SHELAT, C.J. :- By a deed of lease dated March 10, 1945 the assessee company took over a plot of land admeasuring 4,059 square yards on lease for a period of ninety-nine years at an annual rent of Rs. 12,685/- per year, and built thereupon its press where it carried on its business as printers and publishers of a daily newspaper called "Sandesh". The deed of lease gave option to both the parties, the lessor to sell the said land at a price of Rs. 4,09,959/- at the rate of Rs. 101/- per square yard, and the lessee to purchase it at the said price, both parties agreeing to exercise their respective option during a period of five years commencing from January 1, 1948 and ending on December 31, 1953 after giving six months' notice. The deed of lease is in Gujarati and, as translated, clause (4) thereof runs as follows :

"If the land leased is acquired under the provisions of the Land Acquisition Act, or the leased land is notified for acquisition and such notification is subsequently cancelled and thereafter whatever may be the balance of the leased land, either party may, within five years after the 1st January 1948, i.e. upto the 31st of December 1953, call upon the other party by six monthly notice either to sell or purchase the leased land at the price of Rs. 4,09,959/- calculated at the rate of Rs. 101/- per square yard and the other party shall be bound to seller purchase at the said price. If the party of the first part is willing to sell the leased land at the rate calculated at Rs. 101/- per square yard within the hereinabove stipulated time and the party of the second part commits breach in purchasing the leased land, the party of the first part shall recover the sale price together with costs and interest thereon at the rate of six per cent per annum of the leased land and the structures constructed thereon, and the deficiency, if any, shall be recovered from the other properties of the party of the second part. And if the party of the second part is willing to purchase the leased land and the party of the first part fails to execute conveyance, the party of the second part shall deposit the said amount either with the Imperial Bank, the Central Bank or the India Bank in the name of the party of the first part or pay the same to the party of the first part and on such payment being made, rent shall cease and the party of the second part shall be entitled to obtain conveyance from the party of the first part and in the said circumstances, two-thirds of the expenses shall be borne by the party of the second part and one-third expenses shall be borne by the party of the first part. If within the hereinabove stipulated period either party fails to effect the sale, the lease shall remain operative and thereafter neither party shall be entitled either to sell or purchase the leased land."

On or about March 23, 1946 the assessee company executed a sub-lease in respect of 1,728 square yards out of the said land at the annual rent of Rs. 6,048/- which sub-lease contained a similar option to sell and purchase the aforesaid 1,728 square yards at the price of Rs. 1,74,528/-. The said sub-lease was in favour of one N.C. Bodiwala, one of the directors of the assessee company. Thus, as against the price of Rs. 4,09,959/-, the assessee company was entitled to exercise its option against the said Bodiwala, and on such exercise of the option, Bodiwala was liable to purchase 1,728 square yards at the price of Rs, 1,74,528/- and the assessee company thus would be liable to pay Rs. 4,09,959/- less Rs. 1,74,528/- to the lessor for the balance of the land.

2. The lessor exercised his option and thereupon the assessee company became liable to purchase the leased land at the aforesaid price on and from March 1, 1951, that being the date when the six months' notice presumably expired. When called upon to purchase the land, the assessee company made default in consequence of which the lessor filed a suit on December 31, 1952 against the ass