2(1)Where in accordance with [F1section 12B(5)(a)] an instrument will operate to discharge any property from a charge to secure the payment of money, it shall be the duty of the nominated person to apply the consideration payable, in the first instance, in or towards the redemption of any such charge (and, if there are more than one, then according to their priorities).E+W
(2)Where sub-paragraph (1) applies to any charge or charges, then if (and only if) the consideration payable is applied by the nominated person in accordance with that sub-paragraph or paid into court by him in accordance with paragraph 4, the instrument in question shall operate as mentioned in sub-paragraph (1) notwithstanding that the consideration payable is insufficient to enable the charge or charges to be redeemed in its or their entirety.
(3)Subject to sub-paragraph (4), sub-paragraph (1) shall not apply to a charge which is a debenture holders’ charge, that is to say, a charge (whether a floating charge or not) in favour of the holders of a series of debentures issued by a company or other body of persons, or in favour of trustees for such debenture holders; and any such charge shall be disregarded in determining priorities for the purposes of sub-paragraph (1).
(4)Sub-paragraph (3) above shall not have effect in relation to a charge in favour of trustees for debenture holders which at the date of the instrument by virtue of which the property is disposed of by [F2the purchaser] is (as regards that property) a specific and not a floating charge.
Textual Amendments
F1Words in Sch. 1 para. 2(1) substituted (1.10.1996) by 1996 c. 52, s. 92(1), Sch. 6 Pt. IV para. 11(2)(a); S.I. 1996/2212, art. 2(2) (with Sch.)
F2Words in Sch.1 para. 1(4) substituted (1.10.1996) by 1996 c. 52, s. 92(1), Sch. 6 Pt. IV para. 11(2)(b); S.I. 1996/2212, art. 2(2) (with Sch.)