The Judgment of the Court was delivered by

Beasley, C.J:— The plaintiff in the suit, who is the petitioner here on 3rd January 1929, sold 10 kalams of paddy at Rs. 3 a kalam making a total of Rs. 30, to the defendants, the respondents here, and on the same date took from the latter a hand-letter which reads as follows: 3rd January 1929. The hand-letter executed in favour of Ramaswami Pillai …… by Murugayya Padayachi and Kailya Padayaohi …… We have taken from you on credit this day 10 kalams of kuruvai paddy at Rs. 3 a kalam for Rs. 30 and we have executed this hand-letter promising to pay the sum of Rupees thirty with interest thereon at three pies per rupee per mensem to you or to your order.

2. This document was unstamped; and being clearly a promissory note—and this is not contested by the petitioner—it was not admissible in evidence because it was unstampted. The District Munsif having rejected the promissory note as evidence declined to give a decree to the petitioner on the original debt holding that the hand-letter was not given in respect of an antecedent debt but was a contemporaneous document executed at the same time as the transaction relating to the sale of the paddy. This petition was directed to be posted before a Bench of three Judges in view of the fact that it was suggested that in this High Court there has been a conflict of opinion on the question as to whether a plaintiff is entitled to fall back upon the original debt where, through insufficiency of stamp or otherwise, a document, which is executed at the same time as the debt sued upon is incurred, is inadmissible in evidence. Some recent decisions of single Judges of this High Court are relied upon in support of the contention that previous Bench decisions of this High Court, viz. 10 Mad 941, which followed 7 Cal 2562; 38 Mad 6603 and the recent case of 67 MLJ 5954 are no longer good law and that on the contrary the views recently expressed by Stone, J., in 67 MLJ 305, and by Venkatasubba Rao, J., in 67 MLJ 9126, and by Wallace, J., in 1926 Mad 11487, correctly state the law. In 67 MLJ 912, Venkatastibba Rao, J., expreaaes the opinion that, so far from the law being settled in this Presidency by the cases relied upon by the respondents the preponderance of authority is in favour of the view that although the execution of the note is simultaneous with the loan, the lender can fall back upon the original consideration. Courts Trotter, J., in 34 IC 4178 says:

The giving of the security does not extinguish but merely suspends the cause of action on the original debt, which revives if the security be not discharged at maturity and treats this proposition as ‘fundamental and rudimentary.’ K. Srinivasa Ayyangar, J., in the same case says:

If a bill or a note is given for a contemporaneous debt, there is a difference of opinion, but the better opinion is that even in such a case the bill merely suspends the remedy and does not operate as a discharge.

3. Whilst I do not agree with Venkatasubba Rao, J., that the preponderance of authority in this Presidency is in favour of that view, I agree that there is certainly a conflict of opinion. In 40 Mad 5859, a decision of Oldfield and Krishnan, JJ., it appears from the facts that the loan and the promissory note were contemporaneous and the question was whether, if the promissory note was illegal and void, the lender could be given a decree apart from the note. On p. 587 Oldfield, J., says:

It is not possible to answer this question without further knowledge of the facts. For it is impossible on the information given by the District Munsif to decide whether there was any-obligation apart from the note, the fact that the loan and the note were contemporaneous not being decisive on the point.

4. Krishnan, J., says on p. 589:

I agree that the second question cannot be answered in the present state of the record as it depends upon facts which have not yet been tried and found. If there is an obligation apart from one under the note itself it may clearly be enforced. The fact that the loan and the note are contemporaneous is not conclusive on the non-existence of such obligation.

