Sections 163 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
These five sections cover what follows from the bailor's ownership position in a bailment. Section 163 gives the bailor any increase or profit from the goods. Section 164 makes the bailor responsible to the bailee if the bailor had no right to bail or to give directions. Section 165 deals with joint owners. Section 166 protects a bailee who in good faith redelivers goods to a bailor without title. Section 167 lets a third person who claims the goods go to court. If a question of title has come up while goods are in someone else's hands, our legal consultation service can help.
In the absence of any contract to the contrary, the bailee must deliver to the bailor any increase or profit which has accrued from the goods bailed (s.163). The bailor is responsible to the bailee for any loss the bailee suffers because the bailor was not entitled to make the bailment, to receive back the goods, or to give directions about them (s.164). A bailee may redeliver goods to one of several joint-owner bailors (s.165). A bailee who in good faith redelivers goods to a bailor without title is not responsible to the owner (s.166). A third person claiming the goods may apply to the Court (s.167).
Section 163: increase or profit
The text: "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."
The Act's illustration. 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.
For goods, think of a shipment of items that produce something while stored. The rule is a default: it applies "in the absence of any contract to the contrary".
Section 164: bailor's responsibility to the bailee
The text: "The bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions respecting them."
Three situations are named: the bailor was not entitled to make the bailment; to receive back the goods; or to give directions about them. The Act prints no illustration under this section.
Section 165: joint owners
The text: "If several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all in the absence of any agreement to the contrary."
So where several joint owners bail goods, redelivery to one of them, or on one owner's directions, is permitted without the others' consent, unless there is an agreement to the contrary.
Section 166: redelivery to a bailor without title
The text: "If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to, or according to the directions of, the bailor, the bailee is not responsible to the owner in respect of such delivery."
The footnote to this section refers readers to section 117 of the Indian Evidence Act, 1872. That is a separate Act and this article does not explain it. The elements are: the bailor has no title; the bailee acts in good faith; he delivers back to the bailor or on his directions; result: no responsibility to the owner for that delivery.
Section 167: a third person's claim
The text: "If a person, other than the bailor, claims goods bailed he may apply to the Court to stop the delivery of the goods to the bailor, and to decide the title to the goods."
The section gives the third person a route: apply to the Court to stop delivery to the bailor and decide title. It does not say how the application is made, which court, or what happens to the goods meanwhile.
The five sections at a glance
| Section | Topic | Rule in short | Contract can change? |
|---|---|---|---|
| 163 | Increase or profit | Bailee delivers it to the bailor or as directed | Yes: "in the absence of any contract to the contrary" |
| 164 | Bailor's responsibility | Bailor answers for the bailee's loss if he lacked entitlement | Not stated |
| 165 | Joint owners | Bailee may redeliver to one joint owner | Yes: "in the absence of any agreement to the contrary" |
| 166 | Bailor without title | Bailee in good faith is not responsible to the owner | Not stated |
| 167 | Third-party claim | Claimant may apply to the Court | Not stated |
A modern example of our own
Umesh leaves 20 breeding hens with Veena's farm for a season. By the end of the season the hens have produced chicks. Under section 163, in the absence of a contrary agreement, Veena must deliver the increase to Umesh along with the hens.
A title example: Waqar gives a second-hand generator to Xavier's workshop to repair. It later turns out that Waqar had borrowed it from someone else and had no right to bail it. Xavier is put to expense and loss because of a claim by the real owner. Under section 164, Waqar, the bailor, is responsible to Xavier for the loss Xavier sustained because Waqar was not entitled to make the bailment. If the workshop, in good faith, hands the generator back to Waqar before it learns of the claim, section 166 says it is not responsible to the owner for that delivery. If the true owner appears first and applies to the Court under section 167, the Court may be asked to stop delivery to Waqar and decide the title.
What can the parties change?
Sections 163 and 165 state their own openings: "in the absence of any contract to the contrary" and "in the absence of any agreement to the contrary". Sections 164, 166 and 167 say nothing of the kind, so their effect cannot be assumed to be variable; the text is silent and a clause attempting it should be reviewed.
What the sections do not say
- Section 163 does not define "increase or profit" beyond the cow and calf illustration.
- Section 164 does not describe how the bailee proves his loss.
- Section 166 does not say what "good faith" requires; the text uses only those words.
- Section 167 does not say what the Court orders, or in what time.
Practical points
- Bailees: before returning goods, think about whether the bailor's title is in doubt. If a third person claims the goods, section 167 gives that person a route to the Court.
- Bailors: do not bail goods you have no right to bail; section 164 makes you answerable to the bailee.
- Joint owners: if you do not want a bailee to return goods to a co-owner alone, say so in the agreement (section 165).
- Record in the contract who gets any increase or profit and in what form.
- For the basic definition of the parties, see section 148.
- The bailee's duty to return the goods at the end is in sections 160 to 162.
Need help when ownership of goods is in question?
When the bailor's title is doubtful, or more than one person claims the goods, the next step should be careful. Our legal consultation team can review the bailment terms and the claims against sections 163 to 167. Bring the delivery record, the agreement and any letters from the claimant.
Key takeaways
- The bailee delivers any increase or profit from the goods to the bailor, unless the contract says otherwise (s.163).
- The bailor is responsible to the bailee for loss caused by his lack of entitlement (s.164).
- The bailee may redeliver goods to one joint owner without all consenting, absent agreement to the contrary (s.165).
- A bailee acting in good faith who returns goods to a bailor without title is not responsible to the owner (s.166).
- A third person claiming goods may apply to the Court (s.167).
Read next
- Sections 160 to 162: return of goods bailed and death ending gratuitous bailment
- Sections 168 and 169: rights of finder of goods and right to sell
- Bailment and Pledge: sections 148–181 overview
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.