M.S. Anirudhan vs The Thomco'S Bank Ltd.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 14 September, 1962

Coram: A.K. Sarkar, J.L. Kapur, M. Hidayatullah

In the matter titled M.S. Anirudhan versus The Thomco’s Bank Ltd., decided on 14 September 1962, the Supreme Court of India sat with a bench composed of Justices A.K. Sarkar, J.L. Kapur, and M. Hidayatullah. The judgment was written by Justice Kapur. Justice Kapur began his opinion by stating that it was unnecessary to repeat the factual background because the facts had already been detailed in the judgments of his learned colleagues, Justices Sarkar and Hidayatullah. He then expressed his view that the appeal should be dismissed and proceeded to set out the reasons for that conclusion.

Justice Kapur explained that, according to the findings of the High Court, the Bank had consented to grant an overdraft of twenty thousand rupees to the first defendant. The appellant, who acted as surety, had executed a surety bond for the amount of twenty‑five thousand rupees. When the Bank pointed out that the amount specified in the bond should be twenty thousand rupees, the principal debtor, who was the first defendant, altered the document by reducing the figure from twenty‑five thousand rupees to twenty thousand rupees. The appellant’s contention was not that he had never stood as surety for the first defendant, but that his surety was for twenty‑five thousand rupees and that the subsequent alteration to twenty thousand rupees was a material change that rendered the contract void. He argued that, even though the alteration might have been to his advantage, a material alteration that was unauthorised by the obligor (the appellant) prevented the obligor from being bound by the altered contract, and also prevented the obligor from being bound by the original contract because the creditor (the Bank) had never consented to the original amount. Justice Kapur noted that the legal principle governing such situations, as reflected in Halsbury’s Laws of England, holds that an unauthorised material alteration defeats the contract as against the party who would otherwise be liable. The principle further provides that if a promisee, after a written contract has been executed, materially alters the contract without the promisor’s consent—whether by adding, deleting, or otherwise changing terms—the contract is avoided as against the promisor. The same rule applies even when the alteration is effected by a stranger, provided the altered document is in the possession of the promisee or his agent; however, if the document is not in the promisee’s custody, the promisor is not discharged. Justice Kapur added a further qualification: when a guarantor entrusts a letter of guarantee to the principal borrower and the principal borrower makes an alteration without the guarantor’s assent, the guarantor remains liable because the guarantor’s act of entrusting the document caused the principal borrower to possess it, and the principal borrower’s subsequent alteration estops the guarantor from claiming lack of authority.

The Court observed that the letter of guarantee stayed in the possession of the principal debtor, who was defendant No 1, and that the conduct of the principal debtor prevented the guarantor from pleading lack of authority, as explained in Williston on Contract, volume VI, paragraph 1914, page 5354. The Court then explained the factual position. The appellant had agreed to act as surety for an overdraft facility that the respondent Bank had extended to the principal debtor, Shankaran. The Bank required a guarantee in a prescribed form and gave that form to the principal debtor. Shankaran caused the appellant to fill in the guarantee for a sum of Rs 25,000. The Bank, however, did not accept the guarantee at that amount and asked that the figure be corrected by inserting Rs 20,000 instead. Consequently, the document was returned to the principal debtor, who is said to have altered it. At the time of the alteration the principal debtor was acting for and on behalf of the appellant, because the appellant had handed the deed of guarantee to the principal debtor for the purpose of delivering it to the Bank. In those circumstances the rule that a contract is avoided by material alteration does not apply, because the alteration was not made while the document was in the possession of the promisee or its agent; rather, it was made by the principal debtor who was then acting as the appellant’s agent. Therefore, the appellant’s plea of material alteration could not succeed, and the appeal was dismissed without any order as to costs. The Court further noted that the appeal arose from a suit filed by the respondent Bank against the appellant in his capacity as guarantor and against Sankaran as principal debtor, seeking recovery of monies advanced on an overdraft account. The trial Court had decreed against Sankaran, who never appealed that decree, so the present appeal concerned only the claim against the appellant. The suit against the appellant was based on a letter of guarantee dated 24 May 1947. The plaint stated that by this letter the appellant had undertaken to repay to the Bank the balance due on the overdraft opened for Sankaran, up to a maximum of Rs 20,000, which was also the ceiling of the overdraft. The appellant defended himself by asserting that he had agreed to guarantee only Rs 5,000, that he had signed a letter reflecting that amount, and that the letter had been altered without his consent by substituting Rs 20,000 for Rs 5,000. The appellant contended that this material alteration discharged him from any liability under the guarantee. The trial court found that the amount guaranteed had