5. In their opinion, therefore, this is a question of fact depending upon whether there was a completed contract independent of the promissory note. The petitioner's contention is that a promissory note is a conditional payment and that, therefore, whenever a promissory note is taken, so long as the promissory note is outstanding, there is no right of action otherwise than upon the note but when the note is not paid at maturity or is dishonoured, the original debt, which has merely remained suspended in the meantime, is revived and can be sued upon, provided that the promissory note has not been negotiated by the payee. Stone, J., in 67 MLJ 30, is of the opinion that as soon as the promissory note is overdue, provided that it is in the possession of the plaintiff, he can either sue on the note or can put the note on one side and sue on the debt; and he relies upon what was stated by Fletcher Moulton, L.J, in (1908) 1 KB 34410 at p. 350. Reliance was also placed by Stone, J., upon the decision of the Privy Council delivered by Lord Moulton, viz. (1914) AC 61811, where he expressed similar views. It is however to be observed that in that case the contract sued upon irrespective of that on the promissory note was held to be a separate and distinct contract and that both gave rise to mutually exclusive causes of action. There, a sum had been found due by arbitrators and it was provided that part of the amount so found due was to be paid for by the giving of the promissory notes in question, i.e, that was a method of payment. This cannot be taken as a decision upon a contemporaneous loan and document. Stone, J., however, does say that it is a question of fact whether the original cause of action is the note itself or whether there is also another cause of action, and certainly he cannot be understood as deciding that, where the promissory note is the consideration for the contract, any other contract can be sued upon which of course would be entirely contrary to the provision of Section 91 of the Indian Evidence Act. I will now deal with some of the earlier cases relied upon by the petitioner both Indian and English. The first of these is 34 IC 417, already referred to. The head-note reads as follows:

The giving of an instrument in writing in recognition of an antecedent debt does not extinguish but merely suspends the cause of action on the original debt, which revives if the security be not discharged at maturity, unless such instrument can be regarded as a mere collateral security in which case it will not operate even as a suspension of the original debt.

6. And obiter dicta:

If a bill or a note is given for a contemporaneous debt, the bill merely suspends the remedy and does not operate as a discharge.

7. There, Courts Trotter, J., was clearly dealing with the case which was before the Court, namely, an antecedent debt followed by the giving of a promissory note, and he did not refer to the effect of a contemporaneous loan and promissory note. K. Srinivasa Ayyangar, J., however, dealt with this question and made the observations which I have quoted earlier in my judgment. Therefore, only one of the Judges there expressed an opinion on this question which was one which did not arise for consideration in, that case. I have already dealt with 40 Mad 585, which makes this question one of fact. I now come to a Full Bench decision of the Rangoon High Court, viz. 12 Rang 50012, where this question was very fully discussed. There it was held that when a promissory note-or any other instrument is given by the borrower to the lender in connexion with a loan, either at the time when the loan is contracted or afterwards, the terms upon which it is given and taken is a question of fact and not of law; that prima facie the giving of a negotiable security by a debtor to his creditor operates as a conditional payment only and not as a satisfaction of the debt unless the parties agree so to treat it and such a conditional payment is liable to be defeated on non-payment of the negotiable instrument at maturity; that if the negotiable instrument is given by the borrower to the lender and the negotiable instrument is itself the consideration for the loan, or if the instrument is accepted as an accord and satisfaction of the original debt, the lender is restricted to his rights under the negotiable instrument by which he must stand or fall, but that if it is agreed between the parties that the instrument shall be taken merely as collateral security for the re-payment of the loan, the lender is entitled to sue upon the original consideration independently of the security and without regard to any rights that he may possess under the instrument; that if all the terms of the agreement under which the loan was made have been embodied in a negotiable instrument or in any other document no evidence can be adduced in proof of the terms of the contract except the document itself and, if such document is for any reason inadmissible in evidence, the suit must fail; that normally and prima facie a lender is regarded as taking a negotiable instrument only as conditional payment and not in satisfaction of the loan; that where the handing over of the money and of the instrument is simultaneous it does not follow that the instrument is the sole repository of the terms of the agreement; and that it is not the time when but the terms upon which the loan was, made that matters and that is a question of fact to be determined according to the particular circumstances obtaining in each case. Amongst other cases, 10 Mad 94 and 7 Cal 256, were dissented from. A number of authorities, both English and Indian, were considered. With regard to the former, these are: (1893) 2 QB 28613. There, a client had given to his solicitor 3, negotiable security for the amount of his bill of costs, and the solicitor had given the client a receipt in which the negotiable security was expressed to be taken “in settlement” of his bill; and it was held that the giving of the negotiable security was not a payment in the event of it being dishcnoured unless there was proof, the onus of which lay on the solicitor, that such was the intention of the parties at the time. On p. 300 Bowen, L.J, says:

It has been established by a series of authorities, which it would be ridiculous to go through seriatim, that a bill of exchange given for a debt amounts to conditional payment of that debt and is only conditional payment so long as it is running; the payment is liable to be defeated when the bill is dishonoured.

