tushar term

8/8/2019 Tushar Term

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SUBMITTED TO :-

Mr. ROKTIM SARMAH SUBMITTED BY:-

TUSHAR JAKHER

REG. NO. 11005735

ROLL NO. RS1009 B27


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It is not until you undertake the project like this one that you

realize how massive the effort it really is, or how much you must

rely upon the Selfless efforts and goodwill of others. There aremany who helped us with this project, and we want to thank

them all from the core of our Hearts. We owe special words of

thanks to our Teacher Mr. Roktim Sarmah for his vision,

thoughtful counseling and encouragement at every step of the

project. We also thankful to the teachers for giving us the best of

knowledge and guidance throughout the project.


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The term material alteration is not defined either in the Indian Contract Act, 1872 or in the

Negotiable Instruments Act, 1881 even though documents relating to these acts suffer frequent

alterations. The term material alteration does not appear to have received any exact definition

from legislature in any enactment in India. It would, therefore, be appropriate to look at the

works of legal authorities and the judgments of the courts to find out as to how the term has been

understood/interpreted.

"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 certainty some provision which was originally


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unascertained and as such void, or may otherwise prejudice the party bound by the deed as

originally executed,"

The well established definition of the term materialalteration or addition means topalpably or perceptively vary or change the form, shape, elements or specifications of a building

from its original design or plan, or existing condition, in such a manner as to appreciably affector influence its function, use or appearance.

Over the years, case law, as well as arbitration decisions rendered by the Division of FloridaLand Sales, Condominiums and Mobile Homes, have established several exceptions to the

material alteration approval requirements

Most notably with respect to necessary maintenance. One critical function of the board ofdirectors is to maintain the condominium property, and it is well established that any projects

that constitute necessary maintenance will not require a vote of the members, even if such aproject might result in a material alteration.

Cases and arbitration decisions have held that a board is authorized to upgrade or change

improvements to comply with ordinance requirements, or to generally protect the commonelements, or in the event an exact or similar replacement of an improvement is unavailable.

Alterations permittedare:

i) completing an inchoate instruments.ii) Converting blank indorsements into indorsements in full;

iii) Crossing of cheques;iv) Qualified acceptance

v) Alteration made with consent of the parties;vi) Alteration made to carry out common intention of all the original parties; for example date of

instruments is altered with the consent of parties.vii) Alteration of any note on the margin of the instruments.

viii) Alteration though material if made before the issue of the instrument.ix) Alteration made for purpose of correcting mistake.


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As the alteration affects the liabilities of parties previous to alteration an acceptor of a negotiableinstrument being subsequent party is bound by his acceptance not withstanding any previous

alteration of the instrument.

Alterations should be apparent on the face of the instrument. Instances may arise where theinstrument is materially altered but alteration is not apparent. Thus:

i) where the instrument does not appear to have been materially altered;ii) Where the cheque does not appear to have been crossed or to have a crossing which

has been obliterated the person or banker liable to pay, makes the payment in duecourse, the parties are discharged from liability.

Such payment shall not be questioned by reason of the instrument having been altered

or the cheque crossed. Acceptor is liable only for the original tenor of the instrument

and not for its altered tenor

Material alteration is makes the instrument void, though the original debt is not

extinguish. However, if any such alteration is made by the indorsee, indorser isdischarged form liability to him, even in respect of the original considerations.

Affect ofmaterialalteration.

Any material alteration of a negotiable instrument renders the same void as against anyone who

is a party thereto at the time of making such alteration and does not consent thereto, unless it wasmade in order to carry out the common intention of the original parties;

Alteration by endorsee:- And any such alteration, if made by an endorsee, discharges his

endorser from all liability to him in respect of the consideration thereof.


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Classes Of Alterations. - Material Alterations

Alterations are to be classified upon two different bases. They may as to their effect upon theinstrument, be material or immaterial; and as to the purpose with which they are made they may

be fraudulent or innocent. A material alteration is one which in some way changes the legaleffect of the instrument.

