M.S. ANIRUDHAN versus THE THOMCOS BANK LTD.

l S.C.R.

SUPREME COURT REPORTS

63

"Entries with respect to the following Khasra Nos. may be made in the revenue papers in the name of Teja Singh, co-sharer No. 5 to the tune of one share and Bhai Jhandha Singh co-sharer No. 2, to the tune of seven shares: 324/3.16, 328/5.06 etc.

1962

< urhakJh Sing,h v. Nikka Singh

Subba Rao, J.

The High Court was, therefore, right in holding that there was a presumption in favour of the correctness of the entry and the appellant had failed to rebut the same. The judgment of the High Court is correct and the appeal fails and is dismissed with costs.

Appeal dismissed.

M. S. ANIRUDHAN v. THE THOMCO'S BANK LTD. (J. L. KAPUR, A. K. SARKAR AND M. HIDAYATULLAH, .lJ.)

1962

Sr.ptrmbtr, 14

Guarantee-Surety-Alterat-ion of terms of letter of guar

antee by principal debtor-Discharge of surety's liability.

The appellant agreed to stand surety for an overdraft allowed by the respondent Bank to S. A blank form of guarantee was given by the Bani< to S, who then had it filled up by the appellant stating thc maximum amount which he guaranteed as Rs. 25000/-. When S brought the letter of guarantee duly signed by the appellant and himself to the Bank the latter refu sed to accept the guarantee up to that it was not prepared to give S accommodation for a larger sum than Rs. 20000/- and wanted it to be limited to Rs. 20000/-. S then made alterations in the letter with the amount of the maximum limit corrected to Rs. 20000/- and gave it to the Bank, In a suit instituted by the Bank against the principal debtor, S, and the appellant on the hasis of the contract of guarantee for lls. 20000/-, the appellant pleaded that as the document was altered without his knowledge or consent, he was discharged from his liability.

limit as

Held, (per Kapur aud Hidayatullah, lJ., Sarkar, J., dissenting), that the appellant was not discharged from his liability under the contract of guarantee.

64

SUPREME COURT REPORTS [1963] SUPP.

1962

M. S. Anirudhan v. The Thomco's Bonk ltd.

per Kapur, J.-S was actin.I{ for and on behalf of the appellant since it was at his· i11stance that the appellant was standing surety and the appellant handed over the deed of gua rantee to S for the purpose of being given to the Bank. The plea of avoidance of contract by material alteration was of no avail to the appellant because the document was not altered while in posse'5ion of the promisee but was altered by S who was at the time acting as the agent of the appellant.

then

per Sarkar, J.-The suit against the appellant as framed must fail. The altered document was not binding on the appeilant, for the alteration had not been made to carry out the intention of the parties. If the alteration .is. ignored ali immaterial, in the appellant, for the Bank refused to accept a guarantee on the terms contained in it before it was altered and therefore there was no contract made between the parties by the document. Further, the contrad sued ·upon is different from the contract which might have been made by acceptance of the document .as it stood before the alteration. The unaltered document. cannot establish the contract sued on.

the document creates no liability

per Hidayatullah, J.-The document in this case could not·

be said to have been materiallv altered because it was not al tered in such a mai:iner as to change its nature. The alteration was made by a co-executant who reduced not only his own liability but that of the surety also. The document was altered while in the possession of S, the very person who, as the agent of the surety, brought it to the Bank. The surety must be deemed to have held out Sas his agent for this purpose and this created an estoppel against the surety because the Bank believed that S had the authority. Accordingly, the alteration of the document did not save the surety from liability under it .

. CIVIL APPELLATE JURISDICTION; Civil Appeal

No. 131 of 1961.

Appeal from the judgment and decree dated September 30.. 1957, of the Kerala High Court in Appeal suit No. 19 of 1956 (T).

T. N. Svl!rarruini,a Iyer, R. Mahalingier and

M. R. Krishna Pillai, for the appellant.

V. A. Seyid Muhammed, the respondent. 1962. September 14. The Judgment of the Court

for

was delivered by

Kapur, J.

KAPUR, J.-It is not necessary for me to give the facts of this case as they are set out in detail in the

1962

M. S. Anirudhan v. The Tlwm&o's Bani: ltd.

Kapur, J.

