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

Anil signs and delivers a stamped paper with an incomplete promissory note, intending Rs 10,000 to be paid. The payee, Dev, completes it for Rs 30,000, within the stamp amount, and sues Anil on it, Dev not being a holder in due course. Under Section 20, what can Dev recover from Anil?

Dev can recover only Rs 10,000. Under the proviso to Section 20, a holder who is not a holder in due course cannot recover from the person who delivered the instrument anything beyond the amount that person intended to be paid.

  1. ARs 30,000, as the amount is within the stamp
  2. BRs 10,000, being the amount intended by AnilCorrect
  3. CNothing, as the instrument is void
  4. DRs 20,000, being the excess over the intended amount

Explanation

The proviso to Section 20 says no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid. Dev is not a holder in due course, so recovery is limited to Rs 10,000. Rs 30,000 would be correct only against a holder in due course.

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