Section 118 NI Act
What default assumptions does the law make about a cheque or other negotiable instrument?
Short answer
The law assumes the instrument was made for value, dated correctly, accepted promptly, transferred before it matures, endorsed in order, properly stamped if lost, and that the holder is a holder in due course, unless proven otherwise.
In detail
Under the Act, unless someone can prove otherwise, a negotiable instrument such as a cheque is presumed to have been created for some value (consideration). If it shows a date, it is taken to have been drawn on that exact day. An accepted bill of exchange is assumed to have been accepted within a reasonable period after its date and before it expires. Any transfer of the instrument is presumed to have happened before its maturity date. The endorsements (signatures) on the instrument are considered to be in the same order they appear. If a promissory note, bill of exchange, or cheque is lost, it is assumed to have been properly stamped. Finally, the person holding the instrument is treated as a holder in due course, meaning they have a clean title, unless the instrument was obtained through crime, fraud, or illegal consideration, in which case the holder must prove their clean status.
Related questions
What happens if my cheque bounces because I don’t have enough money?
If your cheque bounces for insufficient funds, you can be prosecuted and may face up to two years in jail, a fine up to twice the cheque amount, or both, provided certain steps are followed.
When I get a cheque, does the law assume it’s to pay my debt?
Yes, the law presumes the cheque is for settling a debt unless someone proves otherwise.
Can I still file a case for a bounced cheque after the one‑month deadline?
You must file a written complaint within one month, but the court may accept a later filing if you show a good reason.
If my company bounces a cheque, can its managers be held criminally liable?
Yes, managers who were in charge of the business at the time can be treated as guilty unless they prove they didn’t know and exercised due diligence.
Not legal advice. This is general legal information, not legal advice. Laws change and every case turns on its own facts — speak to a lawyer about your situation.