Chapter IV - Of the Performance of Contracts
Section 61
Section 61: Allocation where neither party chooses
Section 61 provides a default allocation where neither party appropriates a payment. Debts are discharged in order of time, with proportionate allocation where they have equal standing.
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Need advice on Section 61?
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 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.
Rule and business relevance
The default applies whether the debts are barred by limitation or not. It operates after checking that neither the debtor nor creditor has made an allocation under the relevant rules.
Limits and related provisions
Do not apply the chronological default before checking payment instructions or a valid creditor allocation. 'Equal standing' should be established from the actual debts and dates, and allocation should not be confused with a fresh right to sue on a time-barred debt.
Hypothetical business example
Hypothetical: a ledger contains several debts and an accepted unallocated payment. After finding no allocation by either party, the accountant applies the statutory order and apportions between debts of equal standing rather than selecting the most commercially attractive invoice.
Practical decision flow
Check for allocation by the debtor, relevant circumstances and creditor appropriation.
Arrange the debts by their legally relevant order of time.
Apply the default and proportionate treatment for equal-standing debts, keeping an auditable calculation.
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
- Check for allocation by the debtor, relevant circumstances and creditor appropriation.
- Arrange the debts by their legally relevant order of time.
- Apply the default and proportionate treatment for equal-standing debts, keeping an auditable calculation.
Avoid
- Do not apply the chronological default before checking payment instructions or a valid creditor allocation. 'Equal standing' should be established from the actual debts and dates, and allocation should not be confused with a fresh right to sue on a time-barred debt.
Glossary
- Neither party appropriates
- No payment allocation has been made by either debtor or creditor.
- Proportionably
- In proportion to the debts of equal standing rather than arbitrarily selecting one.
Frequently asked questions
Is the oldest-debt rule always the first step?
No. Section 61 applies where neither party makes an appropriation.
What if debts have equal standing?
The payment is applied in discharge of each proportionately.
Are time-barred debts excluded automatically?
No. The provision expressly includes debts whether barred by limitation or not.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026