Telecom Spectrum Is a “Material Resource of the Community”; Supreme Court Holds IBC Cannot Restructure Its Ownership or Control
Evan V
The Supreme Court of India on Thursday held that telecom spectrum—being a public resource and a “material resource of the community” in the constitutional sense—cannot have its ownership or control determined through the insolvency framework under the Insolvency and Bankruptcy Code, 2016.
A Division Bench of Justice P S Narasimha and Justice Atul Chandurkar held that spectrum, though reflected as an “asset” in the books of telecom service providers, does not become property of the corporate debtor capable of being dealt with under the IBC in the manner contended.
During the pronouncement, Justice Narasimha observed: "IBC cannot be the guiding principle for restructuring the ownership and control of spectrum,"
The principal question was whether telecom service providers, upon being called upon to pay licence dues by the Department of Telecommunications, could rely on a moratorium by initiating a voluntary corporate insolvency resolution process under the IBC.
The Court accepted the broad thrust of the Union’s position and proceeded to delineate the legal character of spectrum and the “true legal province” governing its administration.
In a detailed statement of principle, the Court held:"We must understand the spectrum as a material resource of the community precisely as what our Constitution refers to 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 serve 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 the treatment of assets under IBC and, in this context, its application to telecommunications laws governing spectrum ownership.
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 Bench 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 appeals arose from a decision of the National Company Law Appellate Tribunal, which had recognised that while spectrum vests in the Union as a public resource, the licence-holder’s right to use spectrum constitutes an intangible asset of the corporate debtor and could form part of the insolvency estate—subject to clearance of Government dues before any transfer/assignment.
The Union questioned the premise that the “right to use” could be treated as an insolvency asset in a manner that, in substance, alters the statutory controls applicable to spectrum.
The controversy stemmed from insolvency proceedings involving Aircel and Reliance Communications, and focused on whether spectrum usage rights fall within the insolvency estate under the IBC and how spectrum-related dues are to be treated in the resolution framework.
On behalf of the Union, R Venkataramani argued that spectrum is a natural/public resource vested in the Union under Section 4 of the Indian Telegraph Act, 1885 and Article 297 of the Constitution, and that the IBC—being a procedural code—cannot, through its overriding clause, displace sector-specific statutory controls over such resources. It was further urged that third-party property is excluded from the insolvency estate and that, ownership-wise, spectrum never vests in the corporate debtor.
On the other hand, the Committee of Creditors and resolution professionals contended that, while the Government retains ownership, the licence creates a transferable right to use spectrum (subject to regulatory approvals), which is treated as an intangible asset for accounting purposes and serves as the commercial basis for extending credit. They also relied on the moratorium protections to argue that disabling or terminating the licence during CIRP would undermine the going concern objective.
Interpreting Section 4 of the Telegraph Act, the Court reiterated that the Central Government holds exclusive privilege over telegraphs and may license use on conditions it deems fit. The Court clarified that a telecom licence—though contractual in form—arises from sovereign statutory power and remains subject to public-interest limitations.
It emphasised that the licence does not transfer ownership of spectrum; it grants only a limited, conditional and revocable permission to use spectrum for a defined purpose and term. On the relationship between insolvency law and the telecom regime, the Court held: "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"
Addressing the balance-sheet argument, the Court held that accounting classification does not determine legal title, noting:"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 further held that the resolution professional cannot assume custody/control of spectrum under the IBC since it is neither owned by the corporate debtor nor freely transferable as property. It also rejected the contention that spectrum usage rights could be treated as a security interest in favour of lenders merely on the basis of arrangements enabling a conditional assignment, emphasising the continuing need for licensor approval and regulatory control.
Case Title: State Bank of India v. Union of India & Ors. with connected cases
Neutral Citation : 2026 INC 153
Case No: Civil Appeal No. 1810/2021 with connected cases
Bench: Justice P S Narasimha and Justice Atul Chandurkar
