On 5 August 2026, a three-judge Supreme Court bench ruled that a final settlement between a contractor and a public-sector employer, evidenced by an unconditional No Demand Certificate (NDC), extinguishes all further financial claims and the right to seek arbitration. The only exception is proof that the settlement was obtained through fraud, coercion, misrepresentation or undue influence: and the burden of proving that exception rests on the party that signed the certificate.

The 1993 contract and the settlement that ended it

The case, M/s Ghulam Siddiqe, Ghulam Habib and Company (Pvt) Peshawar v Government of NWFP through Chief Engineer Communication and others, arose from a construction contract awarded on 16 December 1993 for a 240-bed facility at the Hayatabad Medical Complex, Peshawar. During execution, disputes emerged over delays in the release of running payments, idle charges, and claims for price escalation.

After the project was completed, the contractor accepted Rs88,555,647 as full and final settlement and signed a No Demand Certificate on 8 February 1999. The certificate contained no reservation, protest or qualification.

Nine years later, an attempt to reopen

In 2008 the company filed an application under Section 20 of the Arbitration Act, 1940, seeking referral of the original disputes to arbitration. The civil judge-V, 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 under Article 185(3) of the Constitution.

No evidence of compulsion, no right to re-litigate

Justice Irfan Saadat Khan, who authored the six-page judgment for a bench that also included Chief Justice Yahya Afridi and Justice Aqeel Ahmed Abbasi, noted that the petitioner had pointed to no contemporaneous correspondence, protest or objection indicating the NDC had been signed under compulsion. The record reflected "an unequivocal acceptance of the final payment without any qualification whatsoever."

The court held that permitting a party to reagitate claims that stood expressly settled would be contrary to the settled principles governing contractual finality. It declined to grant leave to appeal and dismissed the petition as devoid of merit.

The legal anchors: estoppel and deference to concurrent findings

The judgment invoked Article 114 of the Qanun-e-Shahadat Order, 1984, which codifies the doctrine of estoppel: a party that has induced another to rely on its representation cannot later deny that representation. By signing an unconditional NDC and accepting final payment, the contractor had made a conscious representation that no further sums were due.

The court also restated the settled principle that, under Article 185(3) of the Constitution, the Supreme Court will not disturb concurrent findings of fact by lower courts unless those findings suffer from gross misreading or non-reading of evidence, perversity or arbitrariness. No such defect was shown.

What the ruling means for public-sector contracts

The judgment delivers a clear signal that NDCs are not procedural formalities. Their commercial purpose: enabling employers to close accounts, settle liabilities, and proceed on the legitimate assumption that no further claims remain: would be destroyed if parties could later walk away from them.

For procuring agencies, the practical implications are:

  • Ensure every final-payment voucher is accompanied by an NDC that is unconditional on its face.
  • Retain contemporaneous records: correspondence, measurement books, completion certificates: that can later rebut any allegation of coercion.
  • Treat an NDC as the documented endpoint of the contractual relationship; do not entertain post-settlement claims unless a court or tribunal first finds the NDC was vitiated.

For contractors, the ruling means that all outstanding claims, reservations and disputes must be recorded and preserved before signing a final settlement. Signing an unqualified NDC and then seeking arbitration will almost certainly fail unless contemporaneous evidence of fraud or duress exists.

The judgment does not address whether a settlement reached during the course of a project: as opposed to one signed after completion: attracts the same finality, nor does it discuss the position under the newer Arbitration Act, 1940's successor legislation. Those questions remain open.