Judgment

JAGANMOHAN REDDY J.: - The first respondent gave on lease to the appellant his cinema theatre known as "Sivananda Theatre" which was later known as "Moviland Theatre" by a registered lease deed dated September 2, 1946. Earlier, this same theatre was leased to respondent 2 on December 29, 1941, for five years commencing from March 1, 1942 ending with February 28, 1947. Clause 14 of the lease deed provided:

"After the expiry of the period of five years fixed under this lease, the lessees shall have the option and liberty to renew or extend the lease for another period of 5 years but subject only to such terms and conditions as may be mutually agreed upon."

On May 2, 1946, counsel for respondent 1 on instruction issued a notice intimating respondent 2 that as the lease will expire at the end of February 1947 he should take such action as may be necessary to give effect to the same and deliver possession". Respondent 2 was also informed that under clause 3 of the lease deed he will cease to pay rent six months prior to the above date of termination of the tenancy in adjustment of the advance paid by him. Respondent 2 replied on May 13, 1946, that he wished to exercise his option to renew the lease for a further period of five years. In continuation of this letter the Lawyer of respondent 2 again wrote to the lawyer of the 1st respondent on September 16, 1946 that according to the present lease the terms and conditions of the fresh lease for 5 years to come into effect in pursuance of the right of option are to be and mutually agreed upon. The letter went on to point out:

"Of course, the main point is about the rent; and our client was expecting your client to propose the terms and waited so long. He has not yet heard from your client in the matter. Our client learns that your client is creating some self-serving evidence in connection with the lease of the property; that apart our client is prepared to pay the reasonable rent subject to the modification in consideration of the heavy out-lay he has invested in converting and equipping your clients building to make it suitable for a Cinema Theatre."

2. It will be noticed that after the registered lease in favour of the appellant was executed, respondent 2 was calling on respondent 1 to propose fresh terms for renewal, particularly in respect of the rent etc. In reply to the notice of September 16, 1946, issued on behalf of respondent 2, the Advocate of respondent 1 replied on September 25, 1946 that his client wishes to repeat that the lease will terminate on due date, that it is not open to renewal as desired by respondent 2, and that his client should vacate the premises and deliver possession. The next day a comprehensive notice was given by the lawyers of respondent 1 to respondent 2 pointing out that the original lease was with the States Engineering Company, and respondent 1 had no notice that the Company was dissolved. In view of what was said it was contended that the agreement to lease which was with the Company stood dissolved, and accordingly respondent 1 does not recognise respondent 2 as a partner of the Company or having any other rights and benefits. In these circumstances the Advocate of respondent 1 informed that it is impossible to enter into a fresh lease with respondent 2 for the reasons stated therein. i. e. for misbehavior, non-payment of rent, for neglecting to look after the property, for encroachments etc. etc. The Advocate for respondent 2 was also specifically informed by paragraph 16 of the notice that "the theatre has already been leased to Mr. H. V. Rajan who is to be put into possession of the property on the 1st of March 1947". Further correspondence ensued and ultimately on March 3, 1947, respondent 1 filed a suit being O. S. No. 112 of 1946 on the file of the Subordinate Judge, Bangalore, for eviction of respondent 2, for delivery of possession and for payment of arrears of rent with interest aggregating to Rs. 520/- together with costs, int