Indian Contract Act Section 178A — Pledge by person in possession under voidable contract

CHAPTER IX OF BAILMENT — Bailments of Pledges

Commercial / Corporate

Summary

When a person has gotten hold of goods through a contract that could be cancelled under section 19 or section 19A, and that contract has not yet been cancelled at the time they pledge the goods, the person receiving the pledge gets a valid ownership right to those goods. This applies only if the person receiving the pledge acts honestly and does not know about the pledger's faulty claim to the goods.

Official Text

When the pawnor has obtained possession of the goods pledged by him under a contract voidable under section 19 or section 19A, but the contract has not been rescinded at the time of the pledge, the pawnee acquires a good title to the goods, provided he acts in good faith and without notice of the pawnor’s defect of title.]