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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

Meera signs and delivers to Karan a stamped paper carrying an incomplete negotiable instrument; the stamp covers ₹5,00,000. She intended it to be completed for ₹1,00,000. Karan completes it for ₹4,00,000 and transfers it to Anil, a holder in due course. What can Anil recover from Meera?

Anil can recover ₹4,00,000. A person who signs and delivers a stamped incomplete instrument is liable to a holder in due course for the amount specified, up to the stamp cover. The restriction to the intended amount applies only against holders who are not holders in due course.

  1. A₹4,00,000, the amount specified, as it is within the stamp coverCorrect
  2. B₹1,00,000, the amount Meera intended
  3. C₹5,00,000, the full stamp cover
  4. DNothing, because the instrument was completed without her knowledge

Explanation

The signer is liable to a holder in due course for the amount specified, provided it does not exceed the stamp cover. ₹4,00,000 is less than ₹5,00,000, so Anil recovers ₹4,00,000. The ₹1,00,000 limit applies only against a holder who is not a holder in due course, such as Karan.

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