1 S.C.R.

SUPREME COURT REPORTS

65

brethern Sarkar & judgments of my learned ~id~yatullah, JJ. In my opinion this appeal should be d1sm1ssed and my reasons arc these :

On the findings of the High Court it appears that the Bank had agreed to allow an overdraft to defendant No. 1 for Rs. 20,000/-, that the appellant gave a surety bond for the repayment of Rs. 25,000/ and when that was pointed out to defendant No. 1, the principal debtor, he (the latter) made the altera tion in the document by Rs. 25,000/- to Rs. 20;000/-.

reducing ·

the figure of

The case of the appellant was not that he never stood surety for defendant No. 1 but that he stood surety for Rs. 25,000/- which was subsequently altered to Rs. 20,000/- and that any change of figure was a material alteration resulting in the avoidance of the contract, even though the alteration might have been advantageous to him, the obliger. It was argued that howsoever innocent the obligee might be or howsoever innocent the alteration might have been made so far as it is material the non-accepting obliger-the appel lant in this case-cannot be held liable on the obhga .tion in the altered form because he never made or consented to such an obligation and he cannot be held liable on the obligation in the original form be cause the obligation was never assented to by the creditor-the respondent Bank. Now an unauthorised material alteration avoids a contract so that if a pro misee after a written contract has been executed mater ially alters it without the consent of the promisor whether by adding anything to the contract or striking out any part of it or otherwise the contract is avoided as against the person who was otherwise liable upon it (Halsbury's laws of England, 3rd Edn., Vol. 8, para 301, p. 176). It may also be taken to be the law that even if the alteration is made by a stranger without the knowledge of the promisee the other party is discharged if the contrac_t is in possessi?n of the promisee or his agent. But 1f the contract IS altered

1Yli2

,\[, S. A.nirtulh•u , .. Tht Th~mr:.•~s B11nk ltd.

Ji.i.jP.LY, J.

fifi

SUPREME COURT REPORTS [1963] SUPP.

by a stranger when the contract was not in the custody of the promisee the promisor is not dischargeq. (Halsbury's Laws of Et1gland, 3rd Edn., Vol. 8, para :lO i, p. l i(l ). There is also a further qualification and that is that if a guarantor entrusts a letter of guarantee to the principal borrower and the principal borrower makes an alteration without the assent of the appellant then the guarantor is liable because it is due to the act of the guarantor that the letter of guarantee remains with the principal debtor, in this case defendant No. l, and what the principal debtcir did will estop · the guarantor from pleading want of authority (Vl'illiston on Contract, Vol. VI, para ]!) 14, P· ;;:1r;4).

Thus the position in the present case comes to this. The appellant agreed to stand surety for an overdraft allowed by the respondent Bank to the principal debtor, Shankaran. The Bank required a guarantee in the form which was handed over to the principal debtor, Shankaran. Shankaran got it filled by the appellant for a sum of Rs. 25,000/-. The Eank did not accept the guarantee up to that limit but wanted the figure to be corrected i.e. by lmertion of Rs. 20,000/-. The document was thereupon han ded back to the principal debtor who, it is stated, altered the document. At that stage the principal debtor was acting for an~ on behalf of the appellant because it was at his instance that the appellant was standing surety and the appellant handed over the deed of guarantee to the principal debtor for the pi1r poses of being given to the bank, the respondent. In these circumstances the avoidance of contract bv material alteration is inapplicable because the docti men t was not altered while in possession of the pro misee or its agent but was altered by the principal debtor who was at the time acting as the agent of the guarantor, the appellant.

In these circumstances the pk;:t of matllrial alteration is of no avail to the appelh1nt and the

J.9(,J

;\[. S. Anin1dhan , .. 1'/ie Thnmro 's /11111'. J.td.

Sarkar,

./.

l S.C.R.

SUPREME COURT REPORTS

Gi

appeal must therefore fail and is disn:isscd but no order as to costs.

SARKAR, J.-This appeal arises out of a suit filed by the respondent Bank against tlw appellant as the guarantor and one Sankaran a·; the principal debtor, to recover monevs advanced to the latter on an overdraft account. The suit was decreed against Sankaran by the trial Court and he never, appealed from that decree. We will, therefore, be concerned in this appeal only with the claim against the appellant.

The suit against the appellant was based on a letter of guarantee dated May :?J., l!l4i. It was slated in the plaint that bv this letter of guarantee the appcl· !ant had undertaken to rq:ay to the Bank the balance due on the overdraft account opened in favour of Sankaran, up to a maximum of Rs. :?0,000/- which was also the maximum amount for which the over· draft had been arranged. The appellant's defrnce to the suit "'as that he had agreed to guarantee the liability of Sankaran on the overdraft up to Rs. ii,000/ · and had signed 1hc letter guaranteeing thereby 1:epay· ment up to that sum but the le1ter had been altered without his consent by substituting Rs. 20,000/. for Rs. 5,000/-. The appellant contended in the courts below that as this was a material alteration of the instrument of guarantee. he was absolved· of all liability on it.

The trial court found that the amount ,guaran teed had origina llv been mentioned in the letter as Rs'. :2,),000 · and this had been altered without the consmt of the appellant to Rs. 20,000/·. Ir obser\"rd that as it was not dispulcd that the alteration was material. the suit against the appellant had to be dismissed and passed a decree accordingly. obviously in the view the alteration had avoided the imtrument.

that

The respondent Bank then appealed io the High C:onrt of Krrala, The High Court agreed with the tri;il

'

1962

M. S. Animdhan v. The Thomco's Bttnk Ltd.

Sarkar, ,f.

