Section 163 of Indian Contract Act, 1872 - Bailor Entitled to Increase or Profit from Goods Bailed
Section 163 states the rule for any increase or profit arising from goods during a bailment. Unless the parties have agreed otherwise, the bailee must deliver that increase or profit to the bailor, or deal with it according to the bailor's directions.
Updated and verified against the official India Code listing for the Indian Contract Act, 1872.
Text of Section 163
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 under Section 163
A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A.
Meaning and Scope of Section 163
Section 163 forms part of Chapter IX of the Indian Contract Act, 1872, which deals with bailment. Under Section 148, bailment broadly concerns delivery of goods by one person to another for a purpose, on a contract that the goods will be returned or otherwise dealt with according to the directions of the person delivering them after the purpose is accomplished.
The expression bailor refers to the person who delivers the goods, while the bailee is the person to whom the goods are delivered. Section 163 deals specifically with an increase or profit that accrues from the bailed goods while they remain in the bailee's custody.
Essential Rule
- The statutory rule applies unless there is a contract to the contrary.
- An increase or profit must have accrued from the goods bailed.
- The bailee must deliver that increase or profit to the bailor or act according to the bailor's directions.
- The statutory illustration treats the calf born to a bailed cow as an increase that must accompany the cow when delivered to the bailor.
Effect of a Contract to the Contrary
The opening words of Section 163 make the rule subject to the parties' contract. Therefore, the statutory obligation operates as the default position. If the bailor and bailee have validly agreed on a different arrangement concerning an increase or profit from the goods, their agreement may govern that issue.
Section 163 in the Scheme of Bailment
| Provision | Subject |
|---|---|
| Section 160 | Return of goods on expiry of time or accomplishment of purpose. |
| Section 161 | Bailee's responsibility when goods are not duly returned. |
| Section 162 | Termination of gratuitous bailment by death. |
| Section 163 | Bailor's entitlement to increase or profit from goods bailed. |
| Section 164 | Bailor's responsibility to the bailee. |
Frequently Asked Questions
What does Section 163 of the Indian Contract Act provide?
It requires the bailee, unless there is a contract to the contrary, to deliver to the bailor or according to the bailor's directions any increase or profit that has accrued from the goods bailed.
Does the bailee normally keep an increase arising from bailed goods?
No. The default rule in Section 163 is that the increase or profit is to be delivered to the bailor or dealt with according to the bailor's directions. A contract to the contrary can alter that default rule.
What example does the Act give?
The statutory illustration concerns a cow left with a bailee for care. If the cow has a calf, the bailee must deliver both the cow and the calf to the bailor.