NEGOTIABLE INSTRUMENTS ACT1881

NEGOTIABLE INSTRUMENTS: MEANING

A negotiable instrument is essentially an instrument of

credit readily convertible into money and easily
carried from one hand to another. The word negotiable
means passable by delivery, and instrument means
a written document which, creates a right in favour of
some person. Thus, the expression negotiable
instrument literally implies a written document
transferable by delivery from one person to another. It
is transferable with a simple procedure requiring a
signature and delivery (in case of order instruments)
or just delivery (in case of bearer instruments). The
law endorses such a way of transfer of a negotiable
instrument and protects it.

As per Section 13, a negotiable instrument means a

promissory note, bill of exchange or cheque payable
either to order or to bearer.
Thus, the real test of a negotiable instrument is that
transferee of a negotiable instrument gets the better title
than that of transferor provided that he (transferee) acquires
it in good faith and for valuable consideration.
CASE:
X steals a bearer cheque from the drawer of Y and transfers
it to Z who takes it for value and in good faith. In this case
title of the transferee (Z) will be free from defect though the
title of the transferor (i.e., X) is defective as the cheque is a
stolen one.

Salient Features of A Negotiable Instrument:

1.Freely transferable. Hassle free transferability is the

indispensable feature of a negotiable instrument. Negotiable
Instruments are moveable from one person to another without any
legal or documentary procedure. The property in a negotiable
instrument passes by mere delivery if the instrument is payable to
bearer and by endorsement and delivery if it is payable to order.
2. Defect free title to the transferee . The real test of a

negotiable instrument is whether the transferee gets the

instrument free of all defects. if a person acquiresa negotiable
instrument in good faith and without knowledge of defect in title of
the transferor, the transferee can enjoy better title to the
instrument, even if the title of transferor was defective. Thus, a
negotiable instrument constitutes an exception to the general rule
of the law of transfer of title that nemo dat quad non habet no
one can transfer a better title than that he himself has.

3. Recovery:The holder is presumed to be the owner of the property

contained in the negotiable instrument and is entitled to sue the
instrument in his own name (in case of dishonour) for the recovery of
the amount. Also, he need not give notice to the debtor of the fact that
he has become holder.
4. No ceiling on number of transfers : There is no definite upper limit
on the number of transfers in case of a negotiable instrument. It can be
transferred any number of times till its maturity. But a cheque whether
by order or bearer can be transferred any number of times till it
becomes stale i.e., within three months from the date of its original
issue.
5.
Payable to order: It should be noted that where the instrument
prohibits its transferability or indicates that it shall not be transferable
but remains valid as between the parties thereto, it is not a negotiable
instrument, as it cannot be negotiated further. Thus for an instrument to
be negotiable, it should be made payable to order. The various forms in
which an instrument may be made payable to order are as follows:

For example:
Pay Ram
Pay Ram or Order
Pay to the Order of A
Pay Ram and Shyam, and.
Pay Ram or Shyam etc
A promissory note, bill of exchange, or cheque payable
to order, which is expressed to be so payable, or which
is expressed to be payable to a particular person and
does not contain words prohibiting transfer or indicating
that it shall not be transferable, are all examples of
negotiable instruments.
But a negotiable instrument may contain any words
restricting its transferability, expressly or impliedly,
e.g., pay to Ram only or pay to Ram and none else. If
it is made so, it will not be treated as payable to order
and thereby shall not be a negotiable one.

6. Payable to bearer: Bearer refers to the person who is in the

possession of an instrument; therefore payable to bearer means
payable to any person who possesses it. A promissory note, bill of
exchange, or cheque is payable to bearer which is expressed to be so
payable, or on which the only or last endorsement is an endorsement in
blank. The most common forms of a bearer instrument are:
Pay Ram or bearer
Pay Ram, Shyam or bearer
Pay bearer
In all the above cases the sum of money contained in a negotiable
instrument would be payable to the bearer. It should also be noted that
if an instrument is originally made payable to order, it may become
payable to bearer if it is endorsed in blank by the payee. For example if
a cheque is made payable to Kumar. Kumar endorses it merely by
signing on the back (without making it payable to Verma or Vermas
order) and delivers it to Verma with a view to making it negotiable. The
cheque then becomes a bearer instrument in the hands of Verma.
7. Payment:A negotiable instrument may be made payable to two or
more payees jointly or it may be made payable in the alternative to one
or two, or one or several payees. [Section 13 (2)]