68

SUPREME COURT REPORTS [1963] SUPP.

later

court that the letter of guarantee originally mentioned Rs. 25,000/- and this figure was to altered Rs.20,000/- without the consent of the appellant. It added that probably the alteration had been made by the principal debtor, Sankaran. It however held that in the the appellant had mentioned Rs. 25.000/- place of Rs. 20,000/- in the letter probably by a mistake and that the alteration had been made in order to carry out the common intention of Sankaran, the appellant and the Bank tha~ for the overdraft accom modation of Rs. 20,000/· allowed to Sankaran the appellant would give a letter of guarantee to the Bank. In this view of the matter the High Court, relying on the principle contained in s. 87 of the Negotiable Instruments Act, 1881, passed a decree against the appellant.

The appellant has come up to this Court in appeal against the judgment of the High Court. Unfortunately, the Bank, for reasons unknown to us, has not appeared in this appeal. Dr. Seiyid Muhammed argued the case for the Bank at our request and has rendered us great assistance.

Now, the provision of the Negotiable Instruments Act on which the High Court relied in terms applies to a negotiable instrument which a letter of guarantee is not. The principle of that provision may however be of wider application. That principle has been formulated in Ha!sbury's Laws of England, 3rd edn., vol. 11, p. 370, in the following words :

"An alteration made in a deed, after its execution, in some particular which is not mat· erial does not in any way affect the validity of the deed; ........................................... .. It appears that an alteration is not material ............ which carries out the intention of the parties already apparent on the face of the deed .. "

It is now well settled lies

that, instruments under hand also : see

this principle app ibid

to

,

1962

'''• S. Anirudhan v. 1"l1 Thomco'.s Bank Ltd.

Sarkar, J.

I S.C.R.

SUPREME COURT REPORTS

69

p. 380, f. n. (c) and Jlfasterv. Miller, (1791) 4 Term Rep. 320. The question then is, was the alteration in the letter of guarantee of the kind contemplated by this principle. The learned Judges of the High Court thought it was and so held that the letter of guarantee as altered could be enforced. I am unable to accede to that view.

It seems to me that the intention to carry out which an alteration is permissible under the rule on which the High Court has relied, is the intention with which the instrument was executed. That is why in formulating the rule it has been stated in Halsbury's Laws of England that the intention has to be "already I need· only refer apparent on the face of the deed". to the observation of Le Blanc, J., in Knill v. Willia.ms(') in support of this proposition,

that

thought

there was any "If I had evidence on which the jury might have found that the words afterwards added had been originally intended to have have been inserted, and were omitted by mistake, I should certainly have left it to them so to find; the case of Kershaw v. Cox(') being then fresh in my mind; but. according to my recollection of the evidence, it was impossible for them to draw that conclu sion from it. The opinion which I delivered in Karshaw v. Cox can only be supported on the ground that the alteration there made in the bill the day after it was negotiated was merely the correction of a mistake made by the drawer of it, in having omitted the words, 'or order', which it was intended at the time should be inserted."

in writing

The two cases on which the learned Judges of the High Court relied are also cases where the mistake In Lachmi Rai was v. ~rideo Rai(') it was found that "the omission regar ding the payment of interest was accidental" and in AnandaMohan Saha v. Ananda Chandra Naha(') where (1809) 10 East. 931; 103 E. R. 839.

instrument.

the

(1)

(2) 3 Esp. N. P. Oas. 246.

(3) A. I. R. 1939 All. 2.W.

(4)

(1916) I. L. R. 44 Cal. 154.

1962

JI. S. Anirudlu11i v. The 1 lwmco '.1 B11nk Lid.

.._(..:arkar, J,

70 SUPREME COURT REPORTS [l!J63] SUPP.

the instrument originally provided for interest on a loan of Rs. :WO/- at Re. 1/- per mensem and had been altered by the addition of the words "per cent", it was said ''that it 1vas the intention of the parties, as it seems to me to be obvious upon reading the docu ment, that interest was to be paid at the rate of one It seems to me that rupee per cent. per menscm' . if it were not so and the intention contemplated in the rule could be gathered from a pre-existing agree ment alone without caring to find out the intention with which the instrument was executed, then there lt would then would be no justification for the rule. warrant the alteration of an instrument intentionally written in variance with the pre-existing agreement which a person was in law free to do, by tLe other party to it. That would amount to making a new contract out of a written instrument by unilateral action and in disregard of the intention of the writer. It For such ;.1 position our lall'S 111ake no provision. may be that a person who writes a document in terms which deliberately depart from the agreement pursuant to which it is written, may be liable on that agreement but he cannot be made liable on the document as altered by the other party to the agreement alone even though snch alteration makes the document consonant with the agreement.