8. In that case, therefore, there was no question that the negotiable security was taken as a payment of the debt and an antecedent ope. In (1889) 22 QBD 61014 the defendants having broken their contract, the plaintiffs made a claim against them for a sum of money as damages. The defendants sent a cheque for an amount smaller than that claimed stating that it was in full payment of all demands. The plaintiffs kept the cheque stating that they did so on account and brought an action for the balance of their claim and it was held that keeping the cheque was not, as a matter of law, conclusive, that there was an accord and satisfaction of the claim but that it was a question of fact on what terms the cheque was kept. This case again was a case of an antecedent debt and it was a question of fact as to whether the cheque was given and received in satisfaction of the claim and I make the observation also that, when a cheque is given in respect of a debt, prima facie it can be presumed that it is intended as a payment. Certainly a cheque cannot be taken as embodying the terms of a contract other than to pay. In (1882) 9 QBD 3715, A being indebted to B in £125-7s-9d for goods sold and delivered gave B a cheque for £100 payable on demand which B accepted in satisfaction. This was held to be a good accord and satisfaction. From the facts of that case it would appear that the cheque was dated 16th August 1880, and that previous to that date the defendant was indebted to the plaintiffs in the sum stated for goods sold and delivered to him. This therefore was a clear case of a cheque given in respect of an antecedent indebtedness and the cheque was equally clearly given as a payment either in full satisfaction or on account. In 162 ER 2216, there is a very brief statement of the facts and it does not appear whether the debt there in respect of which a promissory note was taken was an antecedent debt or a contemporaneous one; nor does it appear in respect of what the debt was, whether a loan or something else. The decision was mainly upon the question as to whether the promissory note could be received in evidence on account of the stamp which was of a greater value than the correct stamp required and it was held that it was inadmissible in evidence and Lord Kenyon, C.J, then observed that as there were other general counts in the declaration, if the plaintiff could give other evidence of a consideration paid by him to the defendant, he would not be concluded from recovering by the fact of the defendant's having given the imperfect promissory mote for it. But there is a footnote to that case which refers to Tyte v. Jones . 1 East 58n.. There a promissory note had been given for money lent, but when produced in Court was unstamped. Lord Kenyon, C.J permitted the plaintiff to recover on a common count for money lent by proving that when the money for which the note had been given was demanded of the defendant, he acknowledged the debt. In (1878) 3 QBD 37118, a garnishee order was made attaching a debt. At the time the order was made the garnishees had given the judgment-debtor a cheque for the amount of the debt. Upon service of the order on the garnishees they stopped payment of the cheque at the Bank, the cheque not having been presented, and it was held that upon the cheque being stopped it was as if it had never been given and that there was, therefore, an existing debt capable of being attached and the garnishee order was effectual. On p. 373, Cockburn, C.J, says:

It is very true that a man who takes a cheque may be estopped from proceeding to enforce payment of the debt until presentment of the cheque, and if the cheque is ultimately paid the debt is extinguished. All that happens in the meantime is that the right of action is suspended. But when the cheque is presented and dishonoured, the debt the remedy for which was suspended until presentment of the cheque, may be treated as a debt subsisting all along, just as if the cheque had never been given. The giving of the cheque only suspends the remedy; it does not extinguish the debt.

9. Of the Indian cases, (1914) AC 618 has already been referred to and so have other Indian cases. One other case which, is referred to by Venkatasubba Rao, J., in 67 MLJ 912 and was relied upon here is 1926 Mad 1148 to which I have already referred, where Wallace, J., says:

When a promissory note is taken for a contemporaneous debt, the balance of opinion is that the execution of the promissory note does not discharge the debt but only suspends the creditor's ordinary remedy during the currency of the promissory note.

