Concluded Agreement Under Section 7 Excludes Statutory Interest Under Section 12

A bench of Justices M.M. Sundresh and Nongmeikapam Kotiswar Singh heard appeals questioning whether parties who voluntarily entered into a concluded agreement under Section 7(2) of the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997 could thereafter seek relief under other statutory provisions, principally Section 12 which provided for payment of interest from the date of taking possession. The State of Tamil Nadu appealed against a Madras High Court direction that had awarded interest to landowners from the date of issuance of notice under Section 3(2) until the date of the impugned judgment.

The Court allowed the appeals in part and set aside the High Court's grant of interest. The bench held that an agreement arrived at under Section 7(2) and given effect to under Section 7(4) became a concluded contract and excluded subsequent invocation of statutory remedies under the 1997 Act. The Court observed that a party could not "have recourse to two different modes" after accepting the compensation agreed by contract and invoked the doctrines of estoppel and approbate and reprobate. The Court, in its reasoning, observed: “Sections 7(2) and 7(4) of the 1997 Act exhibit a laudable objective. They facilitate land owners or interested persons to negotiate and arrive at an agreement on the amount of compensation to be paid. Once such an agreement is arrived at, it becomes a concluded contract under Section 3 of the Indian Contract Act, 1872. The rights and liabilities of the parties would only be governed by the terms of the contract. Hence, a contract voluntarily entered into between the parties, shall not be disturbed by taking recourse to the statutory provisions, which are sought to be excluded by such contract. A party to a contract cannot be permitted to have recourse to two different modes, especially after having accepted the compensation under the contract without any demur or protest. It is not open to either of the parties to resile from the terms of the agreement. We may note that the issues of rent and compensation were raised even earlier. These issues were put to an end through the agreement. Therefore, the private respondents are totally estopped from seeking any relief beyond the terms of the contract.” The Court concluded that the High Court erred in applying Section 12 to reopen a voluntary settlement and held that the impugned judgment "cannot be sustained in the eyes of law" to the extent it awarded interest.

Background The dispute related to leasehold lands in Coimbatore that were leased in 1942 to the Defence Department, later transferred to the Airport Authority of India (AAI). A tripartite arrangement in 2006 fixed lease terms; acquisition proceedings under the 1997 Act commenced in 2011 with notices under Section 3(2) and subsequent Gazette notifications between 2013 and 2015. Litigation followed as landowners sought compensation and arrears of lease rent; some obtained interim relief. In March 2018 a State-level negotiation meeting produced consensual rates (Rs. 1,500 per sq. ft. for residential and Rs. 900 per sq. ft. for agricultural land), which the Government approved by G.O. (Ms) No.173 dated 20.11.2019 and sanctioned payment of compensation. Some amounts were deposited pursuant to court directions and interim orders; arrears of rent were also paid.

The Madras High Court, by its judgment dated 18.08.2020, held that "When consent is given and an agreement to receive payment on certain terms and conditions is arrived at, then the same is a complete package..." and yet awarded interest from the date of the Section 3(2) notification until its judgment, excluding periods covered by stay orders. The State challenged that portion of the decision on the ground that parties had voluntarily agreed the compensation and that Section 12 (which provided for interest "from the time of so taking possession until it shall have been so paid or deposited") did not apply to settled contracts. The State contended that applying Section 12 after a consent agreement amounted to re-writing the contract and permitted "approbation and reprobation." The Supreme Court accepted that position, noted precedents holding that consent awards could not be reopened, and set aside the High Court's interest award while leaving other parts intact. The appeals were allowed and the impugned judgment was set aside to the extent indicated; no order as to costs was made and pending applications stood disposed of.

Case Details: Case No.: 2025 INSC 1332 Case Title: The Government of Tamil Nadu, Rep. by its Secretary, Transport Department & Ors. v. P.R. Jaganathan & Ors. etc. Appearances: For the Petitioner(s): Dr. Abhishek Manu Singhvi, Senior Counsel For the Respondent(s): Ms. Aishwarya Bhati, Additional Solicitor General; Mr. S. Nagamuthu, Senior Counsel (and other learned counsel for private respondents)