Indian Contract Act Section 61 — Application of payment where neither party appropriates

Summary

Where neither the person paying nor the person receiving the payment has specified which debt the payment should go towards, the payment is applied to the debts in the order they became due, starting with the oldest. This applies even if some of those older debts are time-barred under the law of limitation of suits.

If two or more debts became due at the same time, the payment is applied to each of those debts proportionally, meaning each debt gets a share of the payment in proportion to its amount.

Official Text

Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionably.

Related Judgments

• 12th September, 2017; GAUTAM SETH vs JAIVEER SINGH — Delhi High Court (2017)
• T.N. GENERATION & DISTBN. CORPN. LTD. vs PPN POWER GEN. CO. PVT. LTD — Supreme Court of India (2014)
• CITI BANK N.A. vs STANDARD CHARTERED BANK AND ORS — Supreme Court of India (2003)
• COMMISSIONER OF LICOME-TAX, MADRAS vs T.S.PL.P. CHIDAMBARAM CHETTIAR (DEAD) THROUGH L.RS — Supreme Court of India (1971)