Sections 59-61 of Contract Act explain how the repayments made by debtor is to be appropriated where the debtor has several debts to repay with same creditor. The rule of appropriation is, 1. where the debtor impliedly or expressly conveys to the creditor that out of several debts, the amount of repayment that he is tendering is to be appropriated towards a particular debt, it becomes the duty of the creditor to appropriate it to the debt that the debtor had referred. This is S.59. 2. Where the debtor fails to invoke his rights under S.59 and keeps silent but makes some payment, it devolves on the creditor to apply it to any one of the debtor's debts, including that of time barred debt. This is S.60. 3. Where both debtor and creditor both together do not invoke their rights under S.59 and S.60, under exceptional circumstances, then the appropriation must be done lawfully in such a way that the first debt (in chronological order) must be extinguished first from the first payment....second from second payment (if first one is extinguished) and so on and so forth. This is S.61.
It is illegal for any banker to club two accounts unilaterally without discussing it with the debtor. Contract act provides the right to debtor by way of S.59 so that the creditor does not exploit him by appropriating the sums paid to his advantage by appropriating it to his own advantage and to the disadvantage of debtor.