No Claim Certificate/Discharge certificate or Supplementary Agreement must be protested at the earliest available opportunity.

In construction arbitration disputes, one of the most commonly argued issues is the effect of a No Claim Certificate/discharge certificate or a supplementary agreement.

Usually, during the performance of the contract, the contractor signs a no-claim certificate/discharge certificate or a supplementary agreement (as the case may be) acknowledging the works done, the payment received, and agreeing that the contractor will forgo its right to claim further damages against the employer under law.

However, when the contractor subsequently for any other reasons raises additional claims against the employer and refers its dispute to arbitration, the employer contends that the contractor's claims are not maintainable in light of the no-claim certificate/discharge certificate or supplementary agreement executed. The contractor to substantiate its claims and damages raises the plea that the certificate/agreement was executed under financial duress, coercion, and pressure from the employer.

But under what circumstances can the validity of a no-claim certificate/discharge certificate or supplementary agreement be upheld or revoked?

Under the Indian Contract Act, 1872, the validity of any agreement survives on the presence of free consent which is defined as thus

• Consent (Section 14): Consent is defined as free when it is not caused by coercion (Section 15), undue influence (Section 16), fraud (Section 17), misrepresentation (Section 18), or mistake (Sections 20, 21, and 22)

Coercion, undue influence and fraud is defined under the Indian contract Act as thus:

• Coercion (Section 15): Coercion is defined under Section 15 of the Indian Contract Act as:"‘Coercion’ is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement."
• Undue Influence (Section 16): Undue influence is defined under Section 16 of the Indian Contract Act as:"(1) A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other."
• Fraud (Section 17): Fraud is defined under Section 17 of the Indian Contract Act as:"‘Fraud’ means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract: (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent."

The Threshold for Proving Coercion or Fraud.

It is a settled principle of law that fraud or coercion cannot be merely alleged but has to be proved with cogent evidence. the contractor cannot simply allege that the no-claim certificate/discharge certificate or supplementary agreement was signed dur to fraud,coercion, duress or undue influence. It must present clear and convincing evidence to establish the same.

The Supreme Court in Union Of India & Ors. v. M/S. Master Construction Co. (2011) 12 SCC 349, which was rendered under Section 11(6) of the 1996 Act (as the law then was), while examining whether disputes can be referred to arbitration in light of a no-claim certificate, held as under:

“24. …A bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets up such a plea must prima facie establish the same by placing material before the Chief Justice/his designate. If the Chief Justice/his designate finds some merit in the allegation of fraud, coercion, duress or undue influence, he may decide the same or leave it to be decided by the Arbitral Tribunal. On the other hand, if such a plea is found to be an after-thought, make-believe or lacking in credibility, the matter must be set at rest then and there.”

The significance of raising an Objection or Protest at the earliest opportunity is vital and credible Evidence

A contractor alleging duress, coercion, fraud or undue influence can establish the same by way of correspondences or communications issued before or after the execution of the no-claim certificate/discharge or supplementary agreement, highlighting the financial difficulties and the coercive conduct of the employer which constrained the contract to submit to signing the same.

The contractor has to show that it had raised a protest or expressly objected to the execution of the no-claim certificate/discharge certificate or supplementary agreement at the earliest available opportunity or at the relevant proximate time. These records of protest are vital to determine whether the no-claim certificate/discharge certificate or supplementary agreement was issued under duress or not. If the contractor fails to show any evidence that it had objected or protested at the earliest available opportunity, then the allegation of duress, coercion, fraud or undue influence would emphatically fail.

The Supreme Court in New India Assurance Company Ltd. v. Genus Power Infrastructure Ltd. (2015 AIR SCW 67), while upholding the validity of a no-claim certificate, held as thus:

“9. In our considered view, the plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion. Given the fact that there was no protest or demur raised around the time or soon after the letter of subrogation was signed...”

In M/S. ANS Constructions Ltd. v. Union Of India (2016:DHC:7999), the High Court of Delhi held as follows:

“8….Although, it is stated that the No Claim Certificate was issued under coercion and undue influence but no protest of any kind was made by ACL at any stage prior to receipt of the sum of `39,80,733.29/- or even immediately thereafter…..”

“16…..No claim certificate was issued on 09.12.2011 and the admitted amount was released by the respondent to ACL in March, 2012. It is seen that even after receipt of the said amount, ACL did not raise any dispute. There is no communication that was issued by ACL alleging that No Claim Certificate was executed under duress or economic coercion. The Arbitrator had taken note of the same and had proceeded on the basis that the No Claim Certificate was valid and binding. It is on this basis that the Arbitrator rejected all the claims raised by ACL.”

Similarly, the Supreme Court in M/s. ONGC Mangalore Petrochemicals Ltd. v. M/s. ANS Constructions Ltd. & Anr. (CIVIL APPEAL NO. 1659 OF 2018) held as under:

“24. Apart from it, we also find that the Final Bill has been mutually signed by both the parties to the Contract accepting the quantum of work done, conducting final measurements as per the Contract, arriving at final value of work, the payments made and the final payment that was required to be made. The contractee-Company accepted the final payment in full and final satisfaction of all its claims. We are of the considered opinion that in the present facts and circumstances, the raising of the Final Bill and mutual agreement of the parties in that regard, all claims, rights and obligation of the parties merge with the Final Bill and nothing further remains to be done.”

