Pledger and Pledgee

Rights and Duties of a Pledger

Rights

• The pledger has a right to claim back the security pledged on repayment of the debt with interest and other charges.
• The pledger has a right to receive a reasonable notice in case the pledgee intends to sell the goods and in case he does not receive the notice he has a right to claim any damages that may result.
• In case of sale, the pledgor is entitled to receive from the pledgee any surplus that may remain with him after the debt is completely paid off.
• The pledgor has a right to claim any accruals to the goods pledged.
• If any loss is caused to the goods because of mishandling or negligence on the part of the pledgee, the pledgor has a right to claim the same.

Duties

• A pledgor must disclose to the pledgee any material faults or extraordinary risks in the goods to which the pledgee may be exposed.
• A pledgor is responsible to meet any extraordinary expenditure incurred by the pledgee for the preservation of the goods.
• Where the pledgee has exercised his right of sale of goods, any shortfall has to be made good by the pledgor.
• The pledgor is liable for any loss caused to the pledgee because of defects in his (pledgor’s) title the goods.

Rights and duties of a Pledgee

Essential Elements of the Pledge:

According to Section 172 of the Indian Contract Act, 1872, the following conditions are to be satisfied to constitute a pledge.

a) Delivery of goods,

b) Such delivery of goods is as security for payment of debt and

c) The subject matter must be movable property.

a) Delivery of Goods: To constitute a pledge, there must be bailment of goods, that is the delivery of goods from one person (borrower in case of loan) to the another person (the person giving loan). Such delivery of the possession of the goods may be actual or constructive.

Rights of Pledgee:

Sections 173 to 176 deals about the rights of the pledgee.

• Right to retain the pledged goods.
• Right to recover extraordinary expenses from the pledger.
• Right to sue and sell the pledged property.