FCC Overturns SHC Rulings in Nai Gaj Dam Contract Dispute

Introduction

The Federal Constitutional Court has overturned two Sindh High Court rulings in the Nai Gaj Dam case, making it clear that constitutional jurisdiction cannot be used to rewrite contracts or alter agreements between parties. 

The court ruled that the SHC had exceeded its authority under Article 199 by modifying an arbitral award, a related court decree and a later MoU between WAPDA and the contractor.

The judgment also upheld WAPDA’s decision to terminate the contract after the Bank of Punjab confirmed that the contractor had submitted a forged performance bank guarantee. The court said the importance of a public project cannot justify changing valid contractual terms or 

Why the Constitutional Court Set Aside the SHC Rulings

Sindh High Court Exceeded Its Jurisdiction

The Federal Constitutional Court ruled that the Sindh High Court had exceeded its authority by changing terms already settled between WAPDA and the contractor. The SHC had interfered with three binding parts of the dispute:

• The arbitral award between the parties

• The court decree based on that award

• The later Memorandum of Understanding

According to the judgment, constitutional jurisdiction cannot be used to redefine rights and obligations that parties have accepted through a contract. The court also made clear that a contracting party cannot be given financial or contractual benefits that were never included in the agreement.

This was the main reason the Constitutional Court set aside the two SHC rulings.

Contractor’s Additional Payment Claim Rejected

Project Was Accepted at 2018 Prices

The contractor had agreed to complete the Nai Gaj Dam project at 2018 prices but later sought additional payments due to inflation and price escalation.

The Constitutional Court rejected the claim, ruling that the contractor remained bound by the rates it had already accepted. The bench also held that later recommendations from the Pakistan Engineering Council could not alter the agreed contractual terms.

As a result, the contractor was not entitled to receive any additional payment on the basis of later price increases.

SHC Could Not Interfere With NAB Investigation

The Constitutional Court ruled that the Sindh High Court had no authority to interfere with the NAB investigation into allegations involving the forged performance bank guarantee.

The bench held that the matter fell within NAB’s lawful jurisdiction, meaning the SHC could not block or influence the investigation through its constitutional powers.

Importance of the Nai Gaj Dam Project

Public Importance Cannot Override the Law

The Constitutional Court acknowledged the national importance of the Nai Gaj Dam project for irrigation, agricultural development, hydropower generation and the rehabilitation of Manchhar Lake.

However, the bench ruled that the significance of a public project does not give courts the authority to disregard the law or alter valid contractual agreements between the parties.

Legal Principle Established by the Judgment

The judgment confirms that constitutional jurisdiction cannot be used to create or expand contractual rights. Parties remain bound by the terms they accepted, and courts cannot grant relief that falls outside those agreed obligations.

It also makes clear that any remedy in a contractual dispute must come from the contract and applicable law, not by using Article 199 to secure terms or benefits that were never agreed.

What Happens Next

Following the ruling, the Sindh High Court’s modifications to the arbitral award, court decree and MoU no longer remain in effect. WAPDA’s decision to terminate the contractor’s agreement also stands as legally justified.

The judgment leaves the allegations linked to the forged bank guarantee within NAB’s lawful jurisdiction. Any further action in the dispute will have to remain within the original contract and the applicable legal framework.

Sources

1. The Nation: Constitutional Court Overturns SHC Rulings in Nai Gaj Dam Case

2. High Court of Sindh: Nai Gaj Dam Project Case Judgment