Where a portion of a fund is specifically bequeathed and a legacy is directed to be paid out of the same fund, the portion specifically bequeathed shall first be paid to the legatee, and the demonstrative legacy shall be paid out of the residue of the fund and, so far as the residue shall be deficient, out of the general assets of the testator.
Illustration:
A bequeaths to B 1,000 rupees, being part of a debt due to him from W. He also bequeaths to C 1,000 rupees to be paid out of the debt due to him from W. The debt due to A from W is only 1,500 rupees;
of these 1,500 rupees, 1,000 rupees belong to B. and 500 rupees are to be paid to C. C is also to receive 500 rupees out of the general assets of the testator.
Legal Commentary & Landmark Judgments: Section 151
Section 151 prescribes the order of payment when a legacy is directed to be paid out of a fund which is itself the subject of a specific legacy.
When administering an estate where a testator bequeathed 'my deposit of Rs. 10 Lakhs to A, directing him to pay Rs. 2 Lakhs to B', the executor must pay Rs. 2 Lakhs to B and Rs. 8 Lakhs to A directly from that deposit without mixing with general estate funds.