-
by sayum
05 December 2025 8:37 AM
“Once a Voluntary Agreement Is Entered Into, the Statute Ceases to Operate” – Supreme Court of India decisively ruled that no statutory interest is payable under Section 12 of the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997, once a compensation agreement is voluntarily concluded under Section 7(2) of the same Act. The Court held that parties who have entered into such an agreement are estopped from invoking statutory provisions thereafter, thereby disallowing any attempt to "approbate and reprobate."
Delivering the judgment, a Bench of Justices M.M. Sundresh and Nongmeikapam Kotiswar Singh emphasized, “once a compensation agreement is entered into under Section 7(2), it becomes sacrosanct and the umbilical cord connecting it to the statute is severed.” The ruling marks a reaffirmation of the principle that consent agreements override statutory defaults, especially in land acquisition matters involving negotiated settlements.
Dispute Originated from Acquisition for Coimbatore Airport Expansion – Compensation Agreed but Interest Later Claimed
The case arose from the acquisition of lands in Coimbatore’s Singanallur and Kalapatti villages for the expansion of the airport runway. These lands had originally been leased to the Defence Department in 1942, and later transferred to the Airport Authority of India (AAI), which paid rent to the landowners.
In 2011, acquisition notices under Section 3(2) of the 1997 Act were issued, and after legal challenges and claims for arrears of lease rent, the matter was settled in a meeting dated 6 March 2018. The State Government, landowners, and AAI agreed to compensation at ₹1500 per sq.ft. for residential land and ₹900 per sq.ft. for agricultural land. The settlement was formalized through a Government Order in 2019 and ₹189 crores were sanctioned accordingly.
However, the Madras High Court, while acknowledging that the agreement was binding and final, still directed the payment of interest under Section 12 of the Act, from the date of acquisition notice till the date of judgment—excluding periods of interim stay and litigation.
Supreme Court: Statutory Interest Cannot Survive a Concluded Agreement
Rejecting the High Court’s view, the Supreme Court ruled that the award of interest under Section 12 was legally unsustainable once compensation was mutually agreed upon under Section 7(2).
“Section 12 of the 1997 Act has no application to a case where an agreement has been entered into between the parties,” held the Court. It emphasized that “a concluded contract under Section 7(2), voluntarily entered into between the parties, would exclude itself from the purview of the 1997 Act thereafter.”
The Court clarified that the objective of Section 7 is to encourage negotiated settlements to avoid prolonged litigation. Once parties agree on the compensation and receive payment, they cannot revive statutory remedies to claim additional sums.
“A Party Cannot Blow Hot and Cold” – Court Invokes Doctrine of Approbate and Reprobate
The judgment turned heavily on the principle of estoppel and the doctrine of approbate and reprobate. Referring to Union of India v. N. Murugesan (2022) 2 SCC 25, the Court held:
“A person cannot be allowed to have the benefit of an instrument while questioning the same. Such a party either has to affirm or disaffirm the transaction… an element of fair play is inbuilt in this principle.”
The landowners had accepted the compensation without any protest. Thus, they were estopped from later demanding interest under the very statute they had opted out of by agreement. The Court concluded that it was a clear case of “acceptance followed by regret,” which could not be allowed.
“It is only thereafter, wisdom dawned upon them to seek interest,” the Court remarked, pointing out that even issues of rent had been previously raised but were closed through the agreement.
Article 226 Cannot Be Used to Rewrite Contracts – High Court Overstepped
In strong terms, the Supreme Court also censured the High Court for invoking its writ jurisdiction under Article 226 to grant relief contrary to a binding contract. It held:
“The power under Article 226 is both discretionary and extraordinary. Unless circumstances so warrant, there shall not be any interference in a concluded contract… By the impugned judgment, the High Court has rewritten the agreement.”
The Court further said that once parties had agreed to compensation voluntarily, the High Court could not reintroduce statutory provisions like Section 12 to reopen the matter. Such judicial rewriting, it held, undermines the sanctity of contracts and negates the legislative intent behind negotiated compensation.
Finality of Consent Awards Reaffirmed – Citing Long Line of Precedents
The Court’s conclusion leaned on several authoritative precedents where it has been consistently held that acceptance of compensation without protest and under a concluded contract bars further statutory claims. These include:
In Ranveer Singh, the Court had categorically held:
“In such circumstances, agreed amount has to be treated as a just compensation permitting no addition or substitution whatsoever… the substantive cause of action also vanishes.”
Similarly, in Sangappa Dyavappa Biradar, it was observed:
“The respondents having accepted the award without any demur were estopped and precluded from maintaining an application for reference in terms of Section 18 of the Act.”
Supreme Court Sets Aside High Court’s Interest Award – Declares Appeals Allowed
Having found the High Court’s decision legally untenable, the Court declared:
“Suffice it is to state that the impugned judgment cannot be sustained in the eyes of law to the extent of payment of interest, as it sought to apply Section 12 of the 1997 Act to a voluntary agreement entered into between the parties under Section 7 of the 1997 Act.”
Accordingly, the impugned judgment was set aside only to the extent of the award of interest, and the appeals were allowed. The Court made no order as to costs.
Date of Decision: 19 November 2025
