Sankara Pillai vs Usman Settu

Mathew, J.—The defendant is the appellant. The suit was on the basis of a pro-note Ext. A executed by the defendant in favor of the plaintiff on 16-10-1950. The main contentions raised by the defendant were that the note was not supported by consideration, that the not was executed under coercion and intimidation by the defendant and that subsequent to the execution of the note, it was materially altered by the plaintiff by affixing three One Anna Stamps so as to make that instrument a valid one. The lower court on a consideration of the evidence came to the conclusion that the note was supported by consideration that there was no evidence to show that the note was executed under a coercion or intimidation, or to show that there was material alteration of the note, and decreed the suit.

In this appeal counsel for the appellant challenges the correctness of the findings of the lower court. He contended that the note was not supported by consideration because there was no ready cash payment as stated in the pro-note. He submitted that the note was executed under the following circumstances: The defendant was a salesman of the Planters Company Limited Coonoor. One firm called Abdulla Abubaker Settu & Sons who were tea merchants in Trivandrum used to purchase tea from the Planters Company Ltd. Certain consignments of tea to Abdulla, Abubaker Settu & Sons got damaged during transit by rail and they were claiming damages on that account from Planters Company Ltd. The Company sent its chief representative to Trivandrum on 27-7-1950. That gentleman was satisfied that the tea had become damaged and he therefore advised the sale of it at a reduced price and promised that he would recommend to Planters Company Ltd., to compensate Abdulla Abubaker Settu & Sons for their loss. In pursuance of that the tea was as a matter of fact, sold and an amount of Rs. 4000/- odd was realized. There still remained a balance and Abdulla Abubaker Settu & Sons claimed that amount from Planters Company Ltd. But there was no response from it. The defendant being the sub agent was persuaded to execute a note to the plaintiff in consideration of the loss which Abdulla Abubaker Settu & Sons sustained on account of the damage caused to the goods.

This case, that the note was executed to compensate the loss incurred by Abdulla Abubaker Settu & Sons on account of the transaction in tea was attempted to be proved by a number of letters. I do not think that I need go into this point as my finding on the question of the material alteration of the note is sufficient to dispose of this appeal.

The main point argued before me by the appellant was that the note was materially altered. That case was pleaded by him in the written statement. According to the defendant originally there was only one 1 Anna Stamp and that what alone was cancelled. Subsequently without his consent three 1 Anna Stamps were affixed below the 1 Anna Stamp and the same were cancelled. The cancellation appears to be in a different ink and the color of the three stamps alleged to have been affixed subsequently is also different from the color of the one 1 Anna Stamp which was affixed originally. Scrutinizing the document, I feel satisfied that the three One Anna Stamps were affixed subsequent to the date of the execution of the note. If there is prima facie evidence on note itself that there was alteration it is for the plaintiff to prove that the instrument was altered before it was executed and delivered. The cancellation of the three stamps in a different ink, and the difference in the color of the three One Anna Stamps are vital circumstances which compel me to come to the conclusion that the note has been altered. The observation of the lower court is also to the effect that a different ink was used for cancelling the 3 One Anna Stamps from the ink used for cancelling the one 1 Anna Stamp. The manner in which three One Anna Stamps were affixed to the note also appeared suspicious to that court. But that court found that the burden of proving that the pro-note was altered was on the defendant, even though there were suspicious circumstances and that that burden was not discharged and that even if the stamps were subsequently affixed that would not constitute a material alteration of the instrument, on the ground that the original intention of the parties was to execute a pro-note; and that note was admitted in evidence without objection by the defendant.

It may be recalled that the T.C. Stamp Act came into force on 20-2-1125 and this note was executed on 30-2-1126. I have already said that the note appears on the face of it to be altered and therefore I think that it was for the plaintiff to have proved that there was no alteration subsequent to the execution and delivery. Unless there is proof forthcoming that this was the condition of the instrument on the date of the instrument, it has to be presumed that the alteration was made after the instrument was executed. Unlike other documents in the case of a negotiable instrument, the presumption is that the alteration was made after the execution of the instrument. (See Bhashyam and Adiga on Negotiable Instruments Act, 10th Edn., page 452).

Counsel for the respondent referred me to the rulings in Surij Mull v. Hudson (I.L.R. 24 Mad. 259), Raman Chettv v. Mahomed Ghouse (I.L.R. 16 Calcutta 432) and Sakharam Sankar v. Ramachandra (I.L.R. 27 Bombay 279) for the purpose of showing that there is an initial presumption that a negotiable instrument is properly stamped. I agree that there is an initial presumption. But when the instrument itself looks suspicious and bears the marks of alterations on the face of it, it is for the plaintiff to make out that there was no alteration after its execution. In Sri Chandsheo Parshad v. Laijia Ram (182 I.C. 330) it was held that it was incumbent upon a person suing upon an instrument which appears to be altered, to show that the alteration was not improperly made. The same view was expressed in Narayanprasad Rai Gokulprasad Rai Vs. Ghanshyamlal alias Shukhlal Jawarharlal Kurmi, .

