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

Ravi signs and delivers a stamped, incomplete promissory note intending it to be for ₹20,000. The payee, Sunil, fills in ₹40,000, which is within the stamp cover, and keeps it himself without negotiating it. Ravi's liability to Sunil, who is not a holder in due course, is limited to:

Ravi is liable only for ₹20,000. Under the proviso to Section 20, a person who is not a holder in due course cannot recover from the signer more than the amount the signer intended, even if the amount filled in is within the stamp cover.

  1. A₹40,000, the amount written, because it is within the stamp cover
  2. BNil, because the instrument was altered
  3. C₹60,000, being the total of both amounts
  4. D₹20,000, the amount intended by RaviCorrect

Explanation

Under the proviso to Section 20, no person other than a holder in due course can recover from the person delivering the instrument anything more than the amount he intended to be paid. Sunil is not a holder in due course, so he recovers only ₹20,000. The ₹40,000 option ignores this proviso.

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