PPT on "Performance of Contract - Reciprocal Promises" for BBA & B.Com 1st year students, CA, CPT, CS & CMA Foundation. Business Law PPT by Sandeep Sharma. (Meaning with suitable example & explanation).

1. PPT “PART 3”
(APPROPRIATION OF PAYMENT)
PPT by Sandeep Sharma

2. When a debtor owes several
distinct debts to a creditor & makes
a payment insufficient to discharge
his whole indebtedness, a question
arises to which debt, the payment
should be appropriated.
(distinct – similar but different in nature)
(Indebtedness - ऋणग्रस्तता, कर्जदारी)

3. Giver
Sections 59 - 61
Receiver
BorrowerLender
Creditor Debtor
VardhanHarsh
(Appropriation – to settle)

4. BorrowerLender
VardhanHarsh
i. Section 59 : Appropriation by the Debtor.
ii. Section 60 : Appropriation by the Creditor.
iii. Section 61 : Where neither of the parties appropriate.

5. i. Section 59 : Appropriation by the Debtor (Vardhan)
Here, Mr. Vardhan express that money to be applied towards the
discharge of a particular debt & Mr. Harsh must do so.
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k
2nd loan (2014) – 50k
3rd loan (2016) – 80k
Paid against 2nd loan – 50k in 2018

6. ii. Section 60 : Appropriation by the Creditor (Harsh)
Here, Mr. Vardhan Unable to express that money to be applied
towards which debt & In such case, Mr. Harsh apply the payment to
the earliest items which are Time-barred.
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k
2nd loan (2014) – 50k
3rd loan (2016) – 80k (Time Barred)
Paid 1 lakh - Settles fully 3rd & partly 1st loan

7. iii. Section 61 : Where neither of the parties appropriate.
Here, Mr. Vardhan Unable to express & Mr. Harsh also fails to
appropriate. The payment shall be applied:-
a) Against Unsecured debt
b) Settle Time barred debt
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k (Time Barred)
2nd loan (2014) – 50k (Unsecured)
3rd loan (2016) – 80k

8. iv. Appropriation in chronological order.
Discharge of the debts due in order of time whether they are time
barred or not.
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k
2nd loan (2014) – 50k (Time Barred)
3rd loan (2016) – 80k (Due on Next month)
(Chronological – Sequential, in order of time)
Paid 60k

9. v. In case of Current Account.
As per Clayton’s Rule
 Earlier debit, discharge first.
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k
2nd loan (2014) – 50k
3rd loan (2016) – 80k
(Discharge – to release from an obligation)
Paid 60k

10. vi. Payment of interest first.
In case of a debt, carrying interest & the debtor has not given any
specific instruction then the creditor has a right, first appropriate the
payment to the interest due & then to the principle sum.
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k
2nd loan (2014) – 50k (interest 2 %)
3rd loan (2016) – 80k
Paid 60k in 2018

11. vii. Payment received in demand of various debts.
In such case, the payment will be appropriated to the each debt due
Proportionately.
Here, 20k amount will be appropriated in each loan.
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k
2nd loan (2014) – 50k
3rd loan (2016) – 80k
Paid (2018) – 60k

12. viii. Appropriation in case of Trust fund.
Sometimes a person as a Trustee keeps one bank account (his
Personal & Trust account as One).
a) Withdrawals: his own money first then from trust fund
b) Deposits: to the Trust fund first then to his own fund
BorrowerLender
VardhanHarsh
1st loan (2012) – 30k
2nd loan (2014) – 50k
3rd loan (2016) – 80k