Section 178A of ICA : Section 178A: Pledge By Person In Possession Under Voidable Contract

Explanation using Example

Imagine that Rita sells a smartphone to Sam under a contract, but unbeknownst to Sam, Rita acquired the smartphone through a contract that she was coerced into, making her contract voidable. Sam, needing a loan, pledges the smartphone as collateral to Tina without telling her about the issues with how he acquired it. Tina, acting in good faith and unaware of any problems, gives Sam the loan. Later, Rita decides to rescind her original contract due to coercion, which would normally make Sam's possession of the smartphone void. However, under Section 178A of the Indian Contract Act, since Tina acted in good faith and without knowledge of the voidable contract, she retains a good title over the smartphone pledged to her.