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

Meera signed and delivered to Karan a stamped blank paper intending a note of Rs 10,000, but Karan completed it for Rs 40,000, within the amount covered by the stamp, and indorsed it to Divya, a holder in due course. Divya's right against Meera is:

Divya can recover Rs 40,000 from Meera. A person who signs and delivers a stamped incomplete instrument is liable to a holder in due course for the amount completed, up to the amount covered by the stamp. The intended-amount limit does not bind a holder in due course.

  1. ALimited to Rs 10,000, the amount Meera intended
  2. BNil, as the instrument was completed without authority
  3. CRecovery of Rs 40,000 from Meera, as she is liable to a holder in due course for the amount completed, not exceeding the stampCorrect
  4. DRecovery only from Karan and not from Meera

Explanation

Section 20 gives the holder prima facie authority to complete the instrument up to the amount covered by the stamp. The signer is liable to any holder in due course for that amount. Only a person other than a holder in due course is limited to the amount intended, so Rs 10,000 is wrong for Divya.

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