Presumptions as to negotiable instruments
Section 118 of the Negotiable Instruments Act, 1881 deals with presumptions as to negotiable instruments. Until the contrary is proved, the following presumptions shall be made:-- (a) of consideration:-- that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated o The Act came into force on 01 Mar 1882.
Until the contrary is proved, the following presumptions shall be made:--
(a) of consideration:-- that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;
(b) as to date:-- that every negotiable instrument bearing a date was made or drawn on such date;
(c) as to time of acceptance: that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer:-- that every transfer of a negotiable instrument was made before its naturity;
(e) as to order of indorsements:-- that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;
(f) as to stamp:-- that a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course:-- that the holder of a negotiable instrument is a holder in due course : provided that, where the instrutment has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.
Section 118, The Negotiable Instruments Act, 1881 (Act 26 of 1881).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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M.S. Narayana Menon @ Mani v. State of Kerala
Court's Decision & Legal Precedent
Judgment of Main Case order-2.pdf 2006-07-04 DATE VERIFIED. Crl.A. 1012/1999. Sinha / Naolekar. Isolates NI 118(a): the consideration presumption is rebuttable on a preponderance of probabilities; the accused may rely on the complainant’s own material and need not disprove the prosecution case; once a probable defence is accepted the presumption ‘disappears’. s.139 is discussed in tandem — Rangappa already fills 139; map 118 only. Do not pad 138.
On this section: NI 118(a) consideration presumption is rebuttable by a probable defence on a preponderance of probabilities; once rebutted it disappears (M.S. Narayana Menon). Do not pad 138/139.
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Punjab & Sind Bank vs Vinkar Sahakari Bank Ltd.
Court's Decision & Legal Precedent
A Pay Order issued by a bank is a cheque within the meaning of Section 138 of the Negotiable Instruments Act, 1881, and the holder of such Pay Order has the legal standing to file a criminal complaint for dishonour. The fact that the drawer and drawee are the same banking institution does not prevent the instrument from being a cheque when held by a third party. The holder is presumed to be a holder in due course under Section 118(g) unless the contrary is proved, and such presumption cannot be rebutted at the stage of quashing the complaint but only during trial.
On this section: Presumption of holder in due course; court held that holder is presumed to be holder in due course until contrary is proved
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Vishnu Dutt Sharma vs Daya Sapra
Court's Decision & Legal Precedent
The principle of res judicata and the concept of abuse of process of law do not operate to bar continuation of a civil suit merely because the accused has been acquitted in a related criminal proceeding arising from the same transaction. A judgment in a criminal proceeding, even if it results in acquittal, does not have binding effect on a parallel civil suit as the standards of proof, burden of proof, causes of action, and legal issues are fundamentally different between criminal and civil proceedings. The applicability of reverse burden provisions and statutory presumptions in criminal law must be strictly interpreted and applied with due regard to the presumption of innocence and constitutional rights of the accused, whereas in civil proceedings no such strict compliance is required. A creditor has the right to pursue both criminal and civil remedies concurrently, and the continuation of such proceedings is neither barred by law nor constitutes an abuse of process, provided the civil suit was not barred at the time of its filing.
On this section: Provides presumptions regarding negotiable instruments, including presumption of consideration. The court discussed how this presumption must be applied strictly in criminal proceedings while maintaining the constitutional right to silence and the presumption of innocence of the accused.
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Pradeep Kumar vs Post Master General
Court's Decision & Legal Precedent
When a negotiable instrument (including Kisan Vikas Patras) is presented for encashment at a post office, the post office must verify that the person presenting the instrument is the 'holder' as defined under Section 8 of the Negotiable Instruments Act, 1881, by following the prescribed rules and procedures including verification of identity slip and obtaining written application from the actual holder. Payment made to a person in possession of the instrument but not entitled to receive payment in his name is not a valid discharge under Section 78 or Section 82(c) of the NI Act. Such payment constitutes negligence and violates the requirement of 'payment in due course' under Section 10 of the NI Act. The post office is vicariously liable for fraudulent acts of its employees committed during the course of employment, and such liability cannot be avoided by claiming that the employee acted in individual capacity or that the fraud was committed by a third party.
On this section: Presumption that holder is a holder in due course - this presumption does not apply to Rukhsana as she obtained the instrument by fraud
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Rangappa vs Sri Mohan
Court's Decision & Legal Precedent
The statutory presumption mandated by Section 139 of the Negotiable Instruments Act extends to include the existence of a legally enforceable debt or liability. This is a rebuttable presumption, and the standard of proof required for an accused to rebut this presumption is that of 'preponderance of probabilities.' The accused must raise a probable defence that creates reasonable doubts about the existence of a legally enforceable debt or liability - a mere plausible explanation is insufficient. The accused may rely on materials already submitted by the complainant and may not be required to adduce evidence of his own. Stop payment instructions on a post-dated cheque do not exempt the drawer from liability under Section 138 of the Act. The burden of proof is on the accused to demonstrate, on preponderance of probabilities, that the presumption does not apply to the specific facts of the case.