Sections 118-19 of the Act lay down the following

presumptions that generally apply to negotiable instruments
unless the contrary is proved:
1. Consideration It is presumed that every negotiable
instrument was made, drawn, accepted, endorsed,
negotiated or transferred for negotiation. [S 118 (a)]
2. Date Every negotiable instrument bearing a date was
made or drawn on the due date [Section 118 (b)]. An
instrument could also be post-dated and even be booked
on a public holiday. But a post-dated instrument can be
sued upon only after the expiry of the due date.
3. Time of Acceptance It is presumed that every accepted
bill of exchange was accepted within a reasonable time
after its date and before its maturity. [S 118 (c)]
4. Time of Transfer It is presumed that every transfer of a
negotiable instrument was made before its maturity. [S
118 (d)]

5.

6.

7.

Order of endorsement: It is presumed that the endorsements

appearing upon a negotiable instrument were made in the order
in which they appear thereon. [S 118 (e)]
Stamp: It is presumed that a negotiable instrument except a
cheque (as no stamp duty is prescribed for cheques under the
Indian Stamp Act) was duly stamped. This proves helpful in case
the instrument is destroyed or lost.
Holder-in-due-course: It is presumed that the holder of a
negotiable instrument is also a holder-in-due-course unless it is
proved that the holder has obtained the instrument from its
lawful owner or from any person in lawful possession thereof by
committing an offence, fraud, or for unlawful consideration.
Thus, a holder-in-due-course is one who has obtained the
instrument in good faith and for value.
Proof of Protest In the event of dishonour of a negotiable
instrument, the holder can file a suit for recovery of the amount
contained in instrument but before doing so s/he should obtain a
certificate from a notary about the fact of dishonour. This
certificate is called protest. The court shall, on proof of protest,
presume that the instrument was presented for payment or
acceptance and that it was dishonoured by non-acceptance or
non-payment, as the case may be.

CLASSIFICATION OF NEGOTIABLE INSTRUMENTS

The negotiable instruments can broadly be classified under the following eight
categories:
1. Bearer instrument
2. Order instrument
3. Inland instrument
4. Foreign instrument
5. Time instrument
6. Demand instrument
7. Ambiguous instrument
8. Inchoate instrument
1. Bearer Instrument. A bearer instrument is a negotiable instrument payable
to bearer. It is one (i) which is expressed to be so payable; or
(ii) on which the
only best endorsement is an endorsement in blank.
A bearer instrument can be negotiated by mere delivery. The holder (anyone
possessing it) of a bearer instrument can obtain the payment of the instrument
whether or not his name appears on the instrument. The bearer however may be
required to acknowledge the receipt of money by putting his signature on the
book of the instrument.

Exception There is an exception to bearer instruments. In the light of

Section 31 of the RBI Act, a promissory note, or bill of exchange cannot
be made payable to bearer. Similarly, a bearer instrument cannot be
made into a promissory note or bill of exchange.
The various forms in which a negotiable instrument can be made
payable to bearer are:
Pay the bearer
Pay to Ram or bearer
2. Order Instruments. A negotiable instrument is payable to order
when
(i) it is expressed to be so payable; or
(ii) is expressed to be payable to a particular person and does not
contain words prohibiting transfer or indicating an intention that it shall
not be transferable.
An instrument payable to order can be negotiated by endorsement and
delivery. The various forms by which an instrument can be made payable
to order are as follows:
Pay Ram
Pay Ram or order
Pay to the order of Ram

3. Inland Instruments: A promissory note, bill of exchange,

or cheque drawn or made in India, and made payable, or
drawn upon any person, residing in India shall be deemed to
be an inland instrument.
[Section 11]
Since a promissory note has no drawee i.e. it cannot be
drawn on any person, an inland promissory note is one which
is made payable in India. Subject to this exception, an inland
instrument is one, which is either:
Drawn and made payable in India, or
Drawn in India upon some persons resident therein, even
though it is made payable in a foreign country.
Examples:
i) A bill drawn in Mumbai on a merchant in Kolkata made
payable in Kolkata or in USA;
ii) A bill drawn in Delhi on a merchant in USA made payable
or accepted payable in Mumbai.

4. Foreign Instruments: According to Section 12 a foreign

instrument is one, which is not an inland instrument.

