CONTRACT OF PLEDGE
Introduction
BY –
SURBHI WADHWA
Assistant Professor (Law)
Jiwaji University,
Gwalior
Introduction
• Section 172 of the Act
defines ‘Pledge’, ‘pawnor’,
and ‘pawnee’. It states
that the bailment of goods
as security for payment of
a debt or performance of
a promise is called
‘pledge’.
• The bailor is in this case
called the ‘pawnor’. The
bailee is called the
‘pawnee’.
• ‘Pledge’ or ‘pawn’ is a kind
of bailment of goods with
the object that those
goods shall serve as a
security for the payment of
a debt or performance of
a promise.
• For example, keeping gold
with banks to obtain loan is
a pledge.
• Any kind of goods,
documents or valuables
may be pledged,
however, pledge can be
made of movables alone.
If the property transferred is
immovable, it will then be
a mortgage, governed by
the Transfer of Property
Act.
Essentials of a Pledge
• Delivery of goods in
pursuance of a contract –
Since pledge is a bailment,
the delivery of the goods
from the pawnor to the
pawnee is a must.
• Delivery of goods may be
actual or constructive.
Handing over the key of a
godown containing the
goods amounts to delivery
of goods.
• Transfer of possession – A
transfer of possession is
necessary to constitute a
complete pledge. It must
be juridical possession,
mere physical possession is
not sufficient.
• Thus, a servant in custody
of his master’s goods
cannot make a valid
pledge of the goods so as
to bind the owner.
• Delivery for securing a
debt – The purpose of
pledge is that the goods
bailed should serve as
security for the payment of
a debt, or performance of
a promise.
• Special interest of pawnee
– The bailee or pawnee
under a contract of
pledge does not become
the owner, but as having
possession and right to
posses, he is said to have a
special interest in such
goods.