Precedents determining whether specific changes are material or immaterial must be used withgreat caution, since it is only by determining the legal effect of the instrument before the

alteration and after the alteration that it is possible to decide whether the change is material ornot.

As will be seen from comparing examples of material and immaterial alterations, a specificchange may be a material alteration in one contract and an immaterial alteration in another. Therules here given are merely general statements, subject to the exception of particular forms of

contract.

Existing Buildings, Extensions and Material Alterations

Part M is the regulation entitled Access for People with Disabilities.

A material alteration is an alteration which affects any part of the structure or fire safety of thebuilding. In the case of material alterations the regulations apply to the existing building but only

insofar as to prevent a new or greater contravention of the regulation. Part M applies in full toextensions to non-residential buildings but does not apply to minor works such as repairs or

renewals.


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The following elements emerge, the presence of which wouldmakea

variation in an instrumentas materialalteration:

y A material alteration varies the apparent nature of relationship of the parties as it altersrights, liabilities or legal position vis--vis what was originally stated in the document.

y It may also otherwise change the legal character and effect of the document.y It may also affect the legal remedies available to the parties.y Impact of changes could be that the document becomes void.y Consequence of material alteration could be that it may prejudice the party vis--vis his

interests as determined originally.

y Material alteration may also remove the unambiguity of the original document and maymake it, through alteration, more certain.

Legalconsequences ofmaterialalteration

Without defining the term material alteration, the Negotiable Instruments Act, 1881 has dealtwith the effect of material alteration in the negotiable instruments. Section 87 determines the

consequences of a material alteration as extracted below:

Effect of material alteration --Any material alteration of a negotiable instrument renders the

same void as against any one who is party thereto at the time of making such alteration and doesnot consent thereto, unless it was made in order to carry out the common intention of theoriginal parties. Two other Sections of the Negotiable Instruments Act, 1881 which deal with

material alterations, are as under:

Section 88.Acceptor or indorser bound notwithstanding previous alteration. -

An acceptor or indorser of a negotiable instrument is bound by his acceptance or indorsementnotwithstanding any previous alteration of the instrument.


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Sec.89. Payment of instrument on which alteration is not apparent. (1) Where a promissorynote, bill of exchange or cheque has been materially altered but does not appear to have been so

altered, or where a cheque is presented for payment which does not at the time of presentation

appear to be crossed or to have had a crossing which has been obliterated, payment thereof by atenor thereof at the time of payment and otherwise in due course, shall discharge suchperson orbanker from all liability thereon; and such payment shall not be questioned by reasons of the

instrument having been altered, or the cheque crossed.

(2) Where the cheque is an electronic image of and the truncated cheque shall be a materialalteration and it shall be the duty of the bank or the clearing house, as the case may be, to ensure

the exactness of the apparent tenor of electronic image of the truncated cheque while truncatingand transmitting the image.

(3) Any bank or a clearing house which receives a transmitted electronic image of a truncated

cheque, shall verify from the party who transmitted the image to it, that the image so transmittedto it and received by it, is exactly the same.

Materialalteration in negotiable instruments and its liability on banks

In order to ascertain the obligations of the banks in India vis--vis material alteration in a

negotiable instrument, best way could be to find out how the courts have determined suchobligations.

y Banker is protected even though he has paid a materially altered cheque if (i) thealterations were not apparent at the time of payment and (ii) he pays in due course, i.e. in

good faith and without negligence


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y If there is anything to arouse his suspicion, he should make enquiries.y Mere indication that the writer of the body of the cheque is different from the signatory,

is not sufficient to arouse suspicio

y Bankers obligation to pay cheques arises out of contract. Under the contract, the bankermay have agreed to follow an overdraft to the customer and pay his cheques upto an

agreed limit. Here, the bankers obligation to pay cheques is subject to the same rules as

are applicable to a deposit account.

The bank has also to see whether there are any alterations in the cheque and whether they have

been properly authenticated. Therefore, where an alteration in a cheque is initialed not by allthe drawers but only by some of them, the bank will be paying the amount on the said cheque at

its own risk. In this connection it is necessary to notice that under Section 89 protection is

afforded to the bank paying a cheque where the alteration is not apparent.

