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journal the particulars of the hundi, viz., its amount, date, due "date, name of Shah or person tendering it for acceptance and “whose name as already intimated, is always indorsed on the "hundi. He then returns the hundi to the servant of the Shah "who takes it back to the Shah's shop. If the day of presentment "be the exact due date, the amount is paid on that very day : if "the hundi is overdue when presented, it is generally paid the "next day, the reason assigned being, that unless presented on "the actual due date, when of course its presentation is expected "and provided for, the munim or principal of the firm may not "be present, or there may not be sufficient cash in the hands of "the Killidar to meet the amount. Payment is made by send'ing the amount by a servant of the drawee to the shop of the "Shah. On receiving the amount, the Killidar of the Shah "writes an acknowledgment in full on the back of the hundi, and "sends it back to the shop of the drawee by the servant who "has brought it thence." For further information as to the usage in force in Bombay in dealing with hundis.


According to mercantile usage among Hindus, where a hundi, drawn "payable to holder" (Shah Jogi), is paid at maturity, by the drawee, to the Shah or holder of the hundi, and such hundi afterwards turns out to be forged, the Shah, though a bona fide holder for value, is bound to repay to the drawee the amount of such hundi, with interest from the date of payment, provided the drawee, has been guilty of no lâches in discovering the forgery, and communicating the fact of such forgery to the Shah. The Shah, however, relieves himself from such liability by producing the actual forger.3


But mercantile usage however extensive, cannot be allowed to prevail if contrary to positive law, including in the latter such usages, as having been made the subject of legal decision, and having been sanctioned by the Courts, have become by such adoption part of the Common Law. To give effect to an usage which involves a defiance or disregard of the law, would be obviously contrary to a fundamental principle. And this would

1 Davlatram v. Bulakidas, 6 Bom. H. C. R., O. C. J. at p. 25.

2 See Sugan Chand Shivdos v. Mulchand Johari-Mull, 12 Bom. H. C. R. 113; Jadowji Gopal v. Jetha Shamji, I. L R., 4 Bom. 333.

3 Davlatram v. Bulakidas, 6 Bom. H. C. R., O. C. J. 24.

4 Goodwin v. Robarts, L. R. 10 Ex. at p. 357; Affd. I App. Cas. 476; S. C. 44 L. J. (Ex.) 57 and


apply, quite as strongly to an attempt to set up a new usage, against one which has become settled and adopted by the Common Law, as to one in conflict with the more ancient rule of the Common Law. Thus it having been decided in two cases, Moore v. Manning' and Acheson v. Fountain, 2 that when a bill of exchange was indorsed to A B, without the words or order," the bill was nevertheless assignable by A B, by further indorsement, Lord Mansfield and the Court of Queen's Bench in the case of Edie v. The E. I Co.3 held, that evidence of a contrary usage was inadmissible.


While the greater or less time during which a custom has existed, may be material in determining how far it has generally prevailed, it cannot be, that if a usage is once shown to be universal, it is the less entitled to prevail, because, it may not have formed part of the law merchant as previously recognized and adopted by the Courts, (the judgment in Crouch v. Credit Fonciers may be supported on the ground, that in that case there was substantially no proof whatever of general usage.)


With reference to hundis, according to the law merchant of India, the bona fide holder for value of a lost, stolen, or forged hundi, is bound to refund to the drawee the amount received thereon, if the drawee has been guilty of no lâches, in discovering the infirmity in the title to, or the validity of, the instrument. This custom was held to be clearly proved in the Bombay High Court, and Arnould J., who tried the case, quoted in his judgment the following evidence. "The amount of a forged hundi must be refunded with interest at 6 per cent. from date of payment. The Shah or person to whom the money has been paid, must point out the responsible person (the drawer), and, if he do not, he is responsible himself, if he do, the drawer must refund. We, in every case, look to the Shah, i.e., the person who brings the hundi to us for payment, as the responsible party," and that of another witness"in all cases we pay on the responsibility of the Shah. If the hundi turns out to be forged or stolen, the Shah to whom the money has been paid, is obliged to refund it to the person who has paid it, with 6 per cent. interest.

1 I Com. Rep. 311.

2 I Str. 557.


3 2 Burr. 1216.

4 Goodwin v. Robarts, L. R. 10 Ex. at p. 356; Affd. 1 App.

Cas. 476; S. C. 44 L. J. (Ex.) 57 and 157.

5 L. R. 8 Q. B. 374.

6 Davlatram v. Bulakidas, 6 Bom, H. C. R., O. C. J. at p. 30.

This is the universally established custom throughout India among natives. It is as old as shroffing; it has been the custom since shroffing came into existence." In deciding on the evidence His Lordship said,' 1" and as to the existence of such a rule as a part of the law merchant of India, I think the weight of evidence preponderates in favor of the Plaintiffs." Local usages relating to any instrument in an oriental language being excluded from the operation of the Act, this must be taken as an exception to the rule contained in this section. A hundi ought not to be paid by the drawee, unless it has endorsed on it, when presented, the name of the "Shah" by whom it is presented or rather by whom it is sent for presentment.