Now there is absolutely no evidence in this case that in writing the letter of guarantee the appellant had intended to mention the maximum amount of gu;m111tcc as Rs. 20,000/- and had by mistake written Rs. 25,000/- instead. In holding that there was such a mistake, the High Court proceeded purely on the basis of conjecture which is evident from the language used by it. It said, "probably defendent 2" (the appellant) "made a mistake in Ext. C" (the letter of guarantee). There was not the slightest warranty for In fact the evidence indicates that thL' conjecture. Rs. :!i'i,000/-had been mentioned intentionally in the letter of guarantee. That evidence was given by the

.M. S • .-lniruilwi v. '[fie Th«11~'s &ik Lti.

1 S.C.R:.

SU.E'-lBME COURt RtPORTS

il

Banks agents too. He said that the overdraft arrange ment commenced on February 24, 1947, when Sanka ran executed a promissory note for Rs. 20,000/- in favour :of the Bank. At that time the appellant \\'as lhc not available to sign the letter or g-uarantcc. letter was typed by the Bank with blank spaces left for entries to be made by the guarantor regarding th~ maximum limit of the account, the rate of interest and the date. Sankaran brought this, letter back to the Bank in May 194 7. At that time the space for the amount of the limit was filled up with the figure Rs.25,000/-. Sankaran said that he required Rs.25,000/ and would renew the promissory note for that amount. The Bank was not prepared to advance to him morC' than Rs. 20,000/- and so the letter of guarantee was returned to Sankaran who then took it away and brought it back some time later with the amount of the maximum limit corrected to Rs. 20,000/-. This is all the evidence on the question.

I think it right to point out here that the Bank's agent did not speak to any oral agreement with the appellant, nor indeed to any interview with him con cerning the overdraft arrangement or the guarantee. The appellant in his written statement no doubt admitted that he had agreed to guarantee the due repayment of the overdraft up to Rs. 5,000/-. He did not however say that the agreement was verbal but mentioned the letter of guarantee. The appellant's admission can of course be taken against him but it must be taken as made and not a part of it only. Again, no verbal agreement com::erning the guarantee had been pleaded anywhere by the Bank, not even in the application that it filed in answer to the written statement of the appel lant alleging that the letter of guarantee having been materially altered no suit lay on it. Lastly, I have tn observe that the trhd court did 11()t find that any such oral agreement had been made. If there had been any agreement, the letter of guarant~e as typed out would have contained no bliililks.

1962

M. S. Anirudhan v. TM Thomco'.s Bank Ltd.

Sarkar, J.

72

SUPREMECOURTREPORTS[l963]SUPP.

In these circumstances it is impossible to hold that there was any prior agreement about the guarantee ?r its limit, between the appellant and the Bank, and 1f there was not, the High Court's view that in the letter of guarantee Rs. 25,000/- had been mentioned bv mistake, would lose its foundation. But even assuming a pre-existing verbal agreement-and in this case the agreement, if any, could only be verbal-the fact that Sankaran made a request that the amount of the overdraft should be increased to Rs. 25,000/ would rather indicate that the letter of guarantee h~d intentionally stated Rs. 25,000/- as the amount of guarantee and this figure had not been written by any It would be impossible to hold on this evi mistake. dence that there had been any mistake in writing the letter of guarantee. The evidence does not prove any pre-existing agreement and tends to prove that there had been no mistake in writing the letter of guarantee even if there was an agreement. Therefore it seems to me that the High Court was in error in thinking that the alteration in this case ·had been made to carry out the intention of the parties. The principle under lying s. 87 of the Negotiable Instruments Act has no application to the facts of this case.

Dr. Seiyid Muhammed, however, put the matter from another point of veiw. He said that in order that an alteration in an instrument made without a party's knowledge might be avoided against him that alteration had to be material and in support of it he referred us to a passage in Halsbury's Laws of England 3rd Ed., vol. 11, p. 380. He then said that no altera tion could be material unless it was to the prejudice of a party. He pointed out that the alteration in the present case had reduced the limit of the appellant's liability from Rs. 25,000/- to Rs. 20,000/- and it was not therefore a material alteration. Hence he conten ded that the letter of guarantee had not been avoided by the atteration.

I do not think that this contention assists the I will assume that an alteration in an

Bank at all.

1962

M. S. Anirudlum v. The Tkomco's Bani( Ltd.

Sarkar, I.

I S.C.R.

SUPREME COURT REPORTS

73

instrument which is not to the prejudic~ of a party to it is not a material alteration and does not release him from his liability uuder the instrument. This rule however does not make the instrument as altered bin ding on that party. If it did, that would amount to changing by unilateral action the terms of a contract made by common consent or to changing the terms of an offer made by one without his consent. As I have earlier said, none c;if these things can be done under our law. I may add that I have not been able to find any authority laying down that in such a case the altered instrument would be binding.

