Material Alteration Submitted by – Tuba Aftab Material Alterations
It indicates alteration or change in the material parts of the
instruments .
It destroys the legal identity of the original instrument .
A material alteration makes the instrument void that is in
operative and affects the right of obligations of parties to the contract . What Constitutes Material Alteration ? The negotiable instrument act of 1881 , is silent on the subject as to what constitutes a material alterations.
Courts of Law in India in this regards have
followed the English Common Law , which held that anything , which has the effect of altering the legal alteration between the parties , or the sum payable , amounts to material alteration Instances of Material Alteration
Alteration of the date of the instrument.
Alteration of the due amount payable.
Alteration in the time of payment .
Alteration of the place of payment .
Alteration of rate of interest .
Tearing of the material part .
Addition of the new party to the instrument .
Addition of words to a bill of exchange , endorsed in blank.
Where a bill is excepted generally , the insertion of the place of payment.
Legal Consequences
Section 87- It renders as void as against anyone
who is party thereto at the time of making such alteration.
Section 88 – Acceptor and Endorser bound
notwithstanding previous alteration. Liability on Banks Banker is protected , even though he has paid a materially altered cheque.
If anything arouses his suspicion , he should
make enquiries for the same
Mere indication is not suspicio.
Banker’s obligation to pay cheque arises out of
contract . Crossed Cheque
It is a cheque which cannot be presented to the banker
or the counter. Section 6 of the Negotiable Instrument Act , 1881 defines cheque as “ a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand “.
A crossing of cheque may be understood to be a
direction to the drawee banker not to pay the money over the bank’s counter but through the banks Description of Liabilities
Paying Banker on the crossed cheque ,
Section 126 – the compensation rested holds to be neither high nor excessive .
Liability of a drawer – If the banker has paid
the amount over the counter , is not entitled to debit the account of the customer with the amount of the cheque and is not considered to be a payment made in due course