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

Raman signs and delivers to Sunil a stamped paper that is wholly blank, intending that Sunil will fill in a promissory note. Under the Negotiable Instruments Act, 1881, what authority does Raman thereby give to Sunil?

Raman gives Sunil prima facie authority to make or complete a negotiable instrument on the stamped paper. The amount can be anything specified, but it cannot exceed the amount covered by the stamp. This is the rule on inchoate stamped instruments in Section 20.

  1. APrima facie authority to make or complete a negotiable instrument for any amount not exceeding the amount covered by the stampCorrect
  2. BAbsolute authority to fill in any amount, even above the amount covered by the stamp
  3. CNo authority, because a blank paper cannot become a negotiable instrument
  4. DAuthority only to hold the paper as a bailee and never to complete it

Explanation

Section 20 provides that a person who signs and delivers a properly stamped paper, either wholly blank or with an incomplete instrument, gives prima facie authority to the holder to complete it for any amount specified and not exceeding the amount covered by the stamp. The authority is therefore capped by the stamp, so the option allowing any amount is wrong.

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