Rights of Pawnee & Pawnor

Introduction

A pledge, also referred to as pawn is a form of bailment in which goods are delivered as security for the repayment of a debt. Section 172 of the Indian Contract Act, 1872 (ICA) deals with pledge. The bailor is in this case called the pawnor and the bailee is called the pawnee.

Rights of Pawnee

• Right of Retainer:
  • Section 173 of ICA confers upon the pawnee the right of retainer.
  • As per this Section, the pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged.
  • This right gives the pawnee a special interest or property in the goods pledged.
• Right of Retainer for Subsequent Advances:
  • As per Section 174 of ICA, the pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.
• Right to Extraordinary Expenses:
  • As per Section 175 of ICA, the pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the preservation of the goods pledged.
• Pawnee’s Right Where Pawnor Makes Default:
  • As per Section 176 of ICA, if the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.
  • If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.

Rights of the Pawnor

• Pawnor’s Right to Redeem:
  • As per Section 177 of ICA, if a time is stipulated for the payment of the debt, or performance of the promise, for which the pledge is made, and the pawnor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them; but he must, in that case, pay, in addition, any expenses which have arisen from his default.
  • By virtue of this Section, the pawnor is entitled to redeem the goods pledged at any time before the actual sale of goods, even though he makes default in payment of the debt or performance of the promise within the stipulated time.
  • His right extinguishes after the sale of the goods. Hence, he enjoys the right to redeem the goods at any time before the actual sale of the goods pledged.