QS Study

Material Alteration of Cheque

Cheques are a form of payment that is recorded by accountants on your receivables ledger. While you may record the payment instantly upon receipt, there will be a lag time between when you record the payment and when the check clears the bank and is posted to your account.

A pertinent question arises as to what are material alterations? Any alteration in the original state of a cheque such as a date, amount, payee’s name, changing the word ‘order’ to bearer appearing after payee’s name or in the endorsement is called material alteration. The term material alteration is not defined either in the Indian contract Act, 1872 or in the Negotiable instrument Act. 1881 even though documents relating to these acts suffer frequent alteration. The term material alteration does not appear to have received any exact definition from the legislature in any enactment in India. It would, therefore, be appropriate to look at the works of legal authorities and the judgments of the courts to find out as to how the term has been understood interpreted. Their Lordships of the Privy Council in the case of NathuLalu. GomitKuar cited the following paragraph from the Halsbury’s alteration very succinctly:

“A Material Alteration is one which varies the rights liabilities, or legal position of the parties ascertained by the deed in its original state or otherwise varies the legal effect of the instrumentals expressed or reduces to certainty some provision which was originally unascertained and as such void, or may otherwise prejudice the party bound by the deed as originally executed”,

The Supreme Court of India in Loonkran thieves Ivan E. John looked at the above definition with approval.

From the above definition, the following elements emerge the presence of which would make a variation in an instrument as material alternation:

  • A Material alteration varies the apparent nature of relationships of the parties as it alters rights, liabilities or legal position vis-a-vis what was originally stated in the documents.
  • It may also affect the legal remedies available to the parties.
  • Impact of changes could be that the documents become void.
  • A consequence of material alteration could be that it may prejudice the party vis-a-vis his interest as determined originally.
  • Material Alteration may also remove the unambiguity of the original document and may make it, though alteration, more certain.
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