Distinguish between the following: Hypothecation and pledge.

The main differences between Hypothecation and Pledge are as under: The pledge can be defined as the form of bailment in which goods are held as security for the payment of the debt or the performance of an obligation. Hypothecation is moreover different from the pledge, in which the collateral asset is not delivered to the lender. The pledge is defined under section 172 of the Indian Contract Act, 1872. On the other hand, Hypothecation is defined under section 2(1)(n) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. In the pledge, the possession of the asset is transferred, but in the case of hypothecation, possession lies with the debtor only. Parties to the contract of the pledge are called as pawnor (borrower) and Pawnee (lender) whereas in case of hypothecation the parties are known as hypothecator (borrower) and hypothecatee (lender). In the pledge, when the borrower default in payment, the lender can exercise his right to sell the asset to recover the debt amount. However in hypothecation, the lender does not have the possession of goods so he can file a suit to realize his dues to take the possession first and then disposing off them.