We received multiple requests to consider doing a post on material alterations to a Cheque than confining ourselves to just alterations in the signature. In this post we look at various issues that arise out of altering a Cheque…let’s get started!
What constitutes material alteration of a Cheque once it has been signed? What changes on a Cheque are allowed once it has been signed and what are not?
The term ‘material alteration’ is not defined either in the Indian Contract Act, 1872 or in the Negotiable Instruments Act, 1881 or for that matter in any other statute. Hence, we have to look at other legal authorities, perhaps judicial rulings.
2 key authorities with respect to the same are:
- Nathu Lal v. Gomti Kuar– In this case Privy Council used a paragraph from the Halsbury’s Laws of England to explain material alteration. It said:
“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 unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally executed,”
- SC of India in Loonkaran Sethia v. Ivan E. Johndeliberated upon the issue of material alteration and reached the following conclusion.
- A material alteration varies the apparent nature of relationship of the parties as it alters rights, liabilities or legal position vis-à-vis what was originally stated in the document.
- It may also otherwise change the legal character and effect of the document.
- It may also affect the legal remedies available to the parties.
- Impact of changes could be that the document becomes void.
- Consequence of material alteration could be that it may prejudice the party vis-à-vis his interests as determined originally.
- Material alteration may also remove the unambiguity of the original document and may make it, through alteration, more certain.
Further, specific judgments of courts have considered following to mean material alterations:
- Amaravathi Chits Investments By … vs T.M. Vaidayanathan: Madras HC Cheque held that changing date after Cheque has been issued, such that law w.r.t. period of limitation does not apply, is a material alteration.
- Section 87 no NIA read with sections 20, 49, 86 and 125 help us determine exact meaning of material alteration.
- There is no provision in theNI Act which either defines the difference in the handwriting or the ink pertaining to the material particulars filled up in comparison with the signature thereon as constituting a ‘material alteration’
- In Lillykutty vs Lawrance Kerela HC held that: “We are of the view, by putting the amount and the name there is no material alteration on the cheque underSection 87 of the Negotiable Instruments Act. In fact there is no alteration but only adding the amount and the date. There is no rule in banking business that payee’s name as well as the amount should be written by drawer himself.”
- When a cheque is issued for consideration and there is no dispute regarding signature, amount and name, it cannot be said that by putting a date on the cheque by the payee who is the holder of the cheque in due course would amount to material alteration.
- In Kaithavana v. Subramanian Potti Kerala High court was of the opinion that “Filling up of the blank cheque by the payee is different from committing a material alteration. No material alteration except the fact that the blank cheque which was handed over by the accused to the complainant was filled up by him is alleged to invoke the provisions ofSection 87.”
- AP HC in Allampati Subba Reddy v. Neelapareddi court was of the opinion that the there was no consent of the defendant to the alteration of the date and therefore in terms of Section 87 of the NI Act it was a material alteration.
- AP HC in Laxminivas Agarwal vs Andhra Semi Conductors Pvt. Ltd. held that “When a cheque is issued for valid consideration, with no dispute regarding signature, amount and name, it cannot be said that putting a date on the cheque by the payee who is the holder of the cheque in due courses would amount to material alteration rendering the instrument void. In fact, there is no material alteration. When a cheque is admittedly issued with blank date, and when the payee has no objection with regard to the name, amount and signature, it can be presumed that there is an implied consent for putting the date as and when required by the beneficiary, and get it encashed. In other words, when the date is put by the payee, or the drawer on the cheque the presumptions underSection 118 of the Act would arise.”
Material alteration would include any such alteration made to the Cheque without the consent of the drawer of the Cheque. Further, such alteration ought to bring about some change in the nature of the Cheque and such changes in turn should change legal standing of the Cheque. Thus, changing or altering amount, date, name of payee or Ac payee, without the consent of the drawer, will mean material alteration of the Cheque.
Blank Cheques present an entirely different challenge. As per observations made by different courts, blank Cheque given to an individual, when altered by the holder of such Cheque will not amount to material alteration. This is because drawer issued Cheque to the holder with the intention of holding them as security against him (drawer). This does not fulfill the requirements of material alteration as per the provisions of section 87. It is basically due to the fact that drawer had consented for such alteration by implication. However, under such cases drawer is protected from illegitimate and illegal used of Cheque by the holder.
 AIR 1940 PC 160
 AIR 1969 SC 73
 K.M. Basappa and Anr. v. Patel Marule Gowda and Anr. AIR (38) 1951 Mysore 102 Page 0668; Vakkalagadda Kondiah v. Channamsetty Pedda Pulliah and Ors.; Allampati Subba Reddy v. Neelapareddi; Jayantilal Goel v. Smt Zubeda Khanum; Bpdl Investments (Pvt.) Ltd. vs Maple Leaf Trading International (129 (2006) DLT 94) —– Also held that alteration of date is material alteration to the Cheque. (Section 87 of NIA was considered).
 While it is correct that in terms of the above provision, any material alteration to a cheque without the consent of the drawer unless it is made to carry out the common intention of the original parties thereto renders the cheque void, the expression “material alteration” has not been defined. Held in Ravi Chopra v. State and another.
 Ravi Chopra v. State and another.
 2003 (3) KLT 721
 II (1996) CCR 106
 AIR 1966 AP 267
 2006 CriLJ 2643