A type of bailment is a pledge. Pawn is another name for pledge. Bailment of commodities as a security for the return of a debt or loan advanced, or the execution of an obligation or promise, is referred to as a pledge. Pledger or Pawnor is the person who pledges the commodities as security, while Pledgee or Pawnee is the person in whose favour the things are pledged. The pawnor transfers/bailed his possessions to the Pawnee as security for the sum he obtains from the Pawnee in the pledge. The pawnor is responsible for paying the sum back to the Pawnee, and the Pawnee is responsible for returning the goods once the pawnor has paid the amount. If the Pawnee makes unlawful use of the commodities bailed to him, he will be responsible for compensating the pawnor. If the pawnor fails to repay the loan, the Pawnee has the right to sell the goods after providing the pawnor notice.
Illustration-A borrowed Rs.100 from B and gave his cycle as a security for the repayment of the amount, in the condition that if A pays back to B he will get his cycle back. it is called the contract of Pledge.
Essentials of pledge– Because a pledge is a specific type of bailment, all of the bailment’s essentials are also the pledge’s essentials. Apart from it, the following are the pledge’s other requirements:
-The goods that have been pledged will exist.
-Goods will be delivered from the pledger to the pledgee.
-In the event of a pledge, there is no transfer of ownership.
Rights of a pawner- The Pawnor has the right to redeem under Section 177 of the Indian Contract Act of 1872. This means that the Pawnor can redeem the goods or property pledged from the Pawnee before the Pawnee makes the actual sale upon repayment of the debt or execution of the commitment. Once the Pawnee has completed the real sale as per his prerogative under section 176 of the Indian Contract Act, 1872, the right to redemption is lost.
Rights of a pawnee-
Right to keep the assets: If the Pawnor defaults on a loan or fails to follow through on a promise, the Pawnee has the right to keep the commodities offered as security. Pawnee can also keep goods if the debtor does not pay the interest on the loan or does not pay the expenditures incurred. Pawnee, on the other hand, cannot keep goods for any other debt or commitment than the one specified in the contract. (See Sections 173 and 174)
Pawnee has the right to reclaim excessive expenses incurred in the maintenance of items promised. (Section 175)
The right to sue to recover a debt and the right to sell pledged goods: If Pawnee fails to settle the bill, the Pawnee has two options: file a lawsuit against him or sell the products. In the first scenario, the Pawnee keeps the goods as collateral security and initiates court proceedings. He is not required to provide the Pawnor any notice of such proceedings. In the latter case, the Pawnee may sell the goods after providing the Pawnor adequate notice of the sale. If the amount received from the sale of goods is less than the amount owed, Pawnor can be sued for the difference. And if the Pawnee receives more money than is owed to him, there will be a surplus which is given to Pawnor. (section 176).
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