SC upholds finality of settlements

The Supreme Court has ruled that no fresh financial claims can be raised after a final settlement has been reached, underscoring the sanctity of contracts and the need for commercial certainty in public-sector projects. A three-member bench headed by Chief Justice Yahya Afridi, and comprising Justice Irfan Saadat Khan and Justice Aqeel Ahmed Abbasi, dismissed a petition seeking leave to appeal against a Peshawar High Court (PHC) judgment. Justice Irfan Saadat Khan authored the verdict. The case arose from the construction contract for the Hayatabad Medical Complex in Peshawar, which was awarded on December 16, 1993. During the execution of the project, the company claimed additional payments, citing delays and shortages of funds. According to the judgment, the company later accepted a final payment of Rs88.555 million and signed a No Demand Certificate, expressly relinquishing any further financial claims arising out of the contract. Despite the settlement, the company subsequently approached the court seeking arbitration for additional claims. Both the trial court and the PHC dismissed the request, and the Supreme Court upheld those decisions by refusing leave to appeal. The apex court held that a party accepting final payment and voluntarily signing a No Demand Certificate could not subsequently raise additional financial claims or invoke arbitration unless it proved that the settlement had been obtained through fraud, coercion or undue influence. The judgment emphasised that the right to seek arbitration ceases once a final settlement has been reached, and that agreements entered into voluntarily remain binding and enforceable. The court further observed that maintaining the sanctity of contracts and ensuring commercial certainty are essential for public-sector development projects, warning that reopening settled claims without proof of fraud or coercion would undermine legal certainty and commercial stability.

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