A pawn or pledge is a special kind of bailment where a movable thing is bailed as security for the repayment of a debt or for the performance of a promise. As per Section 172 of the Indian Contract Act, 1872, a pledge is a contract where a person deposits an article or good with a lender of money as security for the repayment of a loan or performance of a promise. A pledge is also known as a pawn. The depositor, or bailor, is the pawnor, and the bailee, or depositee, is the pawnee. The pawnee is under a duty to take reasonable care of the goods pledged to him. Let us learn about the rights of the pawnee and the pawnor.

Ownership of the pledged goods does not pass to the pledgee. The general property remains with the pledger, but a “special property” in it passes to the pledgee. The special property is a right to the possession of the articles, along with the power of sale on default. Delivery of the goods pawned is a necessary element in the making of a pawn. The property pledged should be delivered to the pawnee.

Essential Features of a Pledge

Since a pledge is a special kind of bailment, all the essentials of bailment are also the essentials of the pledge. Apart from that, the other essentials of the pledge are:

• There shall be a bailment for security against payment or performance of the promise,

• The subject matter of the pledge is goods, • Goods pledged for shall be in existence,

• There shall be the delivery of goods from pledger to pledgee.

• There is no transfer of ownership in the case of the pledge.

Exception: In exceptional circumstances, the pledgee has the right to sell the movable goods or property that have been pledged.

Who may pledge?

Any of the following persons may make a valid pledge:

i. The owner, his authorized agent, or

ii. One of the several co-owners who is in the sole possession of goods, with the consent of other owners, or

iii. A mercantile agent, who is in possession of the goods with the consent of the real owner, or

iv. A person in possession under a voidable contract before the contract is rescinded, or

v. A seller, who is in possession of goods after the sale or a buyer who has obtained possession of the goods before the sale,

vi. A person who has a limited interest in the property. In such a case, the pawn is valid only to the extent of such interest.