SECTION 118 N. I. ACT: PRESUMPTION THAT CHEQUE MADE OR DRAWN UNLESS PROVED CONTRARY

 Justice Ashok Bhushan and Justice M. R. Shah of Supreme Court noted that as per Section 118 of the Negotiable Instruments Act, the presumption is that cheque or a negotiable instrument is made or it is drawn and this would be presumed as such till it is proved to the contrary. The court held the accused respondent guilty according to Section 138 of the Negotiable Instruments Act and sentenced the second respondent, third and fourth respondent to 3 months of imprisonment along with a fine of an amount of Rs 10,000/- by each, which if defaulted, have to undergo further one month of imprisonment while the original accused was ordered by the court to pay an amount of eight lakh rupees to the complainant as compensation.

The appellant-complainant had Foreign Exchange business and accused-respondent was issued a certain amount and then, accused-respondent had issued cheques which got dishonoured. Thereafter, accused-respondent was sent a legal notice and still, the amount was not returned.

Appellant-complainant filed a complaint before Metropolitan Magistrate where the court found that the legal liability was not there since it was not proved that payment was through the card and so dismissed the matter.

An appeal was filed before Sessions Court where the court dismissed the same.

An appeal filed before the High Court was dismissed by the court.

So, an appeal was filed before the Supreme Court where the court noticed :

“In the case of K.N. Beena vs. Muniyappan, (2001) 8 SCC 458, it is observed and held by this Court that under Section 118 of the N.I. Act, unless the contrary is proved, it is to be presumed that the negotiable instruments (including a cheque) had been made or drawn for consideration.” This is one of the top legal judgments in India.