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CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

Anil signs and delivers a duly stamped blank paper to Bhavna as security. The stamp covers Rs 1,00,000. Bhavna writes a promissory note for Rs 90,000 although Anil had intended Rs 60,000, and sues Anil as the original payee, not as a holder in due course. Under the Act, how much can Bhavna recover from Anil?

Bhavna can recover no more than Rs 60,000. Because she is not a holder in due course, the proviso to Section 20 bars her from recovering anything beyond the amount the signer intended to be paid, even though Rs 90,000 lies within the stamp cover.

  1. ARs 90,000, because it is within the stamp cover
  2. BRs 1,00,000, the full stamp cover
  3. CNothing in excess of Rs 60,000, the amount Anil intended to be paidCorrect
  4. DNothing at all, because the paper was blank when delivered

Explanation

Bhavna is not a holder in due course, so the proviso to Section 20 limits her to the amount Anil intended, Rs 60,000. Rs 90,000 is within the stamp but that only protects holders in due course. Blank delivery does not void the authority.

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