The Honorable Mr. Brandreth, when the original Bill was introduced into Council, on the 13th December 1867, spoke to this custom prevailing in the Punjab, he said, "but by the custom of Sahukars-bankers in the Punjab-there was no discharge from liability" (referring to the provisions of the section). "Persons who cashed, accepted, purchased or received bills in the Punjab, were held responsible for their mistakes, if they dealt with a party who had wrongly acquired possession. For their own protection therefore, such persons were in the habit of exercising great caution, and of requiring security from the opposite party in the transaction, unless he was well known as trustworthy. By the law of the Punjab, the innocent payer of the bill that had been stolen was no more discharged, than the innocent purchaser of stolen property."

A custom, that the gumastahs of the acceptor of a hundi should not be held liable as drawers, although on the face of the hundi they were not described as the gumastahs was held good."

The following extract will illustrate when and how incidents or usages may be attached to written contracts and when not :— "We must take it as admitted that such a custom (to treat as


negotiable instruments, debentures of a company) has prevailed "of late years; but as the instruments themselves are only of "recent introduction, it can be no part of the law merchant. "Incidents, which the parties are competent by express stipu

1 Davlatram v. Bulakidas, 6 Bom. H. C. R., O. C. J. at p. 31. 2 Ib., at p. 28.

3 Hari Mohun Bysak v. Krishna Bysak, 9 Beng. L. R. App. 1.



"lation to introduce into their contracts, may be annexed by custom, however recent, provided that it be general, on the ground that they are tacitly incorporated in the contract. If "the wording of the instrument is such as to exclude this tacit incorporation, no usage can annex that incident as, for instance, "to exclude days of grace. But where the incident is of such a nature, that the parties are not themselves competent to intro"duce it by express stipulation, no such incident can be annexed "by the tacit stipulation arising from usage. It may be so annexed by the ancient law merchant, which forms part of the "law and of which the Courts take notice. Nor if the ancient "law merchant annexes the incident, can any modern usage take “it away. We have already intimated our opinion that it is "beyond the competency of parties to a contract, by express "words to confer on the assignee of that contract, a right to sue " in his own name. And we also think it beyond the competency "of the parties by express stipulation, to deprive the assignor of "either the contract, or the property represented by it, of the


right to take back his property from any one to whom a thief may have transferred it, even though the transferee took it "bona fide and for value. As these stipulations, if express, "would have been ineffectual, the tacit stipulations implied from "custom must be equally ineffectual.”


And again no custom can over-ride the terms of the contract as set forth in the hundi, nor can such custom, being irrational, absurd, and contrary to equity and good conscience, be sustained in a Court of Justice.?

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Where there was a verdict of a jury founded on strong evidence, that according to the usage in London, an indorsement to an indorsee by name, without any further words was restrictive, the Court held that the evidence should not have been received, the law merchant being known to the Court to be that it was not restrictive.3

Plaintiff obtained a hundi from the first Defendant, drawn upon

1 Crouch v. Credit Foncier, L. R. 8Q. B. at p. 386, but see Goodwin v. Robarts, L. R. 10 Ex. 355; Affd. 1 App. Cas. 476; S. C. 44 L. J., (Ex.) 57 and 157.

2 Indur Chunder Doorga v.

Luchmee Bibi, 15 Suth. W. R. per
Paul, J., at p. 502; S. C. 7 Beng.
L. R. 682.

3 Edie v. E. I. Co., 2 Burr, 1216.

his firm at C. On a representation that the hundi was lost, the first Defendant granted Plaintiff a second hundi on the same firm. When this duplicate was presented to the firm, the original had already been presented by the second Defendant and the duplicate was declined in accordance with its own terms. On due date the original hundi was paid by the acceptors. Plaintiff then sued, either for the non-acceptance of the hundi, or to recover money had received on the ground that the original consideration had failed. Held, that the non-ac Held, that the non-acceptance of the duplicate hundi could not give Plaintiff any cause of action and that the consideration had not failed.

Insufficiently stamped hundis cannot be received in evidence, even on payment of penalty.' This was a ruling under Act XVIII of 1869, but is applicable now, as by proviso 1 of Sec. 34, Act I of 1879, (see Appendix), bills of exchange and promissory notes are excepted from instruments which may be received in evidence on payment of penalty. By Clause 2 of Sec. 3 of the Act, a Bill of exchange includes a hundi, and so did the definition in the former act.

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A hundi is called 'Khoka' when paid and cancelled."

With reference to this section, the Select Committee in their report, dated 27th May 1878, say, "but when the analogy between "bills and hundis is complete, and there is no proof of special "usage it has been ruled,' that the English law applies. We "think we should give effect to this ruling." This will not only save the custom of native merchants as to hundis, but also their custom (if any such exist) as to promissory notes and cheques, and in their report of 20th January 1881. "We

agree with the Commissioners, that uniformity of practice is "particularly desirable in matters relating to negotiable paper, "and to facilitate the assimilation of the practice of shroffs, to "the practice of European merchants, we have declared that "local usages may be excluded by any words in the body of the "instrument, which indicate an intention that the legal relation "of the parties thereto, shall be governed by the provisions of "the proposed Act."

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1 Mothoora Mohun Roy v. Peary Mohun Shah, I. L. R. 4 Cal, 259.

2 Mathews v. Girdhalal,7 Bom. H. C. R. 2.



3 Amritram
Doss, 2 Hyde. 261.

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