Rights of Pawnor and Pawnee

Pawnors right to redeem-

According to section 177 of Indian contract act “even after making the default in payment of the debt, within the stipulated time or performance of the promise pawner may redeem the goods pledged at any subsequent time before the actual sale of them but he may do so only after paying any expenses which have arisen from his default.

In Dwarika versus Bhagwati AIR 1939 Rangoon 113 there was an agreement to the effect that if the goods pledged who not redeemed after reasonable time, it would he redeemable.

it was held in Rangoon High Court that this agreement is valid however according to Pollock and Mulla (Indian contract act and specific relief Act ) this decision was wrongly decided.

It is submitted that such agreement should be held as invalid because according to section 177 pawnor has the right to “redeem the goods pledged at any subsequent time before the actual sale of them.”

Rights of Pawnee-

1. Pawnee’s right to retain the goods –

Section 173 of the Indian contract act lays down : The Pawnee may retain the goods pledged, not only for the payment of 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 goods pledged.

2. Right of the Pawnee to recover from the Pawner the extraordinary expenses incurred by him – Section 175 of the Indian contract act provides: The Pawnee is entitled to receive from the pawner extraordinary expenses incurred by him for the preservation of the goods pledged.

3. Pawnee’s right to sue the Pawner to retain the goods pledged or to sell the thing pledged – Under section 176 for there is three rights:

(A). Right to sue

(B). Right to retain the goods pledged as a collateral security, or

(C). Right to sell after giving reasonable notice of sale.

In Sunderlal Saraf vs Subash Chand AIR 2006 MP 35, it was observed by the Madhya Pradesh high court if we analyse section 176 of the contract act, it is perceptible that a pawnee has three rights in case of default by Pawnor:

(i). he may bring a suit upon the debt, and

(ii). he may retain the pawned as collateral security, or

(iii).he may sell it giving the pawnor a a reasonable notice of sale.