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

Meera signs a stamped paper and hands it over to Karan with an incomplete promissory note written on it. The stamp covers up to ₹50,000. Karan completes it for ₹40,000 and transfers it to Dev, a holder in due course. What is Meera's position?

Meera is liable to Dev for ₹40,000. Under Section 20, signing and delivering a stamped incomplete instrument gives the holder authority to complete it for any amount up to the stamp cover, and the signer is liable to a holder in due course for the amount filled in.

  1. AShe is not liable, because the note was incomplete when signed
  2. BShe is liable to Dev for ₹40,000, as the amount does not exceed the stamp coverCorrect
  3. CShe is liable to Dev only for ₹50,000, the full stamp value
  4. DShe is liable only if she signed in the presence of witnesses

Explanation

Section 20 gives the holder prima facie authority to complete the instrument for any amount specified, not exceeding the stamp cover. The signer is liable to a holder in due course for that amount. Karan filled in ₹40,000, which is within ₹50,000, so Meera is liable for ₹40,000, not the full stamp value.

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