Material alteration is that change in the negotiable instrument which causes it to speak a different language
in legal effect from that which it had originally spoken. Change in order to be material must alter the business effect of the instrument. These changes may relate to the legal identity or character of the instrument either in the terms or in the legal relation to the parties to it. All changes which alter the operation of the instrument or the rights and liabilities of the parties shall be material, it will be immaterial whether the alteration is for the benefit or detriment to any party to the instruments.
Instances of Material Alteration :
(a) Alteration in the date of the instrument
(b) Alteration of the sum payable
(c) Alteration in the of payment.
(d) Alteration in the place of payment
(e) Alteration in the rate of interest.
(f) Alteration by the addition of a new party
(g) Alteration of an order instrument into a bearer instrument
Effect of Material Alteration :
A material alteration shall discharge all parties who are liable on the instruments at the time of alteration
and who do not consent to such alteration. But an alteration shall not affect the liabililty of persons becoming parties subsequent to the alteration. Besides this, section-89 provides that where a negotiable instruments has been materially altered but does not appear to have been so altered, payment thereof (a) by a person or banker liable to pay (b) paying the same in good faith and (c) according to the apparent tenor thereof and without negligence, shall discharge such person or banker from all liability thereon.