Examples:
A bill drawn outside India and made payable outside or inside
India;
ii) A bill drawn in India and made payable outside India and
drawn on a person resident outside India.
5. Time Instrument. An instrument which is payable at
sometime in future is called a Time Instrument. Therefore, a
promissory note or a bill of exchange shall be known as time
instrument, if it is payable:
a) After a fixed period; or
b) After sight; or
c) On a specified day; or
d) On the happening of an event which is certain to happen.

The expression after sight in a promissory note implies that the payment
cannot be demanded on it unless it has been shown to the maker. But in case
of a bill of exchange, the expression after sight denotes after acceptance (if
accepted), or after noting for non-acceptance, or after protest for nonacceptance.
Examples:
3 months after date
7 days after sight
Payable on 2nd Monday of July 2008
Forty days after Diwali
6. Demand Instrument: A promissory note or bill of exchange in which no
time for payment is specified, and a cheque, are payable on demand. Thus, a
cheque is always payable on demand while a promissory note and a bill of
exchange in which no time is specified for payment are payable on demand.
Section 21 further provides that if a note or bill bears the expression at
sight and on presentation, it would mean that these instruments are
payable on demand. But it should be noted that the expressions payable at
sight and payable on presentation are slightly different from payable on
demand. The former must be presented before payment is demanded on
whereas the latter need not be presented for payment.

7. Ambiguous Instrument: An ambiguous instrument is one whose form

or terms are such that can be treated as a bill of exchange or as a

promissory note depending on the holders choice, and it shall be treated
accordingly. Section 17 states, where an instrument may be constructed
either as a promissory note or bill of exchange, the holder may, at his
election, treat it as either, and the instrument shall hence forth treated
accordingly. Thus, an instrument can be taken as ambiguous in the
following cases:
Where drawer and drawee are the same person;
Where drawee is a fictitious person;
Where drawee is a person incompetent to enter into a contract.
8. Inchoate Instrument: The term inchoate instrument implies an
incomplete instrument. A negotiable instrument duly signed and stamped
but left blank or incomplete in some respect is called an inchoate
instrument. According to Section 20, if a person signs an incomplete
instrument and delivers it to another, it provides the holder thereof with
prima facie authority to complete it and if, in executing that authority, the
instrument is completed, the former i.e. signer will be liable on it to a
holder as well as holder in due course.

KINDS OF NEGOTIABLE INSTRUMENTS

The Negotiable Instruments Act recognizes only three kinds of

instruments i.e., promissory notes, bills of exchange and
cheques. The Act, however does not exclude any other
instrument if it entitles a person to a sum of money and is
transferable by delivery and the transferee can acquire a
better title. Accordingly, shares/dividend warrants, bearer
debentures, government bonds payable to bearer, treasury
bills, port trust

debentures and instruments written in local

languages i.e. hundis etc., also included in the category of

negotiable instruments.

Promissory Note
A promissory note is an instrument in
writing (not being a bank note or currency
note)
containing
an
unconditional
undertaking, signed by the maker to pay a
certain sum of money only to, or the order
of a certain person, or only to bearer of the
instrument.
(Section 4]
The person making the promise to pay is
called the maker and the person who is
to receive the money stated in the note is
called the payee.

Parties to a Promissory Note:

A promissory note, should have the following parties:

1.
Maker A person who issues or executes the note
promising to pay the amount stated therein is called the
maker.
2.
Payee This is the person who is to receive the money
stated in the pro-note.
3. Holder This is the person who is entitled in his own name
to the possession of a pro-note, and to receive or recover
the amount thereon. S/He may be either the payee or some
other person to whom he may have endorsed the note.
4. Endorser This is the maker or payee who may endorse an
instrument.
5. EndorseeThe endorsee is the transferee or the person
in whose favour the pro-note has been endorsed.

Essentials of a valid promissory note

Following are the essential characteristics of a

promissory note:
1. Must be in writing
2. Must contain an express undertaking to pay
3. The promise or undertaking to pay must be
unconditional
4. The promise must be for paying certain sum of money
5. Must be signed by the maker
6. The maker must be a certain person
7. The payee must be certain
8. Payment must be in legal tender money of India
9. Must be properly stamped
10.Must contain number, place and date of signature

Specimen of Promissory Notes

Specimen 1
Rs. 5000/
New Delhi
2 November 2010
Sixty days after date I promise to pay Mr. X the sum of rupees five thousand only with
interest thereon at 12% per annum for value received.
Revenue
To,
Stamp
Mr. X
Revenue Stamp
New Delhi
Mr. X (Sd/- on stamp)