All that we would get in this case if Dr. Seiyid Muhammed is right, is that the alteration might be ignored and, the instrument in its original form might be considered as existing unaffected by the alteration. Jn the present case, therefore, we would have a letter of guarantee wiitten by the appellant undertaking to repay the balance due by Sankaran on the overdraft account up to a limit of Rs. 25,000/-. What then '!The suit is not on a contract to guarantee up to Rs. 2•3,000/-. Indeed according to the Bank's pleading and evidence there never was any agreement for such a guarantee between it and the appellant. The letter, therefore cannot be considered as evidence of such a contract. Further the evidence to which I have already referred proves that as an offer, the letter was not accepted by the Bank. In fact the letter in its original form is of nn assistance to the Bank at all in this case, it neither proves a guarantee for Rs. 25,000/- nor for Rs. 20,000/-.

But it is said that the letter contained an enforce able contract as it was supported bv consideration which had already moved from the Bank, namely, the advance made to Sankaran before the date of the letter and the promise to make further advances. Ti.en it is said that inadequacy of consideration does not avoid a contract as stated in Explanation 2 of s. 25 of the Con tract Act, 18i2, and therefore the Bank's undertaking

1962

,\_/, S. A1iirudha11 "· I it;; I Jwmc·u ·.1 }Jank Ltd.

!:Jarko.1, J.

74 SUPREME COURT REPORTS [1963];StJPl\

to advance upto Rs. 20,000/- could support th11 appellant's promise to guarantee up to Rs. 25,000/·, Bul it is not the Bank's case that there was such a c~Ii­ tract of gLtarantcc. Its case was that lhc contract of guarantee was for Rs. 20,000/-. Thal contract is nut supported by the letter on which alone the suit is based. If there was no contract as stated in the letter. then no question of consideration to support it can possibly arise. Therefore it seems lo me that the con tention that the alteration was immaterial and di<l not affect the instrument so far as the appellant is concer ned is to no purpose in the present case.

The position may then be thus stated. We ha,ve a suit against the appellant based on a written con tract to guarantee repayment of Sankaran's dues to the Bank up to Rs. 20,000/-. There is no evidence of 'the appellant any verbal contract of guarantee. wrote a letter guaranteeing repayment of those dues up to Rs. 25,000/-. Sankaran also signed this letter but that signature is of no consequence to the question of guarantee which alone arises in this appeal for Sankaran could not guarantee his own debt and his signature would therefore on! y be evidence of his liability for the amount advanced to him by way of overdraft.. Such liabili~y, however, ?e had already undertaken by executmg a promissory note for Rs. 20,000/'- in favour of the Bank. His sign;iture on the letter of guarantee therefore made no difference in 'the legal relations that have to be comidercd · ln this a#JJeal. Returning· now to the letter of guarantee written by the appellant, the Bank refused to accept that letter and, tperefore, on the Bank's o\Mn case contract on .its terms was ever made. That no letter was altered without the consent of the appellant pi:obably by Sankaran by substituting Rs. 20,000/- for Rs. 25,000/-. If the alteration was without the ap pellant's consent, it could not have been authorised by him ; if it had be<:n, consent would he implied. Theri: is further neither evidence, nor pleading oor

. .1\1. S. Anirzulha'!. v. 171e 7"/wmco'~ Ban~ Ltd.

Sark«r, J.

Hida)'8tullsh, J.

1 S.C.R.

SUPREME COUlU- l'.EPORTS

75

finding of any such authority. The altered document is not binding on the appellant for the alteration had not been made to carry out the intention of the parties. If the al lcration is ignored, then the document . creates no liabiliL y in the appellant, for the Bank ref used to accept a guarantee on the terms contained in the document before it was altered. Further, the contract sued upon is different from the contract which might have been made bv the document as it stood before the alteration. Th~ unaltered document cannot estab- lish the contract sued upon.

.

The conclusion to which I arrive then is that the suit against the appellant as framed must fail. I would, therefore, allow the appeal with costs here and below and dismiss the suit against the appellant.

·

HnJA YA'JTLLAH, J.--I have had the advantage uf reading the judgment prepared by my brother Sarkar. In my opinion, and I say ic with great respect, this appeal must fail. I shall give my reasons brief!)~. The facts of the case arc simple. The suit, out of which this appeal arises, was filed by the Thomco's Bank Ltd, Trivandrum, (to be called in this judgment the 'Bank') against V. Sankaran (the principal Debtor) and N. S. Anirudban (the surety and appellant before us). The suit was based against V. Sankaran on a promissory note executed by him in favour of the Bank on February. 24, 1947, (Exhibit B) and against the present appellant on a letter of guarantee dated May 24, 194 7. In so far as Sankaran has not appealed against the decree passed against . him we need not mention the facts leading up to the promissory note which was prior in time. Anirudhan in defending himself stated that the letter of guarantee was for Rs. 5,000 and that 'it had been altered without his knowledge and consent in a sum of Rs. 20,000/.. The letter of guarantee is Exhibit C and the original does show two corrections in the figures as well as the written words mentioning' the amount. Figure "5" in the amount 6f Rs. 25,000/- in figures appears to have been

1962

M. S. Anirudhan v. The Thomco's Bank Ltd.

Hidavalullah, J.

