Supreme Court Holds Operational Debt Claim Time-Barred in EPC Contract Dispute, Clarifies Limitation Rules

Case Snapshot

Case Name: Srinivasa Reddy Velagala v. Sravanthi Infratech Pvt. Ltd.

Citation: 2026 INSC 835

Bench: Justice J.B. Pardiwala and Justice Manoj Misra

Date of Judgment: August 11, 2026

Area of Law: Insolvency and Bankruptcy Code, Limitation Law, Contract Law

The Judgment in One Line

Insolvency application dismissed as time-barred where operational debt crystallized in 2012 but application filed in 2018; subsistence of contract does not create continuing cause of action.

Why This Judgment Matters

This landmark judgment clarifies critical aspects of limitation under the IBC. The Supreme Court held that the subsistence of a contract does not create a continuing cause of action for an operational debt; the "default" occurs at a singular point in time when payment becomes due. The Court also clarified that suspension of works under a contract does not constitute frustration, and damages (suspension/demobilization charges) cannot be treated as operational debt unless crystallized by adjudication. The judgment reinforces that the IBC is not a tool for recovery of time-barred debts and that limitation under Article 137 applies strictly.

Background

The appellant invited bids for setting up a 225 MW power station. The respondent was awarded the EPC contract for ₹827 crore on February 9, 2011, with a 14-month completion period. The payment schedule included milestones: 10% advance, 5% against ordering major equipment, 5% against release of advances, 70% against Billing Break-up (BBU), and 5% each on commissioning. T

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