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CMA Intermediate · Business Laws and Ethics · Negotiable Instruments Act, 1881

Dev signs a stamped incomplete instrument for ₹10,000 intended, and delivers it to Esha, who fills in ₹30,000, within the stamp value. Esha is not a holder in due course. Under the proviso to Section 20, what can Esha recover from Dev?

Esha can recover only up to ₹10,000, the amount Dev intended. The proviso to the inchoate instrument rule bars any holder who is not a holder in due course from recovering from the person delivering the instrument anything in excess of the intended amount.

  1. A₹30,000, since the amount is within the stamp
  2. BNothing, because the instrument was incomplete when delivered
  3. C₹20,000, being the excess over the intended amount
  4. DNot more than the ₹10,000 Dev intended to be paidCorrect

Explanation

The proviso to Section 20 says no person other than a holder in due course can recover from the person delivering the instrument anything in excess of the amount intended by him. Esha is not an HDC, so recovery is limited to ₹10,000. ₹30,000 would be available only to an HDC.

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