The Supreme Court has held that telecom spectrum is a natural resource held by the Union of India in public trust and cannot be treated as an asset of a corporate debtor under the Insolvency and Bankruptcy Code, 2016 (IBC).
The case arose from insolvency proceedings initiated by Aircel group entities, which had defaulted on substantial licence fees and spectrum usage charges payable to the Department of Telecommunications (DoT). Financial creditors led by the State Bank of India (SBI) argued that spectrum usage rights constituted valuable intangible assets forming part of the corporate debtor’s estate and therefore capable of being dealt with under the IBC. The Union of India, on the other hand, contended that spectrum is a sovereign resource held in public trust and cannot be subjected to insolvency restructuring in a manner that compromises statutory dues.
Spectrum is a Natural Resource Held by the Union of India in Public Trust
Accepting this core submission, the Bench comprising Justices P.S. Narasimha and Alok Aradhe observed that telecom spectrum is a “material resource of the community” and is vested in the Union government under the Telegraph Act and Article 297 of the Constitution. The Court held that ownership, control and economic benefits arising from spectrum are matters of public trust and cannot be governed solely by corporate insolvency principles.
The Court emphasised that distribution of such material resources must subserve the common good and cannot be reduced to purely commercial treatment.
No Ownership in Spectrum
The Court then examined whether the grant of a licence under Section 4 of the Indian Telegraph Act, 1885, confers any ownership or proprietary interest on telecom service providers (TSPs). It held that a licence is contractual in form but rooted in sovereign statutory privilege. What is granted is a limited, conditional and revocable right to use spectrum for a specified period. The Court drew a careful distinction between ownership, possession and occupation, observing that TSPs cannot be said to possess spectrum in the proprietary sense but only occupy a right to use it. Ownership remains with the nation, and control remains with the Government as licensor.
Spectrum Not an ‘Asset’ Under Section 18 of IBC
Another issue before the Court was whether spectrum usage rights fall within the scope of “assets” under Section 18 of the IBC, enabling the resolution professional to take control and custody during the Corporate Insolvency Resolution Process (CIRP).
The Court analysed the scheme of the IBC alongside the telecommunication regulatory framework and concluded that spectrum, being neither owned nor transferable as property by the licensee except in accordance with strict statutory guidelines, cannot be equated with a corporate asset freely available for insolvency resolution. While spectrum usage rights may have commercial value, they remain subject to continuing sovereign control and compliance with licence conditions, including payment of dues.
The Court also examined the nature of dues payable to the DoT, including licence fees, spectrum usage charges and deferred instalments of auction payments, and whether such dues qualify as “operational debt” under Section 5(21) of the IBC. In doing so, it considered the revenue-sharing regime under telecom policy and the statutory character of payments arising from the grant of sovereign privilege. The Court emphasised that spectrum cannot be used without payment of the requisite dues and that insolvency proceedings cannot be invoked as a device to extinguish or dilute public revenue claims tied to a natural resource.
Another significant issue concerned the interplay between insolvency proceedings and the Spectrum Trading Guidelines, 2015. The Court examined whether spectrum licences or usage rights could be transferred under an approved resolution plan without clearing past dues, particularly when the guidelines expressly mandate prior clearance of government dues as a precondition for transfer. It held that the statutory and regulatory framework governing telecom cannot be overridden or bypassed by insolvency proceedings. An approved resolution plan cannot substitute for compliance with mandatory regulatory requirements, including prior governmental consent and clearance of liability.
The Court further considered whether spectrum could be treated as a security interest in favour of lenders under tripartite agreements between the DoT, telecom companies and financial institutions. In this context, the Court underscored that any contractual arrangement with lenders remains subordinate to the sovereign control of the State over spectrum and cannot create proprietary rights inconsistent with statutory provisions.
On the question of bona fides in initiating CIRP, the court cautioned that the IBC is designed for revival and value maximisation, not as a strategic shield against regulatory enforcement in respect of natural resources.
Addressing the overriding clause under Section 238 of the IBC, the Court clarified that while the Code prevails over inconsistent laws in appropriate circumstances, it cannot be interpreted in a manner that restructures sovereign ownership or undermines constitutional obligations relating to natural resources. The insolvency framework and telecom regulatory regime must be harmonised, and the IBC cannot be used to rewrite the essential character of spectrum as a public trust resource.
“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.”
Appearances
Appellant- Mr. Gurmeet Singh Makker, AOR Mr. S. S. Shroff, AOR Mr. Anoop Rawat, Adv. Ms. Misha, Adv. Mr. Vaijayant Paliwal, Adv. Mr. Saurav Panda, Adv. Ms. Charu Bansal, Adv. Ms. Mohna Nijhwan, Adv. Mr. Shreyas Gupta, Adv. Ms. Mohana Nijhawan, Adv. Ms. Rashi Sharma, Adv. Ms. Kirti Gupta, Adv. Mr. Ahkam Khan, Adv. Mr. Dhruv Dewan, Adv. Mr. Rohan Batra, AOR Mr. Rishabh Bhargava, Adv. Mr. Dhruv Sethi, Adv. Mr. Harsh Vardhan Arora, Adv. Ms. Sanjukta Roy, Adv. M/S. Cyril Amarchand Mangaldas Aor, AOR Mr. Rakesh Dwivedi, Sr. Adv. Mr. Raunak Dhillon, Adv. Ms. Aishwarya Gupta, Adv. Ms. Niharika Shukla, Adv. Mr. Anchit Jasuja, Adv.
Respondents- Mr. Amrish Kumar, AOR Mr. Dhruv Dewan, Adv. Mr. Rohan Batra, AOR Mr. Rishabh Bhargava, Adv. Mr. Dhruv Sethi, Adv. Mr. Harsh Vardhan Arora, Adv. Ms. Sanjukta Roy, Adv. Mr. S. S. Shroff, AOR Mr. Rakesh Dwivedi, Sr. Adv. Mr. Raunak Dhillon, Adv. Ms. Aishwarya Gupta, Adv. Ms. Niharika Shukla, Adv. Mr. Anchit Jasuja, Adv. M/S. Cyril Amarchand Mangaldas, AOR
Mr. Vikash Chandra Shukla, Amicus Curiae Mr. Lakshya S. Pandey, Adv. Ms. Isha Barshiliya, Adv.