Specimen 2
Rs. 5000/-

New Delhi

2 November 2010
Ninety
days after date I promise to pay Mr. Y or order the sum of rupees Five thousand only.
Revenue
To,
Revenue Stamp
Stamp
Mr. Y
New Delhi Mr. Y (Sd/- on stamp)

Bill of Exchange

A bill of exchange is an instrument in writing containing an unconditional order,

signed by the maker, directing a certain person to pay a sum of money only to,
or to the order of a certain person, or to the bearer of the instrument.
Parties to bills of exchange. A bill of exchange may involve the following
parties:
1.
Drawer This is the person who writes and signs the bill.
2.
Drawee This is the person on whom the bill is drawn
3.
Acceptor This is the person who accepts the bill. In practice, the drawee is the
acceptor but a third person may accept a bill on behalf of the drawee.

4.

Payee: This is the person to whom the money stated in

the bill is payable. He may be the drawer or any other
person to whom the bill has been endorsed.

5.

Holder This is the person who has the possession of the

bill. After being drawn s/he may be the original payee,
endorsee and bearer in case of a bearer bill.

6. Endorser The person, either the drawer or holder, who

endorses the bill to any one by signing on the back of it is
called an endorser.
7.

Endorsee is the person in whose favour the bill is

endorsed.

8.

Drawee in case of need This is a person who is introduced at

the option of the drawer. Any endorser may insert the name of
such person, and the effect of it is that a resort may be had to
him in case the bill is dishonoured for non-acceptance or nonpayment or in any other need.

9.

Acceptor for honour The person who may become a party to a

bill as acceptor voluntarily in the event of the refusal by original
drawee to accept the bill if demanded by the notary. The
acceptor for honour offers to accept the bill supra protest with a
view to safeguard the honour or prestige of the original drawer
or any other endorser, as the case may be.

Usually there are three parties to a bill of

exchange drawer, drawee and payee. It is
also not necessary that three separate
persons should answer to the description
of drawer, drawee and payee. Depending
upon the situation one person may fill any
two of three positions. When a bill is drawn
as pay to me or my order, drawer and
drawee may be the same person. Similarly,
when a principal draws a bill on his agent
or upon himself, drawee and payee may be
the same person.

Specimen of a Bill of Exchange

Rs. 5000/New Delhi
1st
April 2010
Sixty days after date pay B or order the sum of rupees five
thousand only for value received.
To, C
Jamia Nagar,
New Delhi-110025
Accepted Sd/- C
Mr. X (Sd/- on stamp)

Essentials of a Bill of Exchange

The definition of a bill of exchange is very close to that of a promissory note.
Therefore bills of exchange have more or less the same essential
characteristics as a promissory note. Following are the essential elements of a
bill of exchange:
1. It must be in writing
2. It must contain an express order directing a certain person to pay
3. The order to pay must be unconditional
4. There are parties to a bill of exchange viz., drawer, drawee, and payee
5. It must be signed by the drawer
6. The drawer must be a certain person
7. The drawee must be certain
8. The payee must be certain
9. The sum payable must be certain
10.The order must be pay money only
11.A bill of exchange can be drawn payable to bearer but cannot originally be
drawn payable to bearer on demand
12.It must be duly stamped according to the Indian Stamp Act
13.Other formalities like, date, place and the words For value received etc. are
usually found in a bill of exchange though they are not necessary in law.

Distinction between a Promissory Note and a Bill of Exchange

1.

2.

3.

4.

Number of Parties A promissory note is a two-party instrument

with a maker and the payee, both being distinct and different
persons. In a bill of exchange there are three parties- drawer, drawee
and payee. It is possible that any two out of three positions may be
filled up by the same person i.e., drawer and drawee may be the
same person, drawee and payee may be the same person and
drawer and payee may be the same person.
Promise and Order A promissory note contains an unconditional
undertaking to pay the drawee whereas a bill contains an
unconditional order to pay.
Maker as a Payee In case of a promissory note the maker cannot
be the payee. i.e a promissory note cannot be made payable to the
maker. But in a bill of exchange the drawee and the payee may be
one and the same person when a bill is drawn as pay to me or my
order.
Nature of Liability The liability of the maker of a pro-note is
primary and absolute since the maker himself promises to pay. But
the liability of the drawer of a bill is secondary and conditional. He
becomes liable to pay only when the drawee or acceptor refuses to
honour the bill or fails to pay.

5.

