CA Foundation · Business Laws · The Negotiable Instruments Act, 1881
Rohit signs a blank stamped paper and hands it to Kiran, telling him to complete it as a promissory note for up to Rs 20,000 in favour of Lalit. Kiran fills in Rs 20,000 and gives it to Lalit, who takes it in good faith. Which statement is correct?
Rohit is liable to Lalit. By signing and delivering a stamped blank paper intending it to be a promissory note, he authorised its completion up to the amount he specified. Kiran filled in Rs 20,000, within that authority, so Lalit, acting in good faith, can enforce the note against Rohit.
- ARohit is not liable, as the instrument was incomplete when signed
- BRohit is liable to Lalit, as a person signing a stamped blank paper can be bound by the completed instrumentCorrect
- CRohit is liable only to Kiran, not to Lalit
- DRohit is liable only if Lalit gave no consideration
Explanation
Where a person signs and delivers a stamped blank paper intending it to become a negotiable instrument, he gives authority to complete it for the amount covered by the stamp. He is liable on it to any holder in due course for the amount filled in within that authority. Here Rs 20,000 is within the authority, so incompleteness is not a defence.
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