Law:

Section:

(a) Contract Act (IX of 1872)---S. 171--Applicability of S.171, Contract Act, 1872---Pre-conditions. The pre-condition for the applicability of section 171 of the Contract Act, 1872 is that there must not be an explicit or implied contract indicative of the intention of the depositors. If the customer has deposited the amount with specific instruction to adjust the amount in such and such account, in that event, when the bank accepts it as such, it cannot vary it or change and adjust it to any other account. Section 171 of the Contract Act would apply when no such specific, express or implied instructions at the time of deposit were conveyed or imparted to the Bank. Moreover, the provision of section 171 of the Contract Act is not applicable to the case on other counts also. (b) Contract Act (IX of 1872)--S. 59---Phrase "whether a debtor in 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"---Connotation---Bank, in the present case, was made to know through letter, the specific instructions by the customer to adjust the specified amount---Bank having accepted that amount with specific directions to adjust the same into the indicated loan account, was bound to adjust the same in that account---Bank, in pursuance of the indicated instructions, afterwards had no discretion/power/authority to vary that agreed adjustment for any other account on its own whim and will, without express consent of the customer---Where the Bank had adjusted such amount in another account of the customer on-its own discretion, S.59 of the Contract Act, 1872 would apply to the case---Principles. Munshi Emamuddin Ahmed through Muhammad Abdur Rehman and others v. Province of East Bengal and others PLD 1952 Dacca 279 ref. JUDGMENT SHEIKH HAKIM ALI, J.---Through this Civil Appeal, judgment dated 22-2-2001 delivered by a learned Division Bench of the Lahore, High Court, Lahore in E.F.A. No.316 of 2000 has been assailed. 2. Precis of facts can be narrated in the following sentences. Respondents…

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