10. Venkatasubba, Rao, J., proceeds upon the view that it is a well settled rule of English law that a negotiable instrument operates only as a conditional discharge and that it is difficult to conceive that Illus. (b) to Section 91 of the Evidence Act, can have been intended to abrogate or annul that well settled rule. He adds that the effect of that illustration is no more than to exclude all proof other than the bill itself when the matter to be proved is the contract embodied in that bill. Prima facie, no doubt a negotiable instrument operates only as a conditional discharge but, if the promissory note embodies all the terms of the contract it is difficult to see how any contract other than that can be put in evidence without offending against the provisions of Section 91 of the Evidence Act. Upon this question Venkatasubb Rao, J., refers to 23 Cal 85119. There the defendant had taken a loan from the plaintiff and executed a document which was held to be a promissory note. At the trial the document was produced but was held to be insufficiently stamped and the Judge refused to admit it in evidence. The appellate Court held that the plaintiff had a cause of action independently of the document. The defendant in his written statement admitted that he borrowed the sum in question from the plaintiff and the appellate Court held that there was an implied contract to repay the money lent even though there was no express promise. 7 Cal 256, was referred to by Petheram, C.J, in the course of his judgment and he explains the decision of Sir Richard Garth, C.J, stating that when he spoke of a ‘deposit’ he did not mean a ‘loan.’ What Sir Richard Garth, C.J, in that case did was to make a two-fold classification, first, where there is a completed cause of action as for goods sold; and secondly, where the cause of action is the note itself, stating with regard to the latter class:

When the original cause of action is the bill or note itself and does not exist independently of it, as, for instance, when in consideration of A depositing money with B, B contracts by a promissory note to repay it with interest at six months' date, here there is no cause of action for money lent or otherwise than upon the note itself, because the deposit is made on the terms contained in the note and no other.

11. With regard to the former class, he says on at p. 259:

When a cause of action for money is once complete in itself, whether for goods sold, or for money lent, or for any other claim, and the debtor then gives a bill or note to the creditor for payment of the money at a future time, the creditor, if the hill or note is not paid at maturity, may always, as a rule, sue for the original consideration, provided that he has not endorsed or lost or parted with the bill or note, under such circumstances as to make the debtor liable upon it to some third person.

12. This decision was also referred to by Jenkins, C.J, in 24 Bom 36020. In that case also there was an independent admission of a loan by the defendant in addition to the bundi which was held to be inadmissible in evidence for want of a stamp and as in 23 Cal 851 it was held that the plaintiff could still fall back upon the other consideration. Dealing with 7 Cal 256, Jenkins, C.J, says:

It is apparent that the actual ratio decidendi was that there was no loan independently of the note.

13. Whereas in 24 Bom 360, there was a loan independently of the note. Jenkins, C.J(appears also to share Petheram, C.J's opinion with regard to the remarks of Sir Richard Garth, C.J, to which reference has already been made, upon the question of the words, ‘loan’ and ‘deposit.’ In referring to llustration (b) Section 91 of the Evidence Act he says:

It is perfectly true that the terms of the contract contained in the hundi can, apart from the conditions which permit secondary evidence only be proved by the hundi, but this does not prevent proof of the loan independently of the note.

14. I do not understand him to mean that, if the whole of the terms of the contract are set out in the document, any evidence other than the production of the document itself is permissible. In 26 All 17821, Aikman, J., differs from the view of Petheram, C.J, in 23 Cal 851 and is of the opinion that Sir Richard Garth, C.J, in 7 Cal 256, did not intend to draw any distinction between the two classifications stated by him with regard to the nature of the debt, i.e, whether it was a loan or whether it was a deposit being of the opinion that he used the word ‘deposit’ merely as an illustration. I agree with Aikman J's view and cannot think that Sir Richard Garth, C.J, intended any such distinction. It is difficult to see why such a distinction should have been intended particularly as a deposit, of money with a person to be repaid at a future date with interest is really a loan. Aikman J's judgment is relied upon by the respondents here. Page, C.J, in 12 Rang 500, thinks that in cases in which the parties agree that the negotiable instrument shall be taken as conditional payment only and not in accord and satisfaction of the original debt, Section 91 of the Evidence Act, has no application because he has himself never known or heard of an instance in which that term of the agreement has been embodied in the negotiable instrument. I fully agree with his view of the matter which is based upon the instrument not containing all the terms of the contract. Where it does however and is itself the consideration of the loan, he is of the opinion that the lender is restricted to his rights under the instrument by which he must stand or fall. I now propose to refer to the cases relied upon by the respondent. The earliest of these is 7 Cal 256 which I need not refer to again and which was-followed in 10 Mad 9422. The head note of the latter case reads as follows:

