Section 118 NI Act: Presumptions as to negotiable instruments Until the contrary is proved, the following presumption shall be made

Section 118 of Negotiable Instruments Act: Presumptions as to negotiable instruments Until the contrary is proved, the following presumption shall be made

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

Until the contrary is proved, the following presumptions shall be made:

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;

as to date; that every negotiable instrument bearing a date was made or drawn on such date;

as to time of acceptance; that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;

as to time of transfer; that every transfer of a negotiable instrument was made before its maturity;

as to order of indorsements; that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;

as to stamp; that a lost promissory note, bill of exchange or cheque was duly stamped;

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 instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an SP 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 burthen of proving that the holder is a holder in due course lies upon him.

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Promissory Note Sec 4 Bill Of Exchange Sec 5 Cheque Sec 6 Holder Sec 8 Holder In Due Course Sec 9

Legal Commentary & Landmark Judgments: Section 118

Section 118 enacts powerful statutory presumptions as to negotiable instruments, mandating that the court shall presume consideration, date, time of acceptance, time of transfer, order of indorsements, stamping, and that every holder is a holder in due course.

Mandatory 'Shall Presume' Status: The court is legally bound to presume all statutory facts under clauses (a) to (g); the burden of disproving them rests entirely upon the defendant.
Presumption of Consideration: Presumed that every negotiable instrument was made, drawn, accepted, and indorsed for valuable consideration.
Standard for Rebuttal: The defendant can rebut the presumption by raising a probable defence on a preponderance of probabilities through cross-examination or documentary evidence.

Key Landmark Precedents:

Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal (1999) 3 SCC 35: The Supreme Court authoritatively settled that the presumption under Section 118(a) is mandatory; the defendant cannot rebut it by mere denial, but must produce evidence making non-existence of consideration probable.
M.S. Narayana Menon v. State of Kerala (2006) 6 SCC 39: The Supreme Court ruled that the standard of proof to rebut Section 118/139 presumptions is preponderance of probabilities, which can be discharged even from the complainant's own admissions.
Bir Singh v. Mukesh Kumar (2019) 4 SCC 197: Affirmed that voluntarily handing over a signed instrument triggers mandatory presumptions under Section 118 and Section 139.

Courtroom Practice & Strategic Litigation Guidance:

Section 118 is the cornerstone of commercial paper litigation. As plaintiff's counsel, once execution and signature are admitted or proved, you do NOT have to prove consideration in chief; the burden is on the defendant. As defense counsel, concentrate cross-examination on creating doubt regarding the plaintiff's financial capacity or accounting records to displace Section 118.

Section 118: Presumptions as to negotiable instruments Until the contrary is proved, the following presumption shall be made

Section 118 of Negotiable Instruments Act: Presumptions as to negotiable instruments Until the contrary is proved, the following presumption shall be made

Legal Commentary & Landmark Judgments: Section 118