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

Ramesh signs and delivers to Sunil a cheque stamped in accordance with law, wholly blank as to amount and payee, intending Sunil to fill in a modest sum. Under Section 20, what is the position as regards a holder in due course?

Ramesh is liable to a holder in due course for the amount filled in, as long as it does not exceed the amount covered by the stamp. Delivering a stamped blank instrument gives prima facie authority to complete it under Section 20.

  1. AThe cheque is void because it is incomplete
  2. BRamesh is liable to a holder in due course for the amount specified, not exceeding the amount covered by the stampCorrect
  3. CRamesh is liable only for the amount he intended, even to a holder in due course
  4. DOnly Sunil can ever enforce the instrument

Explanation

Under Section 20, delivering a stamped, blank paper gives prima facie authority to complete it for any amount specified, not exceeding the stamp cover. The signer is liable to a holder in due course for that amount. Only a person other than a holder in due course is limited to the amount intended.

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