76

SUPREME COURT REPORTS [1963] SUPP.

altered to "0"; and in the words' "Rupees twenty five thousand" the word "five" has been struck out. The appellant's case that 5,000 in figures was altered to 20,000 by the addition of the figure "2" and the alteration of the figure "5" into "0" and the corres ponding change in the words by the addition of the words "twenty" and the scoring out of word "five" has not been believed. Thus the case made out by Anirudhan has not been accepted. The correction, however, is patent and the question that has arisen in this case is whether bv the alteration of the letter of guarantee the surety i~ discharged.

The finding of the High Court is that there was the Bank and no prior oral agreement between Anirudhan. This letter, as is obvious from the dates, was given after tl1e loan had already been made. The contention of the Bank was that when Sankaran brought this letter and asked for additional loan of Rs. 5,000 the Bank refused to advance any further amount and declined to accept this letter of guarantee for Rs. 25,000 lest the Bank might be compelled to loan a further sum of Rs. 5,000. Sankaran then took back the letter and after some time brought it back with the figure "5" changed into "0" and the word "five" scored out. These corrections were not initi alled either by Sankaran or by Anirudhan. The Bank, however, accepted this letter and kept it and sued is whether Anirudhan upon Anirudhan's liability is discharged by the alteration in the document which alteration is not proved to have been made either by him or with his knowledge or consent.

it. The question

It is conceded and indeed it is the law that only a material alteration makes a document void. It is also the law that if the custodian of the document makes or allows an alteration to be made while the document is in his custody he cannot sue upon it because it is his duty to preserve the document in the In the present case, the state in which he got it.

1962

At. S. Anin1dlU1 v.

Tht Tlwmco's Ba

ltd.

Hida_yatutlah,

1 S.C.R.

SUPREME COURT REPORTS

77

document was not altered by Bank nor with the Bank's consent or connivance while the document was in its custody. The document was apparently altered either If it was by Anirudhan or by Sankaran or by both. altered by Anirudhan, or by him and Sankaran toge ther, the document still remains the document of Aniru dhan and the suit of the Bank based upon it is com petent against him. If it was altered by Sankaran the question is whether the alteration was a material alteration to make it void against Anirudhan. The High Court is of the opinion that it was not material. I am inclined to accept the conclusion of the High Court. Anirudhan by the letter to the Bank wished to guarantee an overdraft of Sankaran not exceeding Rs. 25,000/·· His case that it was Rs. 5,000/- and not Rs. 25,000 has been disbelieved. The document was originally written for a'n amount of Rs. 25,000/- which was reduced to Rs. 20,000/- I will assume, by Sankaran and the letter of guarantee was accepted by the Bank. The question is whether by the reduction of the amount of the guarantee Anirudhan can say that the document executed by him has been materially altered and his In my judgment, in the present liability is at an end. case it cannot be said. The document still continues to represent what was intended by Anirudhan. That intention was to guarantee a loan up to Rs. 25,000/ which includes the sum for Rs. 20,000/- for which the guarantee now stands. The question is whether Anirudhan can say that this guarantee is at an end.

There are really two defences c.pen to Anirudhan the surety. The first is that he had offered to stand surety on certain terms and as those conditions have been altered he is discharged from any liability. The second also depends on the alteration and it is that a document executed by him has been materially altered and is therefore void. This is a plea of non est factum. Both the arguments rest upon the alteration of the contract into which Anirudhan wished to enter. A surety is considered a '.'favoured debtor" and his

1962

.'AJ; S. Anirudhnn v. ~ht Thm1rco's Bank Ltd.

Hidayatul/0/1, J.

78

SUPREME COURT REPORTS [1963] SUPP.

liability is Btrictissimi juris. Lord Westbury, L.C., in Rlest v. Rrrnrn (')stated this liability in the following words:~

"It must alwavs be rocollected in what manner a surety is bound. You bind him to the letter of his engagement. Beyond the proper inter pretation of that engagement you have no hold upon him. He receives no benefit and no consideration. He is bound, therefore, merelv according to the proper meaning and effect of the written engagement that he has entered into. If that written engagement is altered in a single line, no matter whrthcr the alteration be inno cently made, he has <: right to say, "The i;ontr act is no longer that. for which I engaged to be surety; you have put an end to the contract that I guaranteed, and my obligation, therefore, is at an end." It is not necessary to go into the fact of that case fulfilment of a where contract for the supply of flour to a banker who in his tum had undertalwn to supply bread to Government. The case turned upon stipulations by the Government an<l their breach and the decision cannot be regarded a dfoect authority, apart from the general observation, in the. present cas0. The statement of the law in Blesl v. Brown (1) was considered by the Cqurt of Appeal in flolme v. Brwnskill (')in an appeal fmm ,q.jllQgment of Denman, J. (later Lord Denman). Cotton, L.J., stattid ,the! law '11 these wqrds:~

surety guaranteed

the

"The true rule in my opinion is, that if there is any agreement between the ·principals with refer ence to the contract guaranteed, the surety ought to he consulted, and that if he has not consented to the alterati<'ln, although in cases where it is without inquiry evident tll.at the alter.ation is unsubstantial, or that it cannot be otherwise than beneficial to the surety. 1he surety may not be discharged; yet, that if it is not self-evident that

en, {2

(i862) • De G. F. &J. 365; 45 E. R. 1225. (1817) 9 q. B. J), f9;.

