Business Laws
The Indian Contract Act, 1872
5% weightage

Pledge

Complete study guide with 7 practice questions, detailed explanations, and expert solutions for Pledge in CA Foundation Business Laws.

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Study Notes: Pledge

Free study material for CA Foundation Business LawsThe Indian Contract Act, 1872

Pledge, governed by Sections 172-181, is a special form of bailment where goods are delivered as security for a debt/obligation. Key distinctions: Pledge transfers possession (not ownership) to pledgee; pledgor retains ownership and right to redeem. Elements: (1) Delivery of possession; (2) As security for debt; (3) Conditional upon debt repayment. Pledgee's rights: (1) Retain possession until debt is paid; (2) Sell goods if debt unpaid after notice; (3) Claim reasonable expenses; (4) Sue for deficiency after sale. Pledgee's duties: Care of pledged goods; return on debt payment; proper sale procedure. Pledgor's rights: Recover goods upon paying debt; redeem within reasonable time after sale notice. Pledgor's duties: Pay debt when due; compensate pledgee for reasonable expenses. Pledge applies to both tangible goods and intangible property. Case law: Lakshmi Vilas Bank v. Rajiv establishes pledgee's duties in sale. For accountants, pledge applies to securities held as collateral, warehouse receipts, and document of title. Exam tip: Distinguish pledge (special bailment) from mortgage (charge on property); focus on possession transfer and redemption rights.

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