General Studies · Right of Appropriation
Under the Right of Appropriation governed by the Indian Contract Act, if a customer owes several distinct debts to a bank and makes a payment without indicating which debt should be cleared, how should the bank legally proceed?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank cannot accept the payment until the customer provides a written mandate specifying the account to be credited.
- 2The bank must split the payment proportionately across all outstanding debts to be fair to the customer.
- 3The bank has the discretion to apply the payment to any lawful debt actually due and payable, including a time-barred debt.✓
- 4The bank must apply the payment to the most recent debt to ensure the latest transactions are settled first.
Correct answer
The bank has the discretion to apply the payment to any lawful debt actually due and payable, including a time-barred debt.
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