Telangana High Court

G Gopal vs A Devender Reddy on 10 June, 2022

Bench: P Naveen Rao, G.Radha Rani

           HONOURABLE SRI JUSTICE P.NAVEEN RAO
                           AND
           HONOURABLE DR. JUSTICE G.RADHA RANI

           CITY CIVIL COURT APPEAL NO.10 of 2019

                       Date: 10.06.2022


Between:

G.Gopal S/o. Sri G.Yellaiah,
Aged about 59 years, occu:Business,
r/o.H.No.9-4-62/20/5, Tolichowki,
Hyderabad.
                                            ..... Appellant/
                                                  Plaintiff
             And
A.Devender Reddy, s/o. A.Narayan Reddy,
Aged about 59 years, occu: Business,
R/o.H.No.8-2-618/M, Plot No.18,
Road No.11, Banjara Hills, Hyderabad.
                                          ..... Respondent/

Defendant

This Court made the following:

PNR,J & GRR,J CCCA No.10 of 2019

HONOURABLE SRI JUSTICE P.NAVEEN RAO AND HONOURABLE DR. JUSTICE G.RADHA RANI

CITY CIVIL COURT APPEAL NO.10 of 2019

JUDGMENT: (per Hon'ble Sri. Justice P.Naveen Rao)

Heard Sri S.Malla Rao learned counsel for the appellant/

plaintiff and Sri Shyam S.Agrawal learned counsel for the

respondent/ defendant. Plaintiff is in appeal against the

judgment and decree dated 15th June, 2018 by the Court of II

Additional Chief Judge, City Civil Court at Hyderabad,

dismissing the suit. The parties are referred to as arrayed in

O.S.No.467 of 2010 on the file of II Additional Chief Judge, City

Civil Court at Hyderabad.

2. Plaintiff instituted the suit for recovery of sum of

Rs.57,01,479/- with future interest @ 18% per annum.

According to the plaintiff he is an LIC Agent. Defendant and his

wife took LIC policies through the plaintiff. On the request made

by the defendant and his wife, plaintiff gave hand loan of

Rs.9,38,000/-, Rs.9,38,000/-, Rs.9,43,108/- and Rs.9,38,000/-

on 31.08.2007, 31.08.2007, 01.11.2007 and 31.12.2007,

respectively. At the time of extending hand loans, defendant

executed four promissory notes, marked as Exs.A1 to A4,

agreeing to repay the entire amount with interest @ 18% per

annum. Alleging that in spite of repeated demands to repay the PNR,J & GRR,J CCCA No.10 of 2019

amounts borrowed from him, the defendant postponed

repayment on one pretext or the other compelling the plaintiff to

issue legal notice on 19.08.2010 demanding repayment and on

failure to respond to the notice to repay the amounts borrowed

from him, he instituted the instant suit.

3. In the written statement, defendant deposed that he

borrowed small amounts from the plaintiff in the year 2001 by

executing the Exs.A1 to A4, but subsequently amounts were

repaid. He denied the allegation of borrowing huge amounts as

mentioned in the plaint. According to the defendant, he and his

wife took policies of Rs.5,00,000/- each under compulsion and

pressure exerted by the plaintiff, but due to paucity of funds,

they could not pay subsequent instalments. It is alleged that

plaintiff is a professional money lender doing business of money

lending without having valid licence. It is further contended that

the promissory notes relied upon by the plaintiff were fabricated,

created, forged and manipulated.

4. Based on the pleadings, the trial Court formulated the

following issues:

(1) Whether the suit promissory notes dated 31.08.2007, 01.11.2007 and 31.12.2007 are true, valid, supported by consideration and binding on the defendant and whether plaintiff is entitled for the suit amount ?

(2) To what relief ?

PNR,J & GRR,J CCCA No.10 of 2019

5. On behalf of the plaintiff, plaintiff was examined as P.W.1

and on behalf of defendant, defendant was examined as D.W.1.

On behalf of plaintiff, Exs.A1 to A23 were marked. Handwriting

Expert was examined as C.W.1 and his report was marked as

Ex.C1. The trial Court decided the issue No.1 against plaintiff

and dismissed the suit.

6. Learned counsel Sri S.Malla Rao contended that in the

written statement, the defendant has not denied execution of

Exs.A1 to A4. The allegation of fabrication, forgery and

manipulation is vaguely made. On a plea of forgery, there was

no specific assertion in the written statement. By referring to

Order VIII of Code of Civil Procedure, 1908, he would submit

that it is the duty of the defendant to clearly answer the

assertions made by the plaintiff, but could not give an evasive

reply. Every allegation of fact, if not denied in clear and specific

terms, amounts to deemed admission of fact alleged by the

plaintiff. It is not the case of the defendant that Exs.A1 to A4 are

forged. In fact, defendant admitted of borrowing money from the

plaintiff and executing Exs.A1 to A4. Therefore, when there is no

specific denial on the alleged execution of promissory notes and

no specific allegation of forgery is made, the trial Court erred in

referring Exs.A1 to A4 to Expert opinion. Further, once the

defendant admits of borrowing money and execution of PNR,J & GRR,J CCCA No.10 of 2019

promissory notes, he accepts his liability and presumption is to

correctness of the contents, dates and other particulars in

Exs.A1 to A4. This aspect was not properly appreciated by the

trial Court. He would submit that once presumption on

consideration and as to the date on the negotiable instrument is

established, the burden is on the defendant to disprove the

assertion of the plaintiff, but defendant miserably failed, except

vaguely contending on the alteration of the year as to 2007.

