Bhaskaran Chandrasekharan v. Radhakrishnan

Radhakrishnan, J.:— The question that has come up for consideration in this case is as to whether insertion of a date on an undated cheque would amount to material alteration within the meaning of Sec. 87 of the Negotiable Instruments Act.

2. Appellant was the defendant in O.S No. 16 of 1986 of the Sub Court, Kottarakkara. Suit was instituted by the respondent-plaintiff for realisation of Rs. 30,000/- with interest. According to him, defendant had borrowed an amount of Rs. 30,000/- and issued a cheque dated 11-6-1985 for the said amount. Cheque was sent for collection through the Catholic Syrian Bank, Kottarakkara. But the cheque was dishonoured stating ‘refer to drawer’. Advocate notice dated 8-7-1985 was issued to the defendant. Defendant did not respond to the notice. Hence the plaintiff instituted the suit. Defendant in his written statement stated that he had not borrowed Rs. 30,000/- from the plaintiff. However, he admitted the issuance of the cheque. According to him, it was issued without consideration for adjustment of certain transactions in connection with toddy shops of Kottarakkara Range.

3. In order to establish his case, plaintiff got himself examined as PW1. Defendant got himself examined as D.W 1. On the side of the plaintiff Exts. A1 to A3 were produced and defendant produced Exts. B1 to B6.

4. The dispute between the parties centres round Ext. A1 cheque dated 11-6-1985. Issuance of the cheque is admitted by both the parties. Defendant's case is that the plaintiff cannot claim relief on the basis of the said cheque, since he had made material alteration in the cheque. According to him, plaintiff inserted the date on the cheque without obtaining his consent. Insertion of a date on the cheque, according to the defendant, would amount to material alteration within the meaning of Sec. 87 of the Negotiable Instruments Act. Trial court accepted the contention of the defendant and held that the date was subsequently inserted. Trial court took the view that since the plaintiff was a holder in due course, it is for the plaintiff to establish that the alteration was made with the consent of the defendant. On facts, the court took the view that cheque was issued only for adjustment of certain transactions between the plaintiff and defendant entered into on 31-3-1985, and the cheque was not supported by any consideration. Trial court therefore dismissed. On appeal, this court reversed the decision of the trial court, and decreed the suit. Aggrieved by the same, defendant has come up with this appeal.

5. Counsel for the defendant contended that the cheque was issued for the purpose of certain adjustments, and settlement of accounts, between the plaintiff and defendant in connection with certain toddy shops' business. According to him, on settlement of accounts, an amount of Rs. 16,346.95 was due to the defendant. For realising the same, he was intending to. initiate appropriate proceedings. It was stated that he issued an undated cheque as security for a loan transaction, in connection with certain abkari business, which was not supported by any consideration. Plaintiff, however, without the consent of the defendant, inserted a date on the cheque. Counsel contended that the insertion of a date on a cheque without consent would amount to material alteration within the meaning of Sec. 87 of the Negotiable Instruments Act. Counsel relied on the decision of the Andhra Pradesh High Court in Jayantilal v. Zubeda Khanum, AIR 1986 AP 120 and contended that material alteration takes in not only a case where certain thing which is already written has been altered or erased, but also a new insertion.

6. Learned counsel appearing for the plaintiff, on the other hand, contended that cheque was issued to him on 11-6-1985 for encashment and that he had no put any date on the cheque. Counsel contended that even if plaintiff had put any date on the cheque, there is a presumption under Sec. 118(b) of the Act, which states that every negotiable instrument bearing a date was made or drawn on such date. According to him, the burden is on the defendant to prove otherwise.

7. In the instant case, there is no dispute with regard to the issuance of the cheque. There is also no dispute regarding the signature, the amount and the name shown in the cheque. In other words, defendant admits his signature admits the name of payee and admits the amount and also the issuance of the cheque. According to defendant, what he issued was a blank cheque, and that it was not supported by any consideration. It is his further case that the same was issued as security for a loan transaction.

8. According to us, the burden is entirely on the defendant to show that cheque was not supported by any consideration. Section 6 of the Act defines cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Cheque is an instrument in writing containing unconditional offer signed by the maker directing a specified banker to pay on demand a certain sum of money only to the payee or to the order of certain person or drawer of the instrument. Section 118 of the Act lays down certain presumptions. Section 118 is extracted below for easy reference:

“118. Presumptions as to negotiable instruments:— Until the contrary is proved, the following presumptions shall be made—

(a) of consideration:— that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred, for consideration;

(b) as to date:— that every negotiable instrument bearing a date was made or drawn on such date;

(c) as to time of acceptance:— that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;

(d) as to time of transfer:— that every transfer or a negotiable instrument was made before its maturity;

(e) as to order of indorsement:— that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;

(f) as to stamps:— that a lost promissory note, bill of exchange or cheque was duly stamped;

(g) that holder is a holder in due course:— that the holder of a negotiable instrument is a holder in due course: provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.”

