Rights of Pawnor and Pawnee

Introduction

In a contract of pledge, both the pawnor (borrower) and pawnee (lender) have specific rights under the Indian Contract Act, 1872. These rights ensure fairness and balance between the parties. Understanding these rights is important for exams and practical legal use.

Meaning / Definition

Pawnor
The pawnor is the person who delivers goods as security for repayment of a debt or performance of a promise.

Pawnee
The pawnee is the person who receives the goods as security and gives the loan or promise.

Modes or Types

Rights of Pawnor

Right of Redemption (Section 177)

• Pawnor has the right to take back (redeem) the goods by repaying the debt
• This right exists until the actual sale of goods by the pawnee
• Even after default, pawnor can redeem before sale by paying debt plus expenses

Right to Enforce Pawnee’s Duties

• Pawnor can ensure that pawnee takes proper care of goods
• Pawnor can demand return of goods and any increase (profit or addition)

Rights of Pawnee

Right to Retain Goods (Sections 173–174)

• Pawnee can retain goods for:
  • Payment of debt
  • Interest on debt
  • Necessary expenses for preservation
• This is called right of particular lien (right to keep goods until payment)

Right to Retain for Subsequent Advances (Section 174)

• Pawnee may retain goods even for later loans unless agreed otherwise

Right to Recover Extraordinary Expenses (Section 175)

• Pawnee can claim expenses incurred to preserve goods
• Cannot retain goods for this, but can sue pawnor

Right to Sue and Sell (Section 176)

• On default, pawnee has two options:
  • File a suit and retain goods as security
  • Sell goods after giving reasonable notice
• If sale amount is:
  • Less → pawnor pays balance
  • More → surplus returned to pawnor

Right Against True Owner (Section 178A)

• If pawnor had possession under a voidable contract (contract that can be cancelled), and pawnee acted in good faith (honestly), pawnee gets valid title

Important Case Law

K. M. Hidaathulla v Bank of India

• Held that pawnee’s remedies (right to sue and right to sell) are separate (independent) options

Distinction / Comparison

Pawnor vs Pawnee Rights

Practical Example

A pledges gold to B (bank) for a loan.

• If A repays the loan, he can take back the gold (right of redemption).
• If A fails to repay, B can either sue A or sell the gold after giving notice.
• If the gold sells for more than the loan amount, B must return the extra money to A.

Summary

• Pawnor has right to redeem goods before actual sale
• Pawnor can enforce duties of pawnee
• Pawnee can retain goods for debt, interest, and expenses
• Pawnee can sue or sell goods on default after notice
• Surplus from sale goes to pawnor; deficit must be paid by pawnor
• Pawnee gets valid title if acting in good faith under voidable contract