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

Anil signs and delivers to Bharat a paper bearing a stamp that covers Rs. 10,000, with an incomplete negotiable instrument written on it. Bharat completes it for Rs. 10,000, though Anil intended only Rs. 4,000, and then recovers on it. Which statement is correct under the Negotiable Instruments Act, 1881?

Bharat, if not a holder in due course, can recover only the Rs. 4,000 Anil intended. A holder in due course could recover the completed amount up to the Rs. 10,000 covered by the stamp, but never more than the stamp cover.

  1. ABharat can recover Rs. 10,000 from Anil even if he is not a holder in due course
  2. BAnil is not liable at all, because the instrument was incomplete when delivered
  3. CBharat can recover only Rs. 4,000 unless he is a holder in due course, who can recover the amount up to the stamp coverCorrect
  4. DBharat can recover any amount, even above Rs. 10,000, if he is a holder in due course

Explanation

Delivering a stamped incomplete paper gives prima facie authority to complete it for any amount not exceeding the stamp cover. A person other than a holder in due course cannot recover more than the amount intended by the signer. A holder in due course can recover up to the stamp cover, never beyond it.

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