Pledge - Pawner and Pawnee

 

A pledge is a type of bailment where goods are delivered by one party (the pawner) to another party (the pawnee) as security for a debt or obligation. The concept of pledge is governed by the Indian Contract Act, 1872, specifically under Sections 172 to 181.

Definition of Pledge

According to Section 172 of the Indian Contract Act, 1872:

·         A pledge is the bailment of goods as security for payment of a debt or performance of a promise.

·         The person who delivers the goods is called the "pawner."

·         The person to whom the goods are delivered is called the "pawnee."

Rights and Duties of Pawner

Rights of Pawner:

1.      Right to Redeem: The pawner has the right to redeem the pledged goods upon repayment of the debt or performance of the promise (Section 177).

2.      Right to Claim Damages: The pawner can claim damages for any loss caused by the pawnee's negligence or unauthorized use of the pledged goods (Section 151 and 152).

Duties of Pawner:

1.      Duty to Pay Debt: The pawner must pay the debt or perform the promise for which the goods were pledged.

2.      Duty to Compensate Pawnee: The pawner must compensate the pawnee for any extraordinary expenses incurred for the preservation of the pledged goods (Section 175).

Rights and Duties of Pawnee

Rights of Pawnee:

1.      Right to Retain: The pawnee has the right to retain the pledged goods until the debt is repaid or the promise is performed (Section 173).

2.      Right to Sell: If the pawner defaults, the pawnee has the right to sell the pledged goods after giving reasonable notice to the pawner (Section 176).

3.      Right to Recover Deficiency: If the sale of the pledged goods does not cover the debt, the pawnee has the right to recover the deficiency from the pawner (Section 176).

Duties of Pawnee:

1.      Duty to Take Care: The pawnee must take as much care of the pledged goods as a person of ordinary prudence would take of their own goods (Section 151).

2.      Duty Not to Use: The pawnee must not use the pledged goods unless the use is necessary for the preservation of the goods or is authorized by the pawner (Section 154).

3.      Duty to Return: The pawnee must return the pledged goods to the pawner upon repayment of the debt or performance of the promise (Section 160).

These sections provide a comprehensive understanding of the concept of pledge and the respective rights and duties of the pawner and pawnee.

Relevant Case Laws

1.      Lallan Prasad v. Rahmat Ali (1967): This case established that the pawnee has the right to retain the pledged goods until the debt is repaid or the promise is performed.

2.      The Morvi Mercantile Bank Ltd. And Anr. v. Union of India (1965): This case highlighted the pawnee's right to sell the pledged goods if the pawner defaults, after giving reasonable notice to the pawner.

These case laws provide a comprehensive understanding of the legal principles related to the doctrine of caveat emptor, and the concept of pledge.

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