Telecom Spectrum Community Resource, IBC Can't Determine Its Ownership & Control : Supreme Court
The Supreme Court today held that the ownership and control of telecom spectrum cannot be determined by the Insolvency and Bankruptcy Code (IBC), since it is a common good. A bench of Justice PS Narasimha and Justice Atul Chandurkar held that the spectrum is a material resource of the community in the Constitutional sense. Hence, the spectrum must benefit the common good, so its control...
The Supreme Court today held that the ownership and control of telecom spectrum cannot be determined by the Insolvency and Bankruptcy Code (IBC), since it is a common good.
A bench of Justice PS Narasimha and Justice Atul Chandurkar held that the spectrum is a material resource of the community in the Constitutional sense. Hence, the spectrum must benefit the common good, so its control has to be secured for the citizens.
"IBC cannot be the guiding principle for restructuring the ownership and control of spectrum," Justice Narasimha observed during the pronouncement.
The issue before the Court was whether telecom service providers, called upon to pay license dues by the Department of Telecommunications, can invoke a moratorium on the basis of a voluntary corporate insolvency resolution process under the IBC.
The Court favoured the stand of the Union Government. Pronouncing the judgment, Justice Narasimha said :
"We must understand the spectrum as a material resource of the community precisely as what our Constitution refers as the material resource of the community. If that be so, it is easy to find the path by simply following the State policy to ensure that spectrum and its benefits subserves the common good and not the uncommon good. But for this purpose, its ownership and more importantly its control, with all its attributes, including benefits have to be secured for the citizens. Our judgment, therefore, is in three parts. In the first part we define the legal implications of spectrum. In the second part, we identify the true legal province. In the third part, we examine treatment of asset under IBC, and in this context, its application to telecommunication laws that govern ownership of spectrum.
Finally, we could reach our conclusion as naturally as water knows the slope. IBC cannot be the guiding principle for restructuring the ownership and control of spectrum."
The Court concluded, "We hold that Spectrum allocated to TSPs and shown in their books of account as an “asset” cannot be subjected to proceedings under Insolvency and Bankruptcy Code, 2016."
The Court was dealing with appeals against a ruling of the National Company Law Appellate Tribunal that held that while spectrum belongs to the Union and is held as a public resource, the right to use spectrum granted to a telecom licensee constitutes an intangible asset of the corporate debtor.
Factual Background
The dispute before the Supreme Court arose from insolvency proceedings of Aircel and Reliance Communications and centres on the legal status of telecom spectrum under the Insolvency and Bankruptcy Code, 2016.
NCLAT had held that such right can form part of the insolvency estate and be dealt with during the corporate insolvency resolution process. However, the Tribunal held that the right to use spectrum cannot be transferred during CIRP unless all past dues owed to the Government under the licence are cleared in full. The NCLAT reasoned that spectrum cannot be used without clearing such dues and that insolvency proceedings cannot be used to reduce the Government's recovery under the waterfall mechanism in Section 53 of the IBC.
The Union of India challenged this finding. Attorney General R Venkataramani argued that spectrum is a natural resource vested in the Union under Section 4 of the Telegraph Act and Article 297 of the Constitution. He contended that the IBC is a procedural statute and its overriding clause under Section 238 cannot be read to displace statutory controls over natural resources. Relying on Sections 18 and 36 of the IBC, he argued that third-party property is excluded from the insolvency estate and that since ownership of spectrum remains with the Union, it cannot be treated as an asset of the corporate debtor. He also questioned the classification of spectrum dues as operational debt.
On the other side, the Committee of Creditors and the resolution professionals argued that while ownership of spectrum remains with the Government, the licence grants a transferable right to use it, subject to regulatory approval. They contended that this right is recognised as an intangible asset in accounting standards and forms the basis on which lenders extend credit. They relied on Section 5(21) of the IBC and pointed out that the Department of Telecommunications had itself submitted claims as an operational creditor. They also invoked Section 14 of the IBC to argue that termination or disabling of the licence during CIRP would defeat the objective of preserving the corporate debtor as a going concern.
The issue to be decided in the appeals was whether the right to use spectrum forms part of the insolvency estate under the IBC and whether spectrum dues can be treated as operational debt.
Supreme Court Verdict
Interpreting Section 4 of the Indian Telegraph Act, 1885, the Court held that the Central Government has exclusive privilege to establish, maintain and work telegraphs and may grant licences on such terms and consideration as it thinks fit. It observed that a licence granted under Section 4 is contractual in form but emanates from sovereign statutory power and remains subject to constitutional limitations.
The Court noted that the grant of a telecom licence does not transfer ownership of spectrum. It confers only a limited, conditional and revocable right to use spectrum for a defined purpose and duration. The licence remains subject to strict compliance with statutory requirements, licence conditions and public interest considerations. The Court held that the insolvency framework cannot be used to rewrite the statutory regime governing natural resources.
"The statutory regime under IBC cannot be permitted to make inroads into telecom sector and re-write and restructure the rights and liabilities arising out of administration, usage, and transfers of spectrum which operate under exclusive legal regime concerning telecommunications. The disharmony caused by applying IBC to the telecom sector which operates under a different legal regime was never intended by the Parliament", the Court held.
On the argument that spectrum is treated as an intangible asset in company balance sheets, the Court noted that accounting recognition under Indian Accounting Standards is based on control over economic benefits and reliable measurement of cost. This recognition, the Court held, does not determine legal ownership of Spectrum. "recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition/transfer of ownership of the spectrum to TSPs. It only indicates control over the future economic benefits flowing from the grant of the right to use the spectrum", the Court observed.
The Court further held that the resolution professional cannot assume control or custody over spectrum under Section 18 of the IBC, as spectrum is neither owned by the corporate debtor nor transferable as property.
It rejected the contention that spectrum usage rights can be treated as a security interest in favour of lenders in view of the Tripartite Agreement and the statutory framework. The Court noted that while the agreement facilitates conditional transfer or assignment in the event of default, such transfer remains subject to the licensor's approval and regulatory control. It emphasised that the licence remains a regulated privilege rather than freely alienable asset.
Case no. – Civil Appeal No. 1810/2021 with connected cases
Case Title – State Bank of India v. Union of India & Ors. with connected cases
Citation : 2026 LiveLaw (SC) 152