Srinivasa Reddy Velagala v. Sravanthi Infratech Pvt. Ltd.

Supreme Court of India, 12 August 2026, 2 judges, 2026 INSC 835

A Section 9 IBC application filed more than three years after the acknowledged default was time-barred; a subsisting EPC contract gives no continuing cause of action, and unanswered legal notices do not restart limitation.

Facts

The appellant awarded the respondent an EPC contract of Rs. 827 crore in 2011 for a 225 MW gas based power station in Andhra Pradesh. The appellant paid only Rs. 50.15 crore of the milestone payments due, and the respondent suspended the works by notice dated 30.07.2011 and demobilised. Neither party terminated the contract. The respondent sent legal notices in 2014 and 2015, which went unanswered, and a Section 8 demand notice dated 02.07.2018 claiming about Rs. 1292 crore. Its Section 9 application was admitted by the NCLT, Amravati Bench, on 13.12.2019, which held that the contract subsisted and the claim was within limitation. The NCLAT affirmed on 01.02.2021, and the corporate debtor appealed.

Questions before the Court

Whether the EPC contract was frustrated by efflux of time.
Whether the monies claimed in the Section 9 application were operational debt under Section 5(21) of the IBC.
Whether there was a pre-existing dispute about the claims.
Whether the Section 9 application was time-barred as to the operational debt.

What the Court held

The EPC contract subsisted. Neither party invoked the termination clause, the contract did not make time of the essence, and a suspension caused by one party's non-payment is self-induced, so it is not a supervening impossibility under Section 56 of the Contract Act. Efflux of time and frustration are different modes of discharge.
Milestone payments under the EPC payment schedule are operational debt. Suspension, idling and demobilisation charges are damages, which are not operational debt until assessed and crystallised by adjudication of a court of competent jurisdiction.
There was no pre-existing dispute. Silence is not by itself proof that no dispute exists, but the appellant's total and consistent silence across all the legal notices, over seven years, with its defence raised first in reply to the Section 9 application, showed none existed.
The application was time-barred. Default under Section 3(12) occurs once, on non-payment of a due debt; a subsisting contract does not create a continuing cause of action. Limitation ran from the 2012 acknowledgments, and legal notices without an acknowledgment under Section 18 of the Limitation Act do not restart it.
The appeal was allowed and the NCLT and NCLAT orders were set aside, with liberty to the respondent to pursue its claims before the dispute resolution forum provided in the EPC contract.

Why it matters

The judgment holds that, for a Section 9 IBC application, limitation runs from the date of each default and is not extended because the underlying contract still subsists. It separates the wider accrual rules for substantive claims in EPC contracts from the date of default under Section 3(12), and confirms that unacknowledged demand notices do not restart limitation. It also holds that unadjudicated damages are not operational debt, and treats prolonged silence of the corporate debtor as strong evidence that no dispute existed.

In the Court's words

Copied from the official judgment; each passage links to its page.

“A default arising out of non-payment of the due and payable amount, provides cause of action on the date when the default occurs and cannot serve as a continuing cause of action. We say so because though an unpaid debt may cause continuous damage, yet it does not cause continuing legal injury. In other words, the legal default itself happens only once even though its consequences may be continuing in nature. Therefore, the respondent’s assertion that the subsistence of contract would provide it with continuing cause of action is incorrect and liable to be rejected.”

J. B. Pardiwala, J.Page 46 of the judgment

“The benefit of extension of limitation by way of acknowledgment in terms of Section 18 of the Limitation Act is available only where, before the expiration of the prescribed period, an acknowledgment of liability has been made in writing by the party against whom the claim stands. In the absence of any such acknowledgment, mere service of a notice of demand would neither revive a time-barred claim nor would give rise to a fresh cause of action.”

J. B. Pardiwala, J.Page 52 of the judgment

“However, the amount claimed under the heads of suspension, idling or demobilization charges would be in the nature of damages as they arise from the alleged breach of the EPC contract by the appellant. It is a settled position of law that damages, whether liquidated or unliquidated, cannot be treated as operational debts unless and until they are assessed and crystallized by way of adjudication by a court of competent jurisdiction.”

J. B. Pardiwala, J.Page 58 of the judgment

“We find it apposite to clarify that silence by itself cannot be considered to be an indicator of whether the dispute existed or not. However, in cases such as the present matter, wherein the silence was consistent and total, over a period of seven years, it can be considered as a strong evidence of the appellant’s intention to not dispute the respondent’s claims.”

J. B. Pardiwala, J.Page 59 of the judgment

Provisions interpreted

Related judgments

Follows Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017)“We also find it apposite to reiterate the observation in Mobilox (supra) that the court’s function is restricted to perceiving the genuineness of the dispute” (page 40)

Case and bench

Parties: Srinivasa Reddy Velagala v. Sravanthi Infratech Pvt. Ltd.
Case: Civil Appeal No. 876 of 2021
Decided: 12 August 2026
Bench: J. B. Pardiwala, Manoj Misra
Opinions: Judgment of the Court by J. B. Pardiwala, J., signed by both Judges. No separate opinion.

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