Introduction
The concept of pledge is fundamental in contract law, especially in the context of securing loans and obligations. Defined under Section 172 of the Indian Contract Act, 1872, a pledge involves the bailment of goods as security for the repayment of a debt or performance of a promise. The parties involved in a pledge are the pawnor (the one who pledges the goods) and the pawnee (the one who receives the goods). Understanding the rights and duties of both parties is crucial for ensuring that the pledge is legally binding and fair.
Rights and Duties of Pawnor and Pawnee
Rights of the Pawnee
Right to Retain
The pawnee retains the pledged goods until the debt is repaid or the promise is fulfilled. This right ensures the pawnee has security until their interest is satisfied.
Right to Sell
Under Section 176, if the pawnor defaults on the payment or performance of the promise, the pawnee has the right to sell the pledged goods after giving reasonable notice to the pawnor. The pawnee can then use the proceeds to recover the debt. If the sale proceeds exceed the debt, the surplus must be returned to the pawnor.
Right of Lien
Section 173 grants the pawnee a right of lien, allowing them to retain the goods until paying all dues, including interest and necessary expenses for preserving the goods.
Right to Extraordinary Expenses
If the pawnee spends extraordinary expenses to preserve the pledged goods, they can recover these costs from the pawnor under Section 175.
Duties of the Pawnee
Duty to Take Reasonable Care
The pawnee must take as much care of the pledged goods as a prudent owner would take of their own goods. This duty ensures that the goods are not damaged or misused while in the pawnee’s custody.
Duty to Return Goods
Upon repayment of the debt or performance of the promise, the pawnee is obliged to return the goods to the pawnor. This is a fundamental duty that underscores the temporary nature of the pawnee’s possession.
Duty Not to Mix Goods
The pawnee should not mix the pledged goods with their own goods. This duty ensures clarity in identifying and returning the pledged goods.
Rights of the Pawnor
Right to Redeem
Under Section 177, the pawnor has the right to redeem the pledged goods by repaying the debt or fulfilling the promise at any time before the actual sale of the goods. This right persists until the sale concludes, giving the pawnor a chance to reclaim their goods.
Right to Receive Accretions
If the pledged goods generate any increase or profit during the bailment period, the pawnor has the right to receive such accretions. This right ensures that any benefit derived from the goods during the pledge period is returned to the pawnor.
Duties of the Pawnor
Duty to Pay Debt or Perform Promise
The primary duty of the pawnor is to repay the debt or perform the promise as agreed upon. Failure to do so can lead to the pawnee exercising their right to sell the goods.
Duty to Compensate Pawnee
The pawnor must compensate the pawnee for any expenses incurred in the preservation of the pledged goods. This includes ordinary and extraordinary expenses that are necessary for maintaining the goods in good condition.
Duty to Disclose Faults
The pawnor must disclose any faults or defects in the goods that could affect their value or expose the pawnee to risks. This duty ensures that the pawnee is aware of any potential issues with the goods.
Conclusion
Understanding these rights and duties helps both parties in a pledge contract navigate their legal obligations and protect their interests. By adhering to these principles, the pawnor and pawnee can maintain a fair and legally sound relationship.
FAQs on Rights and Duties of Pawnor and Pawnee
1. What is the primary difference between the rights of a pawnee and a pawnor in a pledge?
The pawnee can retain and sell the pledged goods if the pawnor defaults. Conversely, the pawnor can redeem the goods by repaying the debt before the sale. Additionally, the pawnor is entitled to any accretions to the goods.
2. Can the pawnee use the pledged goods for personal purposes?
No, the pawnee cannot use the pledged goods for personal purposes. Instead, the pawnee must take reasonable care of the goods and return them once the debt is repaid or the promise is performed.
3. What happens if the pawnor defaults on the repayment of the debt?
If the pawnor defaults, the pawnee can sell the pledged goods after giving reasonable notice. If the sale proceeds exceed the debt, the surplus must be returned to the pawnor.
Also Read: What is Pledge | Meaning and Nature
Reference: topper
