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CS Professional · Drafting, Pleadings and Appearances · Commercial Contract Management

Rohan, induced by misrepresentation, bought a machine from Sunil under a voidable contract. Before Rohan rescinded, he pledged the machine to Bharat Finance, which acted in good faith without notice of any defect in Rohan's title. Rohan later rescinds. What is Bharat Finance's position?

Bharat Finance acquires good title. Section 178A protects a pawnee who acts in good faith and without notice when the pawnor held the goods under a voidable contract that had not been rescinded at the time of the pledge.

  1. AIt acquires no title because the contract was later rescinded
  2. BIt acquires good title under Section 178A because the contract had not been rescinded at the time of pledgeCorrect
  3. CIt acquires title only if Sunil consents
  4. DIt acquires title only if the pledge was registered

Explanation

Section 178A protects a pawnee acting in good faith and without notice where the pawnor obtained possession under a contract voidable under section 19 or 19A and the contract had not been rescinded at the time of pledge. Later rescission does not defeat this.

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