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Question
How do you think appropriation of payments takes place?
Solution
Appropriation means the application of payments The question of appropriation of payments arises when a debtor owes several debts to the same creditor and makes a payment that is not sufficient to discharge the whole indebtedness.
Appropriation of Payments:
Sometimes, a debtor owes several distinct debts to the same creditor and he makes a payment that is insufficient to satisfy all the debts. In such a case, a question arises as to which particular debt the payment is to be appropriated. Section 59 to 61 of the Act lays down the following rules as to the appropriation of payments which provide an answer to this question. Therefore, where the debtor expressly states that the payment is to be applied to the discharge of a particular debt, the payment must be applied accordingly.
Application of payment:
Where debt to be discharged is not indicated [60] If section 60 is attracted, the creditor shall have the discretion to apply such payment for any lawful debt which is due to him from the person making the payment.
Application of payment:
Where neither party appropriates [61] The payment shall be applied in discharge of the debts in order of time whether they are or are not based by the limitation Act 1963 if the debt is of equal standing (i.e. payable on the same date) the payment shall be applied in discharge of each of this debt proportionately.
