Chapter IV - Of the Performance of Contracts
Section 59
Section 59: Payment allocated by the debtor
Section 59 gives effect to the debtor's allocation of a payment among several distinct debts owed to the same creditor. The allocation can be express or indicated by the circumstances.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.
Illustrations
(a) A owes B, among other debts, 1,000 rupees upon a promissory note which falls due on the first June. He owes B no other debt of that amount. On the first June, A pays to B 1,000 rupees. The payment is to be applied to the discharge of the promissory note.
(b) A owes to B, among other debts, the sum of 567 rupees. B writes to A and demands payment of this sum. A sends to B 567 rupees. This payment is to be applied to the discharge of the debt of which B had demanded payment.
Rule and business relevance
If the payment is accepted, it must be applied to the particular debt indicated. The creditor cannot simply redirect an accepted, identified payment to a different debt because that would be more convenient.
Limits and related provisions
First establish the debts, the indication and the payment's acceptance. A vague internal note never communicated or reflected in the circumstances may not establish the intended allocation. Sections 60 and 61 cover different situations where no debtor indication or no appropriation exists.
Hypothetical business example
Hypothetical: a customer pays the exact amount of a specified invoice in response to a demand identifying it. The creditor checks the express message and circumstances before allocating the accepted amount to an older unrelated invoice.
Practical decision flow
List the distinct debts between the same debtor and creditor.
Preserve the payment instruction and circumstances indicating the intended debt.
If accepting the payment, record the allocation consistently and reconcile the remaining balances.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- List the distinct debts between the same debtor and creditor.
- Preserve the payment instruction and circumstances indicating the intended debt.
- If accepting the payment, record the allocation consistently and reconcile the remaining balances.
Avoid
- First establish the debts, the indication and the payment's acceptance. A vague internal note never communicated or reflected in the circumstances may not establish the intended allocation. Sections 60 and 61 cover different situations where no debtor indication or no appropriation exists.
Glossary
- Appropriation
- Allocation of a payment to a particular debt.
- Express intimation
- A communicated instruction identifying the debt the payment is intended to discharge.
Frequently asked questions
Must the debtor's allocation always be express?
No. The circumstances may imply the particular debt.
Can an accepted identified payment be allocated elsewhere freely?
Section 59 says it must be applied accordingly.
Which section applies if no debt is indicated?
Section 60 addresses creditor allocation where the debtor and circumstances provide no indication.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026