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

Ravi signs and delivers to Sunil a paper that is duly stamped under the law relating to negotiable instruments and is wholly blank. Under the Negotiable Instruments Act, 1881, what does Ravi thereby give to Sunil?

Ravi gives Sunil prima facie authority to complete a negotiable instrument on the paper for any amount specified, provided it does not exceed the amount covered by the stamp. The law treats the signed and delivered stamped blank paper as an inchoate instrument capable of completion by the holder.

  1. APrima facie authority to make or complete a negotiable instrument upon it for any amount not exceeding the amount covered by the stampCorrect
  2. BAbsolute authority to write any amount, even if it exceeds the amount covered by the stamp
  3. CNo authority at all, because a blank paper cannot become a negotiable instrument
  4. DAuthority only to cancel the paper and return it to Ravi

Explanation

Under Section 20, a person who signs and delivers a duly stamped paper, wholly blank or carrying an incomplete instrument, gives prima facie authority to the holder to complete it for any amount not exceeding the stamp cover. The option claiming absolute authority ignores the stamp ceiling.

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