JUDGMENT

I.P. Mukerji, J. - Facts:

1. The first appellant is the successor-in-interest of Chartered Bank of India, Australia and China. The latter on 12th December, 1905 obtained by a deed of lease commencing from 12th February, 1906 for 100 years from one Maharaj Adhiraj Bijoy Chand Mahtab Bahadoorof Burdwan, a property measuring 3 bighas, 9 cottahs, 18 chittacks, what is now, premises No. 4, Netaji Subhas Road, Kolkata - 700001. The respondents are the successors of the Maharaj. By two supplementary leases executed on 20th April, 1927 and 31st December, 1934 some addition was made to the demised land and the obligation to pay municipal taxes was spelled out, while maintaining the terms and conditions of the original lease.

2. The renewal clause in the lease is of paramount importance in this matter.

3. It provided that the lessee had the option, on the expiry of the original lease, to take a fresh lease of another 100 years only, at a yearly rent of Rs.3,700/- and a monthly rent which would be "1/ 12th of 71/2 % of the value of the property on the commencement of the renewed lease except the value of the private lane or road and the buildings standing on it.'

4. In terms of the covenants in the deed of lease the appellant No.1 constructed a building on the demised land having a built up area of approximately 1,24,000 sq. ft. What happened in or about July, 2003 is most interesting. The first appellant transferred its leasehold interest to the second appellant, describing it as an "assignment of its leasehold interest". In the same month on or about 24th July, 2003 the second appellant wrote to the respondents that they intended to exercise the right of renewal of the original lease, as the assignee of the first appellant. By their letter dated 10th September, 2003, the respondents did not approve of this assignment and refused to renew the lease in favour of the appellant no. 2. They contended that the appellant no. 1 had exercised its option to obtain renewal of the lease in July, 2003 for a further period of 100 years and that the respondents were entitled to obtain specific performance of this agreement. The respondents made it clear that they were agreeable to execute a lease from 12th February, 2006 for 100 years in favour of the appellant no. 1 in terms of their obligation under the original lease dated 12th December, 1905. With the letter dated 10th September, 2003 was enclosed a valuation report of M/ s. Talbot and Co. dated 9th September, 2003, valuing the property in terms of the said covenant in the lease at 41,01,49,000/-. Going by this valuation the monthly rent on renewal of the lease would be Rs.25,63,431.25/-. When the question arose whether the appellant No. 1 was willing to pay the above rent, it contended that it had "assigned" the lease to the appellant No. 2 and that a fresh lease to be executed in favour of the latter on expiry of the original lease. To this, the respondents' reaction was that only the appellant No. 1 was entitled to claim a fresh lease of 100 years. They insisted that they would treat the appellant No. 1 as the lessee for the next 100 years commencing from 12th February, 2006 and to hold them responsible for performance of all covenants under the lease. The appellant No. 2 according to the respondents did not have the financial capacity to pay the rent under the lease. Moreover, they were not willing to enter into any legal relationship with the appellant No. 2. On 20th May, 2004 the respondents filed a suit in this court (CS No. 136 of 2004) inter alia claiming specific performance of the lease agreement dated 12th December, 1905 together with a declaration that the assignment of the lease by the appellant No. 1 in favour of the appellant No.2 was invalid. The appellants, as a counterblast instituted a suit against the respondents in this court (CS No. 35 of 2006) inter alia seeking a decree for specific performance of the lease agreement dated 12th December, 1905 by execution of a fresh l