On this section: Presumption of consideration - applied to establish that negotiable instruments are presumed to be made for consideration and the nature of rebuttable presumptions in commercial transactions.
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Milind Shripad Chandurkar vs Naimulla M. Khan
Court's Decision & Legal Precedent
A sole proprietor of a proprietary concern cannot maintain a complaint under Section 138 of the Negotiable Instruments Act, 1881, based solely on affidavit claiming proprietorship. The proprietor must establish his proprietorship through documentary evidence such as business registration documents, tax records, bank account statements, and similar official records to satisfy the statutory requirement of being the 'payee' or 'holder in due course' of the cheque. Mere affidavit statements, admissions by the accused, or oral testimony of witnesses are insufficient when documentary evidence can reasonably be expected to exist for a substantial business undertaking.
On this section: Presumptions regarding cheque - applied to establish presumptions regarding execution and genuineness of cheque
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Kulwinder Singh vs Jagtar Singh
Court's Decision & Legal Precedent
Once evidence is closed after a party has been given ample opportunity to present his case, the court will not exercise its discretion to reopen evidence merely on the basis of dilatory tactics or to introduce evidence that is prima facie irrelevant. The source of funds from which a creditor arranged a loan is irrelevant to prove the transaction of lending, provided the creditor has discharged his onus regarding execution of the negotiable instrument and receipt. The legal presumption of consideration under Section 118(a) of the Negotiable Instruments Act vests in favor of the creditor once he has proved the transaction, and the burden shifts to the defendant to rebut this presumption.
On this section: The court applied Section 118(a) to establish that a legal presumption of consideration vests in favor of the creditor once he has proved the execution of the pronote and receipt. The defendant has the right to rebut this presumption but failed to do so despite ample opportunity. This presumption is central to the court's reasoning that the defendant's attempt to reopen evidence to prove the source of the plaintiff's funds is irrelevant and constitutes a dilatory tactic.
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G. Sanjeeva vs M. Vishnu Kumar
Court's Decision & Legal Precedent
When a suit is based on a promissory note and its execution is proved or the signature is admitted, the court must raise a presumption under Section 118(a) of the Negotiable Instruments Act that it was made for consideration; the burden to disprove such consideration lies solely on the defendant.
On this section: Presumption that every negotiable instrument was made for consideration until the contrary is proved.
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Dharam Nath vs Krishan Kumar
Court's Decision & Legal Precedent
When a cheque has been duly signed and issued by the accused, and the holder of the cheque has established the existence of a legally enforceable debt through credible evidence (including testimony regarding possession of pronote and receipt), the accused cannot escape liability by simple denial. The presumption under Section 139 of the Negotiable Instruments Act favors the holder of the cheque, and to rebut this presumption, the accused must present cogent facts and circumstances making it plausible that no debt existed. Technical objections regarding non-production of original documents are not sustainable when the accused had opportunity to demand their production during cross-examination but failed to do so. The burden shifts to the accused to prove absence of debt, not merely to deny it.
On this section: Establishes presumption that cheque was issued for valid consideration; cited by appellate court in upholding conviction
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Dr. Rajesh Verma vs Sri Trinath Gorh
Court's Decision & Legal Precedent
In cheque dishonour cases under Section 138 of the Negotiable Instruments Act, once the complainant establishes prima facie that a cheque was issued and dishonoured, statutory presumptions under Sections 118 and 139 arise in favour of the holder. The burden then shifts to the accused to rebut these presumptions by leading cogent and credible evidence demonstrating that no legally enforceable debt existed or that the cheque was not issued in discharge of such debt. Mere denial or plausible explanation by the accused is insufficient; the accused must necessarily disprove the prosecution case through substantive evidence. Failure to put suggestions to the complainant during cross-examination or to adduce defence evidence results in acceptance of the complainant's version and conviction of the accused.
On this section: Presumptions as to negotiable instruments. The court applied the presumption that every negotiable instrument was made for consideration and that the holder is a holder in due course, placing the burden on the accused to rebut these presumptions.
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BIJU S/O PEREPPADAN DEVAASY vs JOBI S/O PAUL CHANDANATHIL HOUSE,MANGALASSERY DESOM
Court's Decision & Legal Precedent
Once the signature on a cheque is admitted, the statutory presumption under Section 139 of the NI Act must be drawn, and the accused must produce cogent evidence, not just mere suggestions, to rebut it.
On this section: Presumption as to negotiable instruments.
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Lalit Jasrajbhai Patel vs Jadhavlal Mavji Patel
Court's Decision & Legal Precedent
An admitted signature on a cheque triggers a statutory presumption of consideration under the NI Act, and such an instrument constitutes an 'acknowledgment in writing' under Section 18 of the Limitation Act, resetting the limitation period from the date of the instrument.
On this section: Presumption that every negotiable instrument was made for consideration.
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Sunil Kumar Pattanaik vs Kumari Nahak
Court's Decision & Legal Precedent
An accused in a Section 138 case can rebut the statutory presumption by raising a probable defense based on the complainant's lack of financial capacity and inconsistencies in their testimony, shifting the burden of proof back to the complainant.
On this section: Presumptions as to negotiable instruments regarding consideration.
