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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

Ravi Traders signs and delivers to Kiran a stamped paper that is wholly blank, and Kiran writes in a cheque amount larger than Ravi intended, but not exceeding the amount covered by the stamp. Kiran then negotiates it to Sunil, who takes it as a holder in due course. What is the position?

Ravi is liable to Sunil for the full amount written, up to the amount covered by the stamp. Under the Act, the signer of a stamped inchoate instrument is liable to a holder in due course for that amount, and the intended-amount limit applies only to other holders.

  1. ARavi is liable to Sunil for the full amount written, up to the amount covered by the stampCorrect
  2. BRavi is liable to Sunil only for the amount Ravi intended
  3. CRavi is not liable at all because the instrument was incomplete when signed
  4. DRavi is liable only if Kiran proves the amount was authorised

Explanation

Section 20 gives the holder prima facie authority to complete the instrument for any amount not exceeding the stamp cover. The signer is liable to a holder in due course for that amount. Only a person who is not a holder in due course is limited to the amount the signer intended.

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