Pawnee's right where pawnor makes default
Section 176 of the Indian Contract Act, 1872 deals with pawnee's right where pawnor makes default. If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledge as a collateral security; The Act came into force on 01 Sep 1872.
If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledge as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in respect of the debt or promise, 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.
Section 176, The Indian Contract Act, 1872 (Act 9 of 1872).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Central Bank of India v. Siriguppa Sugars and Chemicals Limited
Court's Decision & Legal Precedent
Judgment of Main Case order-8.pdf 2007-08-07 DATE VERIFIED. CA 3499-3500/2007. P.K. Chatterjee / P.K. Balasubramanyan. Reportable. Isolates Contract 172: the pawnee’s special property in pledged goods under ss.172–176 prevails over unsecured claims of the Cane Commissioner and workmen, absent a winding-up. Map contract-act 172 cited only. Do not pad 173/176 (not empty-teaching isolates this pass).
On this section: Applies the pawnee's Section 176 rights of retention and sale of the pledged goods to fix the priority in which the sale proceeds of the pledged sugar are distributed.
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Ajoy Khanderia v. Barclays Bank & Anr.
Court's Decision & Legal Precedent
A person who only pledges his own goods as collateral for another's credit facility is a pawnor, not thereby a borrower or guarantor. Section 176 confers on the pawnee remedies of retention/suit on the debt and sale of the pledged goods after notice; it does not, by legal fiction, extend the pawnor's personal liability beyond the value of the pledged goods. DRT/DRAT orders treating a pure pledgor as personally liable for the entire debt were set aside.
On this section: Direct teaching isolate of s.176: pawnee's rights on pawnor's default are against the pledged goods (and the debtor), not a personal decree against a non-borrower/non-guarantor pawnor for the whole debt.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… This is a 'notice for invocation' as required under the terms of the Transaction Documents. This notice constitutes a notice for invocation of collateral pledged shares for the purpose of Section 176 of the Indian Contract Act, 1872. 42. In the context of the submissions made and aforesaid clauses from various documents of the parties reproduced herein above, it is to be noted that Hon"ble Supreme Court in PTC India Financial Services Ltd vs Venkateswarlu Kari & Anr ( Supra ) has observed as under: …
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… Indianivesh Limited is a robust and solvent listed Company and a Parent Company of the Indianivesh Group which is engaged in various businesses, such as bridge financing, merchant banking, Corporate finance etc. 33. Learned Senior Counsel also argues that under Section 176 of the Indian Contract Act, 1872, Pledgee is bound to give the Pledger reasonable notice of sale prior to selling the goods to avoid unfair play and sharp practices and, in the present case, Respondent has failed to give the said notice and has acted unfairly in selling shares at low values. 34. Per contra, Mr. …
Questions about Section 176
What have the courts held on Section 176 of the Indian Contract Act?
Central Bank of India v. Siriguppa Sugars and Chemicals Limited (07 Aug 2007) is the leading judgment on this section among those set out below: Applies the pawnee's Section 176 rights of retention and sale of the pledged goods to fix the priority in which the sale proceeds of the pledged sugar are distributed. Another 1 judgment on this section is set out below, 1 of them from the Supreme Court. They run from 2007 to 2021.
How do I find court cases under Section 176 of the Indian Contract Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Contract Act 176, section 176 Contract Act, section 176 of the Indian Contract Act. People searching for it also type 176 contract act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Central Bank of India v. Siriguppa Sugars and Chemicals Limited (07 Aug 2007).
When did Section 176 of the Indian Contract Act come into force?
Section 176 of the Indian Contract Act, cited as Contract Act 176, came into force on 01 Sep 1872, having been enacted on 25 Apr 1872. It is in force as at the date shown on this page.
Other sections of this Act
- 73. Compensation for loss or damage caused by breach of contract1822 words
- 23. What considerations and objects are lawful, and what not596 words
- 74. Compensation for breach of contract where penalty stipulated for577 words
- 28. Agreements in restraint of legal proceeding void512 words
- 25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law423 words
- 16. "Undue influence" defined397 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.