List of Current Affairs

Source: Supreme Court  

Why in News? 

A Bench of Justice JB Pardiwala and Justice K. Vinod Chandran, in Mageba Bridge Products Private Limited v. M/s. Trade Centre (2026), held that time spent in pursuing winding up proceedings cannot be excluded under Section 14 of the Limitation Act, 1963 for the purpose of filing a suit for recovery of money, as winding up and recovery are proceedings seeking distinct reliefs. 

What was the Background of Mageba Bridge Products Private Limited v. M/s. Trade Centre (2026) Case? 

• The respondent filed a suit for recovery of ₹24,36,105 in June 2010, based on unpaid invoices dating back to January 2006 and March 2007, i.e., beyond the three-year limitation period prescribed for such suits. 
• Prior to filing the suit, the respondent had approached the Company Court in February 2009 seeking winding up of the appellant company over the same unpaid dues. 
• The Company Court found that the appellant had raised a bona fide dispute regarding the debt and relegated the respondent to the civil remedy of a suit. 
• While the appellant admitted three invoices, which stood paid, and agreed to furnish security for two invoices dated January 2006, the respondent pressed for recovery under all the invoices. 
• The respondent contended that the time spent pursuing the winding up proceeding ought to be excluded under Section 14 of the Limitation Act while computing limitation for the recovery suit. 
• The Calcutta High Court allowed the recovery suit, prompting the appellant to approach the Supreme Court. 

What were the Court's Observations? 

• On the distinction in relief sought: The Court held that a winding up proceeding, which may or may not enable recovery of the debt, stands on a different footing from a suit for recovery of money, and the pendency of one does not affect the limitation applicable to the other. 
• On applicability of Section 14: The Court held that the respondent's defence under Section 14 of the Limitation Act could not survive, since the time spent in the winding up proceeding could not be treated as relating to the same matter in issue, nor was the same relief claimed in both proceedings. 
• On reliance on precedent: The Court relied on Yeswant Deorao Deshmukh v. Walchand Ramchand Kothari (1950), where exclusion of time spent in insolvency proceedings was similarly denied for the purpose of condoning delay in filing an execution petition, to hold that time spent in winding up proceedings could not be excluded here either. 
• On limitation and final relief: Finding the recovery suit filed beyond the three-year limitation period, the Court set aside the High Court's judgment to the extent it granted the relief of recovery, while affirming that the suit had been properly instituted by a validly registered partnership firm. The appeal was allowed and the recovery suit was dismissed as barred by limitation. 

What is Section 14 of the Limitation Act, 1963? 

Section 14 – Exclusion of Time of Proceeding Bona Fide in Court Without Jurisdiction: 

Sub-section (1) – Exclusion for suits: 

• In computing the period of limitation for any suit, the time during which the plaintiff has been prosecuting with due diligence another civil proceeding shall be excluded. 
• This applies whether the other proceeding was before a court of first instance, appeal, or revision, and whether it was against the defendant. 
• Exclusion applies only where the proceeding relates to the same matter in issue. 
• The proceeding must have been prosecuted in good faith. 
• The court in which it was prosecuted must have been unable to entertain it due to defect of jurisdiction or other cause of a like nature. 

Sub-section (2) – Exclusion for applications: 

• In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding shall be excluded. 
• This applies whether the other proceeding was before a court of first instance, appeal, or revision. 
• The other proceeding must have been against the same party and for the same relief. 
• The proceeding must have been prosecuted in good faith. 
• The court in which it was prosecuted must have been unable to entertain it due to defect of jurisdiction or other cause of a like nature. 

Sub-section (3) – Exclusion for fresh suits under Order XXIII Rule 1 CPC: 

• Notwithstanding Order XXIII, Rule 2 of the Code of Civil Procedure, 1908, sub-section (1) applies to a fresh suit instituted with the court's permission under Order XXIII, Rule 1. 
• This applies where such permission was granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court or other cause of a like nature. 

