Contract Law and Rights and Liabilities of Parties to Contract : Supreme Court Explains in its Recent Judgment of November 2025

Contract Law and Rights and Liabilities of Parties to Contract : Supreme Court Explains in its Recent Judgment of November 2025

In case of State of Tamil Nadu v. P.R. Jaganathan [2025] GCtR 1772 (SC) it was held with reference to agreement with land owners that "Once such an agreement is arrived at, it becomes a concluded contract under Section 3 of the Indian Contract Act, 1872. The rights and liabilities of the parties would only be governed by the terms of the contract. Hence, 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. 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." Sections 7(2) and 7(4) of the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997 exhibit a laudable objective. They facilitate land owners or interested persons to negotiate and arrive at an agreement on the amount of compensation to be paid. Once there is a final agreement, all disputes with respect to determination of rent and interest would get subsumed within the contract itself. Any interpretation to the contrary, would be violative of Section 7(2) and Section 7(4) of the Tamil Nadu Acquisition of Land for Industrial Purposes Act, 1997.

The power under Article 226 of the Constitution of India is both discretionary and extraordinary. Unless circumstances so warrant, there shall not be any interference in a concluded contract.