The Indian Contract Act, 1872
176. Pawnee’s right where pawnor makes default –
If the pawnor makes default in payment of the debt, or performance, at the stipulated time, or the promise, in respect of which the goods were pledged, the pawnee may bring as suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.
If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater that the amount so due, the pawnee shall pay over the surplus to the pawnor.
It is the discretion of the pawnee to sell the goods in case the pawnor makes default but if the pawnee does not exercise that discretion no blame can be put on the pawenee and pawnee has the right to bring a suit for recovery of the debt and retain the goods pledged as collateral security; State Bank of India v. Smt. Neela Ashok Naik, AIR 2000 Bom 151.