Contracts of Pledge: Jaiib/DBF Paper 3 (Module D) Unit-5

Contracts of Pledge: Jaiib/DBF Paper 3 (Module D) Unit-5

Dear bankers,

As we all know that is Contracts of Pledge for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are Contracts of Pledge (Unit-5), Commercial Laws with Reference to Banking Operations (Module D), Legal & Regulatory Aspects of Banking -Paper 3.


  • 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 ‘pawnor’.
  • The bailee is called ‘pawnee’.

♦Ingredients of Pledge

To Constitute a valid pledge, there must be:

  • A contract in relation to an identified chattel to be delivered to the pledgee as security;
  • Actual delivery of possession of the identified chattel in pursuance of the contract

The essential ingredients of a valid pledge are:-

  • The property pledged should be actually or constructively delivered to the pawnee; and
  • Pawnee has only a special property in the pledge while the general property remains with the pawnor and wholly reverts to him on discharge of debt.

Nature Of Pledge

  • If the pawnor makes default in payment of the debt in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor and retain the goods pledged as a security (or) he may sell the goods pledged, after giving notice of the sale to the pawnor.
  • If the proceeds of such sale are less than the amount due, in respect of the debt, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.
  • It is important to note, that in all contract of bailment, the bailee, while he is in possession of the goods, steps into the shoes of the owner for the purpose of legal remedy. Thus, if any person were to deprive the bailee of the goods-by way of theft etc. the bailee, himself would have the right file a suit against such other person.

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