Meaning of Pawnor
Under the Indian Contract Act, 1872, Section 172 defines a pledge as the bailment of goods as security for payment of a debt or performance of a promise. The person who delivers the goods as security is called the pawnor, while the person who receives them is the pawnee. The pawnor remains the owner of the goods but gives possession to the pawnee until the debt is repaid. This arrangement ensures that the creditor has security, while ownership rights are preserved with the pawnor.
Rights and Duties of Pawnor
The pawnor has important rights and liabilities under Sections 177 and 178. The primary right of the pawnor is the right of redemption, meaning that they can reclaim the pledged goods upon payment of the debt at any time before the pawnee sells them. However, the pawnor must fulfill their duty to repay the loan or obligation. If they default, the pawnee may sell the goods after giving reasonable notice. The pawnor also has the duty to compensate the pawnee for any extraordinary expenses incurred in preserving the goods.
Importance in Commercial Transactions
The concept of pawnor is central to commercial transactions, as pledges are widely used in banking and lending. For example, borrowers often pledge valuable goods, documents, or jewelry to secure loans. This arrangement gives creditors confidence to lend while ensuring borrowers retain ownership rights until default. Understanding pawnor rights is crucial for law students because it highlights how law balances debtor-creditor relationships by protecting both parties’ interests.
Real-Life Example
Suppose Ramesh pledges his gold necklace to a bank as security for a loan of ₹1,00,000. Ramesh, being the pawnor, has the right to redeem his necklace once he repays the loan with interest. If he defaults, the bank (pawnee) can sell the necklace after giving due notice. This real-life example shows how the pawnor’s rights and obligations operate in everyday financial transactions.
Mnemonic to Remember – “ROS”
To recall pawnor’s essentials, remember ROS:
- R = Right of redemption
- O = Ownership remains with pawnor
- S = Security delivered for loan
Think of it as: “Pawnor keeps Ownership, gives Security, and redeems Rights.”
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