The Supreme Court has ruled that a party to a concluded contract, which was entered into voluntarily and statutorily regarding land acquisition compensation, cannot subsequently seek further relief by invoking statutory provisions for interest.
A Bench comprising Justice M.M. Sundresh and Justice Nongmeikapam Kotiswar Singh set aside a judgment of the Madras High Court that had directed the payment of interest to landowners despite them having signed a voluntary agreement fixing the compensation amount. The Court held that once an agreement is arrived at under Section 7(2) of The Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997 (the 1997 Act), it constitutes a “complete package,” precluding claims for statutory interest under Section 12 of the same Act.
Legal Issue and Outcome
The central issue before the Apex Court was: “Whether a party to a concluded contract, voluntarily and statutorily entered into, can seek further relief by taking refuge under the statutory provisions?”
The Court answered in the negative, allowing the appeals filed by the Government of Tamil Nadu. The Bench held that the High Court erred in applying Section 12 of the 1997 Act (dealing with payment of interest) to a case governed by a voluntary agreement under Section 7(2).
Background of the Case
The dispute pertains to lands in Singanallur and Kalapatti villages of Coimbatore District. These lands were originally leased to the Department of Defence in 1942 and later transferred to the Airport Authority of India (AAI).
In 2011, proceedings were initiated to acquire these lands for the expansion of the Coimbatore Airport runway under the 1997 Act. Following litigation regarding compensation and lease arrears, the parties invoked Section 7(2) of the 1997 Act to settle the matter amicably. A meeting was held on March 6, 2018, resulting in an agreement where compensation was fixed at Rs. 1,500 per sq. ft. for residential lands and Rs. 900 per sq. ft. for agricultural lands.
The Government of Tamil Nadu subsequently approved these rates via a Government Order dated November 20, 2019, sanctioning Rs. 189.29 crores for compensation.
However, in the impugned judgment dated August 18, 2020, while the Madras High Court acknowledged that the agreement was a “complete package” and rejected claims for solatium, it directed the payment of interest under Section 12 of the 1997 Act. The High Court ordered interest to be paid from the date of the Section 3(2) notification until the date of its judgment.
Arguments of the Parties
The Appellants (Government of Tamil Nadu): Represented by Senior Counsel Dr. Abhishek Manu Singhvi, the State argued that the compensation fixed by negotiation involved a 250% hike over the prevailing guideline value of 2011. The State contended that the landowners, having voluntarily agreed to the compensation, were estopped from raising contrary pleas. They argued that an agreement under Section 7(2) brings an end to all disputes, including rent and interest, and the High Court erred in invoking Section 12.
The Respondents (Landowners): Represented by Senior Counsel Mr. S. Nagamuthu, the landowners argued that there was no express exclusion of Section 12 in the agreement. They contended that they were entitled to “just and fair compensation” and that the High Court had correctly considered the fact that they had lost possession of their lands for a considerable period.
Airport Authority of India (AAI): Additional Solicitor General Ms. Aishwarya Bhati, appearing for the AAI, submitted that the AAI had complied with interim orders regarding arrears of rent and that there was no privity of contract between the AAI and the private respondents regarding the acquisition compensation.
Court’s Analysis
The Supreme Court examined the scheme of the 1997 Act, specifically Sections 7 and 12.
On the Nature of Section 7(2) Agreements: The Court observed that Section 7(2) facilitates the determination of compensation through agreement. The Bench stated:
“Therefore, after an agreement is entered into, the terms and conditions mentioned thereunder, along with the amount duly arrived at, alone would govern the parties. In other words, the agreement becomes sacrosanct, leading to the termination of the umbilical cord which connects the agreement to the other provisions pertaining to the passing of the award under the 1997 Act.”
On the Applicability of Section 12 (Interest): The Court clarified that Section 12, which mandates 9% interest from the time of taking possession until payment, does not apply to cases settled by agreement.
“Section 12 of the 1997 Act 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 of the 1997 Act, voluntarily entered into between the parties, would exclude itself from purview of the 1997 Act, thereafter.”
Doctrine of Approbate and Reprobate: The Court held that the respondents were engaging in “approbation and reprobation” by accepting the enhanced compensation under the agreement while simultaneously seeking statutory interest.
“It is not as if the agreement has been entered into by force or deceit… It is only thereafter, wisdom dawned upon them to seek interest.”
The Court cited the decision in Union of India v. N. Murugesan (2022), reiterating that a party cannot be allowed to accept and reject the same instrument.
Reliance on Precedents: The judgment referenced several key decisions to support the finality of consent awards and settlements:
- Ranveer Singh v. State of Uttar Pradesh: Held that an agreed amount in a consent award is treated as just compensation inclusive of statutory interest.
- Nathani Steels Ltd. v. Associated Constructions: Observed that once a dispute is amicably settled, it cannot be unilaterally reopened.
- NOIDA Industrial Development Authority v. Ravindra Kumar: Ruled that landowners who voluntarily accepted compensation by agreement cannot later claim higher market value.
Decision
The Supreme Court concluded that the High Court had effectively “rewritten the agreement arrived at between the parties” by awarding interest. The Bench termed the High Court’s interference in a concluded contract under Article 226 as unwarranted.
The Court held:
“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.”
Consequently, the appeals were allowed, and the direction to pay interest was set aside.
Case Details:
- Case Title: The Government of Tamil Nadu & Ors. v. P.R. Jaganathan & Ors.
- Case No: Civil Appeal arising out of SLP (C) Nos. 12770-83 of 2020
- Quorum: Justice M.M. Sundresh and Justice Nongmeikapam Kotiswar Singh
