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

Ramesh signs and delivers to Suresh a properly stamped paper on which an incomplete negotiable instrument is written. Under the Negotiable Instruments Act, 1881, what authority does Ramesh thereby give to Suresh, the holder?

The signer gives the holder prima facie authority to make or complete the negotiable instrument for any amount specified, but not exceeding the amount covered by the stamp. The stamp value acts as the upper limit, so the holder cannot fill in a larger sum.

  1. APrima facie authority to complete the instrument for any amount specified, not exceeding the amount covered by the stampCorrect
  2. BNo authority at all, because an incomplete instrument is void
  3. CAuthority to complete it for any amount, even above the stamp value
  4. DAuthority only to endorse it further without completing it

Explanation

Section 20 states that a person who signs and delivers a stamped paper that is blank or has an incomplete instrument gives prima facie authority to the holder to complete it for any amount specified, not exceeding the amount covered by the stamp. The option allowing any amount above the stamp value is wrong, because the stamp value is the ceiling.

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