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Legal Aspects in Banking :: Pledge and Hypothecation


1.Pledge is defined u/s 172 of Indian Contract Act.

2.Pledgee has the right to possession.

3.Reasonable notice u/s 176 required to be given to the borrower before selling the pledged goods.

4.The Bank is liable u/s 151 to take good care of the seized goods.

5.For goods and securities pledged to the Bank, there is no limitation period.


1.Hypothecation is  defined IN SEC 2 of SARFAESI ACT (The Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act) is a notional, special and equitable charge provisions of

3.The possession and ownership remains with the borrower.

4.Transfer of Property Act and Indian Contract Act are not applicable

5.rights can be exercised through a court of law

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