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Srinivasa Reddy Velagala v. Sravanthi Infratech Pvt. Ltd.

Civil Appeal · 2026 INSC 835Decided 12 Aug 2026
Civil Appeal No. 876 of 2021
Justice J.B. Pardiwala · Justice Manoj Misra · Justice K. Vinod Chandran

Background

The appellant (a power company) had awarded an EPC contract worth around Rs. 827 crore to the respondent for building a gas-based power station, but payments fell into dispute and the respondent (the contractor/operational creditor) filed an application under Section 9 of the IBC seeking to initiate insolvency proceedings against the appellant for non-payment of dues. The National Company Law Tribunal admitted the application and the National Company Law Appellate Tribunal affirmed it. The appellant challenged this before the Supreme Court, arguing among other things that the claim was time-barred, that the amounts claimed were not genuine "operational debt," that a pre-existing dispute existed, and that the EPC contract itself had been frustrated by the passage of time.

Decision Breakdown

The Supreme Court held that the EPC contract had not been frustrated merely by suspension of work, since neither party had actually terminated it and the delay was self-induced by the parties' own conduct rather than any unforeseen impossibility. It found that payments due under the EPC contract's payment schedule qualified as "operational debt," but amounts claimed for suspension, idling, or demobilisation charges were merely unassessed damages and did not qualify. The Court also held there was no genuine pre-existing dispute, since the appellant had stayed silent for years in response to the respondent's legal notices. Crucially, however, the Court found the claim was time-barred: the debt crystallized in early 2012 when liability was acknowledged, the respondent took no action within three years, and its later legal notices (sent after four years, with no reply from the appellant) could not revive the limitation period under Section 18 of the Limitation Act. The Court therefore allowed the appeal, set aside the insolvency admission, but gave the respondent liberty to pursue its claims through arbitration as provided in the EPC contract.

Lesson Learnt

Insolvency proceedings under the IBC are not a substitute for pursuing a time-barred civil or arbitral claim: a creditor must act within the limitation period from when a debt crystallizes, and sending legal notices years later (met only with silence) does not reset the clock or revive a stale claim.

Official source (sci.gov.in)View Judgment (PDF)

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