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Indian Contract Act, 1872 · Chapter IX: Of Bailment · Bailments of pledges

Section 172: "Pledge", "Pawnor" and "Pawnee" defined

In plain words

A pledge is a bailment of goods as security for payment of a debt or performance of a promise. The bailor is called the pawnor and the bailee the pawnee.

Example: Handing over gold jewellery to a lender as security for a loan is a pledge.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Read the in-depth explanation, with key Supreme Court rulings ↓

Official text

The bailment of goods as security for payment of a debt or performance of a promise is called "pledge". The bailor is in this case called the "pawnor". The bailee is called the "pawnee".

Source: India Code (indiacode.gov.in), the consolidated text published by the Legislative Department, Government of India. Text as updated on India Code on 15 October 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Understanding this section

Section 172 defines a pledge as a bailment of goods as security for payment of a debt or performance of a promise. The bailor is the pawnor and the bailee the pawnee.

The two essentials

  • Delivery of possession, actual or constructive. Without delivery there is no pledge.
  • The pawnee gets only a special property in the goods; ownership stays with the pawnor.

Pledge, hypothecation and mortgage

SecurityPossessionTypical use
PledgeWith the creditorGold loans, pledged shares, warehoused goods
HypothecationStays with the debtor; creditor has a chargeVehicle loans, stock and book debts
MortgageUsually with the debtorImmovable property (Transfer of Property Act)

Rights of the pawnee

  • Retain the goods for the debt, interest and necessary expenses (section 173).
  • Recover extraordinary expenses of preservation (section 175).
  • On default, sue on the debt or sell after reasonable notice (section 176).

Dematerialised shares

Pledges of dematerialised securities are made through the depository system, but the Supreme Court has held that the Depositories Act operates in addition to the Contract Act, not in derogation of it, so the rules of pledge still apply.

Key Supreme Court rulings

  • Lallan Prasad v. Rahmat Ali AIR 1967 SC 1322

    There is "no difference between the common law of England and the law with regard to pledge as codified in sections 172 to 176". The pawnee may retain the goods and sue on the debt, but must be able to return them on payment; a pawnee who cannot redeliver the goods must give credit for their value.

  • PTC India Financial Services Ltd. v. Venkateswarlu Kari 2022 INSC 562

    The Depositories Act and the 1996 Regulations regulate how dematerialised securities are pledged but do not override the Contract Act's law of pledge; the pawnee has a special, not general, property in the pledged shares.

Common mistakes

  • Calling hypothecation a pledge; without delivery of possession it is not one.
  • Treating the pawnee as the owner of the pledged goods.
  • Forgetting that the Contract Act still governs demat pledges.

Read with: Section 176 Indian Contract Act, 1872, Section 148 Indian Contract Act, 1872, Section 171 Indian Contract Act, 1872

Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.

Supreme Court judgments citing the section 172