The trial court observed that the guarantee letter had originally stated a sum of twenty‑five thousand rupees, and that this figure had subsequently been changed to twenty thousand rupees without the appellant’s consent. The court held that the alteration was material, and therefore the suit against the appellant could not proceed. Consequently, the trial court dismissed the suit and entered a decree in favour of the appellant, reasoning that the unauthorised alteration had effectively destroyed the validity of the guarantee instrument.

The respondent bank appealed this decision to the High Court of Kerala. The High Court accepted the finding that the original amount of twenty‑five thousand rupees had been altered to twenty thousand rupees without the appellant’s agreement, and it suggested that the alteration might have been carried out by the principal debtor, Sankaran. However, the High Court also concluded that the appellant had likely written twenty‑five thousand rupees instead of twenty thousand rupees by mistake, and that the subsequent alteration was intended to give effect to a common understanding among Sankaran, the appellant and the bank. That common understanding, the court said, was that for an overdraft facility of twenty thousand rupees granted to Sankaran, the appellant would provide a guarantee to the bank. Relying on section eighty‑seven of the Negotiable Instruments Act, 1881, the High Court held that the altered guarantee could be enforced and consequently passed a decree against the appellant. The appellant then brought this appeal before the Supreme Court. The bank, for reasons not explained in the record, did not appear before this Court. At the request of the Court, Dr. Seiyid Muhammed represented the bank’s interests and rendered substantial assistance to the proceedings.

The Supreme Court noted that the provision of the Negotiable Instruments Act invoked by the High Court applies only to negotiable instruments, and a letter of guarantee does not fall within that category. Nevertheless, the Court recognised that the underlying principle of that provision might have a broader reach. The principle is articulated in the third edition of Halsbury’s Laws of England, volume two, page three hundred seventy, which states that an alteration made after execution of a deed, if it is not material, does not affect the deed’s validity; conversely, a material alteration that reflects the parties’ original intent, as apparent on the face of the deed, does not invalidate the instrument. It is now well established that this principle extends to instruments made under hand, as affirmed on page three hundred eighty of the same work and in the case of Master v. Miller (1791) 4 Term Rep 320. The Court therefore posed the question whether the alteration in the guarantee letter fell within the scope of this principle. The learned judges of the High Court had concluded that it did, and consequently affirmed the enforceability of the altered guarantee. The Supreme Court, however, could not agree with that conclusion. The Court observed that the permissibility of an alteration under the rule depends on the intention that existed at the time the instrument was executed. Accordingly, the rule requires that the intention be already evident on the face of the instrument, a requirement expressly reflected in the formulation of the principle in Halsbury’s Laws.

It was observed in Halsbury’s Laws of England that the intention required to justify an alteration must already be apparent on the face of the deed. The Court referred to the remarks of Justice Le Blanc in Knill v. Williams, reported in the 1809 volume of the Eastern Reports, to illustrate this principle. Justice Le Blanc stated that, had he believed there was evidence allowing a jury to conclude that words added after the execution of a document were originally intended but omitted by mistake, he would have left that determination to the jury. He recalled the case of Kershaw v. Cox, which was then fresh in his mind, and noted that based on the evidence before him it was impossible for the jury to reach such a conclusion. He further explained that his opinion in Kershaw v. Cox could be supported only on the basis that the alteration made to the bill the day after it was negotiated was a mere correction of a mistake by the drawer, specifically the omission of the words “or order,” which were intended to be inserted at the time of drafting.