According to the learned counsel, there was no material

alteration without consent of the defendant.

7. Learned counsel for the defendant submitted that trial

Court has analyzed the evidence on record carefully and having

found that there was material alteration in negotiable

instruments in issue has rightly held that plaintiff is not entitled

to succeed in the suit. There is no perversity in the decision of

the trial Court. Once material alteration is proved, plaintiff

cannot seek enforcement of promissory notes relied upon by

him.

8. The issue for consideration is:

1) Whether the trial Court erred in holding that there was

material alteration with reference to the year mentioned in

Exs.A1 to A4, and therefore is not entitled to recover the

amounts covered by Exs.A1 to A4 ?

PNR,J & GRR,J CCCA No.10 of 2019

9. The execution of Exs.A1 to A4 and borrowing the amount

is not disputed by the defendant. His defence is two fold. Firstly,

the amount mentioned in four promissory notes was not correct

and that he borrowed small amount and said amount was also

repaid and there was no liability on his part. Second limb of the

defence is that Exs.A1 to A4-promissory notes were executed in

the year 2001, but later plaintiff altered the year of execution to

2007. According to the defendant, the material alteration is

visible to a naked eye and supported by Expert opinion.

10. Thus, the issue boils down to whether there was material

alteration with reference to the year of execution of promissory

notes marked as Exs.A1 to A4.

11. From the bare look at Exs.A1 to A4, it is apparent that the

numerical '7' is not written as can normally be written leading to

suspicion of correction of year 2001 as 2007. Ex.C1 is the report

of Telangana State Forensic Science Laboratories. The Expert

opines that "there are alterations in the red enclosed portions

marked Q1 to Q8. Numerical '1' is altered as numerical '7' with

different tint of ink". In his deposition, the Expert stood by the

contents of Ex.C1. In the cross-examination, CW.1 deposed

that she had taken the printout of Q1 to Q8; that added stroke

would always be disproportionate to the original existing stroke PNR,J & GRR,J CCCA No.10 of 2019

with uneven ink spread; that when the stroke added to the

existing stroke, there will be tremor of alterations; that there

would be difference in pressure of existing stroke and in the

added stroke and that pressure cannot be standard in ball

point pen; she denied the suggestion that the direction of added

stroke would change; she denied the suggestion that alterations

and additions might only be decipherable under U.V.rays; she

denied the suggestion that only way to pressure and

demonstrate those observations regarding alterations and

additions to the report was by photographing them. She had

admitted that all the aspects stated in the cross-examination

were not actually mentioned in the report. She has categorically

stated that Forensic Science Laboratory is not submitting

photographs, charts, graphs, sketches, diagrams etc., to the

Court along with the opinion and they are being produced only if

the Court directs them to produce. These assertions are not

rebutted.

12. It was vehemently contended by the learned counsel for

plaintiff that once twin conditions of Section 118 of the

Negotiable Instructs Act, 1881 (for short, 'the Act') are complied,

it is no more open to the trial Court to deny the prayer sought by

the plaintiff. According to the learned counsel, presumption on

consideration was proved as defendant himself accepted PNR,J & GRR,J CCCA No.10 of 2019

borrowing of money and execution of Exs.A1 to A4-promissory

notes. He further submitted that as incorporated in Section

118(b) of the Act, there is always a presumption of validity of the

date mentioned in the promissory note, if the promissory note

bears a date. In the instant case, promissory notes bear dates of

execution and it is presumed that they were drawn on such

dates. The defendant having failed to rebut two essential legal

presumptions cannot take the plea of alteration to frustrate valid

claim.

13. There is no quarrel with the proposition on presumption of

a valid instrument on satisfying twin requirements of Section

118 of the Act. But, the issue for consideration is not with

reference to date on a negotiable instrument, but issue is on

alteration of dates mentioned in the negotiable instruments. If

there is an alteration in the negotiable instrument even with

reference to date, Section 87 of the Act comes into operation.

14. Section 87 of the Act reads as under:

"S.87. Effect of material alteration.--Any material alteration of a negotiable instrument renders the same void as against any one 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. Alteration by indorsee. -- And any such alteration, if made by an indorsee, discharges his indorser from all liability to him in respect of the consideration thereof. The provisions of this section are subject to those of Sections 20, 49, 86 and 125."

15. According to this provision, any alteration of a negotiable

instrument renders the same void and if such alteration is made PNR,J & GRR,J CCCA No.10 of 2019

by indorsee, it discharges his indorser from all liability to him.

