Question

A borrows Rs. 20,000/- from B and keeps his golden watch as security for the payment of the debt. It is called as ___.

• A. lien
• B. hypothecation
• C. pledge
• D. guarantee

Hint:

A pledge requires the borrower to transfer possession of the property to the lender as security for the loan.

Answer 1

The Correct Option is C

When a person borrows money and offers an item of value as security for the repayment of the loan, it is referred to as a pledge.
In this case, A offers his golden watch as collateral to B.
A pledge involves the transfer of possession of the item but not its ownership.

Answer 2

When A borrows Rs. 20,000/- from B and hands over his golden watch as security for the repayment of the debt, this transaction is known as a pledge.

A pledge is a special kind of bailment where goods or movable property are delivered by the borrower (called the pledgor) to the lender (called the pledgee) as security for a debt or obligation.

The pledgee holds possession of the goods until the debt is repaid. If the borrower fails to repay, the pledgee has certain rights over the pledged goods, including the right to sell them.

Thus, pledging is a form of security interest that provides the lender assurance of repayment backed by possession of the pledged goods.

Conclusion:
The act of keeping a golden watch as security for a loan is called a pledge.