The two authorities on which the learned judges of the High Court relied also involved situations where the mistake lay in the original composition of the instrument. In Lachmi Rai v. Srideo Rai the court found that the omission concerning the payment of interest was accidental. Similarly, in Ananda Mohan Saha v. Ananda Chandra Naha, reported in the 1916 volume of the Indian Law Reports, the instrument initially provided for interest on a loan of Rs 200 at the rate of Re 1 per mensem. The instrument was later altered by inserting the words “per cent.” The court observed that it was obvious, upon reading the document, that the parties intended interest to be payable at the rate of one rupee per cent per mensem.

The Court expressed the view that if the intention contemplated in the rule could be inferred merely from a pre‑existing agreement without examining the intention present at the time the instrument was executed, the rule would lack justification. Allowing such a inference would permit an instrument, deliberately drafted in variance with a prior agreement, to be altered by the other party, thereby creating a new contract unilaterally and disregarding the original writer’s intention. The law, however, provides no basis for such a position. While a person who drafts a document in terms that deliberately depart from the underlying agreement may be liable under that agreement, he cannot be held liable for the altered document solely because the alteration renders it consistent with the agreement. Finally, the Court noted that there was absolutely no evidence to suggest any other intention.

In this case the Court observed that when the appellant prepared the letter of guarantee he intended to state the maximum amount of guarantee as twenty thousand rupees, but according to the High Court’s finding he allegedly wrote twenty‑five thousand rupees by mistake. The High Court based that conclusion on conjecture, as shown by its phrasing that the appellant “probably made a mistake in Ext. C”. No substantive proof was offered to support that conjecture. By contrast, the record shows that the figure twenty‑five thousand rupees was entered in the letter of guarantee deliberately. That conclusion is supported by testimony of the bank’s agent. The agent explained that the overdraft facility began on 24 February 1947 when the plaintiff, Sankaran, executed a promissory note for twenty thousand rupees in favour of the bank. At that time the appellant was unavailable to sign the guarantee letter. The bank therefore produced a typed letter containing blank fields for the guarantor to fill in the maximum limit, the interest rate and the date. Sankaran returned the incomplete letter to the bank in May 1947, and at that moment the blank for the limit was filled with the figure twenty‑five thousand rupees. Sankaran asserted that he required an overdraft of twenty‑five thousand rupees and would renew the promissory note for that amount. The bank, however, was unwilling to advance more than twenty thousand rupees, and consequently returned the letter of guarantee to Sankaran. Sankaran took the document away and later submitted it again with the maximum limit corrected to twenty thousand rupees. This sequence of events constitutes the entire evidence concerning the amount written in the guarantee. The Court further noted that the bank’s agent did not refer to any oral arrangement with the appellant, nor did he indicate any interview with the appellant regarding the overdraft or the guarantee. In the appellant’s written statement he admitted that he had agreed to guarantee repayment of the overdraft up to five thousand rupees, but he did not claim that this agreement was verbal; instead he referred to the letter of guarantee. While the appellant’s admission may be used against him, it must be considered in its entirety and not in isolation. Moreover, the bank never pleaded the existence of any verbal guarantee agreement, either in its written pleadings or in its response to the appellant’s statement, where it alleged that the letter of guarantee had been materially altered and that no suit could be based on it. The trial court also found no evidence of any oral agreement. Had such an agreement existed, the typed letter of guarantee would have been completed without any blank spaces. In view of these facts, the Court concluded that it was impossible to infer the existence of any prior agreement regarding the guarantee or its limit between the appellant and the bank.

In this case, the Court observed that the view of the High Court, which held that the figure of Rs 25,000/- appearing in the letter of guarantee was a mistake, could not be sustained. Even if one were to presume that a verbal agreement had existed between the parties – and, if any such agreement were to exist, it could only have been oral – the request made by Sankaran that the overdraft limit be raised to Rs 25,000/- actually suggests that the parties had deliberately recorded Rs 25,000/- as the guaranteed amount. Consequently, the Court found that the letter of guarantee could not have been written by mistake. The evidence presented failed to establish any prior agreement and, on the contrary, tended to demonstrate that there was no error in the drafting of the letter of guarantee, even assuming an agreement had existed. Accordingly, the Court concluded that the High Court was mistaken in holding that the alteration of the guarantee was intended to implement the parties’ intention. Moreover, the Court held that the principle enunciated in section 87 of the Negotiable Instruments Act was inapplicable to the facts of this dispute.