1962

M. S. Aninulun v. The Thomea1s Bank Ltd.

H;da)'lltullah, J.

l S.C.R.

SUPREME COURT REPORTS

79

the alteration is unsubstantial, or one which cannot be prejudicial to the surety, the Court will not, in an action against the suerty, go into an inquiry as to the effect of the alteration ...... " To this statement of the law, must be added the dissent of Brett, L.J., who stated that the surety in that case was not raleased observing that the doctrine of release of sureties was carried far enough and that he would not carry it any further. There is noticeable a rule stated by Lord difference between the strict Westbury and that stated by Cotton L. J., and the law now accepts that unsubstantial alteration which arc to the benefit of the surety do not discharge the surety from the liability. Of conrsf'., if the alteration is to the disadvantage of the surety, or its unsub~tantial chara cter is not self-evident the surety can claim to be discharged. The Court will not ti1en inquire whether it in fact harmed the surety. That dictum of Cotton L. J., was quoted with approval by the Judicial Committee in llnrd v. The >latimwl Bank of Neir Zwlmul. Limited (1 ). Other ca~es in which a similar is taken are mrntioned in these two liberal view deci~ions.

Before I examine the position of Anirudhan ·with regard to the law applicable to sureties. l wish to refer to.the law relating to the alteration of documents. These two matters really go together in this case. Here, again. the strict rule at one time was t~at the slightest alteration makes the document void. The leading case for a long time was Piyot's cri.•e ('r where Lord Coke stated the doctrine as follows:-

"These points were resolved: 1. When a lawful de~d is raised, wherebv it becomes void, the obli~@r may plead non est jc!GIUm, and gJve the matter in evidence, because at the time l!>f the plea pleaded, it is not his deed . ., "Secondly, it was resolved, that when arw deed is altered in a point material, by the plaintiff himself, or by any stranger, without the privity II Co. Rep. 26 b; 77 E. R. 1177.

(2)

(1883) 8 App. CaL 7~.

(I)

1962

M. S. Anirudhan v. The Thomco' s Bank Ltd.

80

SUPREME COURT REPORTS [1963) SUPP.

of the obligee, be it by interlineation, addition, raising, or by drawing of a pen through a line, or through the midst of any material word, that the deed thereby becomes void ... so if the obligee himself alters the deed by any of the said ways, although it is in words not material, yet the deed is void: but if a stranger, without his privity, alters the deed by any of the said ways in any point material, it shall not avoid the deed."

The passage is also to be found in an article "Discharge of Contracts by Alteration" by Williston in 18 Harvard Law Review, p. 105. The strictness of this rule was tempered in subsequent cases and was departed from in Altious v. Corn1.bell (')where Lush, J. (speaking for Cockburn, C. ]., Blackbum, J., and himself), after referring to numerous authorities, observed-

"This being the state of the authorities, we think we are not bound by the doctrine of Pigot's case or the authority cited for it; and not being bound. We are certainly not disposed to lay it down as a rule oflaw that the addition of words which cannot possible prejudice any one, destroys the validity of the note. It seems to us repug nant to justice and common sense to hold that the maker of a promissory note is discharged from his obligatioi;i to pay it because the holder has put in writing on the note what the law would have supplied if the words had not been written." What is said here about an addition or alteration of a promissory note was prior to the enactment of the rule in Bills of Exchange Act in England which has altered the law with regard to negotiable instru· ments but the observations apply forcefully to a document of the type we have where there were two executants (one being the debtor and the other his surety) and the debtor has not increased but rt:duced the amount of his own liability as well as .that of his

(1)

(1868) 3 Q. B. 573.

1962

. M S. An irudha1 v. The Tlwmco's BanJ Ltd.

Hidayatullah, J,

1 S.C.R.

SUPREME COURT REPORTS

81

surety. That immaterial alterations do not matter is borne out by the observation of Swinfen Eady, J ., in Bishop of Credi ton v. Bishop of Rxeter (')where Pigot's cape(') and the earlier statement of the law in Shep pard's Touchstone, 7th ed. (Preston's), p. 55, were not accepted. During the course of the argument Swinfen Eady, J., referred to cases in which corrections in the t<ttimonium of documents to accord them with existing facts were held not to be material alterations. The question before me is whether a document jointly executed by two persons creating a liability equal for both is to be regarded as materially altered if the liability is reduced equally for both but the alteration In my opinion, such is made only by one of them. an alteration must be regarded as unsubstantial and not otherwise than beneficial to the suretv and it cannot attract the strict rule stated by Lord Coke or that stated by Lord Westbury in the cited cases.