9. When once the execution of a cheque is admitted, presumptions under Sec. 118 of the Act arise, until the contrary is proved. Initial presumption rests on the plaintiff to prove that the cheque was issued by the defendant. As soon as the execution of the cheque is proved, the rule of presumption laid down under Sec. 118 of the Act applies. So also once there is admission of issuance of a cheque or the same is proved to have been issued, the presumption under Sec. 118 is raised that it is supported by consideration. When statutory presumption is discharged by the plaintiff the burden shifts to the defendant to show that the cheque, though issued, is not supported by valid consideration. In other words, once the issuance of the cheque is admitted or proved, and the presumption is drawn under Sec. 118 of the Negotiable Instruments Act that presumption can be rebutted by circumstantial evidence or by presumption of fact drawn under Sec. 114 of the Evidence Act.

10. Therefore the question to be considered in this case is as to whether defendant has rebutted the presumption drawn under Sec. 118 of the Negotiable Instruments Act. In the instant case, defendant has admitted issuance of the cheque. There is no dispute regarding the signature, amount or regarding the payee's name, etc. However, defendant submits that cheque was issued for final settlement of accounts between the plaintiff and the defendant in connection with toddy shops' business of Koltarakkara Range.

11. In order to discharge the burden, defendant has to adduce acceptable evidence. In the instant case, there is only the self-serving evidence of defendant who got himself examined as D.W 1. Defendant has relied on documents Exts. B1 to B6. Ext. B1 is an agreement between the plaintiff and the defendant with regard to right to conduct arrack shop No. 10, in Group IV of Kottarakkara Range, which was given to defendant under certain terms and conditions. Defendant also relied on Ext. B4 dated 31-3-1984 with regard to an agreement in respect of toddy shop No. 10. We are of the view that merely because there were some transactions between the plaintiff and defendant, the same would not lead to the conclusion that the cheque was not supported by consideration. Oral evidence of D.W 1 and Exts. B1 to B6 as such would not lead to the conclusion that the cheque was not supported by consideration. Those documents would show that there were some transactions between the plaintiff and defendant. But defendant has to adduce reliable evidence to rebut the presumption under Sec. 118 of the Act, which according to us, he has not discharged.

12. Counsel for the defendant further contended that even if the cheque was supported by consideration, by putting date on the cheque by the plaintiff, the cheque has been materially altered rendering that instrument void under Sec. 87 of the Act. Section 87 is extracted below for easy reference:

“87. Effect of material alteration:— 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 was made in order to carry out the common intention of the original parties………………”

13. There is no case for the defendant that either his signature or the amount or the payee's name has been altered in the cheque. He has no case that the cheque has not been issued. It is his only case that plaintiff has put the date, and that would amount to material alteration. In order to appreciate the contention of the parties, we have to examine what is material alteration under the Act. The words ‘material alteration’ have not been defined in the Act. Supreme Court in Loonkaran Sethia v. Ivan E John, (1977) 1 SCC 379 : AIR 1977 SC 336 explained the material alteration’ as follows:

“A material alteration, is one which varies the rights, liabilities, or Jegal position of the parties as 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 which may otherwise prejudice the party bound by the deed as originally executed.”

14. Alteration of the date in the cheque may be material alteration. Alteration may have the effect of lengthening 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.

15. The general rule is that a material alteration renders the negotiable instrument void. However, if an alteration is made with the consent of the drawer of the cheque, it may not amount to material alteration, because the holder of the undated cheque has got the implied authority to put the date on the cheque. Once the date is shown on the cheque, the burden is on the drawer of the cheque to prove that the payee had no authority to do so.

16. There is no provision in the Act which makes a cheque or any of the negotiable instruments void, if it is not dated. However in England, under the Bill of Exchange Act, a bill of exchange is not valid on the reason that it is not dated. In India the position is different. In India the legal position is that undated cheque may be invalid, but not void. Banks may also not bounce the cheque if it is not dated. There may be cases where bank may honour the undated cheque, considering the standing of the parties and other surrounding circumstances.

17. 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 course 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.

18. In other words, when the date is put by the payee, or the drawer on the cheque the presumptions under Sec. 118 of the Act would arise. The burden is, therefore, entirely on the drawer of the cheque to establish that the payee had no authority to put the date and encash the cheque. In other words, payee has got the implied authority to put the date. When the date appears on the cheque, presumption under Sec. 118(b) operates. Therefore the burden shifts to the drawer to establish that he has not authorised the drawee to put the date on the cheque.

19. In Kirmany v. Aga Ali Akbar, AIR 1928 Mad. 919 a Division Bench of the Madras High Court has taken the view that if a promissory note is proved to be genuine, and it bears a date and the place of execution, the presumption is that it was executed on the place and the date it shows and the onus lies on the party pleading a different place and date, to show it. The decision reported in Jayantilal's case, relates to the insertin of a date on a pronote, thereby materially affecting the rights and liabilities of the parties. We are of the view that the said decision is not applicable to the facts of the present case.

20. In the instant case, admittedly the cheque was complete in all respects, except the date. It is the contention of the defendant that hand-writing of the date on the cheque is different and that the ink used for putting the date is also different. Assuming that if there is difference in the hand-writing with regard to the date as well as the ink used, that is not enough to rebut the presumption under Sec. 118(b) of the Act, since the payee has put the date on the basis of implied authority. We are therefore of the view that defendant has not discharged the burden or rebutted the presumption under Sec. 118(b) of the Act.

21. We therefore hold that insertion of a date on an undated cheque would not amount to material alteration, since the holder in due course has got implied authority to do so, unless it is otherwise proved by the drawer of the cheque. Consequently, we uphold the judgment of the learned single Judge and dismiss the appeal.