Section 118 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 118 lists seven presumptions that the law makes about a negotiable instrument "until the contrary is proved". They cover consideration, date, time of acceptance, time of transfer, order of indorsements, stamps on a lost instrument, and whether the holder is a holder in due course. This article follows the consolidated text consulted.
Unless the opposite is proved, the Act presumes that every negotiable instrument was made or drawn for consideration, that a dated instrument was made on its date, that an accepted bill was accepted within a reasonable time and before maturity, that every transfer was before maturity, that indorsements are in the order they appear, that a lost instrument was duly stamped, and that the holder is a holder in due course. The last presumption has a proviso that reverses the burden where the instrument was obtained by an offence, fraud or for unlawful consideration.
What "presumption" means here
The section opens: "Until the contrary is proved, the following presumptions shall be made". The word "until" tells you these are rebuttable presumptions. The party who denies the presumed fact must prove the opposite. The text does not say how strong that proof must be, and this article does not add a standard.
Presumptions are the reason an instrument is useful in recovery. A holder who sues, or sends a demand, does not have to prove at the outset that value was given for it. If you plan a claim, our recovery suit service can help you gather the instrument and supporting papers. A note on spelling: the Act writes "indorsed" and "indorsement"; "endorse" is the common spelling.
Section 118 is the general rule for all negotiable instruments. The specific presumption for a cheque given for a debt or liability is in Section 139, which is covered in our existing post and is not re-explained here. Section 118 and Section 138 work together in a cheque case, but each has its own wording.
The seven presumptions
| Clause | Heading in the text | What is presumed |
|---|---|---|
| (a) | of consideration | every negotiable instrument was made or drawn for consideration; and every such instrument, when accepted, indorsed, negotiated or transferred, was so for consideration |
| (b) | as to date | every negotiable instrument bearing a date was made or drawn on such date |
| (c) | as to time of acceptance | every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity |
| (d) | as to time of transfer | every transfer of a negotiable instrument was made before its maturity |
| (e) | as to order of indorsements | the indorsements appearing on a negotiable instrument were made in the order in which they appear |
| (f) | as to stamps | a lost promissory note, bill of exchange or cheque was duly stamped |
| (g) | that holder is a holder in due course | the holder of a negotiable instrument is a holder in due course |
Clause by clause
(a) Consideration. The presumption covers the original making or drawing and each later step: acceptance, indorsement, negotiation or transfer. Consideration is a contract-law idea, and the Act's own rule on an instrument made without consideration is in Section 43. For the underlying principle, see our article on Section 25 of the Indian Contract Act, 1872.
(b) Date. An instrument bearing a date is presumed to have been made or drawn on that date. This matters when an instrument is post-dated or when the date affects maturity or limitation.
(c) Time of acceptance. An accepted bill is presumed to have been accepted within a reasonable time after its date and before maturity. Reasonable time is dealt with in Section 105.
(d) Time of transfer. Every transfer is presumed to have been made before maturity. This is relevant to holder in due course status and to the rules on overdue instruments.
(e) Order of indorsements. The indorsements are presumed to have been made in the order in which they appear on the instrument.
(f) Stamps. For a lost promissory note, bill of exchange or cheque, the presumption is that it was duly stamped. The text gives no stamp duty amount here; see our guide on stamp duty on a promissory note and bill of exchange for the general topic, and note that this Act says nothing on the rates.
(g) Holder in due course. The holder of a negotiable instrument is presumed to be a holder in due course.
The proviso to clause (g)
The text adds: "Provided that, where the instrument 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."
So the presumption of holder in due course does not protect a holder where the instrument was:
- obtained from its lawful owner, or a person in lawful custody, by an offence or fraud; or
- obtained from the maker or acceptor by an offence or fraud; or
- obtained for unlawful consideration.
In those cases the burden is on the holder to prove that he is a holder in due course. The Act's rule on instruments obtained by fraud or for unlawful consideration is in Section 58.
Two examples
Example 1 (clause (a)). Rohan Traders is sued on a cheque it drew in favour of Sharma Enterprises. Rohan Traders says nothing was received in return. Because of the presumption of consideration, the instrument is taken to have been drawn for consideration until Rohan Traders proves otherwise.
Example 2 (proviso to clause (g)). A cheque is stolen from the office of Tandon Pharma and finds its way to Uppal Agencies, who sues on it. The cheque was obtained from a person in lawful custody by means of an offence. Under the proviso, Uppal Agencies cannot rely on the presumption: the burden of proving that it is a holder in due course lies on Uppal Agencies.
Points to watch
- Rebuttable. All seven are subject to proof to the contrary.
- Clause (a) and (g) do most of the work. In practice, most disputes turn on consideration and on holder-in-due-course status.
- Illustrations of cheque cases. Where a cheque is given for a debt, the presumption in Section 139 and the offence in Section 138 apply on their own terms. For the defences discussed in practice, see our guide on defence in a Section 138 case.
- Nothing on court practice. The text states no standard of proof and no examples of what suffices to rebut a presumption.
Need help with a claim built on an instrument?
If you hold an instrument and the other side denies that anything was due on it, the first step is to line up the instrument, the dates and the transfer chain against these seven presumptions. Our team can take you through the papers and the route for a recovery suit.
Key takeaways
- Section 118 sets seven rebuttable presumptions for negotiable instruments.
- The most used are consideration (a) and holder in due course (g).
- The proviso to (g) puts the burden on the holder where the instrument was obtained by offence, fraud or for unlawful consideration.
- Section 139 is the cheque-specific presumption and is covered in our existing post.
- The text gives no standard of proof.
Read next
- Sections 119 to 122: presumption on protest and estoppel
- Sections 8 to 10: holder, holder in due course and payment in due course
- Section 139: presumption of legally enforceable debt
- Section 43: instrument made without consideration
Disclaimer: Based on a consolidated text of the Negotiable Instruments Act, 1881 stating the position as of 26 December 2015 and on the Negotiable Instruments (Amendment) Act, 2018, as consulted on 2 October 2026. Later amendments and current criminal procedure law should be checked. This article is general information, not legal advice; check the official text before acting.