Customs Act, alleging unpaid import duty and smuggling. He appealed. Pending the appeal Junagadh merged into Saurashtra, which later merged into Bombay and eventually became part of Gujarat; the appeal was transferred to the Revenue Tribunal.

Meanwhile the vehicles were kept in an open space opposite the police station at Veraval, totally uncared for, from 1947 to October 1951. Most of the machinery, tyres and even some wheels were pilfered, leaving only skeletons. No register entry explained how they came to be there. In October 1951 the officer in charge reported them as unclaimed, and on his application — which named the respondent as the person from whom they were seized — a Magistrate ordered their disposal under s. 523 CrPC as unclaimed property. No notice was served on the respondent; only a public notice was pasted up. They were auctioned for about Rs 2,000, and the proceeds went to a creditor of the respondent under an attachment.

On 6 February 1952 the Revenue Tribunal set aside the confiscation and directed return of the vehicles. When the respondent asked for them he was told they had been sold. He sued for return of the vehicles or their value.

The trial court decreed Rs 26,797-8-0. In appeal the State tried to argue, for the first time, that it was not liable for torts of its servants; the High Court (Bombay, at Rajkot) held the plea could not be raised without pleading or issue, and confirmed the decree with a slight reduction. The State appealed by special leave.

1. Was the State liable to return the vehicles or pay their value, when the seizure was lawful and the sale was made under a Magistrate's order?
2. Could the State be treated as a bailee when there was no contract between it and the owner, given s. 148 of the Contract Act?
3. Did State of Rajasthan v Vidhyawati and Kasturilal v State of U.P. protect the State?

The appeal was dismissed with costs.

A duty to take care of seized property

The seizure and the confiscation order were made with jurisdiction, and the sale was under a judicial order. "But between their seizure and the auction there was a duty implicit from the provisions of the Act to take reasonable care of the property seized." The confiscation order was not final, being subject to appeal, and the State knew that if it was set aside the property would have to be returned "in the same state in which it was seized except as to normal depreciation." Yet, while the appeal was pending, it let its police dispose of the vehicles as unclaimed — though it knew from the pending appeal, and from its own application naming the respondent, that they were not unclaimed.

Bailment without contract

The State argued that s. 148 of the Contract Act allows bailment only under a contract. The Court rejected this: "Bailment is dealt with by the Contract Act only in cases where it arises from a contract but it is not correct to say that there cannot be a bailment without an enforceable contract." It held: "There can, therefore, be bailment and the relationship of a bailee in respect of specific property without there being an enforceable contract. Nor is consent indispensable for such a relationship to arise. A finder of goods of another has been held to be a bailee in certain circumstances."

Applied to the facts, there was "not only a statutory obligation to return but until the order of confiscation became final an implied obligation to preserve the property intact". And: "Just as a finder of property has to return it when its owner is found and demands it, so the State Government was bound to return the said vehicles once it was found that the seizure and confiscation were not sustainable." Therefore "the position of the State Government until the order became final would be that of a bailee."

The Magistrate's order does not help the State

The disposal order did not wipe away the owner's right or the Government's obligation to return; and "The order of disposal in any event was obtained on a false representation that the property was an unclaimed property." The Court added an alternative ground: "Even if the Government cannot be said to be in the position of a bailee, it was in any case bound to return the said property by reason of its statutory obligation or to pay its value if it had disabled itself from returning it either by its own act or by any act of its agents and servants."

Sovereign immunity does not arise

"In these circumstances, it is difficult to appreciate how the contention that the State Government is not liable for any tortious act of its servants can possibly arise." Vidhyawati and Kasturilal "have no relevance in view of the pleadings of the parties and the cause of action on which the respondent's suit was based."

Where the State seizes property under a statute and its order is still subject to appeal, it holds the property as a bailee — bailment needing neither contract nor consent — and is under a statutory and implied obligation to preserve it and return it if the seizure is set aside. If it has disabled itself from returning the property, by its own act or that of its servants, it must pay the value. Such a claim is not a claim in tort, so the immunity for torts of servants in sovereign functions does not arise.

• Direct question: Can the State be held liable for loss of goods seized by its officers? Discuss with reference to Kasturi Lal. Contrast the two: in Kasturi Lal the claim failed in tort; here it succeeded in bailment and statutory obligation.
• Problem question: goods seized by customs or police are lost or damaged while an appeal is pending, and the seizure is later set aside. Plead return or value on the bailment route; the State cannot shelter behind sovereign immunity.
• Contract cross-reference: Can there be bailment without a contract? Yes — cite this case, the finder of goods analogy, and the holding that consent is not indispensable.