Section 61 The Indian Contract Act, 1872
📘 Section 61 – The Indian Contract Act, 1872
Topic: Application of Payment Where Neither Party Appropriates
🔹 Bare Text of Section 61:
“Application of payment where neither party appropriates.”
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 for the limitation of suits.
If the debts are of equal standing, the payment shall be applied in discharge of each proportionately.
🧾 Explanation in Simple Terms:
Section 61 deals with situations where:
A debtor owes multiple debts to a creditor.
A payment is made, but neither the debtor nor the creditor specifies which debt it is meant for.
In such cases, the law itself decides how the payment will be applied.
🔍 Two Scenarios under Section 61:
Debts of Different Dates
👉 Payment will be applied to the oldest debt first, then the next, and so on — whether or not some debts are time-barred.
Debts of Same Date (Equal Standing)
👉 Payment will be divided proportionately among all debts.
📌 Examples:
🔸 Example 1 – Debts in Order of Time:
A owes B ₹1,000 from Jan, ₹2,000 from Feb, and ₹3,000 from March. He pays ₹2,000 in June and doesn’t say which debt it’s for. B doesn’t apply it either.
👉 The ₹2,000 will go:
₹1,000 to January debt (fully paid),
₹1,000 to February debt (partially paid).
🔸 Example 2 – Debts of Equal Standing:
A owes B ₹3,000 each on two different contracts made on the same day. A pays ₹3,000.
👉 The payment will be divided equally: ₹1,500 towards each debt.
⚖️ Legal Principle:
This section provides a default rule of payment allocation when there is silence from both parties. It prevents disputes by offering a logical and fair method of appropriation.
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