PLEDGE

Section 172 pledge, pawnerand pawneedefined.-

The bailment of goods as security for payment of a debt or performance of a promise is called pledge. The bailor is
in the case called pawnor. The bailee is called the pawnee.

Thus a pledge is only a special kind of bailment, and the chief basis of distinction ois the object of the contract.
Where the object of the delivery of the goods is to provoide a security for a loan or for the fulfilment of an
obligaiton, that kind of bailment is called pledge. Pledge is a baialment of personal property as aa security for some
debt or engagement. The pawner is one who is liable to an engagement gives to the person to whom he is liable a
thing to be held security for payment of his debt or the fullfillment of his liability.

The bailment of goods as security for payment of a debt or performance of a promise

Not for the immovable property only for the movable property

Only tranfer of specific movable property right not gneral movable property right

Bailment

Bailor possesssion +enjoy Bailee

It is the general property right.

Pledge

Pawnor only possession + right to sell Pawnee

It is the specific property right.

Pledge = bailment, so duty to take care exist.

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 is
done.
Case law1: mercantile bank v. UOI,1965,Sc

Facts

Certain goods were consigned with the railway to self from Bombay for transit to okhla. The consigner endorsed
the railway receipt to the appellant bank against an advance of RS 20000. The goods having being lost in transit,
the bank as an endorsee of the railway receipt and pledge of the goods sued the railway for the loss of goods
which were worth RS 35500.

Decision

The trail court has rejected the action. The Bombay high court allowed recovery up to RS 20000 only. There
were cross appeal in the decision. The Supreme Court decide whether railway receipt cold be equated with the
goods covered by the word goods for the purpose of constituting delivery of goods. Railway receipt is symbol of
goods, so pledge bank has a right to recover the full value of the goods list.

Case law2: blundell leigh v. Atten borough, 1912 kb

Facts:

On november 1, 1919, the palintiff handed her jewwllery to one miller to value it and let her know what offer he
could make as to lending her money; he has keep the jeweller as security if he made the advance. On the same
day miller pledged the jewellery with the defendant, a pawn broker, who in good faith advance 1000gbp on it. On
November 5, miller advanced 500gbp to the plaintiff on the security of the ring. Miller died. The plaintiff came to
know the facts. She paid the amount she had borrowed and sued the defendant for return of her jewellery.

Argument: the contention on her part was that when she gave the jewellery to miller for examination, he only
bacame a gratutious bailee having no right to deal with it. There was no valid pledge then. Subsequently he
advanced the money; no valid pledge could arise as he had already parted with the possession of the goods.

Decision:

The court held that the pledge was valid. Delivery made on November 1 was a good delivery for the purpose of
creating a pledge, whenever that pledge was created. It is clear that hte plaintiff intended, when she handed over
the jewellery to miller, to creat a valid pledge as between him and her from the movement when he handed her
money by way of loan which she was prepared to accept.

Pledge by hypothecation

There is no statutory power.

In betweent the pledger and pledgee there is no delivery of possession.
Special property is no deliverd.
It requires the court order and the express contractis to be made.

Sometime the goods are allowed to remain in the cutody of the pledger for a special purpose. But that does not
militate againist the effectiveness of the pledgee.
 Pawner keeps the custody of goods / securites for some special purpose.
No loss of right of pledge.
Any fraud / conversation was made by pawner in such cases, the pledgee / pawnee doesnt lose any right
Prefernce is given to Pawnees right.

Differnce between hypothecation and pledge

Hypothecation pledge

Goods as security for debts with actual Pledge is bailment of goods security when
tranfer of property / posession to the cresitor. possession/ actual property transfer to
pawnee
No delivery Delivery is necessary

Future repayment / goods bought in future Existing and specific goods

No duty to take care as such Duty to take care

No special status so, ICA Specifically dal in ICA

Right of retainer [Ss. 173 174]

Section 173. Pawnees right of retainer.-

The Pawnee may retain the goods pledged, not only for a payment of the debt or the performance of the promise,
but for interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the
preservation of the goods pledged.

The first important right of a Pawnee is the right to retain the goods pledged until his dues are paid. He has the right
to retain the goods not only for payment of the debt or performance of the promise, but for the interest due on the
debt, and all necessary expense incurred by him in respect of the possession or for the goods pledged.

Section 174. (Associated with general lien)

Pawnee not to retain for debt or promise other than that which goods pledged: presumption in case of
subsequent advances.-

The Pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise
other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the
contrary, shall be presumed in regards to subsequent advance advances made by the Pawnee.

The pledge can retain the goods only for the payment of the particular debt for which the goods were pledged and not
for any other debt or promise, unless there is a contract of contrary.
Case law.3: muncheji banaji v. official assignee of Bombay.

The pledge is created, a subsequent advance is made without any other security, a contract to burden the same goods
shall be presumed.

Case law4: Bank of New South Wales v o connor.

The right of the retainer ends on the proper tender of payment. If the pledge refuses a proper tender, he opens himself
up for pledges remedies of seeking return and absolute liability of baiee under section 160 and 161 for failure to
return in time.

Case law5: Bank of Bihar v. State of Bihar, 1972, SC

Since special property right is transferred, it is said that pledge plea is preferred over other creditors.

Section 175. - Pawnees right as to extraordinary expenses incurred.-

The Pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the preservation of the
goods pledged.

Pawnee cant retain the goods; he can separately file the case in the court and get the extraordinary expenses.

The Pawnee is entitled to receive from the Pawnee extraordinary expenses incurred by him for the preservation of the
goods pledged. For such expenses, however, he does not have the right to retain the goods. He can only sue to
recover them.

Section 176. Right to sell.

Pawnees right where pawnor make default.-

If the Pawnor make any default in payment of the debt, or performance, at the stipulated time, of the promise, in
respect of which the goods were pledged, the Pawnee may bring a suit against the pawnor upon the debt or promise,
and retain the goods pledged as a collateral security; or he may sell the things pledged, on giving the pawnor
reasonable notice of the sale.

If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to
pay the balance. If the proceeds of the sale are greater than the sale the amount to due, the Pawnee shall pay over the
surplus to the pawnor.

To file a suits
Retain the goods for the collateral security
After giving the reasonable notice to sell the goods
They are concurrent right.
Case law6: lallan Prasad v rahmat ali.

Facts:

The defendant borrowed Rs.20000 from the plaintiff on a promissory note and gave him aero scrapes wroth about
Rs. 35000 as a security for the loan. The plaintiff sued for repayment of the loan, but unable to produce security,
having sold it.

Decision:

The pledge cant recover back the money.

Rationale:

The special property right which transfers entitles the pawnor to take back the goods upon payment, when it lost if
its sold w/o seeking for nonpayment.

If the creditor holding security sues for debt, he is under an obligation on payment of the debt to hand over the
security, and that if, having improperly made away with the security he is unable to return it to the debtor he cannot
have judgment of the debt.

Pawnor cannot insist to sell the property and release the amount, its choice of Pawnee.

Right of pledger in this regards as,

If sale is done, it needs to be honestly performed.

If no sale right used, then redeem the goods.
Sale is improper get damage.

Case law7: ramasamy chetty v. palahiappa chettaiar, 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 give0n the notice, there is no necessary to sent in reasonable period. Its Pawnees discretion.