What are Hundis and what are its kinds ?

Hundis are instruments drawn by Indians in an oriental language. These are bills of exchange in vernacular language. Hundis have been in existence in this country from very ancient times and have been recognized by law as valid and effective negotiable instruments.

The Negotiable instruments Act deals with only three classes of negotiable instruments; namely, promissory note, bills of exchange and cheques. It does not govern Hundis, which are governed by custom or local usages. But where by any words in the instrument itself the usages regarding such instruments are excluded or where the writing expressly indicates an intention that the legal relations of the parties thereto shall be governed by the Negotiable instruments act, the act will apply.

Kinds Of Hundis

Several varieties of Hundis are current amongst Indian traders. Hundis may be either Darshani or Muddati. Darshani hundis are payable at sight while Muddati hundis are payable after a certain period, after date of sight. The various kinds of hundis which relate to these classes are as follows.

1. Shah jog Hundi :

This is a hundi payable only to a shah i.e., a respectable person or a person of worth in the market. This is the most widely used hundi in the country. Such a hundi is not payable to bearer but only to a respectable bearer. A shah jog hundi may pass from hand to hand till it reaches a shah, who , after making due enquiries to secure himself presents it to the drawee for acceptance or payment; then its negotiability ceases. It will not be paid unless the name of the shah by whom it is presented is endorsed on it.

A shah jog hundi differs from a bill of exchange in two respects:

(1) The acceptance of the drawee is not generally written across it, but the particulars are entered in the drawer’s book.

(2) It is not usually presented for acceptance before due date.

A shah jog hundi may be either darshani or muddati. It has all the characteristics of negotiable instrument. It passes by mere delivery. But it is payable only to a respectable person. A minor may be the holder of shah jog hundi and a payment to whom may be a good payment.

2. Jokhmi Hundi :

This is a hundi drawn against goods shipped on the vessel named in the Hundi. The drawer of the hundi is the consigner who draws for the value of the goods on the consignee. It resembles a policy of marine insurance. A jokhmi hundi is designed with a double purpose; namely – to put the drawer of the hundi in funds and at the same time to affect an insurance upon the goods themselves. The drawer negotiates the hundi to a broker and the broker charges a commission for his services. The broker will get the money if the vessel arrives safe in port. If the ship is lost the broker bears loss. Thus both the drawer and the drawee are protected.

3. Nam jog Hundi :

This is a hundi payable to named party or his order. Its form is very much the same as that of the shah jog hundi, except that in place of the word shah, the name of the payee is inserted. Generally it contains a description of the person mentioned; when this is so it is not transferable. The alteration of a nam jog hundi into a shah jog hundi is a material alteration and renders the hundi void.

4. Dhani jog Hundi :

This is hundi payble to Dhani or owner, i.e., a person who purchases it. It is payable to any owner, holder or bearer. It is a negotiable instrument payable to bearer; where it is endorsed in full, it ceases to be a bearer hundi. It is in the form of promote.

5. Jawabi Hundi :

This is a hundi employed to send money to distant places and resembles a money order. The drawer who is interested in sending the money writes to the payee and delivers the letter along with the remittance to a banker. The banker either endorses it on to any of his correspondents or negotiates its transfer. On payment the payee signs his receipt on the letter which is then returned to the remitter in the same way.

6. Firman jog Hundi:

This is a hundi which is payable to order.

7. Zickri Chit:

A Hundi may be accepted for honour under what is called a Zickri Chit or letter of protection without being noted or protested. It is in use all over India in connection with Marwari hundis. It is furnished, to the holder by some prior party to the Hundi, when the hundi gets dishonored. It creates something like an acceptor for honor, and it is valid in law.