PLEDGE

-Dr. Shikha Dimri

Associate Professor
UPES School of Law
 SUBJECT MATTER OF PLEDGE

Any kind of goods, documents or

valuable things of personal nature may
be pledged.

 Shares, Government promissory notes

may also be subject matter of pledge.

 There cannot be a pledge of that which

cannot be the subject matter of sale ,
therefore money cannot be pledged
 DEFINITION

Section 172- 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”.
 EXAMPLE

• If A hands over his gold chain to B as a security for

loan given by B to A, it is the case of pledge. As soon as
A returns the money to B,the latter will have to return
the chain to A.

• Pledge is a form of bailment, but the characteristic

feature of pledge is that there is delivery of goods as
security for a debt or promise.
 Difference between pledge & bailment

 In both cases there is delivery of movable goods

 In pledge the bailment is made as a security for due discharge

of a legal obligation. In ordinary bailment this is not so.

 In case of gratuitous bailment the bailee is bound to return

the goods on demand by the bailor. On other hand pledgee is
not bound to return the goods delivered as security on
demand by the bailor unless the debt is repaid.

 A bailee has right of lien on goods bailed but no right of sale.

A pledgee has such right under certain circumstances.
 ESSENTIALS

DELIVERY OF POSSESSION

IN PURSUANCE OF CONTRACT

DELIVERY OF GOODS SHOULD BE BY

WAY OF SECURITY

SECURITY BEING FOR THE PAYMENT OF

DEBT OR PERFORMANCE OF A PROMISE
• Morvie Mercantile Bank v. Union of India [constructive
delivery]

• SC was called upon to decide whether railway receipt

could be equated with goods covered by for the
purpose of constituting delivery of goods. Subba Rao
J, who delivered the majority opinion, held,that
railway receipt was the same thing as delivery of
goods, the pledge was therefore valid and the pledgee
was entitled to sue for the loss.

• Reeves v Cappler [ pledge by hypothecation]

• Bank of Chittoor v Narasimbulu [ pledge by
hypothecation]

• Blundell Leigh v Attenborough [ delivery

preceded the pledge]
 RIGHTS OF PAWNEE

 RIGHT OF RETAINER [S.173-174]

 RIGHT OF EXTRAORDINARY EXPENSES[S.175]

 RIGHT TO SELL [S.176]

 RIGHTS OF PAWNER

•Pawners right to redeem [S.177]

 WHO CAN PLEDGE ?

Pledge by Mercantile agent [S.178]

Sec 2(9) SOG-Mercantile Agent is an

agent having in the customary course of
business such agent authority to sell or
to consign goods for the purpose of sale,
or to buy goods or to raise money on the
security of goods.
Pledge by a person in possession under
voidable contract[S.178-A]

Pledge by a person who has limited

interest[S.179]

Pledge by a seller in possession of goods

after sale [30(1)]bare act sale of
goods.docx
Pledge by a buyer in possession of goods
after sale [30(2)