RIGHTS OF PAWNEE AND PAWNOR

RIGHTS OF PAWNEE AND PAWNOR

As per section 172 of the Indian Contract Act, 1872, a Pledge is a contract where a person deposits an article or good with a lender of money as security for the repayment of a loan or performance of a promise. Pledge is also known as a pawn. The depositor or the bailor is the Pawnor and the bailee or the depositee is the Pawnee. The Pawnee is under the duty to take reasonable care of the goods pledged with him. Let us learn about the Rights of Pawnee and Pawnor.

Key features of Pledge are:

  • The property under pledge shall be delivered to the Pawnee.
  • Such delivery shall be in the pursuance of the contract.
  • This delivery shall be for the purpose of security.
  • Also, delivery of articles shall be upon a condition to return.

 RIGHTS OF PAWNEE

Pawnee has the following rights:

  • Pawnee has a right to retain the goods pledged until payment of debt, interest and any other expense incurred for maintenance of such goods. For example, X pledges his gold jewelry for some loan from a bank. In such a case bank has all the rights to retain the gold jewelry not only for adjustment of loan amount but also for payment of interest accrued on such loan amount.
  • Pawnee has a right to file a suit for recovery of debt while retaining the goods pledged as security.
  • He has a right to sue for the sale of goods pledged and the payment of money due to him.
  • Pawnee has a right to seek reimbursement of extraordinary expenses incurred. However, he cannot retain goods with him in such a case.
  • Pawnee has a right to sell the goods after giving reasonable notice and time to pawnor. Pawnee can sue pawnor for deficiency, if any, after the sale of such goods. Also, if there is any surplus on sale of goods pawnee must return it to pawnor.

RIGHTS OF PAWNOR

   In case pawnee makes any unauthorized sale of goods pledged without giving proper notice and time to pawnor than pawnor has following rights:

  • Right to file a suit for redemption of goods by making payment of debt.
  • Right to claim for damages and loss on the ground of conversion.

LIEN

A lien is a legal right to claim a security interest in a property provided by the owner of the property to the creditor. It is generally used as a guarantee for some sort of legal obligation such as loan repayment.

In other words, a lien ensures that a creditor obtains the right to the property if a borrower fails to meet his legal and/or financial obligations. The grantor (the owner of the property) is called the lienee while the party that receives the lien is referred to as the lienor or lien holder.

TYPES OF LIENS

CONSENSUAL

Consensual liens are created by contractual obligations between the concerned parties. The most common examples are loans obtained to purchase real estate or personal property (chattel). They can be mortgages or auto loans.

 NON- CONSENSUAL

Non-consensual liens arise from statutory or common law. The most notable example is a tax lien, which is imposed by law against the property of a taxpayer. If a taxpayer fails to pay the taxes owed to the government, the tax agency can seize his or her real or personal property for the amount of the lien.

EXAMPLE OF LIEN

John wants to purchase a new house. In order to afford the purchase, he borrows $300,000 from ABC Bank. The bank wants to guarantee the repayment of the loan, and it requires John to provide the house as the collateral for the loan.

The bank files the documents with the government agency required to register the lien. Upon the completion of the process, the bank becomes the holder of the collateral provided by John (in this case, John’s house).

If John is unable to meet his financial obligations according to the mortgage agreement with ABC Bank, the bank will take possession of the property and will be able to sell it to satisfy the loan obligation.

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