Dr Seiyid Muhammed, however, approached the matter from a different perspective. He argued that, in order to set aside an alteration made to an instrument without the knowledge of a party, the alteration must be material, and he supported this proposition by quoting a passage from Halsbury’s Laws of England, third edition, volume 11, page 380. He further maintained that an alteration could not be considered material unless it inflicted prejudice upon a party. pointing out that, in the present case, the alteration reduced the appellant’s liability from Rs 25,000/- to Rs 20,000/-, and therefore was not a material alteration. On that basis, he contended that the letter of guarantee had not been avoided by the alteration.

The Court, however, found that Dr Seiyid Muhammed’s argument offered no assistance to the Bank. Assuming, for the sake of argument, that an alteration which does not prejudice a party is not material and does not release that party from liability, the Court emphasized that such a rule does not render the altered instrument binding on the affected party. To hold otherwise would amount to a unilateral modification of the terms of a contract that was originally created by the mutual consent of both parties, or to an alteration of an offer without the offeror’s assent – actions that are not permissible under Indian law. The Court further noted that it could locate no authority establishing that an instrument, once altered in this manner, would become binding on the party who did not consent to the change.

Consequently, the Court concluded that, even if Dr Seiyid Muhammed’s position were accepted, the result would be merely that the alteration could be disregarded and the instrument would be treated as if it remained in its original, unaltered form. In the present case, therefore, we would

In this case the appellant had written a letter of guarantee in which it undertook to repay the balance due by Sankaran on the overdraft account up to a limit of twenty‑five thousand rupees, and the suit that had been filed was not based on a contract to guarantee twenty‑five thousand rupees. According to the pleadings and the evidence produced by the Bank, there had never been any agreement for such a guarantee between the Bank and the appellant; consequently the letter could not be treated as proof of the existence of a contract of guarantee. Moreover, the evidence already referred to by the Court showed that the letter, when presented as an offer, had not been accepted by the Bank, and therefore the original form of the letter was of no assistance to the Bank in the present proceedings, because it did not establish a guarantee for either twenty‑five thousand rupees or twenty thousand rupees. The Bank, however, argued that the letter contained an enforceable contract because it was supported by consideration that had already been supplied by the Bank, namely the advance made to Sankaran before the date of the letter and the promise to make further advances. The Bank further contended that the inadequacy of consideration did not defeat the existence of a contract, relying on Explanation 2 of section 25 of the Contract Act, 1872, and asserted that the Bank’s undertaking to advance up to twenty thousand rupees could support the appellant’s promise to guarantee up to twenty‑five thousand rupees. Yet the Bank’s own case was that the contract of guarantee was for twenty thousand rupees, and that contract was not founded on the letter, which alone formed the basis of the suit. If the letter did not give rise to a contract, then no question of consideration to sustain such a contract could arise, and the suggestion that the alteration of the instrument was immaterial and did not affect the appellant’s obligations proved to be without purpose in these facts. The position may therefore be summarised as follows: the suit against the appellant was based on a written contract to guarantee repayment of Sankaran’s dues to the Bank up to twenty thousand rupees, and there was no evidence of any verbal guarantee contract. The appellant had written a letter guaranteeing repayment up to twenty‑five thousand rupees, and Sankaran had also signed that letter, but his signature was irrelevant to the question of guarantee, because a debtor cannot guarantee his own debt; his signature only indicated his liability for the overdraft amount, a liability he had already undertaken by executing a promissory note for twenty thousand rupees in favour of the Bank. Consequently, his signature on the guarantee letter made no difference to the legal relations that the Court had to consider. The Bank, on its own case, had refused to accept the letter, and therefore no contract on the terms of the letter had ever been concluded. The letter had subsequently been altered, apparently without the appellant’s consent, by substituting the sum of twenty thousand rupees for twenty‑five thousand rupees, and if such alteration occurred without consent it could not be authorised by the appellant; if it had been authorised, consent would have been implied, yet there was no evidence, pleading or finding of any such authority. The altered document therefore was not binding on the appellant, and if the alteration were ignored the document would create no liability because the Bank had refused to accept a guarantee on the terms contained in the document prior to alteration. Moreover, the contract that formed the basis of the suit was different from any contract that might have been created by the document as it stood before alteration, and the unaltered document could not establish the contract that was the subject of the suit.

