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

Vikram signs and delivers a properly stamped paper with an incomplete cheque, intending it to be filled for Rs 20,000. The holder, Sunil, completes it for Rs 30,000, within the amount covered by the stamp, and negotiates it to Tara, a holder in due course. Vikram's liability to Tara is:

Vikram is liable to Tara for Rs 30,000. The signer of a stamped inchoate instrument is liable to a holder in due course for the amount completed, provided it does not exceed the stamp cover. Only others than a holder in due course are limited to the intended amount.

  1. ALimited to Rs 20,000, the amount he intended
  2. BNil, since the amount was altered without his consent
  3. CRs 30,000, as the signer is liable to a holder in due course for the amount completed within the stampCorrect
  4. DRs 10,000, being the excess over the intended amount

Explanation

Section 20 gives the holder prima facie authority to complete the instrument for any amount not exceeding the amount covered by the stamp, and the signer is liable to a holder in due course for that amount. The limit to the intended amount applies only against persons other than a holder in due course. Tara is one, so she can recover Rs 30,000.

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