CONCEPT OF PLEDGE
The bailment of products as security for payment of a debt or performance of a promise is named ‘Pledge’. The bailor is, during this case, referred to as the ‘pledger’ or ‘pawnor’ and also the bailee is named the ‘pledgee’ or ‘pawnee’. this is often outlined underneath section 172 of Indian Contract Act, 1872.
A pledge could be a bailment for security. it’s a special quite livery. For Example:- If A borrows Rs. two hundred from B and keeps his watch as security for payment of the debt, the livery of watch is a pledge. Any kind of movable property, i.e.m goods, documents, or valuables could also be pledged.
Even a Savings Bank Pass Book could also be pledged (J. & k. Bank v. Tek Chand, A.I.R. (1959) J.&K.67). however delivery is important to finish a pledge. The delivery could also be actual or constructive. If, attributable to the majority of the property or for a few different reason, actual delivery is impractiacable, a symbolic, delivery can do (as as an example delivery of the keys to a secure deposit box).
The producer of a movie borrowed a total of cash from a financier-distributor and united to deliver the ultimate prints of the film once prepared. Held, the agreement wasn’t a pledge, there being no actual transfer of possession [Revenue Authority v. Sudarshan footage, A.I.R. (1968) Mad. 319]
PARTIES TO THE PLEDGE
1. The person delivering the great is named ‘pawnor’.
2. The person to whom the products area unit being delivered is named ‘pawnee’.
A pawnor is entitled to pay back the borrowed total to the pawnee within the time discovered within the contract created between them. once the lapse of your time, a pawnee has right to require legal actions over the pawnor for recovery of his cash.
If R delivers some gold to the bank for the aim of borrowing some quantity in exchange, here R is pawnor and also the bank is pawnee. The bank is entitled to recover the cash from among fixed date back R. If the latter fails to try to to therefore, the previous will take steps whichever is appropriate.
INGREDIENTS OF PLEDGE
1. Delivery of Property
The property vowed ought to be sent from the pawnor to the pawnee. aboard the property, the happiness is to boot affected. within the event that any agreement is framed, wherever move of money is enclosed and spending on of property is not created, then, at that time it’ll not be thought-about as a promise. The conveyance may well be real or by attornment. The immediate moving to access of the property to the pawnee is named genuine/useful conveyance. the opposite kind incorporates the conveyance created by the outsider for the advantage of the pawnor.
2. Performance of Contract
Pledge could be a carriage in accordance with associate degree agreement, and it’s basic for a considerable agreement that the conveyance of plus ought to occur. However, the simultaneous conveyance of the property and also the headway of advance is not needed. The conveyance may be either antecedently or once the event.
3. Property should be goods
This fixing brings the elemental bifurcation among pledge and livery. The property that is being affected ought to be merchandise, that is, they must be transportable in nature. At the purpose once properties like trimming, vehicles, then forth area unit place as a guarantee, then, at that time the agreement is called as a pledge. If there ought to be an occasion of any theft, wherever the wrongdoer denies all the trimming of a lady on the gun muzzle, with a condition that he can presumably save her within the event that she’s going to move her decorations to the stealer, this can not be named as a pledge.
4. Existence of property
The resource pawned ought to be in gift presence. One cannot pledge over a property he is not claiming at once or it is not existing. an overseas probability of it being bought in what is to return is not a ground for a pledge.
Case law- Lallan Prasad v Rahmat Ali
The defendant borrowed Rs. 20,000 from the plaintiff on a note and gave him aeroscrapes price regarding Rs 35,000 as security for the loan. The litigator sued for recovery of the loan, however was unable to provide the safety, sold it, and, therefore, his action for the loan was rejected.
Shelat J. cited that ‘If a soul holding security sues for the debt, he’s underneath associate degree obligation on payment of the
debt handy over the safety, which if, having improperly created away with the safety he’s unable to come back it to the mortal he cannot have judgement for the debt’.
Case Law: Revenue Authority v. Sudarshan footage
A film-producer borrowed Rs one large integer from a financierdistributor and united to deliver the ultimate prints of the film once prepared. This agreement wasn’t a pledge as a result of there was no actual transfer of possession of products as security.
