Doctrine of Election | Party Cannot Claim Benefits Under Settlement While Challenging Its Obligations: Karnataka HC

The Karnataka High Court recently reaffirmed the doctrine of election, holding that a party cannot simultaneously accept and reject the same instrument. The judgment underscores that litigants who derive benefits from an order cannot later disown its obligations, reinforcing principles of fairness and consistency in commercial disputes.

Background & Facts

The Dispute

The petitioners, comprising landowners and their legal representatives, entered into a commercial arrangement with Respondent No. 1 (M/s. Smartworks Coworking Spaces Pvt. Ltd.) and Respondent No. 2 (M/s. Vaishnavi Infrastructure Pvt. Ltd.) for the development of a property. Disputes arose regarding GST liability and rental payments for the petitioners' share of the built-up area. The respondents had leased out the petitioners' share to Respondent No. 1 at rates between ₹200 - 300 per sq. ft. without the petitioners' consent, while the petitioners claimed they were agreeable to only ₹100 per sq. ft.

Key Facts

• The petitioners filed Commercial O.S. No. 114/2024 seeking damages and other reliefs.
• I.A. Nos. XIII and XIV of 2025 were filed by the petitioners seeking permission to withdraw amounts deposited by Respondent No. 1 as damages.
• The XI Additional District and Sessions Judge (Dedicated Commercial Court), Bengaluru Rural District, rejected the applications on 02.04.2025 (Annexure-J).
• The petitioners challenged this order via Writ Petition No. 19812/2025 under Article 227 of the Constitution of India.

Procedural History

• 19.10.2024: Petitioners filed I.A. Nos. XIII and XIV of 2025 seeking withdrawal of deposited amounts.
• 02.04.2025: Trial Court rejected the applications.
• 28.03.2025: Writ Petition filed before the High Court.
• 16.09.2025: High Court disposed of the writ petition on the basis of a memo filed by the petitioners, wherein they undertook to deposit ₹6 crores in an escrow account as GST liability, if any, arising on their share of the built-up area. The Court permitted withdrawal of the deposited amounts without prejudice to the petitioners' contentions in arbitration.
• Post-16.09.2025: Correspondences between parties regarding rental negotiations.
• 04.12.2025: Arbitrator directed the petitioners to open an escrow account and deposit ₹6 crores within 6 weeks.
• Subsequent to 16.09.2025: Petitioners withdrew ₹26,98,46,069 from the deposited sum of ₹34,74,42,324.
• Present Application: Petitioners sought recall of the 16.09.2025 order, contending that the memo was filed based on half-baked negotiations and that rental aspects were never finalized.

Relief Sought

The petitioners sought:

1. Recall of the order dated 16.09.2025.
2. Permission to withdraw the memo filed on 16.09.2025.
3. Release of the amounts deposited without prejudice to their contentions in arbitration.

The Legal Issue

The central question was whether a party, having voluntarily undertaken an obligation in a memo and derived benefits therefrom, can subsequently seek to resile from that obligation on the ground that other aspects of the settlement remained unresolved.

Arguments Presented

For the Petitioners

1. The memo dated 16.09.2025 was filed as part of settlement negotiations, which included both GST liability and rental payments.
2. The rental negotiations were postponed to 28.09.2025, but the respondents failed to engage, leaving the petitioners in a lurch.
3. The memo was based on incomplete negotiations, and since the rental aspect was never finalized, the petitioners should not be bound by the GST undertaking.

For the Respondents

1. The petitioners voluntarily filed the memo and unconditionally undertook to deposit ₹6 crores towards GST liability.
2. Having withdrawn ₹26,98,46,069 pursuant to the order, the petitioners cannot now seek to resile from their commitment.
3. The principle of approbate and reprobate applies, as the petitioners accepted benefits under the order and cannot now reject its obligations.
4. The GST undertaking was independent of rental negotiations and not contingent upon them.

The Court's Analysis

The Court relied on the doctrine of election, which prohibits a party from approbating and reprobating the same instrument. The petitioners, having voluntarily filed the memo, secured the release of substantial funds, and withdrew ₹26,98,46,069, cannot now seek to disown their obligations under the same memo.

"The principle of election has been very felicitously expressed in the treatise Equity - A Course of Lectures by F.W. Maitland: ‘That he who accepts a benefit under a deed or will or other instrument must adopt the whole contents of that instrument, must conform to all its provisions and renounce all rights that are inconsistent with it.’"

The Court cited several judgments of the Supreme Court of India to elaborate on the doctrine:

1. Karam Kapahi v. Lal Chand Public Charitable Trust [(2010) 4 SCC 753]: The Court held that a party cannot accept and reject the same instrument. The principle is founded on fairness and consistency.
2. Union of India v. N. Murugesan [(2022) 2 SCC 25]: The Court reiterated that the doctrine of approbate and reprobate is a principle of equity, and a party cannot blow hot and cold by accepting benefits under an instrument and later rejecting its obligations.
3. Rajasthan State Industrial Development & Investment Corpn. v. Diamond & Gem Development Corpn. Ltd. [(2013) 5 SCC 470]: The Court observed that a party cannot fast and loose or approbate and reprobate, emphasizing that one who knowingly accepts benefits under an instrument is estopped from denying its validity.

The Court held that the petitioners' conduct unmistakably attracted the rigour of the doctrine. They voluntarily furnished the undertaking, secured the release of enormous sums, and withdrew ₹26,98,46,069, only to later seek recall of the order on the ground that they were unwilling to perform the obligation of securing the GST component in an escrow account.

The Verdict

The Court dismissed the application seeking recall of the order dated 16.09.2025, holding that the petitioners' conduct violated the doctrine of election. The petitioners were estopped from resiling from their undertaking, having already derived benefits under the order.

What This Means For Similar Cases

No Party Can Approbate and Reprobate

• Practitioners must note that once a party voluntarily undertakes an obligation and derives benefits therefrom, they cannot later reject the same instrument on the ground that other aspects of the settlement remain unresolved.
• Courts will strictly enforce the doctrine of election, particularly where a party has acted in a manner inconsistent with their later contentions.

Settlement Negotiations Must Be Comprehensive

• Partial settlements or undertakings based on incomplete negotiations may not be binding if other material aspects remain unresolved.
• However, if a party accepts benefits under such a settlement, they cannot later seek to resile from their obligations, as this would amount to approbating and reprobating the same instrument.

Practical Implications for Commercial Disputes

• Parties should ensure that all aspects of a settlement are finalized before filing undertakings or memos in court.
• Withdrawal of funds pursuant to an order will estop the party from later challenging the same order, especially if the challenge is based on obligations that were part of the consideration for the order.
• Arbitration proceedings and court orders are distinct, and obligations undertaken in one forum cannot be avoided by raising disputes in another forum.