K.M. Srinivasan Pillai vs R. Kanniappa Pillai

Ramaswami, J.—This Second Appeal is directed against the decree and judgment of the learned District Judge of Coimbatore in A.S. No. 426 of 1949, confirming the decree and judgment of the learned District Munsif of Erode in O.S. No. 193 of 1948. The facts are:-On 3lst July 1945 the defendant Kanniappa Pillai for consideration received executed the promissory note Ex. A 1 to the plaintiffs indorser The suit was filed for recovery of the amount due there under. The defendant''s contentions were covered by six issues, four of which were found in favour of the plaintiff by the learned trial Munsif and two issues have been found against the plaintiff and they were: "Whether the suit promissory note is vitiated by any material alterations" in that two of the four one-anna stamps affixed to the promissory note were affixed after execution and without the knowledge of the executants and with a view to make the promissory note viable and secondly, whether there has been due cancellation of the stamps Therefore, the suit was dismissed by the trial Munsif, On appeal by the plaintiff the learned District Judge affirmed the findings of the learned District Munsif and dismissed the appeal There was this second appeal which was heard by Ramaswami Gounder, J. and he called for a finding in regard to the affixture of two of the four one-anna revenue stamps subsequently and which made the instrument unenforceable, in the light of the observations in his judgment, That finding has now been submitted by the learned District Munsif of Erode He has held that the suit promissory note is vitiated by material alterations and that two of the four stamps affixed to Ex. A.1 were affixed subsequently. In view of the fact this point itself is sufficient for the disposal of this second appeal, it is unnecessary to consider the further finding also which has been called for and sub-milted viz., whether two of the four stamps have not been duly cancelled, This is the stage in which this second appeal is coming before me.

I have been taken through the evidence by the learned Advocate for the appellant and I have come to the conclusion that the finding submitted by the learned District Munsif that two stamps had been affixed subsequently is unassailable.

It was the further endeavour therefore of the learned Advocate to persuade me that such subsequent affixture does not constitute a material alteration under S. 87 of the Negotiable Instruments Act, S. 87 states:

Any material alteration of a negotiable instrument renders the same void as against any one who Is a party there to at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties: The provisions of this section are subject to those of Ss. 20, 49, 86 and 125.

The relevant section under the English Bills of Exchange Act, 1882, is S. 64 S. 64 (i) provides that where a bill or acceptance is materially altered without the assent of all parties liable on the bill, the bill is avoided except as against a party who has himself made, authorised, or assented to the alteration, and subsequent indorsers. The holder-in-due-course has, however, been protected. It is provided that where a bill has been materially altereds, but the alteration is not apparent, and the bill is in the bands of a holder in due course, such holder may avail himself of the bill as if it had not been altered, and may enforce payment of it according to its original tenure : see the proviso to S. 64(i) of the Act.

The American Law regarding material alteration of negotiable instruments and its consequences is practically the same as in India and in England.

The short point for determination, therefore, is whether the affixture of two-one-anna stamps subsequent to the execution of the promissory note Ex. A.1 without the knowledge of the executant in order to make it an enforceable instrument in a Court of Law, is a material alteration falling within the mischief of and hit at by S. 87 of the Negotiable Instruments Act.

The definitions of the two words "material" and "alteration" can be gathered from the standard lexicons. Funk and Wagnell''s New Standard Dictionary of the English Language defines :

Material; Partaking as if of the substantiality of matter: pertaining to the subject matter: having value or importance of much consequence; weighty: essential

Alteration; The result of altering change or modification, Murray''s New English Dictionary:

Material : Pertaining to matter as opposed to form. Alteration; An altered or changed condition.

Similar definitions are given in Webster''s International Dictionary of the English Language

Byles in his treatise on Bills of Exchange, Twenty first Edition (1955) comments in regard to material alterations dealt with in S. 64(2) of the English Bills of Exchange Act viz-,

In part the following alterations are material, namely, any alteration of the date, the sum payable, the time of payment, the place of payment, and, where a bill has been accepted generally, the addition of a place of payment without the acceptor''s assent.

is as follows at page 297 and following;

The provisions of S. 64(2) are not intended to be exhaustive. There may be material alterations other than those there dealt with; and it has been stated that any alteration is material which would alter the business effect of the instrument if used for any business purpose for which such an instrument is used....

An alteration which is otherwise material does not cease to be material because it is prejudicial to the party making it.....There are two cases in which an alteration, though in a material part, will not avoid the instrument, first, where such an alteration is made before the bill is issued, or become an available instrument; and secondly, where the bill is altered to correct a mistake, or supply an omission, and in furtherance of the original intention of the parties. Quibball v. Bank of England 9 Q.B.D. 555.

Jacob''s Law of Bills of Exchange, Cheques, Promissory Notes and Negotiable Instruments Generally Fourth Edition (1943) states at page 201:

The test of materiality is whether the alteration affects the rights or liabilities of any of the parties to the bill, whether it affects them prejudicially or not; or even beneficially, and the onus of proving non-materiality of the alteration, when apparent, is upon the person claiming under the bill: Koch v. Dicks (1933) 1 K.B. 307......

See also to the same effect Chitty on Bills of Exchange and Promissory Notes with reference to the Law of Scotland, France and America, Eleventh Edition by J.A. Russell (1878), Ch. VIII-Effect of Alterations of Bills and Notes, PP. 136-141 and Halsbury''s Laws of England Vol. II (Hailsham) P. 556.

