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Lallan Prasad v. Rahmat Ali (1967): A Pledge Case Simplified

This case is an important one that talks about pledges under the Indian Contract Act, 1872, and shows how possession plays a big role in such agreements.

What Happened?

  • Lallan Prasad gave a loan to Rahmat Ali and took some goods as security (called a pledge) to ensure the loan would be repaid.
  • When Rahmat Ali didn’t pay back, Lallan Prasad went to court to recover the money but couldn’t prove he still had the goods that were pledged.
  • The question was: Can Lallan Prasad claim the loan amount without proving possession of the pledged goods?

What Did the Court Decide?

The Supreme Court said:

  • A pledge is like a promise where goods are kept as security for a debt. But for a pledge to stay valid, the creditor (pledgee) must hold onto the goods.
  • If the pledgee loses possession of the goods and can’t explain what happened to them, they lose their right to enforce the pledge.
  • Since Lallan Prasad couldn’t prove he still had the goods, he wasn’t allowed to recover the loan amount through the pledge.

Why Is This Case Important?

  • It highlights that possession is a key part of a pledge. Without it, the pledgee loses special rights over the goods.
  • It also ensures creditors don’t misuse pledges by claiming money without being accountable for the pledged items.


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