The terms of a contract to repay a loan of money with interest, having been settled and the money paid, a promissory note specifying these terms was executed later in the day by the defendant and given to plaintiff. This promissory note was not stamped. In a suits brought to recover the unpaid balance of the-loan on an oral contract to pay, it was held that the plaintiff could not recover.

15. On p. 96 Collins, C.J and Parker, J., say:

But when a loan is made by plaintiff to defendant and in consideration of that loan the defendant contracts by a promissory note to pay it with interest at a certain date, there is no cause of action ‘for money lent or otherwise than upon the note, and if for want of a stamp the note is not receivable in evidence the plaintiff's claim must fail.

16. The promissory note there admitted the receipt of the money and promised to repay the same on a certain date with interest. In 38 Mad 660, there was a varthamanam which read as follows:

Amount of cash borrowed of you by me is Rs. 350. I shall in two weeks' time be retnrning this sum of rupees three hundred and fifty with interest thereon at the rate of Rupee one per cent per month, and get back this letter.

17. It was held that this amounted to an unconditional undertaking to repay borrowed money and was therefore a promissory note and not merely an offer to borrow or an acknowledgment of indebtedness. The document was inadmissible for want of a stamp and Sadasiva Ayyar, and Spencer, JJ., held that to allow a suit as one on ‘account for money had and received’ concealing the real contract of loan which had been reduced to the form of a document would nullify Section 91 of the Evidence Act. 24 Bom 360, was dissented from and 10 Mad 94 followed. 20 MLW 94323, 36 MLW 43224, and 37 MLW 72325, are all decisions in which the view supporting the respondent's contention has been taken. The recent decision of Varadachariar, and Burn, JJ., in 58 Mad 261, also supports that contention; and also the decision of Anantakrishna Ayyar, J., in 63 MLJ 30326. In 53 All 11427, a decision of a Full Bench of that Court in which a number of authorities are referred to, it was held that where the promissory note and the lending of the money are part and parcel of the same transaction and the terms of the loan are the very terms of the promissory note, the contract of loan cannot be proved apart from the document itself and the plaintiff's suit must fail if the J document itself be inadmissble in evidence. The Lahore High Court also seems to have taken the same view as that of the Allahabad High Court in this case in which reference is also made to the observations of Rankin, C.J, in 28 CWN 7028. It is clear that upon this question there is a conflict of opinion.

