The Brahmanda Purana discusses the story of how Parasurama reclaimed the land from Varuna.
In Chapter 57 of Upodghāta-pāda of Brahmanda Purana. The sages who had their homes in Gokarna visited Parashurama at Mahendra Parvatha, requesting him to reclaim the Holy Kshetra of Gokarna which was caused to fall into the water by the sons of Sagara when they were digging up the Earth.
12. After bowing down to Rāma, those sages said thus:—“O excellent sage, understand that we are the sages who had our homes in
Gokarṇa.
13. That great holy place along with the sacred ponds etc. was caused to fall into the waters of the ocean by the sons of Sagara who were
digging up Earth for some other reason.
14. Undoubtedly, we desire and expect from you to regain that holy spot that sanctifies everyone, after causing the waters of the ocean
to recede.
17. It behoves you, O leading Brāhmaṇa, to grant that excellent holy spot now, after causing the waters of the ocean to recede, by your own
prowess”.
25-26. On being earnestly requested by the sages thus, the intelligent scion of the family of Bhṛgu acceded to it, for the sake
of Dharma only in his view. Along with them, the excellent sage
proceeded towards the South-Western direction, O king, with a
desire to see the lord of rivers (Varuṇa).
27. The leading scion of the family of Bhṛgu, the noble-minded sage Rāma descended from Sahya, the excellent mountain and reached the
western shore of the lord of rivers.
Convinced by the sage's request, Parashurama descends from Mahendra Parvatha and reaches the West Coast. Parashurama requests Varuna to return the land. But Varuna doesn't respond to Parashurama's plea. Believing that Varuṇa had ignored his request. This infuriated Parasurama, who attempted to shoot his arrow to dry up the ocean. Afraid of this outcome, Varuna surrendered to Parashurama and granted his request. Then Parashurama (mentally) decided on the boundary. He whirled his Sruvā (the sacrificial ladle) with great speed and hurled it into the sea. went 200 Yojanas in the direction of the northwest and fell. (Ref : Upodghāta-pāda ch 58)
1. On seeing Varuṇa who said this and fell on the ground at his feet, the intelligent leading member of the family of Bhṛgu, withdrew the
missile.
2. After withdrawing the missile, Rāma looked at Varuṇa standing in front of him. Anger having subsided, he said to him smilingly.
3. “These leading sages who had their homes in Gokarṇa had come to me before, O lord of rivers, while I was staying on the mountain
Mahendra.
4. The holy spot Gokarṇa inhabited by the sages was caused to fail down into your waters formerly, by the sons of Sagara who were digging
the Earth.
5. After having approached me, those sages, the residents of that holy place have rushed down here to regain once again that holy spot
which is very dear to Śiva.
14. Then he mentally decided the boundary. Wishing to point it out, O king, he took up his Sruvā (the sacrificial ladle). The intelligent
sage was desirous of throwing it in the ocean.
15-18. After making him (Rāma) delighted in his mind and devoid of anger towards himself (i.e. Varuṇa), the lord of rivers disappeared.
When he had gone, Rāma stood facing the north. He whirled his Sruvā
with great speed and hurled it into the briny sea. When it was
hurled into the ocean, the Sruvā went two hundred Yojanas in the
direction of the north-west, O king, and fell down. That place is the
holy spot named Śūrpāraka. It is conducive to rid oneself of all sins.
It is on the shore of the lord of rivers and well-known in the three
worlds. The Sruvā (sacrificial ladle) slipping down from Rāma’s hands
fell, O great king between that holy spot (and the shore of the
ocean), thereby indicating Rāma’s exploit.
19-22. The place, O king, where the ground created by Rāma was established is the holy place Śūrpāraka, glorious and renowned in all
the worlds. The ocean withdrew its waters so far. After granting the
Earth to Rāma, O king, he stood aside. Rāma (the leading member of
Bhṛgu’s family) who never transgressed the bounds of decency made him
stand by this agreement accepted by himself (i.e. Varuṇa), knowing
that it is the eastern boundary on the Earth, the ocean yielded the
ground.
23-25. All the gods were surprised to see the exploit of Rāma. When the water of the ocean receded there on the Sahya mountain, there were
here and there (at some places) some markings of boundaries of towns
and villages as before (their submerging in the sea). These he
observed there by chance, due to their lower level. Thereafter, the
most excellent member of the family of Bhṛgu, lovingly gave their
respective places as desired by them to the sages of purified souls.
