SAPNA KUMARI LAW AND TAXATION CR PENDING

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 pledge1. Pawner: delivers the goods2. 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 To regain back the goods

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SAPNA KUMARI LAW AND TAXATION CR PENDING

To indemnify the Pawnee

Duties of Pawnee:

Not to misuse the goodsTo 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 lender2. 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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SAPNA KUMARI LAW AND TAXATION CR PENDING

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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SAPNA KUMARI LAW AND TAXATION CR PENDING

BIBLIOGRAPHY:

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

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

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