Srinivasa Reddy Velagala Vs Srinivasa Reddy Velagala (Supreme Court of India)
The Supreme Court allowed the appeal against the judgment of the National Company Law Appellate Tribunal (NCLAT), which had affirmed the order of the National Company Law Tribunal (NCLT) admitting the respondent’s application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Supreme Court held that although the EPC contract between the parties continued to subsist, the operational debt claimed by the respondent was time-barred. The continued subsistence of the contract could not result in a continuing cause of action for the purpose of limitation under the IBC.
The dispute arose from an EPC contract for setting up a 225 MW gas-based combined cycle power station at Bikkavolu, East Godavari District, Andhra Pradesh. The appellant issued a Letter of Award dated 24 December 2010 for ₹827 crore to the respondent, and the parties subsequently entered into an EPC agreement dated 9 February 2011. The contract contemplated completion of the project within 14 months and provided for arbitration of disputes.
The EPC agreement contained milestone-based payment obligations. After completing the relevant milestones, the respondent submitted its Billing Break-up (BBU). The appellant acknowledged the amounts payable, but payments were not made. Consequently, the respondent issued a notice dated 30 July 2011 suspending the works. Despite suspension of the EPC contract, neither party exercised the contractual right to terminate the agreement.
