On 5 August 2026, the Supreme Court of Pakistan ruled that an unconditional No Demand Certificate signed by a contractor upon accepting final payment constitutes a complete and binding settlement. A party that has done so cannot subsequently raise additional financial claims or invoke arbitration unless it proves the settlement was procured through fraud, coercion, or undue influence. The judgment takes immediate effect as binding precedent.

The dispute: a 1993 hospital contract, settled in 1999, challenged in 2008

The case arose from a contract awarded on 16 December 1993 to Messrs Ghulam Siddiqi, Ghulam Habib and Company (Pvt) Ltd, Peshawar, for constructing a 240-bed facility at Hayatabad Medical Complex, Peshawar. During execution, the contractor claimed additional payments citing delays, idle charges, and price escalation. After the project was completed, the company accepted Rs88.555 million as full and final payment and signed a No Demand Certificate on 8 February 1999, expressly relinquishing all further claims.

Nine years later, in 2008, the same contractor filed an application under Section 20 of the Arbitration Act, 1940, seeking to refer the old disputes to arbitration. The civil judge, Peshawar, dismissed the application on 13 May 2008. The Peshawar High Court upheld that dismissal on 29 February 2016 in Regular First Appeal No. 118 of 2008. The contractor then petitioned the Supreme Court for leave to appeal.

What the Supreme Court held

The six-page judgment, authored by Justice Irfan Saadat Khan and announced by a bench comprising Chief Justice Yahya Afridi, Justice Irfan Saadat Khan, and Justice Aqeel Ahmed Abbasi, rested on three main findings:

  • No Demand Certificates are final. Signing an unconditional NDC after receiving final payment amounts to a conscious representation that no further sums remain due. The right to seek arbitration ceases once such a settlement is reached.
  • Fraud or coercion must be proved. A party may reopen a settled matter only by demonstrating that the NDC was obtained through fraud, coercion, misrepresentation, or another legally recognised vitiating circumstance. The contractor in this case produced no contemporaneous protest, reservation, or correspondence suggesting the certificate was signed under compulsion.
  • Concurrent findings will not be disturbed lightly. Under Article 185(3) of the Constitution, the Supreme Court will not interfere with concurrent findings of fact by lower courts unless they suffer from gross misreading or non-reading of evidence, perversity, or arbitrariness. The Court found no such defect.

The estoppel rule: Article 114 of the Qanun-e-Shahadat Order

The judgment expressly invoked Article 114 of the Qanun-e-Shahadat Order, 1984, which codifies the doctrine of estoppel. The Court held that a party who induces another to rely on a representation: here, that all claims stood settled: cannot later deny the truth of that representation. Permitting parties to reopen settled matters would, the Court said, “undermine the sanctity of final settlements, create uncertainty in concluded commercial transactions and expose public funds to stale and belated claims.”

Why the ruling matters for public-sector projects

The Court stressed that commercial certainty and finality are indispensable attributes of contractual dealings, particularly where public funds are involved. No Demand Certificates, the judgment noted, enable public employers to close accounts, settle liabilities, and proceed on the legitimate assumption that no further claims remain outstanding. The ruling affirmed that courts should be reluctant to allow a party to reopen a concluded transaction after unequivocally accepting final payment.

The case is reported as PLJ 2026 SC 114.

What public bodies and contractors should do now

  • Ensure that every final payment under a public procurement contract is accompanied by an unconditional No Demand Certificate signed by the contractor.
  • Retain the original signed NDC and any contemporaneous correspondence about it in the contract file.
  • If a contractor wishes to preserve any residual claim, ensure that a written reservation or protest is recorded at the time the NDC is signed: a blanket NDC without qualification will close the door.
  • Treat an NDC as conclusive evidence of settlement in any subsequent dispute or audit.

What the evidence does not yet establish is whether the Supreme Court will issue any further elaboration on the standard of proof required for claims of fraud or coercion in the NDC context, or whether the ruling will prompt legislative amendments to the Arbitration Act, 1940, or to provincial procurement rules.