Section 173 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 173 is the pawnee's basic right: to keep the goods pledged until the secured debt or promise is dealt with. It also says what the pawnee may hold them for besides the debt itself: the interest on the debt and all necessary expenses incurred for possession or preservation. If you take or give goods as security and need the terms recorded, our legal consultation service can help.
The pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged. So the retainer covers three heads: the debt or promise, the interest of the debt, and necessary expenses of possession or preservation.
The text
Section 173 reads: "The pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged."
The terms pledge, pawnor and pawnee are defined in section 172: a pledge is the bailment of goods as security for payment of a debt or performance of a promise.
The three heads
| Head | Words of the section | Plain meaning |
|---|---|---|
| 1 | "payment of the debt or the performance of the promise" | The main obligation the pledge secures |
| 2 | "the interest of the debt" | Interest on the debt |
| 3 | "all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged" | The pawnee's necessary costs of holding and preserving the goods |
Points to notice:
- The word "retain" is the operative one. The section gives a right to hold on to the goods; the pawnee's rights where the pawnor defaults (suit and sale) are in section 176.
- The interest is "the interest of the debt". The section does not say at what rate or from when; the text is silent and the contract between the parties would be the place for those terms.
- The expenses must be necessary and must be incurred "in respect of the possession or for the preservation" of the goods. Expenses outside those two purposes are not within this section's words.
- Extraordinary expenses for preservation are dealt with separately in section 175; see section 175.
The Act prints no illustration under section 173.
What the pawnee cannot retain for
Section 173 lists what the pawnee may retain for. Section 174 then limits it: the pawnee shall not, in the absence of a contract to that effect, retain the goods for any debt or promise other than the one for which they were pledged, with a presumption for subsequent advances. See section 174. The two sections together define the scope of the pawnee's hold.
A modern example of our own
Jyoti pledges a set of silverware to Kishore Lenders as security for a loan of 2 lakh rupees, with interest as agreed. Kishore Lenders pays a modest amount to keep the silverware in a locked, insured cabinet, an expense necessary for preserving the goods pledged. When Jyoti comes to redeem, Kishore Lenders may retain the silverware until it is paid the debt, the interest on the debt, and the necessary expenses of possession and preservation. Jyoti cannot ask for the silverware back on paying only the principal.
A promise example: Lalit gives a camera to a supplier as security that he will complete a delivery. The supplier may retain the camera for the performance of that promise and, under the section, for necessary expenses of possession.
What can the parties change?
Section 173 uses the word "may" and has no words about contrary contracts. The principal, the interest and the expenses are matters the parties themselves set in the pledge agreement; for instance, the rate of interest comes from the contract. The text does not say whether the parties can narrow the pawnee's right to retain for the three heads; a clause that does so should be read with care.
What the section does not say
- It does not say how long the pawnee may retain; that depends on the debt and the later sections.
- It does not fix a rate of interest.
- It does not define "necessary expenses" beyond the words "in respect of the possession or for the preservation".
- It does not say what happens to the goods when the debt is paid; redemption is dealt with in section 177, in another article.
Practical points
- Pawnees: keep receipts for every expense incurred in holding or preserving the goods, and give the pawnor a statement when the pledge ends.
- Pawnors: ask for an account of interest and expenses before paying to redeem; the retainer covers those heads.
- Both: write the interest rate and the date from which it runs into the agreement.
- Insurance, storage and similar costs should be agreed in advance so that "necessary expenses" is not disputed.
- Other laws may also apply to lending against goods; check them before acting.
Need help with a pledge agreement?
The pawnee's right to retain depends on what was pledged, what it secures and what the agreement says about interest and expenses. Our legal consultation team can review a pledge against sections 172 to 176. Bring the pledge document, the loan terms and a list of expenses.
Key takeaways
- The pawnee may retain the goods pledged for the debt or promise, the interest of the debt and necessary expenses of possession or preservation (s.173).
- The right to retain is distinct from the right to sue or sell on default (s.176).
- Section 174 limits what the pawnee may retain for beyond the original debt.
- The Act prints no illustration under section 173.
Read next
- Section 172: pledge, pawnor and pawnee defined
- Section 174: pawnee not to retain for other debts and subsequent advances
- Section 175: pawnee's right to extraordinary expenses
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.