Thus, from the above, three principles emerge relating to material alteration vis--vis a banks

liability which may be stated as under:

y Section 89 of the Negotiable Instrument Act, 1881, does not afford protection to thebanker if the alterations on the cheque are apparent and not authenticated by the drawer.

y If the customer hands over signed but otherwise blank cheques to the bank officials, hisnegligence would not give right to the bank to claim protection against fraudulent orforged material alteration committed by an employee of the bank.

y In the case of fraudulent material alteration in a cheque by a bank employee, the bankcannot setup a defence that a customer should guard against fraud / forgery by an

employee of the bank.

Alterations though materialbut not vitiating

Whereas generally speaking material alteration avoids an instrument, alterations which are

material in nature may not always vitiate an instrument. In following cases, though the alterationwas held to be material, but was held not to be vitiating the document.

(i) When thealteration is madebeforethebill or note is issued


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When the alteration is made before the bill or note is issued, it does not vitiate the instrument.Thus where a note intended to be executed by father and son was signed by the son, but as the

father did not turn up, his nishani was put in by the son, it was held that Section 87 did not apply,and that there was no material alteration.

Further, when an instrument is altered from a note to a bill before it is negotiated or where in ajoint and several note by three, after two have signed, the third before signing inserted newwords in the instrument or where the place of drawing was changed before the instrument was

available as a bill or where the bill or note was altered by the consent of all the parties beforedelivering it over to the payee, it was held that alteration took place before the instrument was

available as such and so not void.

(ii) When madeto correctmistakes or effectuate intention ofthe parties

When alteration is made merely to correct a mistake or to make it what it was originally intendedto be, it does not vitiate the contract, as, where a provision for interest was inserted in accordance

with the original intention. Again, where an indorsement is inserted to rectify a mistake or where

a bill was dated by mistake 1832 instead of 1823, and subsequently the agent of the drawercorrected the mistake, or again where a note by the defendant was altered by him after deliveryto the plaintiff, by the insertion of the words or order and it was proved that the alteration was

in pursuance of the original intention of the parties, it was held that the alteration did not vitiatethe contract.


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Conclusion

Sometimes, changes though subtle, may change the entire meaning and intent contained in an

instrument. On the other hand, changes which do not create any new right or liability in favour ofthe persons executing the changes may be of little consequence.

For instance, acknowledgment or receipts on the documents, even though alterations in

themselves by way of addition of a few words do not change the character of the originaldocument. Similarly there are other innocent alterations such as alterations made to correct

typographical mistakes, spelling errors etc, with the consent of the parties concerned. Suchalterations would not lead to a Negotiable Instrument losing its substance or identity nor would

they be considered material alterations.

However where the changes are material in nature i.e. varying the rights, liabilities, or legalposition of the parties then such an alteration would render the instrument void (as the identity of

the instrument gets destroyed) against anyone who is a party thereto at the time of making suchalterations and does not consent thereto unless it was made in order to carry out the common

intention of the original parties.

To hold one of the parties liable under such circumstances, wherein he does not consent toalteration would amount to making for him a contract that he never agreed to.


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Capital Syndicate vs Jameela on 13/1/2003

JUDGMENT

R. Rajendra Babu, J.

1. This appeal is at the instance of the complainant in C.C. No. 312/99 before the Judl. FirstClass Magistrate's Court, Kunnamkulam. The firm Capital Syndicate through its Manager filed

the criminal complaint against the accused Jameela alleging commission of offence UnderSection 138 of the Negotiable Instruments Act (for short, hereinafter referred to as 'the Act'), Theaccused obtained hire purchase facility from the complainant firm, doing financial business, in

respect of her autorikshaw bearing No. KL-10/7100 and received an amount of Rs. 27,950/- byexecuting Ext. P3 agreement on 8.10.1983.

