Hashim Yeop Sani CJM:

[1] To appreciate fully the real issues raised in this appeal it is best that the background facts of the case be set out first. In their chronological order they may be stated briefly as follows.

[2] The disputed property (hereinafter referred to as the "said property") is premises No 55 on Lots 366 and 368, TS 19, NED Penang on which stands an 11-storey building. The appellants proprietors of Hotel Ambassador entered into possession of the said property to commence the business of a hotel called Hotel Ambassador. The appellants went into possession of the said property pursuant to a lease and annexure dated 2 January 1967 executed between the appellants and the proprietors of the said property.

[3] The annexure to the lease provided for the rental to be paid by the appellants at RM11,000 per month. Clause 4(e) of the annexure contained provisions for renewal after determination of the first ten years for a further period of ten years on monthly rental of RM12,000 and a further period of ten years at monthly rental of RM13,000. The first initial period of ten years expired on 21 March 1976.

[4] The option for extension of the lease subsequent to the initial period was never exercised or registered or endorsed in the land register and the appellants continued occupation of the said property.

[5] The appellants must have been undergoing a financial strain some time in the early 80's as can be seen from Civil Suit No: 287/89 commenced against them by the previous owners of the said property. The suit was for the recovery of arrears of rental in respect of period February 1984 to May 1989 amounting to RM756,000. The writ also asked for vacant possession. On 3 March 1990 the previous owners obtained judgment for the said sum of RM756,000 but abandoned the claim for possession.

[6] In the meantime the said property had been charged to a finance company, Malayan United Finance Bhd Subsequently foreclosure action was taken under the charge.

[7] A company, Seapower (M) Sdn Bhd, the respondents now, purchased the said property at a public auction under the National Land Code. The public auction was held on 26 July 1989 pursuant to an order of sale dated 14 August 1986 made by the High Court, Penang in Originating Summons No 777/85.

[8] Upon respondents paying the whole purchase price of RM6,000,000 the certificate of sale in form 16F was issued by the Senior Assistant Registrar, High Court, Penang on 8 December 1989 under s 259(3) of the National Land Code which certificate was under the same provision registrable as if it were an instrument of dealing.

[9] The proclamation of sale contained inter alia the following conditions of sale.

8. The properties are sold subject to all existing tenancies, if any, and all claims of tenants and occupiers by contract, custom statute or otherwise.

12. Upon payment of the balance of the purchase money the purchaser shall be let into possession or the receipt of the rents and profits of the properties.

[11] On 29 May 1990 the appellants took out a writ against the respondents in Civil Suit No: 22-202-90. In the statement of claim the following reliefs were sought:

(a) a declaration that they were the lawful tenants of the said property;

(b) an order to restrain the respondents from interfering with or disturbing their lawful and actual possession and use of the disputed property; and

(c) damages and costs or such other further order or relief as may be just or necessary.

[12] On 29 May 1990 the appellants took out summons in chambers seeking for the order of restrain. The application was subsequently heard ex parte and a restraining order was granted with the usual undertaking as to damages. The applicat