Voluntary Contract Under Land Acquisition Act Bars Claim of Statutory Interest: Supreme Court Overrules High Court’s Grant of Interest Under Section 12

“Once parties enter into a concluded contract under Section 7(2), Section 12 ceases to apply” —  Supreme Court of India, in a significant ruling on land acquisition jurisprudence, held that once compensation is fixed through a voluntary and binding agreement under Section 7(2) of the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997, the landowners cannot later claim interest under Section 12 of the same Act. The decision came in the case of The Government of Tamil Nadu v. P.R. Jaganathan & Ors., and involved civil appeals arising from SLP (C) Nos. 12770-83 of 2020.

A Bench comprising Justice M. M. Sundresh and Justice Nongmeikapam Kotiswar Singh ruled that the High Court erred in awarding interest from the date of acquisition notification, as the concluded agreement of compensation excluded further claims under the statute. The Court strongly invoked the doctrine of approbate and reprobate, holding that parties cannot accept contractual benefits and then invoke statutory rights in contradiction.

“Section 12 gets excluded when compensation is settled through contract under Section 7(2)”

The central issue before the Court was whether landowners who voluntarily entered into a compensation agreement under Section 7(2) of the 1997 Act could subsequently claim interest under Section 12, which applies when compensation is not paid at the time of taking possession.

Answering in the negative, the Court held:

“Once such an agreement is arrived at, it becomes a concluded 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.” (Para 21)

The Court emphasized that Section 12 applies only where possession is taken without prior payment or deposit, and is inapplicable when a mutually agreed compensation is paid.

“Section 12... has no application to a case where an agreement has been entered into between the parties. This is for the reason that a concluded contract under Section 7... would exclude itself from the purview of the 1997 Act thereafter.” (Para 8)

High Court Had Acknowledged Finality of Agreement But Still Granted Interest

In its 2020 ruling, the Madras High Court had acknowledged that the agreement was a “complete package” that foreclosed any further claim of solatium or additional compensation.

Yet, in contradiction, it proceeded to award interest under Section 12, reckoning it from the issuance of acquisition notice under Section 3(2) till the date of its judgment (18.08.2020).

The Supreme Court termed this an impermissible judicial rewriting of a valid and binding contract:

“The High Court has wrongly pressed into service Section 12... Under the contract, no room is given to any of the parties to seek any remedy available under the Act.” (Para 22)

Doctrine of Approbate and Reprobate Bars Selective Invocation of Statutory Provisions

Heavily relying on the doctrine of approbate and reprobate, the Court held that landowners who received the agreed compensation (with 250% enhancement over the 2011 guideline value) without protest were estopped from claiming further relief under the Act.

“It is a clear case of approbation and reprobation... One cannot take advantage of one part while rejecting the rest.” (Para 23, quoting Union of India v. N. Murugesan, (2022) 2 SCC 25)

This principle, rooted in equity and estoppel, prohibits a party from enjoying the fruits of a contract while simultaneously challenging its burdens.

Article 226 Cannot Be Used to Rewrite Concluded Contracts

The Supreme Court further ruled that the High Court’s invocation of Article 226 of the Constitution to modify the terms of a voluntary contract was legally untenable.

“The power under Article 226... is both discretionary and extraordinary. Unless circumstances so warrant, there shall not be any interference in a concluded contract.” (Para 24)

No fraud, coercion, or procedural illegality was alleged or proved in the formation of the agreement, and thus the High Court’s intervention violated basic contract law principles under Section 3 of the Indian Contract Act, 1872.

From Wartime Leases to Airport Expansion Disputes

The dispute arose from lands originally leased to the Department of Defence in 1942 for military purposes, later transferred to the Airport Authority of India (AAI). In 2011, the Government of Tamil Nadu initiated proceedings under the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997, for expansion of the Coimbatore Airport.

After litigation and negotiations, a compensation agreement was signed on 06.03.2018, fixing the rate at ₹1500 per sq.ft. for residential lands and ₹900 per sq.ft. for agricultural lands — a 250% enhancement over prevailing guideline values. This was later formally approved via G.O. (Ms) No.173 dated 20.11.2019.

Despite accepting the compensation, landowners later sought interest under Section 12, leading to the High Court’s partial acceptance and the Supreme Court’s subsequent intervention.

The Supreme Court’s judgment delivers clarity on the scope of contractual finality in statutory acquisitions under the Tamil Nadu 1997 Act. The decision reaffirms:

• Negotiated compensation under Section 7(2) is binding, and
• No interest under Section 12 can be claimed thereafter, unless explicitly reserved in the agreement.

This ruling is expected to strengthen the legal sanctity of negotiated land acquisition settlements, provide guidance to state authorities and landowners, and prevent unwarranted litigation post-agreement.

“For the foregoing reasons, we have no hesitation in setting aside the impugned judgment to the aforesaid extent... Appeals are allowed.” — Para 25

Date of Decision: 19/11/2025