Question

Hundis are governed by the _____ in the locality.

• A. Customs
• B. Usages
• C. Both (A) and (B)
• D. None of the above

Answer 1

The correct option is C Both (A) and (B)

A Hundi is an unconditional order in writing made by a person directing another to pay a certain sum of money to a person named in the order. Hundis, being a part of the informal system have no legal status and are not covered under the Negotiable Instruments Act, 1881. Hundis are governed by the custom and usages of the locality in which they are intended to be used. In case there is no customary rule known as to a certain point, the court can apply the rules of the Negotiable Instruments Act. It is also open to the parties to exclude expressively the applicability of any custom relating to Hundis by agreement and include the provision of the Negotiable Instrument Act.