1. The facts of the case are given in our order in Civil Revision No. 589 of 1934. It is contended on behalf of the plaintiff that he was entitled to a decree not only against defendant 2, but also against defendant 1; because the instrument was a negotiable instrument governed by the Negotiable Instruments Act, and he has a right to recover the amount from the prior party thereto himself under Section 43 of that Act. Now under that section if any such party has transferred the instrument with or without endorsement to a holder for consideration, such holder may recover the amount due from any prior party thereto. The question then is whether the instrument has been transferred to the plaintiff as a holder thereof.
2. The instrument was not negotiated, but the amount due under the promissory note was transferred to the plaintiff under a sale deed, and a mere note was made on the back of the promissory note that the amount due under it had been transferred to the plaintiff by mean of the sale deed. That is not the negotiation of a negotiable instrument contemplated by the Act. Section 14 makes it clear that when a promissory note is transferred to any person so as to constitute that person the holder thereof, the instrument is said to be negotiated. It is obvious therefore that every transfer of a promissory note does not amount to a negotiation, and it is a negotiation only when the transfer is such as to constitute the person entitled to the instrument the holder thereof. A holder is defined in Section 8 as a person entitled in his own name to possession of the instrument and to receive and recover the amount due thereon.
3. Now the essence of a negotiable instrument is that the amount due under it should be payable unconditionally and that there should be no condition imposed under any separate document executed between the parties. So long as the document is negotiated, the holder thereof is entitled to recover the amount from his transferor as well as from every prior party thereto. But once the document is not negotiated but the rights under it are transferred by means of a sale deed, which embodies certain conditions and terms between the parties, the document ceases to be a negotiable instrument in the ordinary sense of the word, and the transfer of such an instrument cannot invoke the terms of Section 43 so as to make the transferor and all prior parties thereto liable inspite of the express terms agreed to by the parties and entered in the sale deed. If the terms of such a private contract were allowed to be ignored, it would be grossly inequitable; whereas if the instrument is negotiated and the rights under it are transferred unconditionally to the holder, he is entitled to make his transferor and any prior party thereto liable under the instrument.
4. The learned Counsel for the applicant relies on some observations made in Surathchandra Shaha v. Kripanath Chaudhury 1934 Cal. 549, at p. 428, where it was remarked that an assignee under a deed of sale was nevertheless a holder of the instrument within the meaning of Section 8 of the Act, and that he could sue in his own name and was entitled in his own name to possession and to receive and to recover the amount due on the band note from the parties thereto. That observation was not necessary for the purposes of that case because the transferee of the instrument was certainly entitled to maintain the suit for recovery of the amount due on the promissory note on the strength of the sale deed in his favour when it was established that the promisor had not made the payment. It could not be doubted that payment by the executant of the promissory note to the transferee in the sale deed would have given him full discharge under the document. In any case we are unable to agree with the view that a transferee under a sale deed of such an instrument is a holder of the negotiable instrument within the meaning of Section 8 and can enforce the rights conferred on such a holder by Section 43 of the Act. Accordingly we dismiss this application with costs.