Shivalingappa v. P. B. Puttappa (1971)

Section 87 is a severe provision: any material alteration of a negotiable instrument renders it void as against anyone who was a party at the time of the alteration and did not consent to it, unless it was made to carry out the common intention of the original parties. A debtor who can bring himself within it escapes the whole debt.

The question this case answers is therefore worth a great deal of money in practice, and it is one students almost always get wrong: what counts as part of the instrument? An endorsement of part payment written on the back of a promissory note looks like part of the note. It is not.

The judgment is also a useful example of how a court handles an allegation of tampering supported only by an expert's opinion that something has been erased.

The plaintiff sued to recover Rs. 2,635, comprising principal of Rs. 2,000 and interest, on a pronote dated 9 February 1961 executed by the defendant in his favour.

The defendant did not deny the execution of the pronote or the consideration for it. He pleaded:

1. discharge to the extent of Rs. 2,000 — that at Navarathri in 1961 he paid the plaintiff Rs. 2,000 and made an endorsement about that payment on the back side of the pronote, in pencil because no pen was available; and
2. material alteration — that the plaintiff erased that pencil endorsement, which was a material alteration rendering the pronote void and unenforceable under s. 87.

The plaintiff denied the discharge, denied that any endorsement was ever made on the back, and denied any erasure.

The trial Munsiff dismissed the suit, holding that the pronote had been materially altered and that the discharge was established. The lower appellate court reversed him, holding that the pronote had not been materially altered and that the discharge had not been satisfactorily established. The defendant appealed.

The appellant argued that the finding against material alteration was not in accordance with law. The judge himself perused the pronote. It was on a printed form. The alleged alteration was on the back side, which was blank, with nothing whatever written there at present. Counsel pointed to the texture of the paper near the middle of the top of that side as indicating that some writing had been erased, and relied on the evidence of a handwriting expert who had given an opinion that there was some erasure of some writing on the back.

To prove that he had made an endorsement which the plaintiff later erased, the defendant examined himself and one Shankarappa. The lower appellate court assessed both and found Shankarappa a chance witness whose evidence was not worthy of acceptance; the High Court found no good reason to disagree. Since the defendant had not established that an endorsement was made in pencil on the back, the question of erasing it did not arise.

The appellant also argued that since the pronote had been in the plaintiff's custody throughout, the plaintiff must satisfactorily explain the erasure found on the back. The Court's answer: merely on the basis of the vague type of evidence of the handwriting expert it is difficult to hold that there was some writing on the back which the plaintiff erased while the document was in his custody.

The Court went further and held that even if the defendant's whole case were accepted, s. 87 could not be invoked.

No part of the promissory note as such had been altered in any manner whatever. Accepting the defendant's case would mean only that an endorsement made by the defendant on the back side of the pronote had been altered by the plaintiff.

The endorsement does not form part of the negotiable instrument. No part of the pronote was written on the back; the entire pronote had been completed on one side of the paper. Section 87 contemplates material alteration of a negotiable instrument. The endorsement alleged to have been made on the back is an independent transaction, unconnected with the negotiable instrument in question. It could as well have been made on an independent piece of paper; merely because it was made on the back of the pronote, it does not become part of the pronote.

As the endorsement is not part of the negotiable instrument, any alteration in it does not attract s. 87. Even if the defendant's entire case about the endorsement were true, it would not render the pronote void.

On the plea of discharge, the lower appellate court had recorded a finding of fact that the defendant failed to prove it, and that finding was not liable to interference in second appeal. The appeal failed and was dismissed.

Section 87 applies only to a material alteration of the negotiable instrument itself. An endorsement of part payment written on the back of a promissory note, where the whole instrument is written on the front, is an independent transaction and no part of the instrument; alteration or erasure of such an endorsement does not render the note void under s. 87.

For an answer on material alteration, the statute has to be laid out in four steps, and this case supplies the first.

What can be altered. Only the instrument. The test is whether the writing forms part of the instrument, not whether it appears on the same piece of paper.

The consequence. Material alteration renders the instrument void as against anyone who was a party at the time of making the alteration and did not consent to it.

The exceptions. Where the alteration was made in order to carry out the common intention of the original parties; and, where made by an endorsee, the further consequence that it discharges his endorser from all liability to him in respect of the consideration. Section 87 is also expressly subject to ss. 20, 49, 86 and 125 — inchoate stamped instruments, conversion of a blank endorsement into a full one, qualified acceptance, and crossing after issue. Each of those permits something to be added to an instrument that would otherwise look like an alteration, and listing them is what turns a good answer into a complete one.

The protections. Section 88: an acceptor or endorser is bound by his acceptance or endorsement notwithstanding any previous alteration. Section 89: where the instrument has been materially altered but does not appear to have been so altered, or where a cheque presented for payment does not appear to be crossed or to have had a crossing obliterated, a person or banker who pays according to the apparent tenor and otherwise in due course is discharged, and the payment may not be questioned by reason of the alteration or the crossing.