The entire amount with interest thereon had to be repaid in 36 instalments; It was alleged that

after remitting 8 instalments, the accused defaulted and when the complainant demandedrepayment of the entire balance amount, in April 1999, the accused issued a cheque drawn on

Dhanalakshmi Bank, Kunnamkulam Branch for an amount of Rs. 36,000/-. On presentation ofthe above cheque for encashment, it was dishonoured due to the insufficiency of funds in the

account of the accused and after complying with all the necessary legal formalities, the Managerof the firm Capital Syndicate filed the criminal complaint. The Manager of the firm was

examined as PW. 1 and Exts. P1 to P10 were marked on the side of the complainant. On the sideof the accused DWs. 1 and 2 were examined and Exts. D1 and D2 were marked. After

considering the entire evidence, the court below found the accused not guilty of the offenceUnder Section 138 of the Act and acquitted her Under Section 255(1) of Cr. P.C. Aggrieved by

the above, the complainant filed this appeal, with the leave of the court, challenging the order ofacquittal.

2. The accused/First respondent herein availed of hire purchase facility and received Rs. 27,950/-

from the appellant financier by executing Ext. P3 hire purchase agreement in respect of her


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autorikshaw and the entire amount, with interest thereon, had to be repaid in 36 instalments. Thefirst respondent remitted only 8 instalments and thereafter defaulted in paying the remaining

instalments. According to the appellant, when a demand was made for payment of the entiredefaulted instalments, the first respondent had gone to the office of the appellant in April 1999,

and issued Ext. P5 cheque for Rs. 36,300/- and the above cheque when presented for

encashment, was dishonoured due to the insufficiency of funds in the account of the first

"a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than

on demand."

A "bill of exchange" is defined in Section 5 of the Act as:

"an instrument in writing containing an unconditional order, signed by the maker, directing a

certain person to pay a certain sum of money only to, or to the order of a certain person or to thebearer of the instrument."

It is obvious, therefore, that the first and essential requisite is certainty. This means certainty (1)as to the person to make the payment, (2) as to the person to receive it, (3) as to the time andplace of payment, (4) as to the conditions of liability, and (5) as to the amount to be paid. This

and the following sections endeavour to define and enforce these certainties not in such an exactand technical way as would only embarrass the transaction of business but substantially in a

perfect and practical way"

Certainty is an essential ingredient for an instrument to be treated as a negotiable instrument,under the Act. The cheque, being a negotiable instrument should, also specify the amount to be

paid and the details of the payee. In the absence of certainty regarding the amount and the payeeat the time of the issue, the cheque cannot be said to be a valid one, though it bear the signature

of the drawer.


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AnAlysis

A material alteration, is one which varies the rights, liabilities, or legal position of the parties as

ascertained by the deed in its original state, or otherwise varies the legal effect of the instrumentas originally expressed or reduces to certainty some provision which was originally

unascertained and as such void, or which may otherwise prejudice the party bound by the deed asoriginally executed".

"Under Section 87 of the N.I, Act, any material alteration of a negotiable instrument renders it

void as against any person being a party to that instrument at the time of such alteration providedhe himself has not consented to such alteration. The following alterations are to be material, that

is alteration of the date, the sum payable, the time of payment, the place of payment, the

signature of the drawer and the original payee or addition or deletion or change of the name ofthe payee therein without the consent of the drawer".

"Alteration of the date in the cheque may be material alteration. Alteration may have the effect oflengthening the period of limitation or shortening it. So also alteration of payee's name is

material which affects the character of the instrument, and so also the relationship of the parties.So also the alteration of signature as well as the amount. All this would amount to material

alteration".

Though the subsequent putting of the date in an undated cheque would not always amount to

material alteration rendering the instrument void under Section 87 of the Act, the subsequent

insertion of the amount and the name of the payee without the consent of the drawer wouldamount to material alteration rendering the instrument void Under Section 87 of the Act.

In the result, the appeal is dismissed.


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http://www.google.co.in/#q=material+alteration+in+india&hl=en&prmd=b&ei=2JPfTKWROo7

RcevQsZcM&start=10&sa

http://www.out-law.com

http://www.indianlawcds.com/banking.htm

http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail

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