The Court observed that the original guarantee document had been changed without the appellant’s knowledge or permission, apparently by the principal debtor, who substituted the amount of twenty‑thousand rupees for the original twenty‑five‑thousand rupees. The Court held that any alteration made without the appellant’s consent could not be considered authorized by him; if consent had existed, it would have been implied. The judgment further noted that there was no evidence, no pleading, and no finding of any authority by which the appellant could be bound by the altered terms. Consequently, the altered document could not bind the appellant because the modification was not made to give effect to the parties’ mutual intention. Ignoring the alteration, the Court found that the document generated no liability for the appellant, since the bank had refused to accept a guarantee on the unaltered terms. Moreover, the contract that the plaintiff relied upon differed from any contract that might have existed before the alteration, and the unaltered document could not establish the plaintiff’s claim. Accordingly, the Court concluded that the suit as framed against the appellant must fail. It therefore allowed the appeal, awarded costs to the appellant in both the appellate and the lower proceedings, and dismissed the suit against the appellant.

Another judge, after reviewing the draft judgment of a colleague, expressed respectful disagreement and held that the appeal must fail. He briefly outlined the factual background, stating that the plaintiff, Thomco’s Bank Ltd. of Trivandrum, had instituted a suit against V. Sankaran, the principal debtor, and N. S. Anirudhan, the surety and appellant. The suit was based on a promissory note dated 24 February 1947 executed by Sankaran and on a letter of guarantee dated 24 May 1947 signed by the appellant. Since Sankaran had not appealed the decree against him, the Court did not revisit the earlier facts concerning the promissory note. The appellant contended that the guarantee originally covered five thousand rupees but had been altered without his knowledge to twenty thousand rupees. Exhibit C, the guarantee letter, displayed two corrections: the numeral “5” in the figure twenty thousand was altered to “O”, and the word “five” in the phrase “rupees twenty‑five thousand” was struck out. The appellant claimed that the figure five thousand had been changed to twenty thousand by inserting the numeral “2” and converting the “5” to “O”, and that the wording was modified by adding “twenty” and deleting “five”. The Court did not accept this version and held that the appellant’s case was not believed, although it acknowledged that the correction was plainly visible.

In this matter the Court considered whether the alteration of the letter of guarantee discharged the surety from liability. The High Court had previously held that there was no oral agreement between the bank and the surety prior to the execution of the letter, and that the letter was executed after the loan had already been made. The bank contended that when the borrower, Sankaran, presented the letter and requested an additional loan of five thousand rupees, the bank refused to advance any further sum and also declined to accept the guarantee for twenty‑five thousand rupees because it feared that acceptance would obligate the bank to extend an additional five thousand rupees. After the bank’s refusal, Sankaran withdrew the letter, and at a later time returned it with the numeral “5” in the figures changed to “0” and the word “five” crossed out. Neither Sankaran nor the surety initialed these corrections. Despite the unauthenticated alterations, the bank accepted the modified document, retained it, and instituted suit against the surety on its basis. The question before the Court was whether the surety’s liability was discharged by an alteration that had not been proven to have been made by him or with his knowledge or consent. The Court noted that the law declares a document void only when it has been materially altered, and that a custodian who makes or permits an alteration while the document is in his possession cannot later sue on it, because he is obligated to preserve the document in the condition in which it was received. In the present case the document had not been altered by the bank, nor had the bank given its consent or connivance to any alteration while the paper was in its custody. The alteration appeared to have been effected either by the surety, by the borrower, or by both of them. If the surety himself, or the surety together with the borrower, had made the alteration, the document remained the surety’s instrument and the bank’s suit based on it was proper against him. If, however, the alteration had been made solely by the borrower, the issue was whether such a change amounted to a material alteration that would render the document void with respect to the surety. The High Court had concluded that the change was not material, and the Court was inclined to adopt that view. The surety, by his letter to the bank, had intended to guarantee an overdraft of the borrower not exceeding twenty‑five thousand rupees; his claim that the guaranteed amount was only five thousand rupees was not accepted. The original guarantee was for twenty‑five thousand rupees and had been reduced, by the alteration, to twenty thousand rupees. Assuming that the bank had accepted the guarantee, the Court examined whether the reduction of the guaranteed sum constituted a material alteration that would terminate the surety’s liability. The Court held that it did not, because the document continued to reflect the surety’s original intention to guarantee up to twenty‑five thousand rupees, and the reduction did not destroy that essential purpose.

