Business

Essential Ingredients of Pledge

Essential Ingredients of Pledge

A pledge is a bailment that conveys possessory title to property owned by a debtor (the pledgor) to a creditor (the pledgee) to secure repayment for some debtor obligation and to the mutual benefit of both parties. The term is also used to denote the property which constitutes the security.

Section 172 of Indian Contract Act, 1872, defines a pledge as, the “bailment of goods as security for payment of a debt or performance of a promise”. Some examples of the pledge are Gold /Jewellery Loans, Advance against goods,/stock, Advances against National Saving Certificates etc.

Essential ingredients:

Delivery of goods: it is essential to complete a pledge. The delivery may be physical or symbolic. Physical delivery refers to a physical transfer of goods from a pledger to the pledge. Symbolic delivery requires no actual delivery of goods. But the possession of goods must be transferred to a pledge.

Transfer of ownership: The ownership of goods remains with the pledger. The possession of the goods vests with pledgee till the loan is repaid.

Right in case of failure to repay: If the pledger fails to repay within the stipulated time, pledgee may Sell the goods pledged after giving reasonable notice, File a civil suit against the pledger for the amount due, File a suit for the sale of the goods pledged and the realization of money due to him.

Moveable Property: The pledge is concerned with the movable property. All types of goods and valuable documents are included in it.