Pledge and Bailment

Introduction

Pledge and bailment are closely related concepts under the Indian Contract Act, 1872. Both involve delivery of goods from one person to another for a specific purpose. However, pledge is a special type of bailment with a limited and specific objective.

Meaning / Definition

Bailment

Bailment means delivery of goods by one person (bailor) to another (bailee) for a specific purpose, upon a contract that the goods shall be returned or disposed of after the purpose is completed (Section 148).

Pledge

Pledge is a special kind of bailment where goods are delivered as security (safety for repayment) for a debt or performance of a promise (Section 172).

Modes or Types

Bailment for various purposes

Bailment can be created for different purposes such as:

• Safe custody (keeping goods safely)
• Repair or service
• Transportation of goods

Pledge as security bailment

Pledge is always created for a specific purpose:

• Security for loan repayment
• Performance of a promise or obligation

Distinction / Comparison

Nature and purpose

Bailment can be for any lawful purpose.
Pledge is only for providing security for a debt or obligation.

Right to use goods

Bailee can use the goods if the contract allows.
Pawnee (person receiving goods in pledge) cannot use the goods.

Right to sell goods

Bailee has no right to sell goods (except in special cases like lien enforcement).
Pawnee can sell goods after giving notice if the borrower (pawnor) defaults.

Scope under law

Bailment is covered under Sections 148 to 171 of the Indian Contract Act, 1872.
Pledge is covered under Sections 172 to 181.

Right of lien (right to retain goods until payment)

Bailee has lien only for charges related to that specific service.
Pawnee has a stronger right, including retention for debt and interest.

Practical Example

Bailment: A gives cloth to a tailor for stitching a shirt. The cloth must be returned after stitching.

Pledge: A farmer gives 50 bags of wheat to a bank as security for a loan. The bank holds the goods until the loan is repaid.

Summary

• Bailment is a general concept; pledge is a special type of bailment
• Bailment can be for any purpose; pledge is only for security
• Bailee may use goods if allowed; pawnee cannot use goods
• Pawnee has the right to sell goods on default after notice
• Bailment and pledge are governed by different sections of the Act