Let. me give an example: If A places an order with a trader for supply on credit of ten bags of wheat and B endorsed the order by writing, "I guarantee payment up to ten bags", can it be said that the guarantee by B is dissolved when A takes the note and finding that the tradesman has only six bags of wheat in stock, corrects his order as well as the endorse In my opinion, to ment by altering 'ten' into 'six'? such a correction neither the one rule nor the other can apply. The strict rule of law which W<\S brought the well-known S1~f!ell's Case("), to our notice from where a Bank of England note was mutilated and its number destroyed, depended upon its special· facts. The number of the Bank of England note was consi its vital part and the alteration a material dered alteration. Suffell's Case(1) was not followed by the Privy Council in a case where a bank note issued by bank which was only a contract and not currency, as in the other case, was destroyed because the owner had forgotten that the note was in the pocket of a q;irment and the garment had been washed. The

(1)

(1905] 2 Cb. 48.5.

(3)

(2)

11 Co. Rep. 26b; 77 E. R. 1177.

(1882) 9 Q. B. D. 555.

1962

M. S • .A.nirudhan v. TIM T!wmco's Bank Ud.

Hidayatul/ah1 J.

82

SUPREME COURT REPORTS [1963] SUPP.

note was reconstructed and showed the contract but not the number. The Privy Council held the bank liable even though the .contract had been altered by eraser (see Hong Kong mul Sltarl{]hrii Bctrikin11 Cm· poration v. J,o Lee Khi(').

These cases establish that both the limbs of the argument which Anirudhan can raise are not valid in the circumstances of this case. In my judgment, the this case cannot be said to particular document in have been materially altered, because it has not been altered in such a manner as to change its nature. The alteration does not save the surety from liability aris ing under it. The alteration was made by a co-exe cutant who reduced not only his own liability but that Indeed, the surety himself under of the surety also. stood the law to be this because he set up the case that the document originally guaranteed an overdraft of Rs. 5,000/- but was altered to guarantee an overdraft of Rs. 20,000/-. This case has been proved false and he never set-up the case that the document was void because the amount was reduced from Rs. 25,000/- to Rs. 20,000/-. It does not lie in thr. moµ th of Anirudhan to say that he meant to guarantee Rs. 25,000/- but not Rs. 20,000/- because he never went to the Bank and made this a condition of the agreement. Now he cannot say that the document has become void against him or that the contract which had emerged by the Bank's acceptance or the document as altered do~ not bind him.·

There is no need, in my opinion,. to co~1sider whether there Was a prior oral agreement t;>r not. I agree there is no proof of such an agreement The letter of Anirudhan to the Bank was based on a cipn sideration which had already moved to Sankaran ;md which Anirudhan wished to guarantee. Even if U'eiited as an offer by Anirudhan to the Bank, the Bank accep ted the amended offer and Sankaran must be deemed the amount, to have had

the authority

to reduce

(I) [1928] A. a. ISi.

1962

M. S. Anirudh<t v. Tiu Tlwmco's Ba• Ltd.

Hidayatullah, I

1 S.C.R.

SUPREME COURT REPORTS

83

though not to increase it. The document was altered while in the possession of the very person who, as the agent of Anirudhan, brought it to the Bank on both the occasions. Anirudhan must be deemed to have held out Sankaran as his agent for this purpose and this creates an estoppel against Anirudhan, because that Sankaran had the authority. the Bank believed The offer thus remains in its amended form an offer of Anirudhan to the Bank and the Bank by accepting it turned it into a contract of guarantee which was backed by the past consideration on which the offer of Anirudhan was originally based.

In my opinion, the appeal must fail.

I would,

therefore, dismiss it.

BY COURT : In accordance with the opinion of the majority, the appeal is dismissed. There would be no order as to costs.

Appeal dismissed.

1962

COMMISSIONER OF INCOME-TAX, BOMBAY v. JUBILEE MILLS LTD., BOMBAY (J. L. KAPUR, A. K. SARKAR AND M. HrnAYATULLAH, JJ.)

Irwmie Tax-Individual members of companiu, aa"8&11lent of-Public s11bstantially interested, meaning of-Group control· ling more thnn 15% voting power-Managing Agents forming such II group-lndia11 Income-tax Act, 1922(11of1922), •· 23A.

Section 23A of the Incom,.tax Act, 1922, empowered the Income-tax Officer to assess individual members of a company in respect of undistributed assc!Sable income of the company in certain circumstances. The proviso to this section made s. 23A iu.:pplicable to a company in which the public was substantially interested. The explanation to the proviso laid down that a company shall be deemed to be one in which the public was