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CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881

Anita signs and delivers a stamped incomplete note intended for ₹10,000. Without authority the payee fills in ₹25,000 within the stamp cover and negotiates it for value, in good faith and before maturity, to Bimal, a holder in due course. What is Anita's liability to Bimal?

Anita is liable for ₹25,000. Section 20 makes the signer of a stamped inchoate instrument liable, in the capacity in which she signed, to a holder in due course for the amount completed within the stamp cover, even if it exceeds the amount she intended.

  1. A₹10,000 only, the amount she intended
  2. BNil, because the amount was filled in without her consent
  3. C₹25,000, in the capacity in which she signedCorrect
  4. DOnly the amount of the stamp duty paid

Explanation

Section 20 makes the signer liable upon the instrument, in the capacity in which he signed, to any holder in due course for the amount filled in within the stamp cover. The restriction to the intended amount applies only against persons who are not holders in due course. So Bimal can recover ₹25,000.

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