Pledge, Pawner and Pawnee defined
The bailment of goods as security for payment of a debt or performance of a promise is called “pledge”. The bailor is in this case called the “pawner”. The bailee is called the “pawnee”. Section 172
A pledge is the delivery of goods by the pledger to the pledge by way of security upon a contract that they shall when the debt is paid or the promise is performed, be returned or otherwise disposed of according to the directions of the pledger. To constitute a valid pledge there must be:
- a contract in relation to an identified chattel to be delivered to the pledge as security,
- actual delivery of possession of the identified chattel in pursuance of the contract
A pledge in law is neither a mortgage nor a lien and does not pass property in the goods but only passes what is described as “special” property, that is, no title to the goods passes but the pledgee is allowed to retain the thing pledged till payment of the debt and in default of payment, to sell the thing pledged so as to pass the property to the vendee.
Delivery of possession
In order to constitute a valid pledge, what is essential is that there must be a delivery of the article, either or constructive, to the pawnee. Possession in an equivocal ter; it may mean either mere manual possession or the mere right to possession. Constructive delivery is adequate to constitute a pledge, and it applies to all those cases where the pledge remains in possession of the goods under the specific authority of the pledge. There cannot be any rigid delimitation of the purpose for which the pledge is permitted to retain possession of the goods. The essential test is not the purpose, but whether the dominion over the goods of the pledge is retained, and the physical possession or handing of the goods by the pledger is under the delegated authority of the pledgee, or is independent.
Rights of Pawnee
The rights of a person in whose favour a hypothecation of a chattel is made are limited strictly to actual chattel hypothecated and do not extend beyond that. So when some animals are the subject of hypothecation, the young ones born, when under pledge with the pledge, are not subject to hypothecation.
Where securities have been delivered with a view to cover the repayment of any overdraft by the pledger bank to the pledge bank and it is agreed that they are to be disposed of on the arising of a stipulated contingency only, then by the very fact of the delivery of the securities to the bailee the latter becomes a trustee in terms of the contract, not for all purposes, but only for the limited purpose indicated by the agreement. The pledger in such a case only transfers his possession of the property to the pledge who has a special interest in the property of enforcing his charge for payment of an overdraft. If any, whereas the property continues to be owned by the pledger Bank and it can ask for a return of securities at any time. And the securities having continued to be the property of the pledger bank, the pledge bank or its managing director has no right to deal with them.
Pawnee’s right of retainer
The pawnee may retain the goods pledged, not only for payment or 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. Sec 173.
Pawnee’s right as to extraordinary expenses incurred
It is the pawnee right to receive from the pawner extraordinary expenses.