A person who accepts an inchoate document, pays consideration for it, fills it up and becomes the payee, cannot be considered a holder in due course.

CHAGLA, C.J. :- A very interesting question under the Negotiable Instruments Act arises in this appeal, and the facts giving rise to this appeal may be shortly stated. One Hariram., who is a finance broker approached the plaintiff on 4-2-1949, representing to him that a loan of Rs.5,000 was required by the defendants, and the plaintiffs case was that on that representation he gave a bearer cheque for that amount to Hariram. This cheque was cashed by Hariram on the following day, i.e., 5-2-1949. On 11-2-1949, Hariram gave to the plaintiff a hundi drawn by the defendants which was an incomplete document, in that the necessary parts of the document were not filled in by the defendants themselves, and this hundi was brought by Hariram and given to the plaintiff in consideration of the loan of Rs.5,000 which the plaintiff had advanced on 4-2-1949. The plaintiff filled in the blanks in this hundi and made this incomplete document into a negotiable instrument, the makers of which were the defendants and the payee of which was the plaintiff. This hundi was discounted with the Central Bank, and when the Central Bank presented the hundi to the defendants for acceptance, the defendants dishonoured it. Thereupon the Central Bank recovered from the plaintiff the sum of Rs.5,000 which the Bank had paid to the plaintiff for discounting the hundi. The plaintiff, therefore, filed the suit against the defendants to recover this sum of Rs.5,000. The case of the defendants was that no consideration had been received by them from the plaintiff, that Hariram had brought a cheque for Rs.10,000 to them on 11-2-1949, the cheque being signed by one H.K. Gvalani, who, Hariram represented, was a financier. The cheque was sent to the Bank, and on that very afternoon, viz., February 11, Hariram represented to the defendants that as this financier was leaving Bombay, he required hundis in respect of this cheque. Thereupon the defendants gave to Hariram two blank hundis for Rs.5,000 each. This cheque for Rs.10,000 was ultimately dishonoured. It was found that there was no such financier as Gvalani in existence, that the cheque which was given by Hariram was his own cheque and that there were no moneys in the Bank to meet that cheque. The defendants filed a complaint against Hariram on 24-2-1949, and on that complaint Hariram was convicted.

2. Now, the question that arises is, what are the rights of the plaintiff under S.20, Negotiable Instruments Act? That section deals with inchoate stamped instruments, and the scheme of that section is that when a person signs and delivers to another person an inchoate document which is properly stamped in accordance with the law relating to negotiable instruments, then by doing so he gives a prima facie authority to the holder to complete the document, the authority being restricted to filling the amount not exceeding that which would be covered by the stamp upon the document. When the document is completed and becomes a negotiable instrument, then the maker of the document is liable to any holder in due course for the amount which has been filled in the document. The proviso to S.20 lays down that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder. It will be noticed that the right given to complete the document is given to the holder and the holder contemplated in this section is not the holder as defined in the Act itself because it is clear that that definition cannot apply to this expression in S.20, but "holder" is used in this section in the literal sense of that word, viz., the person who actually holds the document.

The section further contemplates that if the holder having completed the document negotiates it then the person who by reason of such negotiation becomes a holder in due course has a right to proceed against the maker and recover the amount mentioned in the document. Therefore