Indian Contract Act Section 174 — Pawnee not to retain for debt or promise other than that for which goods pledged. Presumption in case of subsequent advances
CHAPTER IX OF BAILMENT — Bailments of Pledges
Commercial / Corporate
Summary
The pawnee (the person who receives the pledged goods) cannot keep the goods to cover any debt or promise other than the one for which the goods were originally pledged, unless there is a contract allowing that. So, without such a contract, the goods can only be held for the specific debt or promise they were given for.
However, if there is a contract that allows the pawnee to hold the goods for other debts or promises, then, unless the contract says otherwise, it is presumed that this contract also covers any later advances (loans or money given after the original pledge) made by the pawnee. In other words, the contract is assumed to apply to future advances too, unless there is something in the contract to the contrary.
Official Text
The pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.