The Supreme Court has ruled that landowners who voluntarily accept compensation under Section 7(2) of the Tamil Nadu Act cannot later claim statutory interest. The judgment reinforces the finality and binding nature of negotiated land acquisition settlements.
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NEW DELHI: In a ruling that impacts land acquisition disputes in Tamil Nadu, the Supreme Court has held that landowners who voluntarily enter into a compensation agreement under Section 7(2) of the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997, cannot later claim statutory interest under Section 12 of the same Act.
The judgment, delivered by a Bench of Justice M.M. Sundresh and Justice Nongmeikapam Kotiswar Singh, sets aside a Madras High Court order that had directed the payment of interest despite a concluded compensation settlement.
The Supreme Court ruled that a voluntary, statutory compensation agreement constitutes a “complete package”, and once parties accept the agreed amount, they cannot reopen it to seek additional benefits such as statutory interest.
Background
The litigation concerned lands in Singanallur and Kalapatti villages (Coimbatore District), originally leased to the Defence Department in 1942 and later transferred to the Airport Authority of India (AAI).
In 2011, the State initiated land acquisition for Coimbatore Airport runway expansion under the 1997 Act. After disputes relating to compensation and lease arrears, both sides opted for an amicable settlement under Section 7(2).
Terms of the 2018 Agreement
On March 6, 2018, the parties agreed to:
- ₹1,500 per sq. ft. for residential lands
- ₹900 per sq. ft. for agricultural lands
The Tamil Nadu Government approved the settlement through a Government Order dated November 20, 2019, sanctioning ₹189.29 crore.
Despite acknowledging that the agreement was a complete settlement, the Madras High Court (August 18, 2020) directed that interest under Section 12 be paid from the date of the Section 3(2) notification until the date of judgment.
This High Court directive triggered the State’s appeal to the Supreme Court.
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Arguments Before the Supreme Court
State of Tamil Nadu (Appellants)
The State, represented by Senior Advocate Dr. Abhishek Manu Singhvi, argued that the landowners had willingly accepted compensation that amounted to a 250% increase over the 2011 guideline value. Singhvi submitted that the Section 7(2) agreement brought all disputes to an end, including any claim for interest, and therefore the landowners were estopped from invoking Section 12 after accepting the negotiated compensation.
Landowners (Respondents)
Senior Advocate S. Nagamuthu, appearing for the landowners, argued that the agreement did not explicitly exclude the application of Section 12. He contended that the landowners were entitled to just and fair compensation, especially since they had lost possession for a lengthy period. He maintained that the High Court had correctly granted interest to compensate for this deprivation.
Airport Authority of India (AAI)
The AAI, represented by ASG Aishwarya Bhati, stated that it had complied with all court-ordered payments related to rent arrears. It emphasized that it had no contractual relationship with the landowners concerning acquisition compensation and therefore could not be held liable for interest claims.
Supreme Court’s Analysis
1. Section 7(2) Creates a Complete and Final Package
The Court emphasized that once compensation is determined through mutual agreement, the agreement becomes “sacrosanct”.
“After an agreement is entered into, the terms and conditions mentioned thereunder… alone would govern the parties.”
The agreement breaks the connection to other statutory provisions related to awards under the Act.
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2. Section 12 Interest Does Not Apply to Settlement Cases
Section 12 provides 9% interest from the date of possession until payment, but not when compensation is settled voluntarily.
“Section 12… has no application to a case where an agreement has been entered into between the parties.”
3. Landowners Cannot Approve and Disapprove the Same Agreement
The Bench applied the doctrine of approbate and reprobate, noting that the landowners accepted the enhanced compensation while trying to claim further benefits.
The Court cited Union of India v. N. Murugesan (2022).
4. Reliance on Landmark Precedents
The Court reaffirmed previous rulings, including:
- Ranveer Singh v. State of Uttar Pradesh – consent awards include all statutory components.
- Nathani Steels v. Associated Constructions – settled disputes cannot be reopened.
- NOIDA v. Ravindra Kumar – landowners who voluntarily accept compensation cannot later claim enhancement.
The Supreme Court concluded that the High Court had overstepped its jurisdiction by altering the terms of a concluded contract.
“The impugned judgment cannot be sustained… as it sought to apply Section 12 of the 1997 Act to a voluntary agreement.”
The Supreme Court allowed the appeals and set aside the Madras High Court’s direction to pay statutory interest. As a result, the voluntary compensation agreement executed under Section 7(2) remains fully valid and unchanged, with no additional financial liabilities imposed on the State.
Case Title:
The Government of Tamil Nadu & Ors. v. P.R. Jaganathan & Ors.
Civil Appeal arising out of SLP (C) Nos. 12770-83
READ JUDGMENT
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