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

Meera signs and delivers to Kabir a stamped paper bearing an incomplete promissory note, intending Kabir to fill in Rs 20,000. Kabir fills in Rs 50,000, within the amount covered by the stamp, and negotiates it to Lata, a holder in due course. Which statement is correct?

Meera is liable to Lata for Rs 50,000. A holder in due course can recover the full amount completed, up to the amount covered by the stamp, from the person who signed and delivered the paper, in the capacity in which she signed.

  1. AMeera is liable to Lata for Rs 50,000 in the capacity in which she signedCorrect
  2. BMeera is liable to Lata only for Rs 20,000
  3. CMeera is not liable at all because Kabir exceeded her intention
  4. DLata can recover only the amount of the stamp duty paid

Explanation

Under Section 20 the signer is liable on the instrument, in the capacity in which she signed, to any holder in due course for the amount filled in, provided it does not exceed the amount covered by the stamp. The limit to the intended amount applies only against holders who are not holders in due course.

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