PLEDGE BY NON- OWNERS
The general rule is that it’s the owner United Nations agency will commonly produce a sound pledge. however within the following cases even a non- owner will produce a sound pledge:
1. Pledge by Mercantile Agent- Section 178 of the Indian Contract Act states that the pledge between the mercantile agent and Pawnee will be legitimate if the specialist has the possession of the product with the assent of the man of affairs and also the Pawnee acted nice confidence and does not have faith in the primary title of the merchandise. The term mercantile agent is outlined beneath sec. a pair of (9) of the Sale of products Act, 1930.
If A could be a mercantile agent of B bails the bike of B that is in his possession to D. D in honesty and doesn’t comprehend the title of the bike settle for as security. Here the pledge is taken into account as valid. however if B is aware of regarding title, then the pledge won’t be control valid.
2. Pledge by seller or buyer in possession once sale A vender left in possession of products once sale and a vendee United Nations agency obtains possession of products with the consent of the vendor before sale, will produce a sound pledge provided the pawnee acts in honesty and has no notice of the previous sale of products to the customer or of the lien of the vendor over the products (Sec. thirty of the Sale of products Act, 1930).
S sells a hundred baggage of wheat to B, delivery and payment of worth to be created within the next 3 months. Before the products are delivered to B, S pledges the products with P United Nations agency acts bonafide and has no notice of the previous sale. The pledge is valid.
3. Pledge wherever pawnor incorporates a restricted interest- As per Section 179 of the Indian Contract Act, wherever someone pledges product within which he has solely a restricted interest, the pledge is valid to the extent of that interest.
F finds a pen on a road and pledges it with P for Rs. 20. F had, however, incurred Rs. ten in obtaining the pen repaired. The owner will get the pen by paying Rs. 10 to P, the grownup.
4. Pledge by co-owner in possession- The pledge between a co-owner and Pawnee will be legitimate within the event that he has the consent of alternative co-owner. However, once the co owner while not the consent of alternative co-owner enters the contract of pledge, that contract will be legitimate if the Pawnee acted in compliance with common decency and does not have faith in the title of the merchandise.
Case 1- If A and B collectively owned a automobile. The automobile is within the possession of A. in the future A needs to bail the automobile for the aim of the pledge, he needs to take the consent of B.
Case 2- if A enters into the pledge with C and bails the automobile to C, while not the consent of B. That pledge is taken into account as valid given that C acts in honesty and doesn’t apprehend something regardi ng the title of the automobile.
5. Pledge by someone to
possession beneath a rescindable contract- As per section 178 ‘A’ of the Indian Contract Act, the pledge between the pawnor having the possession of the merchandise beneath rescindable contract and pawnee will be legitimate, on condition that throughout the pledge the contract has not been disowned and also the pawnee acted in compliance with common decency and does not comprehend the title of the product. In alternative words, wherever someone obtains possession of products beneath a rescindable contract, the pledge created by him is valid provided
a. The contract has not been rescinded before the contract of pledge, and
b. The pawnee acts in honesty and without warning of the pawnor’s defect of the title. Illustration:- If A has possession of the watch beneath rescindable contract, bails the watch to B. B in honesty and doesn’t comprehend the title of the watch, accepts it. That pledge is taken into account as valid. however if B is aware of regarding the title, then that pledge isn’t thought of as valid.
At the purpose once a private exchanges the possession of his product to somebody else for a few explicit reason, then, at that time it’s called the contract of legal transfer. just in case there’s a plus of 1 gathering through the legal transfer and alternative gathering does not receive something consequently, that legal transfer is named unwarranted legal transfer. Also, once the contract of legal transfer is finished that induce the common advantage of each as an example deliverer and agent, is named non-needless legal transfer.
The deliverer has the duty to reveal the state of the product and to reimburse the add led to by a agent to stay merchandise protected and any hurts against the harm caused to agent by the product of the deliverer. also, the agent has the duty to stay the merchandise of the deliverer safe and to come back them to deliverer once completion of the rationale that the legal transfer happens.
In the pledge, the pawnor move/bailed his product to the Pawnee as protection from the add he takes from the Pawnee. The pawnor has Associate in Nursing obligation to require care of the add to the Pawnee and also the Pawnee has Associate in Nursing obligation to come back the merchandise once pawnor pays the add. The Pawnee ought not utilizes the merchandise bailed to him within the event that he will, he are going to be obliged to pay compensation to the pawnor.