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Shaik Noorjahan Begum vs Shaik Ismail Sharif
Court's Decision & Legal Precedent
When a defendant admits a signature on a negotiable instrument but fails to adduce evidence to rebut the statutory presumption of consideration, the court must rule in favor of the holder of the instrument.
On this section: Used to presume that the instrument was made for consideration once execution is proved.
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Shri Subhash G Narvekar vs Mr Dharmendra Kumar Singh
Court's Decision & Legal Precedent
In cheque dishonour cases under Section 138 of the Negotiable Instruments Act, the statutory presumptions in favour of the complainant (under Sections 139 and 118) are mandatory and rebuttable. The accused must rebut these presumptions by preponderance of probability through cogent evidence. Mere allegations without supporting material, such as claiming blank cheques were issued for charity without proof of the charity or the complainant's charitable status, are insufficient to rebut the presumptions. The bank's cheque return memo creates a prima facie presumption of dishonour under Section 146, which is rebuttable only if the accused produces evidence of funds in the account. When the accused fails to discharge the burden of rebuttal, the court must find the accused guilty of the offence under Section 138.
On this section: Presumptions as to negotiable instruments - Court applied this section to presume consideration for the cheques, requiring accused to provide cogent evidence to rebut the presumption.
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KESHAV NATH vs STATE
Court's Decision & Legal Precedent
When an accused in a cheque dishonour case under Section 138 of the Negotiable Instruments Act takes a defence that the cheque was stolen or lost, the accused must establish this defence by cogent evidence and by demonstrating conduct consistent with that of a prudent person who would have immediately reported the theft/loss to police and his banker, sought return of the cheque, and taken appropriate legal action. Mere denial of liability or inconsistent statements regarding the defence are insufficient to rebut the mandatory statutory presumption under Section 139 of the NI Act that the cheque was issued in discharge of a legally enforceable debt or liability. The burden of proof to rebut this presumption lies on the accused and cannot be discharged by bare explanation or reasonable probability; it must be supported by proof that the court either believes to exist or considers so probable that a prudent man would act upon the supposition that it exists.
On this section: Presumption of consideration - Every negotiable instrument is presumed to have been made or drawn for consideration unless the contrary is proved
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… in the case of Mallavarapu Kasivisweswara Rao (supra) it has been held by the Apex Court that it is a settled position that the initial burden lies on the accused to prove the non existence of consideration. The relevant passage from the judgment may be gainfully reproduced which is as under: > "17. Under [Section 118 (a )](https://indiankanoon.org/doc/1177058/) of the Negotiable Instruments Act, the court is obliged to presume, until the contrary is proved, that the promissory note was made for consideration. It is also a settled position that the initial burden in this regard lies on the defendant to prove the non-existence of …
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… the defendant in favour of the plaintiff and passing of the consideration under the same. - (ii) The defendant contended that he repaid the borrowed amounts to the plaintiff and the plaintiff obtained three promissory notes from him for the interest amount only and the plaintiff filed this suit to gain unlawfully. Section 118 of Negotiable Instruments Act lays down statutory presumption as to the Negotiable Instruments. One of such presumption is that every negotiable instrument was made or drawn for consideration and that every such instrument when it has been accepted, indorsed, negotiated or transferred was accepted, indorsed, …
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… Judicial statements have differed as to the quantum of rebutting evidence required. In Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay AIR 1961 SC 1316, this Court held that the presumption of law under Section 118 of Negotiable Instruments Act could be rebutted. In certain circumstances, by a presumption of fact raised under Section 114 of the Evidence Act. The decision must be limited to the facts of that case. The more authoritative view has been laid down in the subsequent decision of the Constitution Bench in Dhanvantrai …
Questions about Section 118
What have the courts held on Section 118 of the Negotiable Instruments Act?
M.S. Narayana Menon @ Mani v. State of Kerala (04 Jul 2006) is the leading judgment on this section among those set out below: NI 118(a) consideration presumption is rebuttable by a probable defence on a preponderance of probabilities; once rebutted it disappears (M.S. Narayana Menon). Do not pad 138/139. Another 15 judgments on this section are set out below, 6 of them from the Supreme Court. They run from 2001 to 2025.
How do I find court cases under Section 118 of the Negotiable Instruments Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: NI Act 118, section 118 NI Act, section 118 of the Negotiable Instruments Act. People searching for it also type ni act 118 and 139 and negotiable instrument act 118. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 16 reported judgments on this section are set out on this page, beginning with M.S. Narayana Menon @ Mani v. State of Kerala (04 Jul 2006).
When did Section 118 of the Negotiable Instruments Act come into force?
Section 118 of the Negotiable Instruments Act, cited as NI Act 118, came into force on 01 Mar 1882, having been enacted on 09 Dec 1881. It is in force as at the date shown on this page.
Other sections of this Act
- 138. Dishonour of cheque for insufficiency, etc., of funds in the account312 words
- 142A. Validation for transfer of pending cases299 words
- 143. Power of Court to try cases summarily297 words
- 143A. Power to direct interim compensation291 words
- 142. Cognizance of offences290 words
- 141. Offences by companies287 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.