The Court observed that the original purpose of Anirudhan’s guarantee was to secure a loan of up to Rs. 25,000, a sum that now included the amount of Rs. 20,000 for which the guarantee continued to stand. The Court then considered whether Anirudhan could contend that the guarantee had come to an end. It identified that the surety, Anirudhan, could rely upon two distinct defences. The first defence was that he had offered to act as surety on specific terms, and because those terms had been altered, he claimed that he was discharged from any further liability. The second defence also depended upon the alteration, alleging that the document he had executed had been materially altered, rendering it void under the plea of non est factum. Both defences therefore rested on the question of whether the contract to which Anirudhan had bound himself had been altered. The Court explained that a surety is treated as a “favoured debtor” whose liability is described as strictissimi juris. In support of this principle, the Court quoted Lord Westbury, L.C., in Blest v. Brown [(1862) 4 De G.F. & J. 365; 45 E.R. 1225] who stated: “It must always be recollected in what manner a surety is bound. You bind him to the letter of his engagement. Beyond the proper interpretation of that engagement you have no hold upon him. He receives no benefit and no consideration. He is bound, therefore, merely 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 whether the alteration be innocently made, he has a right to say, ‘The contract 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.’”

The Court further noted that it was not necessary to revisit the factual matrix of the Blest case, where the surety had guaranteed performance of a contract for the supply of flour to a banker who, in turn, had undertaken to supply bread to the Government. That case turned on statutory stipulations and their breach, and its decision could not be treated as a direct authority for the present dispute, apart from the general observation on surety liability. The Court then turned to the authority of the Court of Appeal in Holme v. Brunskill [(1877) 3 Q.B.D. 495]. Referring to the judgment of Cotton, L.J., the Court reproduced the following passage: “The true rule in my opinion is, that if there is any agreement between the principals with reference to the contract guaranteed, the surety ought to be consulted, and that if he has not consented to the alteration, although in cases where it is without inquiry evident that the alteration is unsubstantial, or that it cannot be otherwise than beneficial to the surety, the surety may not be discharged; yet, that if it is not self‑evident that the alteration is unsubstantial, or one which cannot be prejudicial to the surety, the Court will not discharge the surety.” This statement was supplemented by the dissent of Brett, L.J., who warned against an overly broad application of the doctrine of release of sureties. The Court acknowledged a noticeable difference between the strict rule expressed by Lord Westbury and the more nuanced approach articulated by Cotton, L.J. The modern law, according to the Court, accepts that unsubstantial alterations that are to the benefit of the surety do not discharge the surety from liability, whereas alterations that are to the disadvantage of the surety, or whose unsubstantial nature is not obvious, may permit the surety to claim discharge without the Court needing to examine the actual prejudice suffered. The Court also noted that the dictum of Cotton, L.J. had been approved by the Judicial Committee in Ward v. The National Bank of New Zealand, Limited [(1883) 8 App. Cas. 755], and that similar liberal views have been adopted in subsequent decisions.