Acceptance A pro-note does not require any acceptance before it is presented

for payments as it is payable by a person who makes it. A bill of exchange on the
other hand generally requires acceptance of the drawee before it is presented for
payment since it is payable by the other person directed by the drawer. The
acceptance, however, may be conditional.

6. Makers

Position In a pro-note, the maker stands in immediate

relationship with the payee, but the drawer of a bill stands in immediate
relation with the acceptor and not the payee.
7.Payable to Bearer A pro-note cannot be made payable to bearer, even if
it is made payable otherwise than on demand. A bill can be made payable
to bearer provided it is not made payable to bearer on demand.
8.Notice of Dishonour In case of dishonour of a pro-note, no notice (of
dishonour) needs to be given to maker. But when a bill is dishonoured, due
notice must be given by the holder to all the parties who are liable under
the bill, particularly the drawer and the immediate endorsee. If notice of
dishonour is not given, such parties will not be liable to pay.
9.
Protest No protest is necessary in case of a promissory note. But
foreign bills must be protested for dishonour if the law of the land where
they are drawn so requires. The term protest refers to a formal certificate
of dishonour issued by the Notary Public to the holder of a bill in question.

CHEQUES

A cheque is a bill of exchange drawn on a specified banker and

not expressed to be payable otherwise than on demand [Section
6]. Simply put, a cheque is a kind of bill of exchange drawn on a
bank that is always payable on demand. The definition of
cheque is modified by an amendment to the Negotiable
Instruments Act in 2002, according to which cheque includes
electronic image of a truncated cheque and a cheque in
electronic form. This makes provision for electronic submission
and clearance of cheque.
A cheque being a kind of a bill of exchange satisfies all the
requirements of a bill except that it does not have any
acceptance and stamp.
Thus, a cheque must be signed by the drawer (i.e., the maker);
it payable must contain an unconditional order to pay a certain
amount of money to a specified person named therein or his
order, or to the bearer; must specify the banker upon whom it is
drawn, and must be dated.

Parties to a cheque
A cheque generally involves the following parties :
1. Drawer The person who makes the cheque
2. Drawee The bank of the drawer on whom thecheque is
drawn
3. Payee The person who is to receive the money stated
in the cheque
4. Holder A person who is in the possession of a cheque
and is entitled to receive or recover theamount thereon.
5. Endorser The maker, drawee, payee or endorseecan
endorse a cheque by signing on the back of it. The
endorser of a cheque has the status of a new drawer.
6. Endorsee The transferee or the person in whose favour
the instrument has been endorsed.

Essentials of a Cheque

If one takes a close look at the definition of a cheque, as per Section 6, it

becomes clear that a cheque has the following 10 essential elements or
characteristics:
1. It must be in writing A cheque must be in writing. An oral order to pay does
not constitute a cheque.
2. It should be drawn on banker It is always drawn on a specified banker. A
cheque can be drawn on a bank where the drawer has an account.
3. It contains an unconditional order to pay A cheque cannot be drawn so
as to be payable conditionally. The drawers order to the drawee bank must be
unconditional and should not make the cheque payable dependent on a
contingency. A conditional cheque shall be invalid.
4. The cheque must have an order to pay a certain sum The cheque
should contain an order to pay a certain sum of money only. If a cheque is
drawn to do something in addition to, or other than to pay money, it cannot
be a cheque. For example if a cheque contains Pay Rs 5,000 and a T.V. worth
Rs to A, It is not a cheque.
5. It should be signed by the drawer and should be dated A cheque does
not carry any validity unless signed by the original drawer. It should be dated
as well.

6. It is payable on demand A cheque is always payable on demand.

7. Validity A cheque is valid for three months from the date it bears.
Thereafter it is termed as stale cheque. A post-dated or antedated
cheque will not be invalid. In both cases the validity of the cheque is
presumed to commence from the date mentioned on it.
8. It may be payable to the drawer himself Cheques may be
payable to the drawer himself. It may be drawn payable to bearer on
demand unlike a bill or a pro-note.
9. Banker is liable only to the drawer The banker on whom the
cheque is drawn shall be liable only to the drawer. A holder or bearer
has no remedy against the banker if a cheque is dishonoured.
10. It does not require acceptance and stamp Unlike a bill of
exchange a cheque does not require acceptance on part of the
drawee. There is, however, a custom among banks to mark cheques
as good for the purpose of clearance. But this marking is not an
acceptance. Similarly, no revenue stamp is required to be affixed on
cheques.

