JUDGMENT

Page, C J - This case raises a question of general interest and importance. The respondent lent two sums of Rs. 300 and Rs. 100 to the applicants, and on each occasion when the loan was made the applicants exaovited & promissory note payable on demand for the amount of the loan and interest thereon at 3 per cent per mensem. In the present suit, which was brought in the Small Cause Court of Mandalay, the respondent sought to recover the amount due on the promissory notes or in the alternative a like sum for money lent. At the trial, the learned Judge found that the promissory notes were not duly stamped, and therefore were inadmissible in evidence under the Indian Stamp Act (2 of 1899, &. 35). A decree was passed in favour of the respondent however on the alternative claim for the amount of the loans without interest, An application in revision having been filed, Dunkley, J., referred the following question for determination by a Full Bench:

When a creditor sues on a claim for money in respect of which the debtor has executed a promissory note, under what circumstances can the creditor sue for the original consideration if the promissory note cannot be proved?

2. In my opinion this is a plain case, and the answer to the question propounded presents no difficulty. I respectfully agree with Bowen, L.J., that it is

extremely desirable that we should keep clearly in our minds what points are points of law and what are points of fact: In re Romer and Haslam (1893) 2 Q.B. 286.

3. There are many Indian and English authorities on this question, and I think that from a consideration of the cases the following propositions of law can be deduced: when a loin is contracted it is an implied term of the agreement that the loan shall be repaid Saminathan v. Palaniappa (1913) 41 I.A. 142. When a promissory note or a bill of exchange, or indeed anything else, is given by the borrower to the lender in connection with the 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 Day v. McLea (1889) 22 Q.B.D. 610.

4. It is prima facie to be presumed (although the presumption is rebuttable) that the parties to the loan transaction have agreed that the promissory note or other negotiable instrument given and taken in such circumstances shall be treated as conditional payment of the loan; the cause of action on the original consideration for money lent being suspended during the currency of the negotiable instrument, and if and so long as the rights of the parties under the instrument subsist and are enforceable; but the cause of action to recover the amount of the debt revives if the negotiable instrument is dishonoured or the rights there under are not enforceable. On the other hand the cause of action on the original consideration is extinguished when the amount due under the negotiable instrument is paid or if the lender by negotiating the instrument or by laches or otherwise has made the bill his own, and thus must be regarded as having accepted the negotiable instrument in accord and satisfaction of the borrower's liability on the original consideration.

It is perfectly well-known law, which is 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. Such a conditional payment is liable to be defeated on nonpayment of the negotiable instrument at maturity, and it is surprising that there can be at the present day any doubt as to the business result of such a transaction: per Esher M.R. in In re Romer and Haslam (1893) 2 Q.B. 286 P. 296.

and:

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 r