Case Note & Summary
The case involved a dispute over a guarantee provided by the appellant for an overdraft facility extended by the respondent Bank to a principal debtor, Sankaran. The appellant initially agreed to guarantee an overdraft of Rs. 25,000, but the principal debtor later altered the guarantee document to reflect a limit of Rs. 20,000 without the appellant's consent. The Bank refused to accept the guarantee at the higher amount, leading to a legal dispute when the Bank sought to enforce the guarantee. The appellant argued that the alteration discharged him from liability, while the Bank maintained that the alteration was immaterial. The High Court ruled in favor of the Bank, stating that the alteration was made to reflect the common intention of the parties. The Supreme Court, however, found that the alteration was made by the principal debtor acting as the agent of the appellant, thus the appellant remained liable under the guarantee. The court dismissed the appeal, affirming the High Court's decision that the appellant was not discharged from his liability due to the alteration.
Headnote
A) Contract Law - Guarantee - Discharge of Surety's Liability - Indian Contract Act, 1872, Section Not Mentioned - The appellant contended that he was discharged from liability due to an unauthorized alteration of the guarantee document by the principal debtor. The court held that the alteration did not discharge the surety as it was made by the principal debtor acting as the agent of the surety, thus maintaining the surety's obligation under the contract (Paras 1-10).
Issue of Consideration
Whether the alteration of the letter of guarantee discharged the surety's liability.
Final Decision
The Supreme Court dismissed the appeal, affirming the High Court's ruling that the appellant was not discharged from his liability under the guarantee despite the alteration.
Law Points
- Guarantee
- Surety
- Material Alteration
- Liability
- Negotiable Instruments Act
