SAPNA KUMARI LAW AND TAXATION CR PENDING

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COMPARATIVE ANALYSIS BETWEEN BAILMENT
OF PLEDGE AND HYPOTHECATION

A pledge is transfer of property as security to pay off the debt. It is a
promise to be performed between the two parties.
Hypothecation is transferring of property in goods.

If the buyer defaults, pledgee can adjust his due amount by selling
the goods in his possession.
If the borrower defaults, the lender in such case has to firstly take
over the possession of the security and then he may sell the same.

The securities in the case of pledge are movable assets
The securities in the case of hypothecation are also movable assets

The pledgee has the possession of assets in pledge.
The borrower holds the possession of assets in hypothecation

Pledge is used for gold and jewellery loans, it is also applicable for
advances against stocks or goods etc.
Car loan is a best explanation in the case of hypothecation. Ali has
the car, but it is at the same time hypothecated to the bank or
financer. If Ali fails to pay back the loan, the bank takes over the
possession of the car after issuing a notice and then sells the car to
the other buyer and credits the proceeds against the loan account.

There are two parties of pledge
1. Pawner: delivers the goods
2. Pawnee: to whom goods are delivered


Duties of Pawnor:

To reveal the faults that he has recognized
To insure Pawnee for the loss if in case there is a premature
dissolution of gratuitous bailment
SAPNA KUMARI LAW AND TAXATION CR PENDING

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To regain back the goods
To indemnify the Pawnee

Duties of Pawnee:

Not to misuse the goods
To look over the goods bailed.
Return the goods back to the Pawnor.

There are two parties of hypothecation:
1. Borrower: Gives the title of the property to the lender
2. Lender: Provides the loan to the borrower
PURPOSE:
the purpose of both hypothecation and bailment of pledge is identical
to secure the creditor who is giving the loan.
PARTIES:
The two parties of hypothecation are
Hypothecatee/creditor
Hypothecator/debtor
RIGHT TO SELL:







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Security movable assets movable assets


Parties 2 parties 2 parties
Pawner/pledger hypothecator
Pawnee/ pledgee hypothecatee

Possession remains with Pledgee remains with borrower

Defaults a pledgee sell the good lender takes over the
if the buyer defaults possession
and sells the good

Examples Gold loan, advances against
car loan, advances for stocks
National Saving Certificates etc.
etc.



PLEDGE HYPOTHECATION

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BIBLIOGRAPHY:

http://legalriskandcompliancemanual.blogspot.com/2013/01/india-pledge-vs-hypothecation-
did-you.html

http://dictionary.reference.com/browse/hypothecate