In the earlier discussion the Court explained that when a contract is altered the guarantor, or surety, must be consulted, and if the guarantor has not consented to the alteration the Court may have to investigate the effect of that alteration. The judgment quoted a statement of law which said that the Court would not open an inquiry into the consequences of the change unless the guarantor’s consent was missing. The Court then added that a dissenting opinion was recorded by Brett, L.J., who held that in the case before him the surety was not released. Brett, L.J., observed that the doctrine of release of sureties had already been extended as far as it could be, and he would not expand it further. The judgment pointed out that there is a clear distinction between the strict rule articulated by Lord Westbury and the approach set out by Cotton, L.J. The modern position, according to the Court, accepts that an alteration which is unsubstantial and which benefits the surety does not discharge the surety from his liability. Conversely, if an alteration is to the detriment of the surety, or if the unsubstantial nature of the change is not obvious, the surety may claim that he has been discharged. In such circumstances the Court will not investigate whether the alteration actually caused any prejudice to the guarantor. The dictum of Cotton, L.J. was subsequently quoted with approval by the Judicial Committee in Ward v. The National Bank of New Zealand, Limited [(1883) 8 App. Cas. 755], and other decisions that adopt a similarly liberal view were also mentioned in those authorities.

Before turning to the specific position of Anirudhan in relation to the law governing sureties, the Court observed that the law concerning the alteration of documents is closely connected to the present case. Historically, the law applied a very strict rule that any alteration, however slight, rendered a document void. The leading authority for many years was Pigot’s case [11 Co. Rep. 26 b; 77 E.R. 1177], where Lord Coke set out the doctrine. He resolved that if a lawful deed is raised in a manner that makes it void, the obligor may plead non est factum and present evidence because, at the time of the plea, the deed is not his. He further resolved that any material alteration to a deed, whether made by the plaintiff, a stranger, or by any means such as interlineation, addition, raising, striking through a line, or inserting words, would cause the deed to become void. Even if the obligee himself makes an alteration that is not material in wording, the deed is still void; however, if a stranger without the obligee’s privity alters the deed in a material point, the deed is not avoided. The same passage appears in an article titled “Discharge of Contracts by Alteration” by Williston, published in the eighteenth volume of the Harvard Law Review at page 105. The Court noted that this strict rule was later softened by subsequent cases and was expressly departed from in Aldous v. Cornwell [(1868) 3 Q.B. 573], where Lush, J., speaking for Cockburn, C.J., Blackburn, J., and himself, after referring to many authorities, stated that the authorities did not bind him to the doctrine of Pigot’s case.

The Court noted that it was not bound by the precedent set in Pigot’s case or by the authorities that had been cited in support of that decision. Accordingly, the Court was unwilling to declare as a rule of law that the mere addition of words, which could not possibly prejudice any party, would invalidate a promissory note. The Court found such a rule to be contrary to both justice and common sense, because it would allow a maker of a promissory note to escape his liability simply because the holder had written on the note the words that the law would have supplied in their absence. The observation concerning the addition or alteration of a promissory note was made before the enactment of the Bills of Exchange Act in England, an enactment that later modified the law relating to negotiable instruments. Nevertheless, the Court considered that the earlier observations remained highly relevant to the present dispute, which involved a document executed by two parties – one being the debtor and the other his surety – where the debtor had reduced, rather than increased, the amount of his own liability as well as that of the surety. The principle that immaterial alterations do not affect the validity of a document was reinforced by the remark of Swinfen Eady, J., in Bishop of Crediton v. Bishop of Exeter [1905] 2 Ch. 485, where the earlier rulings in Pigot’s case [11 Co. Rep. 26b; 77 E.R. 1177] and the statement in Shepard’s Touchstone, 7th ed. (Preston’s), p. 55, were rejected. During the arguments, Swinfen Eady, J., referred to cases where corrections made in the testimonium of documents to bring them into conformity with the actual facts were held not to be material alterations.

