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    PLEDGE

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    Vishal Anand
    This document discusses the law of pledges in India. [1] A pledge involves the bailment of goods as security for repayment of a debt or performance of a promise, where possession is transferred to the pawnee. [2] The key rights of a pawnee include the right to retain possession of the pledged goods until repayment, the right to sell the goods upon default, and the right to recover extraordinary expenses incurred in preserving the goods. [3] A mercantile agent can validly pledge goods entrusted to them if done in the ordinary course of business and the pawnee acts in good faith.

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    PLEDGE

    Uploaded by

    Vishal Anand
    78 views22 pages
    This document discusses the law of pledges in India. [1] A pledge involves the bailment of goods as security for repayment of a debt or performance of a promise, where possession is transferred to the pawnee. [2] The key rights of a pawnee include the right to retain possession of the pledged goods until repayment, the right to sell the goods upon default, and the right to recover extraordinary expenses incurred in preserving the goods. [3] A mercantile agent can validly pledge goods entrusted to them if done in the ordinary course of business and the pawnee acts in good faith.

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    This document discusses the law of pledges in India. [1] A pledge involves the bailment of goods as security for repayment of a debt or performance of a promise, where possession is transferred to the pawnee. [2] The key rights of a pawnee include the right to retain possession of the pledged goods until repayment, the right to sell the goods upon default, and the right to recover extraordinary expenses incurred in preserving the goods. [3] A mercantile agent can validly pledge goods entrusted to them if done in the ordinary course of business and the pawnee acts in good faith.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    78 views22 pages

    PLEDGE

    Uploaded by

    Vishal Anand
    This document discusses the law of pledges in India. [1] A pledge involves the bailment of goods as security for repayment of a debt or performance of a promise, where possession is transferred to the pawnee. [2] The key rights of a pawnee include the right to retain possession of the pledged goods until repayment, the right to sell the goods upon default, and the right to recover extraordinary expenses incurred in preserving the goods. [3] A mercantile agent can validly pledge goods entrusted to them if done in the ordinary course of business and the pawnee acts in good faith.

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    PLEDGE

    S.172
    The Bailment Of Goods
     As Security
    For Payment Of A Debt Or
    Performance Of A Promise

    Bailor= Pawnor
    Baliee= Pawnee
     Pledge = Bailment: so duty to take care exists
     Goods same as bailment
     Delivery of Possession : NECESSARY
     Constructive/Actual
     To check constructive possession: check upon who
    has dominance over the goods & under whose
    authority its done
    Morvi Mercantile Bank v. UOI, 1965,SC
    Railway receipts are symbols of goods , so pledgee bank
    has a right to recover the full value of the goods lost
    Pledge by Hypothecation
    Pawnor keeps the custody of goods/securities for
    some special purpose
    No loss of the right of pledge
    any fraud/conversion was made by the pawnor in such
    cases, the pledgee/pawnee doesn’t lose any right
    Preference is given to pawnee’s right
    HYPOTHECATION PLEDGE
    goods as security for debts Pledge is bailment of
    without actual transfer of goods as security where
    property/possession to the possession/actual
    creditor property transfers to
    No delivery pawnee
    future repayments/goods Delivery is necessary
    bought in future existing and specific
    No duty to take care as
    goods
    such
    Duty to take care
    No special statute, so ICA
    Specifically dealt u/ICA
    Sure hon,
    but only
    Blundell-Leigh v. Attenborough,1912
    upon MONEYKB
    ‘PLEDGE’
    RIGHTS OF PAWNEE
    1. RIGHT TO RETAINER- s.173 & s.174

    preserv possess
    ation ion

    Interes s.173-Right
    t to retain

    Debt/perf
    ormance
    s.174
    Pledgee’s right ends upon proper tender of
    performance by the pledger

    Since special property right is transferred, it is said


    that pledgee’s plea is preferred over other creditors
    Bank of Bihar v. State of Bihar, 1972,SC

    So, s.171 precedes over s.174


    2. RIGHT TO EXTRA ORDINARY EXPENSES-
    S.175

    ‘RECEIVE ‘RETAIN’
    ‘SUE IN
    ’ COURT’
    3.RIGHT TO SELL-S.176

    DEFAULT
    Concurrent rights

    s.176

    Right To Sue
    &Retain
    Right To Sell
    Lallan Prasad v. Rahmat Ali, 1967,SC
    Money – Rs.20,000 on PN
    Security pledged= Aeroscraps worth Rs.35,000
    Sued for claiming it back
    Unable to produce the security as it was already sold
    Court held: Pledgee cannot recover back the money
    Rationale: The special property right which transfers
    entitles the pawnor to take back the goods upon
    payment, which is lost if its sold w/o seeking for non-
    repayment
    Pawnor cannot insist to sell the property and realise
    the amounts, its choice of pawnee

    Rights of Pledgor in this regard are:


    - if sale is done, it needs to be honestly performed
    - If no sale right used, then redeem the goods
    - sale is improper, get damages
    Ramaswamy Chetty v. Palaniappa Chettiar, 1930
    Mad HC
    NOTICE
    Notice -MANDATE
    Clear, specific in language, indicate the intention of
    parties
    No implied notice
    ‘sale’ is intended sale, so no requirement of the date,
    place or time nor money
    Rationale: reasonable time for the pawnor to redeem
    the property
    If given the notice, there is no necessity to sell it in
    reasonable period, its pawnee’s discretion
    Sale proceeds
    Sale w/o notice: Invalid

    Unauthorised sale: Right to redemption/suit for


    conversion & damages

    Proceeds of sale: Property of the pawnor

    Pawnee’s right is to appropriate the money due to him


    PAWNOR’S RIGHT TO REDEMPTION
    S.177
    Supplementary to s.176

    BEFORE
    SALE
    WHO CAN PLEDGE?
    Possession of
    By a mercantile
    goods/docume
    agent
    nts to title

    Possession
    with consent

    Ordinary
    course of
    Pawnee-
    business Good faith
    Mercantile Agent s.178
    S.2(9) of SOG- Authorized to sell/consign/buy/raise money
    on security of goods

    Before amendment to s.178, any person in possession pledge


    -Repealed

    Goods to be entrusted as a MA & not any other special


    purpose

    Consent: consent of owner to agent -Even if obtained by any


    other manner- implied
    S.2(4)- Documents to title
    Includes bill of lading, dock warrant, warehouse –
    keeper’s certificate, etc- documents used to prove the
    possession /control of goods/authorizing the same by
    delivery/endorsement or delivery the possessor of the
    document to transfer/receive the goods
    Good faith
    General Clauses Act, 1897 – s.3(20) says good faith
    means “a thing is to be deemed done in good faith
    where it is in fact done honestly, irrespective of whether
    it is done negligently”.
    BOP: who dispute the pledge
    Two things to be proved by pawnee:
    1.) possession by MA is with consent
    2.) pledgee was innocent
    Notice: Actual/Constructive
    Voidable contract-s.178A
    Important requirement: Pawnor: the title holder
    Method of rescinding: Notice/any other method if
    the party is unable to be contacted

    S.179: This needs to be read with s.178


    END OF UNIT -II

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