Communication Committee Member by Dr. Ankeeta Gupta August, 2026
By Communication Committee Member by Dr. Ankeeta Gupta August, 2026 Posted On : October 08, 2026
The period of limitation does not run ad-infinitum under the Insolvency and Bankruptcy Code, 2016. Even though the debt may cause an injury, it stops becoming a legal damage once the period of limitation has run out.
Srinivasa Reddy Velagala Vs. Sravanthi Infratech Private Limited [Civil Appeal No. 876 of 2021; 2026 INSC 835] (12.08.2026)
In the facts of the case NCLAT had affirmed the admission of the corporate debtor holding that since neither party had terminated the EPC contract it continued to subsist, hence continuing the cause of action and defeating the plea of limitation. The Supreme Court held that the right to sue accrues on the date default occurs under section 3(12) of the Code, and that default is grounded at a singular point in time, and that although an unpaid debt may cause continuous damage it does not cause continuing legal injury. Therefore, the mere subsistence of the EPC contract furnishes no continuing cause of action. The Supreme Court further held that the claims having been acknowledged on 05.01.2012 and 03.02.2012, limitation ran afresh from those dates, and the subsequent legal notices could not reset the clock in the absence of an acknowledgment of liability under section 18 of the Limitation Act, 1963. The Supreme Court thus held that effluxion of time and frustration are conceptually distinct, from frustration under section 56 of the Indian Contract Act, 1872 which requires a supervening impossibility, and that suspension arising from a party's own election amounts to self-induced frustration, the contract therefore continued to subsist. On the character of the claim, the Supreme Court held that milestone payments under the payment schedule qualify as operational debt under section 5(21) of the Code, but that suspension, idling and demobilisation charges are in the nature of damages and cannot be treated as operational debt unless assessed and crystallised by adjudication before a court of competent jurisdiction. The Supreme Court held the National Company Law Tribunal and National Company Law Appellate Tribunal were not the fora for determination of such disputes.
Srinivasa Reddy Velagala Vs. Sravanthi Infratech Private Limited [Civil Appeal No. 876 of 2021; 2026 INSC 835] (12.08.2026)
In the facts of the case NCLAT had affirmed the admission of the corporate debtor holding that since neither party had terminated the EPC contract it continued to subsist, hence continuing the cause of action and defeating the plea of limitation. The Supreme Court held that the right to sue accrues on the date default occurs under section 3(12) of the Code, and that default is grounded at a singular point in time, and that although an unpaid debt may cause continuous damage it does not cause continuing legal injury. Therefore, the mere subsistence of the EPC contract furnishes no continuing cause of action. The Supreme Court further held that the claims having been acknowledged on 05.01.2012 and 03.02.2012, limitation ran afresh from those dates, and the subsequent legal notices could not reset the clock in the absence of an acknowledgment of liability under section 18 of the Limitation Act, 1963. The Supreme Court thus held that effluxion of time and frustration are conceptually distinct, from frustration under section 56 of the Indian Contract Act, 1872 which requires a supervening impossibility, and that suspension arising from a party's own election amounts to self-induced frustration, the contract therefore continued to subsist. On the character of the claim, the Supreme Court held that milestone payments under the payment schedule qualify as operational debt under section 5(21) of the Code, but that suspension, idling and demobilisation charges are in the nature of damages and cannot be treated as operational debt unless assessed and crystallised by adjudication before a court of competent jurisdiction. The Supreme Court held the National Company Law Tribunal and National Company Law Appellate Tribunal were not the fora for determination of such disputes.