1. This appeal arises out of a suit upon food of a simple money-bond, dated the 10th of September 1910. The defendant pleaded payment. The Court of first instance decreed the plaintiff's claim. The lower Appellate Court found that the defendant had made a payment by a cheque, that the plaintiff had not made any appropriation of the payment and that accordingly the payment should be credited to the earliest debt then due by the defendant to the plaintiff which was the bond sued upon. The lower Court says that the way the accounts were kept between the plaintiff and the defendant was that on the one side all advances made by the plaintiff to the defendant were entered and on the other side all the payments that were made to the plaintiff by the defendant. He seems to have been prepared to hold that from the way the account was kept, the plaintiff must be deemed to have from time to time appropriated the payments to the earliest debts. The case, however, was really decided on the assumption that there had been no appropriation by either party and it is on this basis that the case has been argued before us.
2. Section 60 of the Contract Act is as follows: Where the debtor has omitted to intimate, and there are no other circumstances indicating, to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force or the time being as to the limitation of suits.
3. Section 61: 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 proportionately.
4. The learned Additional Judge considered that if there had been no appropriation by either the debtor or the creditor, the payment must be applied to the earliest debt which was the bond in suit.
5. It is contended on behalf of the appellant that a creditor can make his election as to the appropriation of the payments up to the last moment', and he cites the case of Seymour v. Pickett (1905) 1 K.B. 715 at pp. 723, 725 : 74 L.J.K. B. 413 : 92 L.T. 519 : 21 T.L.R. 302 as showing that the appropriation can even be made when the plaintiff is being examined at the trial of the case. On the other hand the respondents contend that under the provisions of Section 61 of the Indian Contract Act where there is no appropriation made by the debtor when paying the money or the creditor when receiving it, the law itself appropriates the payment in the manner provided by Section 61. The learned Vakil refers to Clayton's case 1 Mer 572 at P. 605 : 35 E.R. 781 at p. 792 : 15 R.R. 161. At page 005 of the report the Master of the Rolls says: 'This state of the case has given rise to much discussion, as to the rules by which the application of indefinite payments is to be governed. Those rules we probably borrowed, in the first instance, from the civil law. The leading rule, with regard to the option given, in the first place to the debtor, and to the creditor in the second, we have taken literally from thence. But, according to that law, the election was to be made at the time of payment, as well in the case of the creditor as in that of the debtor, in re praesenti, hoc est statim, at que solutum est: caeterum, postea non penmittitur.' If neither applied the payment, the law made the appropriation according to certain rules of presumption, depending on the nature of the debts, or the priority in which they were incurred. And, as It was the actual intention of the debtor that would, in the first instance, have governed; so it was his presumable intention that was first resorted to as the rule by which the application was to be determined. In the absence, therefore, of any express declaration by either, the inquiry was, what application would be most beneficial to the debtor. The payment was, consequently, applied to the most burthensome debt, to one that carried interest, rather than to that which carried none,--to one secured by a penalty, rather than to that which rested on a simple stipulation;--and, if the debts were equal, then to that which had been first contracted.'
6. Clayton's case 1 Mer 572 at P. 605 : 35 E.R. 781 at p. 792 : 15 R.R. 161. was one in winch there was a current account, and it was held that the payments must be appropriated to the debts earliest in date. Clayton's case 1 Mer 572 at P. 605 : 35 E.R. 781 at p. 792 : 15 R.R. 161. was discussed in Seymour v. Pickett (1905) 1 K.B. 715 at pp. 723, 725 : 74 L.J.K. B. 413 : 92 L.T. 519 : 21 T.L.R. 302. and also in the case of Gory Brothers and Co. v. The Owners of the Turkish Steamship 'Mecca' (1897) App. Cas. 286 : 66 L.J. P.C. 86 : 76 L.T. 579 : 45 W.R. 667. At page 293 of the report of the last mentioned case Lord Macnaghten says: 'In 1810 when Clapton's case 1 Mer 572 at P. 605 : 35 E.R. 781 at p. 792 : 15 R.R. 161. was decided, there seems to have been authority for saying that the creditor was bound to make his election at once according to the rule of the civil law, or at any rate, within a reasonable time, whatever that expression in such a connection may be taken to mean.' It seems to us that what the Indian Legislature did by Sections 59--61 of the Indian Contract Act was to adopt the rule of civil law with certain modefications. Unless the meaning of Section 60 is that the debtor is to make his appropriation (if any) at the time of paying and the creditor to make his appropriation (if any) at the time of receiving the money, it is difficult to conceive what is the meaning of Section 61 or how it could be applied. We think that the view taken by the Court below was correct. If by reason of the manner in which the plaintiff kept the account, he is to be deemed to have appropriated the payment to the debt of earliest date, there is an end to the case. If, on the other hand, there was no appropriation by either debtor or creditor, the payment must be applied to the earliest debt due by the defendant to the plaintiff. This was the bond in suit. We dismiss the appeal with costs, including in this Court fees on the higher scale.