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

Facts
The appeal in the Supreme Court arose out of a suit filed by one Thomco’s Bank in Trivandrum
against the appellant N.S. Anirudhan and one V. Sankaran in the trial court. The suit was based
against V. Sankaran on a promissory note executed by him in favour of the Bank on February 24,
1947 and against the present appellant on a letter of guarantee dated May 24, 1947. By this letter of
guarantee the appellant had undertaken to repay to the Bank the balance due on the overdraft account
opened in favour of Sankaran(S), up to a maximum of Rs. 20,000/- which was also the maximum
amount for which the overdraft had been arranged. The letter of guarantee submitted to the court bore
two corrections both in figures as well as in the written words mentioning the amount of guarantee.
The figure ‘5’ in the amount of guarantee of Rs. 25000/- appeared to have been altered to ‘0’ resulting
in the sum being Rs. 20000/-. Also in the words ‘Rupees Twenty Five Thousand’ the word ‘five’
appeared to have been struck out, resulting in the sum being ‘Rupees Twenty Thousand’ in words
been submitted to us by a student in order to help you with your studies. This is not an example of the
work written by our professional law writers. It was contended by the appellant Anirudhan in the trial
court that he had furnished a guarantee of only Rs. 5000/- which was altered by the principal debtor
Sankaran to Rs. 20000/- without his consent. However this set of facts of alteration in the letter of
guarantee as put forth by Anirudhan and the case made out of it was not accepted in the Trial Court.

Procedural History
· The Trial Court found that the original amount of guarantee was of Rs. 25000/- and was
altered to Rs. 20000/- without the consent of the surety and also since no question about the
material nature of the alteration was raised, the suit against the appellant was dismissed.
· On appeal in the High Court of Kerala, it was found that there was no prior oral contract
between the surety and the Bank. The contention of the Bank was that after having contracted
to provide a loan of Rs. 20000/- , Sankaran brought the letter of guarantee and asked for a
further loan of Rs. 5000/- which was refused by the bank. Then Sankaran took back the letter
of guarantee and then returned it after sometime making the alterations mentioned
above.These changes were not consented to by Anirudhan but the Bank however kept the
letter and sued Anirudhan on it. The High Court allowed the appeal by the Bank and made
Anirudhan liable to pay the amount of guarantee mentioned in the letter.
· Against this decision of the High Court, Anirudhan appealed in the Supreme Court.

SUPREME COURT

Kapur, J.- S was acting for and on behalf of the appellant since it was at his instance that the
appellant was standing surety and the appellant handed over the deed of guarantee to S for the purpose
of being given to the Bank. The plea of avoidance of contract by material alteration was of no avail to
the appellant because the document was not altered while in possession of the promisee but was
altered by S who was at the time acting as the agent of the appellant.

Hidayatullah, J.-The document in this case could not besaid to have been materially altered
because it was not altered in such a manner as to change its nature. The alteration was made by a co-
executant who reduced not only his own liability but that of the surety also. The document was altered
while in the possession of S, the very person who, as the agent of the surety, brought it to the Bank.
The surety must be deemed to have held out S as his agent for this purpose and this created an
estoppel against the surety because the Bank believed that S had the authority.. Accordingly, the
alteration of the document did not save the surety from liability under it.

Sarkar, J.-The suit against the appellant as framed must fail. The altered document was not
binding on the appellant, for the alteration had not been made to carry out the intention of the parties.
If the alteration, is ignored as immaterial, then the document creates no liability in the appellant, for
the Bank refused to accept a guarantee on the terms contained in it before it was altered and therefore
there was no contract made between the parties by the document. Further, the contract sued upon is
different from the contract which might have been made by acceptance of the document as it stood
before the alteration. The unaltered document cannot establish the contract sued on.