What is the ruling on liability (daman) when a bailee uses a deposited item or denies possession, and subsequently returns it to the owner?

Primary text

When a custodian becomes liable for a deposited item (wadi'ah) through its use or by denying its possession, the liability is lifted from him once he returns the item to its owner. If the owner accepts the returned item, this constitutes a new mandate for safekeeping. If the owner does not take the item back but renews the mandate for safekeeping or absolves the custodian of liability, the custodian is released from the liability. This is the apparent position of the Madhhab because the liability is a right belonging to the owner, and thus its relinquishment absolves the custodian, analogous to forgiving a debt owed by him. Furthermore, renewing the mandate effectively terminates the previous possession that incurred the liability.