Banking · Legal Aspects of Banking

Assertion: In the context of 'Pledge' as a form of creating a charge over collateral, the actual or constructive delivery of the goods to the pawnee (bank) is an indispensable legal requirement. Reasoning: According to the Indian Contract Act 1872, a pledge is defined as the bailment of goods as security for the payment of a debt or performance of a promise, and without the transfer of possession, the transaction may be classified as a hypothecation rather than a pledge, thereby affecting the bank's immediate right to sell the goods without judicial intervention.