The Court then framed the question before it: whether a document jointly executed by two persons, creating an equal liability for both, should be regarded as materially altered if the liability of each is reduced equally but the alteration is made by only one of them. The Court held that such an alteration must be regarded as unsubstantial and, in fact, beneficial to the surety; therefore, it could not invoke the strict rule articulated by Lord Coke or by Lord Westbury in the cited authorities. To illustrate the principle, the Court offered a hypothetical: suppose A places an order with a trader for ten bags of wheat on credit, and B endorses the order by writing, “I guarantee payment up to ten bags.” If A later discovers that the trader has only six bags in stock and accordingly amends both the order and the endorsement by changing “ten” to “six,” the Court concluded that neither the rigid rule nor the alternative rule would apply. The Court further observed that the strict rule derived from the well‑known Suffell’s Case [(1882) 9 Q.B.D. 555], in which a Bank of England note was mutilated and its number destroyed, was based on the special facts of that case, the note’s number being deemed its vital part. Consequently, the Court found that the document before it had not been materially altered in a manner that changed its nature, and the alteration did not relieve the surety of liability arising under the document.

The Court observed that the rule in Suffell’s Case [(1882) 9 Q.B.D. 555] concerning a material alteration of a Bank of England note was not applied by the Privy Council in a later decision involving a bank note that was merely a contract and not legal tender. In that later case the note had been destroyed when the holder inadvertently left it in a pocket of a garment that was subsequently washed; the note was later reconstructed showing the contract terms but lacking the original number. The Privy Council, referring to Hong Kong and Shanghai Banking Corporation v. Lo Lee Khi [[1928] A.C. 181], held that the bank remained liable even though the contract had been altered by an eraser. The Court then explained that the authorities cited show that the two lines of argument that the appellant, Anirudhan, sought to rely upon are not viable in the present circumstances. The Court found that the document at issue was not materially altered because the changes did not affect the document’s essential character. Consequently, the alteration could not relieve the surety from liability. The alteration had been effected by a co‑executant who reduced his own liability as well as that of the surety. Moreover, the surety himself had understood the law in this way, having argued that the original guarantee covered an overdraft of Rs 5,000 but that the document had been altered to guarantee an overdraft of Rs 20,000. The Court held that this allegation was false and that the surety never claimed the document was void because the amount had been reduced from Rs 25,000 to Rs 20,000. It was not suggested that Anirudhan intended to guarantee Rs 25,000 but not Rs 20,000, as he never approached the bank to make such a condition part of the agreement. Accordingly, the Court concluded that Anirudhan could not claim that the document had become void against him or that the contract, which arose from the bank’s acceptance of the altered document, did not bind him.

The Court further held that it was unnecessary to examine the existence of any prior oral agreement, as no evidence of such an agreement was presented. The letter written by Anirudhan to the bank was based on consideration that had already been transferred to Sankaran, and Anirudhan intended to guarantee that consideration. Even if the letter were treated as an offer from Anirudhan to the bank, the bank had accepted the amended offer, and Sankaran was deemed to have possessed the authority to reduce, but not to increase, the amount. The alteration of the document had occurred while it was in the possession of the very person who, as Anirudhan’s agent, presented it to the bank on both occasions. The Court therefore concluded that Anirudhan had held out Sankaran as his agent for this purpose, creating an estoppel against Anirudhan because the bank had relied on Sankaran’s apparent authority. Accordingly, the offer remained, in its amended form, an offer of Anirudhan to the bank, and the bank’s acceptance transformed it into a binding contract of guarantee supported by the past consideration on which Anirudhan’s original offer was based.

The Court observed that the instrument in question constituted a contract of guarantee which was supported by the earlier consideration that had originally formed the basis of Anirudhan’s offer. Because the guarantee was grounded in that past consideration, the Court concluded that the contractual relationship remained valid despite the subsequent alterations alleged by the parties. The adjudicating judge expressed the view that, under the facts presented, the appeal could not be sustained and therefore must be dismissed. Accordingly, the judge ordered that the appeal be dismissed in its entirety, reflecting the conclusion that the appellant had failed to establish any reversible error. The Court, following the majority opinion, affirmed the dismissal and expressly stated that no order regarding the award of costs would be made. Consequently, the appeal was formally closed without any costs being imposed on either party, and the matter was concluded in the manner set out by the judgment. The decision thus left the original guarantee agreement in force, confirming that the parties’ rights and obligations under that agreement remained unchanged. By refusing to grant any cost relief, the Court signaled that the appeal did not merit any financial consequence for the parties involved.