The effect of Accord and Satisfaction

In the absence of any evidence of protest or demur raised by the contractor to the execution of the no-claim certificate/discharge certificate or supplementary agreement at the earliest available opportunity, the same can also be construed to be executed on the basis of accord and satisfaction.

The Supreme Court in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. (2009) 1 SCC 267, on the claim of accord and satisfaction, opined as follows:

“25. …Where both parties to a contract confirm in writing that the contract has been fully and finally discharged by performance of all obligations and there are no outstanding claims or disputes, courts will not refer any subsequent claim or dispute to arbitration. Similarly, where one of the parties to the contract issues a full and final discharge voucher (or no due certificate as the case may be) confirming that he has received the payment in full and final satisfaction of all claims, and he has no outstanding claim, that amounts to discharge of the contract by acceptance of performance and the party issuing the discharge voucher/certificate cannot thereafter make any fresh claim or revive any settled claim. Nor can he seek reference to arbitration in respect of any claim.

50 (ii) A claimant makes several claims. The admitted or undisputed claims are paid. Thereafter negotiations are held for settlement of the disputed claims resulting in an agreement in writing settling all the pending claims and disputes. On such settlement, the amount agreed is paid and the contractor also issues a discharge voucher/no-claim certificate/full and final receipt. After the contract is discharged by such accord and satisfaction, neither the contract nor any dispute survives for consideration. There cannot be any reference of any dispute to arbitration thereafter.”

The Delhi High Court in Supermint Exports Pvt. Ltd. v. New India Assurance Co. Ltd. and Others (2026 SCC OnLine Del 1138), while deciding on a similar factum, placed strong reliance on Boghara Polyfab (supra) and Master Construction (supra) and held as follows:

“74. The illustrations contained in para 52 of Boghara Polyfab make this clear. Illustrations (iii) and (iv), in which the Supreme Court has held the principle of discharge of the claim by accord and satisfaction not to apply are cases in which there was compulsion and duress exercised by the employer/insurer. In Illustration (iii), the Supreme Court has clearly stated that the employer specifically stated that unless the discharge voucher was executed in the terms desired by the employer, payment of the admitted amount would not be released. This, according to the Supreme Court, clearly exhibited coercion on the part of the employer.

77. …All decisions are ad idem on the point that mere assertion of financial stringency cannot suffice to escape the effect of an unconditional no claim certificate or discharge voucher. The party seeking to do so has to establish that he had no option but to sign on the dotted line, such a case in which the opposite party completely refused to release any payment till he did so. The use of the word “admitted amount” in example (iii) in para 52 of Boghara Polyfab is obviously deliberate. It is only where the opposite party refuses even to release the admitted amount, unless the claimant subscribes to the unconditional discharge voucher, that financial duress or compulsion can be pleaded.
78. …if a signatory to an unconditional discharge voucher, affirming full and final settlement of a claim, can escape the effect of the voucher by merely pleading financial stringency, absent any material evidencing fraud, coercion, or duress or compulsion caused by the opposite party, it would reduce such vouchers to meaningless scraps of paper. The judgments of the Supreme Court, cited supra, indicate that the signatory to an unconditional discharge voucher has, in order to avoid accord and satisfaction, to explain the circumstances which prevented him from protesting when he had time to do so, as well as establish some degree of complicity, on the part of the insurer/opposite party in placing him under compulsion to sign the voucher.
79. Clearly, no such circumstance, as could indicate, even prima facie, that the respondent had practiced fraud, coercion or undue influence, on the appellant, can be said to exist in the present case...”

Consequently, in light of the aforesaid decisions of the Hon’ble Supreme Court and the Hon’ble High Court of Delhi, no claims would survive if a no-claim certificate/discharge certificate or supplementary agreement(as the case may be) was executed by way of accord and satisfaction,.

The Effect of Acquiescence and Waiver

Further, the principles of acquiescence and waiver are also directly applicable. If a party raises a formal protest or objection to the no-claim certificate, supplementary agreement, or discharge certificate for the first time during arbitration proceedings, the claims can also be said to be barred by the principles of waiver and acquiescence.

It is settled law that acquiescence is a tacit or passive acceptance of a known legal position, and waiver is the voluntary relinquishment of a known legal right. The Supreme Court in Union of India & Ors. v. N. Murugesan & Ors. (2022) 2 SCC 25 has held that acquiescence presupposes knowledge against a particular act, which becomes a tacit or passive acceptance thereof.

Thus, the contractor’s failure to raise an objection or protest to the execution of a no-claim certificate/discharge certificate or supplementary agreement at the earliest possible opportunity and challenge the validity of the same only at the time of arbitration clearly establishes tacit acceptance thereby constituting acquiescence . This tacit acceptance further leads to waiver, whereby the contractor legally relinquishes its right to claim further damages.

Conclusion 

Thus, what can be inferred is that a party's failure to protest at the earliest available opportunity against a no-claim certificate/discharge certificate or supplementary agreement carries significant evidentiary value at the stage of adjudicating claims in arbitration. A contractor must remain diligent during the performance of the contract to avoid these evidentiary lacunae; otherwise, their subsequent claims are bound to fail, even if they initially signed the no-claim certificate/discharge certificate or supplementary agreement under unrecorded financial strain or duress..