Police were called in and found the Jeevarajahs could not confirm where and when the ticket had been bought.
They have now been jailed for 14 months each after Anne Jeevarajah, 38, admitted theft and fraud, and her 45-year-old husband admitted fraud.
Judge Alasdair Darroch, sitting at Norwich Crown Court, told them: "It was a flagrant breach of trust. This is the sort of matter which the public expects to be dealt with very seriously."
Relatives will look after the couple's ten-year-old daughter while they serve their sentences. Mr Badham-Davies, 73, who has since received his full winnings, said after the hearing that he forgave the Jeevarajahs. He seemed more upset about a police ban on him visiting the shop during their investigation.
"I don't feel any malice or animosity. I see it as a betrayal," he said.
"I feel hurt about it but they made a mistake. I forgive them. The only thing that upset me to an extent is it really spoiled my village life.
"I loved going into that village shop. The girls who work there are really nice and there was an ongoing friendship."
Construction company owner Mr Badham-Davies normally bought lottery tickets at the Jeevarajahs' shop in Hingham, Norfolk, every week. But on June 25 last year he picked up the winning ticket at a nearby supermarket.
He went into the newsagent's on July 2 to buy his usual numbers and a lucky dip. While he was there, he asked Mrs Jeevarajah to check his ticket from the previous week and she said three of his numbers had come up.
Her husband, who came to the UK from Sri Lanka in 1989 and worked as an electrical engineer before taking over the shop six years ago, tried to claim the real prize a few days later.
Mr Badham-Davies found out he was due to receive a six-figure windfall only when Mr Jeevarajah confessed what had happened after Norfolk Police started investigating. Ian James, defending the couple, told the court the family would pay a huge price, including losing their home and business.
Villagers were shocked at the case. One man, who asked not to be named, said: "They seemed a very nice couple but they have destroyed the goodwill people had for them. What they did was unforgivable."
A Camelot spokesman said: "We have information in our system which can monitor every single ticket purchased.
"We know when and where a line of numbers is bought and when a winning ticket is presented and scanned into a terminal. The success of the National Lottery is built on player trust and the sentences handed down provide clear evidence that Camelot will not allow that trust to be undermined in any way."
Detective Constable Sophie Getley said: "This type of fraud is taken very seriously and will be investigated robustly."
- DAILY MAIL