18. So far as the Madras High Court is concerned, the preponderance of opinion, seems to me to support the respondents' argument. But all Courts take the view that with regard to antecedent debts, the position is that the original debt can be sued upon irrespective of the subsequent document or promissory note and the better opinion with regard to contemporaneous loans and promissory notes is that, where the promissory note is the consideration for the loan, the debt, cannot be proved aliunde. That view, in my opinion, is clearly the correct view, in view of Section 91 of the Evidence Act. With regard to the view expressed in the Rangoon case that prima facie a negotiable instrument is given as a conditional payment for a loan, I think that view expresses the matter rather too generally. Certainly in cases where the note is given in payment of goods, which was the position in most of the English cases, that would be so. But dealing with money lending transactions, I am nob disposed to think that this view is entirely correct and in a country where borrowing and lending of money is so universal, the prima facie rule as stated in English cases cannot be adopted without some qualification. A borrower goes to a person who lends money and asks for a loan. The lender says that he will not lend the money unless the borrower executes a promissory note. The borrower agrees to do so and I imagine in a majority of cases executes the promissory, notes first and in exchange for it receives, the money. Is the lender under these circumstances to be presumed to be receiving the promissory note as a conditional repayment of the money? Or does the promissory note which states that the borrower has received a sum of money on the date of the receipt and a promise to repay it with interest from the contract itself? It is, in my view, difficult to avoid the conclusion that it does. What other term is there which is omitted? Page, C.J, in 12 Rang 500 is of the opinion that the term that the promissory note is taken as a conditional payment is omitted, but this presupposes that there was such a term. I fully agree with what has been stated in many of the cases to which reference has been made that the question must be one of fact, but where it is clear that the promissory note itself contains all the terms, I think that, in the absence of any evidence to the contrary, it must be accepted as the contract and that no contract aliunde can be proved. A great deal must depend upon what appears on the face of the document. In some cases the promissory note may state that it is given in payment for goods sold and delivered. Such cases, in my opinion, do not present any difficulty because the presumption there, would be that the promissory note was given in conditional payment for the goods sold and delivered. In other cases it may be clear that there was already a completed contract before the promissory note was given. In such cases I agree that evidence of that contract can be given irrespective of the promissory note. The position does seem to me to be different however when the promissory note appears to be part and parcel of the transaction of loan. My view, therefore, is that in all cases Courts must be guided by what appears on the face of the promissory note. If it is expressed in such a way as to leave what was intended by the parties in any way in doubt, then the facts must settle the question. If it is clear on the face of the promissory note that it is the contract, then no further evidence can be permitted. Turning to the suit document itself, it seems to me that it was given as a conditional payment for the paddy. This being so the promissory note not having been paid on demand may be treated as dishonoured and the original debt thus revived. The plaintiff was, therefore, entitled to fall back upon the original debt. The petitioner succeeds with costs and the case must go back to the lower Court for disposal according to law.

Cornish, J.:— Upon the vexed question whether the payee of it note given for a contemporaneous loan has or has not a right of action on the debt, I prefer to reserve my opinion, because it seems to me that question cannot be said to arise for decision on the facts of this case. Of course if there is evidence that a note was agreed to be taken in satisfaction of the debt created by the loan, there is no difficulty in restricting the payee's right of action to the note. But I am unable to appreciate why that position should be assumed to be established by the circumstance of the loan and the note being contemporaneous transactions. It would seem to be contrary to what was stated by Lord Esher in (1893) 2 QB 286, as pretty well-known law, which was acted upon in every form of mercantile business, that the giving of a negotiable security by a debtor to his creditor operates as a conditional payment only, and not as a satisfaction of the debt, unless the parties agree so to treat it.

19. But, as I have already stated, I think that on the facts disclosed it is not necessary to decide the question. Therefore I confine my judgment to the particular facts of this case. On the construction of the plaint I think that the suit must be held to have been brought upon the debt on account of which the unstamped note had been taken by the plaintiff. The document is referred to as a hand-letter, which shows a consciousness on the part of the plaintiff or his legal adviser that the document unstamped could not be relied upon as a promissory note. The material allegations in the plaint, as I read them, are that there was a sale of paddy by the plaintiff to the defendant and that defendant gave to plaintiff for the sum die with interest a document which purported to be a note. In these circumstances, if the note had been a valid instrument, it seems to me that the case would fall within the well established rule that when a creditor takes a bill or a note or a cheque on account of a debt, it is a qualified or conditional payment; that is to say, the instrument is received in payment subject to the condition that it will be duly honoured. The debt remains unaffected, though the cause of action is suspended while the instrument is running. Thus, in (1878) 3 QBD 371, Lord Chief Justice Cockburn stated:

When the cheque is presented and dishonoured, the debt, the remedy for which was suspended until presentment of the cheque, may be treated as a debt subsisting all along, just as if the cheque had never been given.

20. A creditor may indeed accept a negotiable instrument in satisfaction of his debt. But in the present case there is not the shadow of a plea in the defendants' written statement that the note was given and accepted in satisfaction of the debt; on the contrary, the mainstay of the defence in the pleading and at the trial apparently was that the note was an invalid instrument, treating the suit as brought on the note. It can make no difference whether the note is invalid or dishonoured as regards the creditor's right of action upon the debt on account of which the document purported to have been given. In my judgment therefore the suit was maintainable on the debt independently of the unstamped and in operative note, and it follows that I agree that the revision petition should be allowed.

Pandrang Row, J.:— I entirely agree with my Lord the Chief Justice.

C.R.K/B.D

21. Revision allowed.