Contract Voluntarily Entered Into Cannot Be Reopened By Invoking Statutory Provisions Excluded By Agreement: Supreme Court
The Court held that once compensation under a negotiated agreement is accepted without protest, the terms of the contract become final and binding, and parties are estopped from seeking any relief beyond the agreement.
Justice M.M. Sundresh, Justice N. Kotishwar Singh , Supreme Court of India
The Supreme Court has held that when compensation payable for acquired land is determined through a negotiated agreement under the applicable statute, the terms of the agreement are binding, and no further claim beyond the contract can be entertained.
The Apex Court was hearing an appeal arising out of a challenge to the Madras High Court’s direction granting interest to landowners by invoking Section 12 of the Tamil Nadu Land Acquisition Laws (Revival of Operation, Amendment and Validation) Act, 2019, despite the existence of a concluded agreement under Section 7(2) determining the amount payable.
A Bench comprising Justice M.M. Sundresh and Justice Nongmeikapam Kotiswar Singh referred to the statutory scheme and observed that, “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”.
Senior Advocate Dr Abhishek Manu Singhvi represented the appellants, while Aishwarya Bhati, Additional Solicitor General (ASG), represented the respondents.
Background
The land in question had originally been leased to government authorities many decades earlier. It later came within acquisition proceedings under the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997.
Disputes arose over compensation and arrears of rent, leading to litigation. During the proceedings, the parties entered into a negotiated agreement under Section 7(2), which fixed the rate of compensation for the acquired land by mutual consent.
Subsequently, the landowners, while accepting compensation, sought additional amounts by invoking Section 12, which provides for payment of interest from the date of taking possession until the date of payment.
The High Court accepted the plea in part and directed payment of interest for a specified period. Aggrieved, the State authorities preferred appeals, contending that the agreement foreclosed any further claim.
Court’s Observation
The Supreme Court examined the statutory framework of Section 7 of the 1997 Act, noting that it permits the amount of compensation to be determined by agreement and provides that the amount so agreed shall be paid strictly in accordance with that agreement. Once entered into, the Court held, the contract becomes final and governs the rights and liabilities of the parties, excluding recourse to the statutory procedures for award, reference, or appeal.
The Bench held that the effect of Section 7(2) and Section 7(4) is that a negotiated agreement “becomes sacrosanct,” and that the linkage to other statutory provisions concerning the determination of compensation stands severed.
In such circumstances, the Court remarked, the subsequent invocation of Section 12 is impermissible, as the parties deliberately chose the contractual route in place of statutory determination.
The Court further held that a party who has accepted compensation cannot subsequently pursue a statutory remedy inconsistent with the terms of the agreement. While making these observations, the Bench remarked: “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 arrived at. 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 applied the principle that a party cannot approbate and reprobate, relying on Union of India v. N. Murugesan, where it was held that a person cannot accept the benefits of an agreement and later dispute its terms. The doctrine of estoppel was also reiterated in this context.
The Bench cited Ranveer Singh v. State of Uttar Pradesh, State of Karnataka v. Sangappa Dyavappa Biradar, and NOIDA Industrial Development Authority v. Ravindra Kumar, to reaffirm that once consent compensation is accepted under a statutory negotiation provision, the right to seek statutory enhancement or additional payments stands extinguished.
The Court also referred to State of Gujarat v. Daya Shamji Bhai, where it was held that after agreeing to compensation and accepting it without protest, the landowner cannot invoke statutory provisions to reopen or modify the consent award.
The Court emphasised that the agreement was neither forced nor tainted by fraud. The landowners had willingly accepted compensation determined at a rate substantially above the guideline value. Hence, seeking additional amounts later was contrary to the law governing concluded contracts.
The Bench held that a writ court cannot rewrite a concluded agreement or allow evasion of contractual terms through Article 226 proceedings. The Madras High Court’s approach in applying Section 12 to a case governed by a contractual settlement was held to be legally unsustainable.
Conclusion
The Supreme Court set aside the Madras High Court’s direction granting interest under Section 12 of the 1997 Act, holding that the agreement under Section 7 constituted a complete and binding settlement.
The appeals were accordingly allowed, and the landowners’ claim to any amount beyond the agreed terms was rejected.
Cause Title: Government of Tamil Nadu & Others v. P.R. Jaganathan & Others (Neutral Citation: 2025 INSC 1332)
Appearances
Appellants: Senior Advocate Dr Abhishek Manu Singhvi
Respondents: Aishwarya Bhati, Additional Solicitor General (ASG), Senior Advocate S Nagamuthu