Explanation – For the purposes of this section: 

• (a) In excluding the time during which a former civil proceeding was pending, both the day of institution and the day it ended shall be counted. 
• (b) A plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding. 
• (c) Misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction. 

Source: Supreme Court  

Why in News? 

A Bench of Justice JB Pardiwala and Justice Manoj Misra, in Srinivasa Reddy Velagala v. Sravanthi Infratech Pvt. Ltd. (2026), held that uncrystallized claims for damages arising from breach of contract cannot form the basis of an "operational debt" under the Insolvency and Bankruptcy Code, 2016, and set aside the concurrent orders of the NCLT and NCLAT admitting a Section 9 application on this ground. 

What was the Background of Srinivasa Reddy Velagala v. Sravanthi Infratech Pvt. Ltd. (2026) Case? 

• The dispute arose out of an Engineering, Procurement and Construction (EPC) contract for setting up a 225 MW gas-based power station in Andhra Pradesh, awarded to the respondent for Rs. 827 crore. 
• The respondent claimed that despite achieving contractual milestones, the appellant paid only Rs. 50.15 crore against a cumulative Rs. 165.4 crore due, following which the respondent suspended work and claimed damages for the appellant's alleged breach. 
• The payments in question fell due between 2011 and 2012, but the respondent filed an application under Section 9 of the IBC only in 2018. 
• The NCLT admitted the Section 9 application, and the NCLAT upheld the admission, prompting the appellant to approach the Supreme Court in appeal. 

What were the Court's Observations? 

• On crystallization of debt: The Court held that damages arising from breach of contract, whether liquidated or unliquidated, cannot be treated as operational debt unless they have been assessed and crystallized through adjudication before a competent court, since the NCLT and NCLAT are not the appropriate fora for adjudicating such disputes and are instead concerned with the survival of the corporate debtor and maximization of recovery in liquidation. 
• On the suspension and idling charges claimed: The Court found that since there was no suit or arbitral proceeding that had assessed or crystallized the suspension, idling, and demobilization charges claimed by the respondent, these amounts could not be treated as operational debt for the purpose of a Section 9 application. 
• On limitation: The Court held that the respondent's claim was barred by limitation, as the debt arose in 2011–2012 but the insolvency application was filed only in 2018, well beyond the three-year limitation period. 
• On revival of stale claims through legal notices: The Court rejected the respondent's argument that the contract, being technically un-terminated, kept its claim alive, holding that repeated legal notices do not revive an expired claim unless the debtor acknowledges the debt in writing, and reiterating that the IBC is not intended to give a fresh lease of life to time-barred debts. 
• On the relief granted: The Court allowed the appeal, set aside the admission of the Section 9 application, and granted the respondent liberty to pursue its claims before the appropriate dispute resolution forum contemplated under the EPC agreement. 

What is Operational Debt under the IBC? 

About: 

• Operational debt refers to a claim in respect of the provision of goods or services, including employment, or a debt in respect of dues payable under any law for the time being in force to the Central or State Government. 
• It is distinguished from "financial debt," which arises from a disbursal against consideration for the time value of money. 
• A claim becomes an enforceable "debt" only when it is due and payable in law; a mere disputed or unadjudicated claim for damages does not automatically qualify. 

Key Requirements for a Section 9 Application: 

• There must be a debt, its default, and the amount must exceed the threshold prescribed under the Code. 
• The debt must not be disputed, or any dispute raised must not be a genuine, pre-existing dispute known before the demand notice. 
• Unliquidated damages, until crystallized by a competent adjudicatory forum, cannot be computed with certainty and therefore cannot support a Section 9 application. 

Significance of Crystallization: 

• Crystallization ensures that only ascertained, legally enforceable amounts are brought within the summary and time-bound insolvency process. 
• It prevents the IBC from being converted into a forum for recovery of disputed or speculative claims, preserving its objective of resolution rather than adjudication of underlying contractual disputes.