Difference between a Bill of Exchange and a Cheque

Point of
S.No.

Bill of Exchange

Cheque

Difference
1.

Drawee

A bill can be drawn on any person A cheque is always drawn on a

(i.e., upon an individual as well banker.
as a banker)

2.

Payable

It may be drawn payable on It can only be drawn payable

demand, or on the expiry of a on demand, and within six
certain period or days after sight months of the date mentioned
or date.

on the cheque.

3.

Grace

A grace of 3 days is allowed No grace is given in case of a

period

in the case of payment of cheque for payment for the sole

bill payable after sight or reason that a cheque is payable
date.

4.

Acceptance

on demand.

Acceptance by the drawee is It does not require any acceptance

must before payment can be and
demanded in respect of a bill.

5.

is

intended

for

immediate

payment.

Payable to

A bill cannot be made payable A cheque can be made payable to

bearer

to bearer on demand

the bearer on demand.

6.

Estoppel of

The drawer cannot stop

Banker

or

the

drawee

is

payment

payment of a bill. In other empowered to stop payment

words a bill of exchange of a cheque if all the related
cannot be countermanded. formalities are not adhered
to.

7.

Presentment

The

drawer

of

bill

is The

drawer

of

cheque

is

for payment

discharged (i.e., not liable to discharged only if he suffers any

pay), if it is not presented for loss or damage due to delay in its
payment

presentment for payment and he

shall be discharged to the extent
of such damage.

8.

Notice of

Notice of dishonour of a If a cheque gets dishonoured,

dishonour

bill is necessary in order insufficiency of funds in the

to charge its drawer.

drawers
sufficient and

account

appropriate

evidence to charge him.

9.

Crossing

The

Act

contains

no A cheque may be crossed.

provision for crossing of a

bill of exchange.

is

HUNDIS

1.

2.

3.

4.

HUNDIS are negotiable instruments written in various vernacular

languages in the country. The term is derived from the Sanskrit word
hundi which means to collect. These are generally in the form of bills of
exchange but may sometimes look like promissory notes in form and
contents. Hundis are quite popular among Indian merchants even today
and are governed by the Negotiable Instrument Act unless there is a local
usage to the contrary.
Types of Hundis
Darshani hundi. A hundi payable at sight is called darshani hundi. It is
negotiable and is like a demand bill. It may be sold at par or at premium
or at discount. A darshani hundi should be presented for payment within
a reasonable time of its receipt by the holder.
Miadi hundi. Also known as muddati hundi, miadi hundi is one which is
payable after a specified period of time like a time bill. Banks usually
provide loans against the security of such hundis.
Shahjog hundi. This is a hundi made payable only to a Shah (a
respectable person of financial worth and substance in the market). It
may be miadi or darshani and can be transferred freely from one person
to another by mere delivery but it is not payable to bearer. In some
respects it is similar to a crossed cheque.
Namjog hundi. It is a hundi payable to the party named in the hundi or
his order. Such a hundi is similar to a bill of exchange payable to order.

5. Dhanijog hundi. Dhani in vernacular means owner. Thus, a dhani jog hundi

is one which is made payable to the owner, or a holder or bearer-owner. It is just

like a bearer cheque and the holder of it becomes holder in due course if he
takes it bona fide and for value.
6. Jokhmi hundi. The term Jokhmi has been derived from the Hindi work
jokhim meaning risk. Such a hundi is usually drawn against goods shipped on
a vessel and implies a certain risk involved in the shipment of goods. Jokhmi
hundi in fact is a combination of bill of exchange and insurance policy and
payable only when the goods arrive in safe and sound condition. If the goods are
lost in transit, the consignor cannot claim payment of the hundi from the
consignee i.e., the drawee.
7. Jawabi hundi. A hundi, which is in the form of letter or recommendation to a
banker for payment of a certain sum of money to a specified person, is termed
as jawabi hundi.
8. Zikri hundi. This is a hundi accepted for honour in writing on a Zikri chit
(letter of protection) without being protested. It is drawn in the name of a
specified person residing in the town or city where the hundi is payable. In case
acceptance is refused by the drawee or when a refusal is likely to occur, the
hundi is furnished to the holder by some prior party to it.
9. Firmanjog hundi . The term Firman refers to order in vernacular language
and therefore, a Firmanjog hundi is made payable to the order of payee. It is
just opposite of dhanijog hundi which is payable to the bearer only.