Thus, even when a negotiable instrument passes the twin tests

laid down in Section 118, indorsee cannot enforce against

indorser if there is material alteration.

16. 'Material alteration' literally means an alteration made to

an instrument that adds or deletes any provision or changes the

rights and obligations of any party under it. 'Material alteration'

in negotiable instrument means, any change in written

instrument which makes it to speak different legal language

from that of the original, that includes altering the date of

instrument.

17. Section 87 carves out two exceptions to apply the penal

consequence on indorsee. Firstly, the material alteration must

be with the consent of the other party and that it was made

towards the furtherance of a common intention. Both these

exceptions are not attracted to the case on hand.

18. This issue was considered by this Court in the following

decisions:

i) Akllampati Subba Reddy alias Subbarami Reddi Vs. Neelapareddi Ramana Reddy1

ii) Jayantilal Goal vs. Smt Zubeda Khanum2

1965 SCC Online AP 172

1985 SCC Online AP 22 PNR,J & GRR,J CCCA No.10 of 2019

18.1. In Allampati Subba Reddy, this Court held as under:

"4. The law on the point seems to me to be clear. The English rule that a material alteration of a date makes it altogether void is summarised thus in Halsbury's Laws of England, III Edition, Vol. 11, page 367, paragraphs 598 and 599:--

"598. A writing proposed to be executed as a deed may be altered by erasure or interlineation or in any other way before it is so executed; and any alteration so made before execution does not affect the validity of the deed. Any alteration, erasure or interlineation appearing upon the face of a deed is presumed, in the absence of evidence to the contrary, to have been made before the execution of the deed."

"599. If an alteration (by erasure, interlineation or otherwise) is made in a material part of a deed, after its execution, by or with the consent of any party thereto or person entitled thereunder, but without the consent of the party or parties liable thereunder, the deed is thereby made void. The avoidance, however, is not ab initio, or so as to nullify any conveyancing effect which the deed has already had; but only operates as from the time of such alteration, and so as to prevent the person, who has made or authorised the alteration, and those claiming under him, from putting the deed in suit to enforce against any party bound thereby, who did not consent to the alteration, any obligation, covenant or promise thereby undertaken or made."

5. The law is not otherwise in India. The abovesaid rule is quoted with approval in several Indian decisions. Section 87 of the Negotiable Instruments Act statutorily adopts the said rule, Section 87 in so far as it is relevant is in the following terms:--

"Any material alteration of a negotiable instrument renders the same void as against any one 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;"

6. It must be remembered that it is not any and every alteration that avoids the instrument. To have that effect, the alteration must be in a material particular. A material alteration can be brought about by change of date or time of drawing or of the place of payment or by change in the sum payable etc., It is thus evident that the date of a promissory note is a material portion of it, and any alteration of such date will naturally avoid the promissory note, unless, of course, as stated in the Section, such an alteration is made with the consent of the other party, or is made to effectuate the common intention of the original parties. It is wrong to assume that the date of the promissory note is merely a description. It indicates the time when the promissory note was executed. In most cases, the date is very material in calculating the date of the performance of the contract and more often fixing the period of limitation within which the plaintiff will have to institute the suit on the foot of such promissory note. It is immaterial whether the alteration is made in the date or month or year. Any such alteration being material must necessaily result in the avoidance of the promissory note.

Xxx PNR,J & GRR,J CCCA No.10 of 2019

9. It is thus evident that where the instrument appears to be altered, it is incumbent upon the holder, that is, the plaintiff, to show that the alteration is not improperly made. It is now fairly settled that in case of negotiable instrument, the presumption is that the alteration was made subsequent to the issue of instrument What must follow is that when a promissory note appears to have been altered or there are marks of erasures on it, the party seeking to enforce the promissory note is bound to satisfy the Court that alteration does not avoid the promissory note by explaining how the alteration has been effected: If it falls under any one of the exceptions mentioned above, it is obvious that such an alteration will not fall within the mischief of Section 87 of the Negotiable Instruments Act."

18.2. In Jayantilal Goal, this Court held as under:

"6. Now, a look at Ex. A.1 pro-note itself makes it apparent that the date, which is in a different ink that is, other than the ink that has been used for body of the pro-note, is a subsequent introduction into the document. This insertion also amounts to 'material alteration', as it takes in not only a case where certain thing which is already written has been altered or erased, but also a new insertion, (see A. Subba Reddy v. Neelapa Reddi, AIR 1966 Andh Pra 267)."

19. The trial Court observed that nothing incriminating

evidence was extracted from CW.1 by the plaintiff to discredit her

assertions on material alteration to year of execution of

promissory notes marked as Exs.A1 to A4. Having regard to the

evidence brought on record, the trial Court rightly observed that

there is material alteration to the numerical '7' in the year

mentioned in Exs.A1 to A4 showing the execution of promissory

notes as if in the year 2007, whereas they were actually executed

in the year 2001.

20. We have looked into the evidence on record. The evidence

on record clearly points out alteration of numerical '1' as '7',

changing the year of execution from 2001 to 2007. Once it is