Pledge / Pawn : Meaning, Definition and Essentials of Pledge/ Pawn

1.Meaning and Definition of Pledge : 

        Pledge also known as 'Pawn'. It is a Special Kind of Bailment. The bailment of goods as security for payment of a debt or performance of a promise is called 'Pledge'. Here bailor(The person delivering goods) is called the 'Pawnor' or 'Pledger' and the Bailee (Person to whom goods are delivered) is called Pledgee or 'Pawnee'.
   
       Section 172 of the Indian Contract Act, 1872 defines"Pledge", "pawnor", and "pawnee" as 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 “pawnor”. The bailee is called “pawnee”.

Example : 

     If X delivers to the Bank ornament (gold) for obtaining loan, it is called pledge. Here in this example X is Pledger  or Pawnor and the Bank is Pledgee. or Pawnee.


2.Essential elements of the Pledge :

         To constitute Pledge, the following conditions are to be satisfied.

(i) Delivery of possession

            There must be a bailment of goods as defined in section 148 of the Contract Act that is delivery of goods. The delivery of possession may be actual or constructive. If the Pledger has goods in his physical possession he could effect the pledge by actual delivery.



(ii) Security for payment of debt : 

         The bailment must be by way of security. The goods are delivered as security for the payment of a debt or performance of a promise.

(iii) Security must be for payment of a debt or performance of a promise.


(iv) Movable Property : 

        To constitute Pledge the subject matter of property must be a movable property. It can be valuable documents, goods, chattels etc.   


3. Relevant Case Law : 


(1) Bank of India Vs. Vinod Steel Ltd AIR 1977 MP 188: 

          In this case, Court held that when certain movables have been pledged by a company to a Bank, they cannot be attached and sold for satisfaction of claims of other creditors of the company without first satisfying the claim of the bank.


  (2) Reeves vs Copper (1933) Bing NC 136

            In this case, the captain of the ship pledged his chronometer with his employer, the ownership. The captain was allowed to keep the chronometer and to use it for the purpose of a voyage later on the captain pledged it again with another person. It was held that the first place was valid as it was a case of constructive delivery.




4.Distinction between Pledge and Bailment:
                   
           Section 148 to Section 171 of the Indian Contract Act 1872 deals with bailment, on the other hand Section 172 to Section 181 of the said Act deals with Pledge.

     See in detail here >>>>> Distinction between Bailment and Pledge   




See also 

1) Meaning, Definition and Essential Elements of Bailment.

2) Difference between Promissory Note and bill of exchange

3) What is Consideration and what are Kinds of Consideration ?

4) What is lien what are the kinds of Lien ?

5) Bailment : Rights of Bailee