The Classical American Treatise, Daniel on Negotiable Instruments, Sixth Edition, Vol. II, states in S. 1373 (page 1551) as follows:

Any change in the terms of a written contract which varies its original legal effect and operation, whether in respect to the obligation it imports, or to its force as matter of evidence, when made by any party to the contract, is an alteration thereof, unless all the other parties to the contract give their express or implied consent to such change. And the effect of such alteration is to nullify and destroy the altered instrument as a legal obligation, even in the hands of a bona fide holder, and whether made with fraudulent intent or not,

In regard to what alteration consists of it is the same in America as in England. The test laid down in America is whether the instrument after the alteration expresses the same contract; whether it will have the same operation and effect after the alteration as before. 8 American Jurisprudence, S. 788 (page 442) has the following to say :

The Uniform Act provides that where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorised, or assented to the alteration and subsequent indorsers; but that when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor; and that any alteration which changes (1) the date, (2) the sum payable, either for principal or interest, (3) the time or place of payment, (4) the number or the relations of the parties, (5) the medium or currency in which payment is to be made, or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.

See also 8 Corpus Juris ''''Materiality of Alteration, P. 728-730 (The American Law Book Co., New York).

The standard law lexicons Bouvier''s Law Dictionary (1928), Wharton''s Law Lexicon, 14th Edition (1938). page 56, Stroud''s Judicial Dictionary. Third Edition, page 1749 and Burrow''s Words and Phrases judicially defined, Vol. 3, page 337, embody the same information in regard to ''''material alteration."

The Standard Commentaries on the Indian Negotiable Instruments Act give the following information. Chalmer''s Negotiable Instruments Act in British India (Fourth Edition), edited by Eggar, states at page 181 :

in suits on negotiable instruments, the mere fact that the alteration was made with dishonest intention will not render the instrument void if the alteration is not material. And generally, in order to render a contract void, an alteration must be either in something which appears to be attested by the signature or in something which is essential to the character of the instrument. Indorsements, marginal observations and so forth, clearly do not come within the principle There is also a punitive element in the rule; and in order to deter persons, whose duty it is to preserve documents, from attempting fraudulently to alter them, the Courts will not permit the holder of an instrument which has been tampered with to waive the alteration and to revert to the contract that was originally made using the instrument as evidence."

Gardner v. Walsh 5 E.B. 83, Suffeek v. Bank of England 9 Q.B.D. 555. Master v. Miller I.S.M.L.C. 11th Edition 767: 4 All. 63 : 9 Mad. 399 (F.B.); 7 Cal. 616 : 33 Cal. 812 : 3 M.H.C.R 247 : 7 Mad. 702 : 23 M. 137: 25 All. 581 (F.B.) : 25 B 616.

T.S. Venkatesa Ayyar''s Law of Promissory Notes (Third Edition) states at page 201, adopting the definition given in Krishna Kisor De Vs. Nagendrabala Chaudhurani,

Any act which changes the legal effect of the instrument, that is, which changes the legal identity or character of the instrument either in its terms or in the relation of the parties, is a material change or technically an alteration. It is the effect of the act upon the instrument and not the particular manner in which it is done that is material and hence an alteration to be material must be an actual alteration whether by erasure, interlineation, addition or substitution of material matter affecting the identity of the instrument or contract. It must also be in a material part of the instrument and must affect the rights and obligations of the parties thereto.

G.C. Das''a Negotiable Instruments Act. Second Edition (1952), defines "material alteration" as follows at page 216:

In order to avoid an instrument the alteration must be material, that is, an alteration which changes the nature of the instrument. An act which changes the legal effect of the instrument, that is, which changes the legal identity or character of the instrument either in its terms or in the relation of the parties is a material alteration. It is the effect of the act upon the instrument and not the particular manner in which it is done that is material and hence an alteration to be material must be an actual alteration whether by erasure, interlineation, addition, or substitution of a material matter affecting the identity of the instrument or contract. It must also be in a material part of the instrument and must affect the rights and obligations of the. parties thereto. The question of materiality of an alteration is a question of law.

Bhashyam and Adiga''s Negotiable Instruments Act, Tenth Edition (1956) at page 439 and following embodies the same information viz., :

It is not any and every alteration that avoids the instrument. To have that effect the alteration must be in a material particular, namely, it must be one which alters, or attempts to alter, the character of the instrument itself, which affects or may affect the contract which the instrument contains, or is evidence of. In this connection there are three decisions of this Court which may be usefully referred to Rangayya Naidu and Another Vs. Sundaramurthy Mudaliar, King, J.: Subbaraman Pattar v. Andi ILR 1943 Mad. 143=56 L.W. 554: Chandrasekhara Ayyar, J.; Lakshmammal v. Narasimharaghava Aiyangar ILR 38 Mad. 746; White C.J. and Old field, J. See also Gour v. Prasanna 33 Cal. 812; Ramsing v. Gulabrai 1 Lah. 262; Jaharmal v. R. Chettyar 1936 Rang. 136 : Krishnamachariar v. Gour 1940 Mad. 62 also 1941 Mad. 383; P. Subramanian v. Parthana 1948 Mad. 709 and Namdev 28 Bom, L.R. 944,

The other text books dealing elaborately with " material alterations " under S. 87 are J S. Khergamvala The and Chiran Jivlal Aggarwala, "The law of Hundies and Negotiable instruments," Sixth Edition (Federal Law Department, DNegotiable Instrument Act Eighth Edn. P. 152 and all) P. 236 and all.

Bearing these principles in mind if we examine the facts of this case, there cannot be the slightest doubt that the affixture of two revenue stamps subsequently, which makes viable the promissory note otherwise legally unenforceable as such is a material alteration within the meaning of S. 87 of the Negotiable Instruments Act. In the result, this second appeal is dismissed with costs.