The burden of proving how the alterations were made in the document lies on the plaintiff suing on the document and in the absence of any proof, it should be presumed that they were made by him or by his next friend, who was in custody of the document.

It was then contended by the respondent that this is not a material alteration within the meaning of Section 87 of the Negotiable Instruments Act and even if it be assumed that there was material alteration it would not make the instrument invalid. I do not find the argument persuasive.

In AIR 1940 160 (Privy Council) their Lordships of the Privy Council considered the question as to what will constitute material alteration of a document:

A material alteration is one which varies the rights, liabilities, or legal position of the parties, ascertained by the deed in its original state or otherwise varies the legal effect of the instrument as originally expressed; or reduces to certainly some provision which was originally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally executed.

Daniel on Negotiable Instruments, 6th Edn., Vol. II, S. 1373 (page 1551) states the law 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 a 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 Srinivasan Pillai v. Kanniappa Pillai (71 Law Weekly 398) Justice Ramaswami Iyer made an elaborate review of the case law on the subject and came to the conclusion that affixing of additional stamps after the execution of a negotiable instrument like a pro-note in order to make it a valid instrument in law is a material alteration of the document and would render the document invalid as against the person so altering it. A subsequent affixture of a revenue stamp on a promissory note to make that instrument legally enforceable in a court of law is a material alteration within the meaning of the terms in the Section. In Bhanwarlal v. Gulab Chand (A.I.R. 1959 Rajasthan 96) a single Judge of the Rajasthan High Court has held that the affixing of additional stamps for the purpose of making the document valid in law as a promissory note was a material alteration of the instrument, and in order to determine whether there is a material alteration or not it is not material whether the document has been admitted in evidence u/s 36 or not. The facts of that case are almost similar with the facts of the present case.

In Lakshmmal v. Narasimharaghava Aiyangar (I.L.R. 38 Madras 746, 749) Chief Justice Sir Charles Arnold White observes as follows:

Mr. Justice Walls held that the alterations were made with the obvious purpose of enabling these documents, which could not be sued upon, to be sued upon where it was expected that they would have to be sued upon, namely in Mysore. There was some discussion as to whether the documents in their original form were bonds or promissory notes. In the plaint they are described as bonds; but in the documents themselves they are described as promissory notes. As promissory notes they are insufficiently stamped; and whether or not in this state of things they could be sued on in their original form in Madras, it seems clear that the insufficiency of stamp would have been a fatal obstacle to their being sued on in Mysore.

I should be prepared to take the same view as the learned Judge and to hold that the alterations were made in order that these documents could be sued upon in Mysore, If that is so, it seems to me to be absolutely clear that the alterations were material alterations since they were made for the purpose of enabling the plaintiff to sue in a Court in which if the alterations had not been made, she would not have been able to sue.

On the basis of the aforesaid rulings I think I am justified in coming to the conclusion that the affixing of three 1 Anna stamps more after the execution of the instrument renders the instrument invalid.

It was thus contended by counsel for the respondent that u/s 87 of the Negotiable Instruments Act if the alteration was effected to carry out the common intention of the parties it was not a material alteration, the basis of this contention being that both parties intended to execute a valid pro-note and therefore intended to execute a note with proper stamps; and if the promisee subsequent to the date of the execution of the note affixed further stamps in order to make the instrument valid it was only in pursuance to the common intention of the parties and therefore it was not a material alteration. This argument is directly against the principle laid down by the Privy Council as to what constitutes a material alteration and also against ratio of the other rulings already referred to above.

Reliance was placed on AIR 1939 Allahabad 248 by the counsel for the respondent. That was a case where the promisee added a provision in the note for payment of interest on the amount of the note after its execution and delivery. It was definitely proved in the case that the promisor had agreed to pay interest at the rate mentioned in the note as altered and that it was due to an inadvertent omission that provision for payment of interest was not inserted in the note. In these circumstances their Lordships held that the alteration was not a material one.

Here the alteration is fundamental. It goes to the root of the validity of the instrument as a pro-note. The contention of counsel for respondent though to a certain extent logical, appears to me to be unsound in law. I therefore come to the conclusion that the view of the lower court is not correct.

As the suit was based on note alone I cannot give a decree on the original cause of action, even assuming that a cause of action for money lent exists apart from the note. In this connection I may refer to the ruling of Mr. Justice Velu Pillai reported in 1962 K.L.J. 644 where the learned Judge has held that no decree on the basis of a pro-note which was not properly stamped can be passed, and no decree on the basis of the original cause of action can be given if there was no pleading to that effect. The result is that this appeal is allowed and the decree of the lower court is set aside. In the circumstances of this case, I do not think that I should award the costs to the appellant.