The Hon’ble Supreme Court Holds: Telecom Spectrum Beyond The Reach Of The IBC.

1.1 The intersection of insolvency law and sector-specific regulatory frameworks has emerged as one of the most contested areas of jurisprudence in India. Particularly in the telecommunications sector, the interplay between the Insolvency and Bankruptcy Code, 2016 (“IBC”) and the regulatory regime governing the right to use spectrum, allocation of such rights, trading and licensing has raised fundamental questions concerning the nature of rights related to the spectrum and its usage, recovery of statutory dues, constitution of asset under the insolvency framework and the extent to which the IBC can override telecommunication laws.

1.2 The telecommunications sector in India operates under a stringent licensing framework administered by the Department of Telecommunications (“DoT”), wherein telecom service providers (“TSPs”) are granted licences and spectrum usage rights subject to payment of licence fees, spectrum usage charges, and other regulatory dues such as Adjusted Gross Revenue (“AGRs”). The spectrum, being a scarce natural resource, is allocated through a competitive auction process and remains under the sovereign control of the Union of India in its capacity as the trustee of the natural resource.

1.3 The recent decision of the Hon'ble Supreme Court (“Hon’ble SC”) in State Bank of India v. Union of India & Ors., 2026 INSC 153, comprehensively addresses this nuanced issue arising at the confluence of insolvency law and telecommunication laws.

1.4 The authors in the present brief seek to discuss the highlights of this decision of the Hon’ble SC and the implications thereof of this landmark development for stakeholders operating in these sectors.

2.1 The present case arises, inter alia, from a lead appeal filed by the State Bank of India (being one of the financial creditors), along with other connected appeals and cross‑appeals, challenging the order dated 13.04.2021 passed by the Hon’ble National Company Law Appellate Tribunal (“NCLAT”) in Union of India v. Vijaykumar V. Iyer, 2021 SCC OnLine NCLAT 355.

2.2 In the said impugned decision, the NCLAT answered the questions of law referred to it by the Hon’ble SC through its order dated 25.09.2020 in Union of India v. Association of Unified Telecom Service Providers of India, (2020) 9 SCC 748. The reference primarily concerned the question whether the spectrum could be subjected to proceedings under the IBC.

2.3 The Hon’ble SC was prompted to examine this issue after a miscellaneous application filed by the Union of India highlighted that several TSPs were undergoing insolvency  proceedings under the IBC – as a result, the DoT was unable to recover unpaid AGR dues arising under the licence agreements executed with these TSPs.

2.4 Pertinently, some of the appeals leading to the present judgment involved a situation where DoT, under licence agreements, had granted telecommunication licences to the TSPs – Aircel Group entities (“Corporate Debtors”). These licences enabled the licensees to provide telecommunication services across multiple service areas in India. However, the Corporate Debtors defaulted in payment of licence fees and spectrum usage charges mandated under the licensing framework. Subsequently, to avoid these payments, the Corporate Debtors filed applications under Section 10 of the IBC seeking initiation of a voluntary Corporate Insolvency Resolution Process (“CIRP”), which got admitted by the adjudicating authority.

2.5 In the impugned judgment, the NCLAT held, inter alia, that spectrum constitutes an intangible asset of the licensee and can, therefore, be subjected to insolvency or liquidation proceedings under the IBC. It further held that dues owed to the Central Government or the DoT fall within the ambit of “operational debt” under the IBC. Moreover, the NCLAT held that the spectrum cannot be utilized without payment of the requisite dues, which cannot be wiped off by triggering CIRP under the IBC.

3.1 The question of law before the Hon’ble SC was whether the TSPs, who had been called upon by the DoT to pay outstanding licence dues, could invoke the moratorium triggered by a voluntary CIRP under the IBC by treating the “spectrum” allocated to them through auction as an “asset” capable of restructuring.

4.1 The Hon'ble SC undertook a comprehensive analysis of the issue at hand addressing the fundamental questions concerning the legal nature of the spectrum, the regulatory framework governing its allocation, and the interplay between insolvency law and telecommunication laws.

A. The spectrum as a finite natural resource and the Union of India as its trustee

4.2 The Hon'ble SC began by elucidating the nature of the spectrum, observing that it may be understood as a finite portion of electromagnetic frequencies enabling wireless services such as phone calls, television signals, Wi-Fi and 5G internet. The Court placed reliance on its earlier judgment in Centre for Public Interest Litigation (CPIL) v. Union of India, (2012) 3 SCC 1, to hold that spectrum has consistently been recognised as a public resource, precious by virtue of being finite and limited in nature.

4.3 By referring to its decisions in CPIL (supra); MC Mehta v. Kamal Nath, (1997) 1 SCC 388; and Natural Resources Allocation, In Re, Special Reference No. 1 of 2012, (2012) 10 SCC 1, and also the constitutional framework under which natural resources are governed, the Hon'ble SC noted that spectrum, being a natural resource of the nation, is administered by the Central Government in its capacity as a trustee on behalf of the people. The Court emphasized that the government may allocate the spectrum through different modalities but cannot part with it in a manner that is not supported by social or welfare purpose consistent with the policy of the State.

B. Legal framework governing spectrum allocation and usage

4.4 The Hon'ble SC examined the statutory framework governing spectrum allocation, with particular reference to Section 4 of the Indian Telegraph Act, 1885 ("Telegraph Act") and its interpretation in Union of India v. Association of Unified Telecom Service Providers of India, (2011) 10 SCC 543, as also Section 9-D of the Telegraph Act. The Court highlighted that the spectrum is vested and secured in the custody of the Central Government not as a property right, but as the exclusive privilege of establishing, maintaining and operating telecommunication systems and granting licences therefor. The Court further observed that the monies received towards parting with the privilege of exploiting spectrum are intended to be ploughed back for subserving the common good.

4.5 The Hon'ble SC also examined successive telecom policies, including the New Telecom Policy, 1994; the New Telecom Policy, 1999; the Telecom Regulatory Authority of India Act, 1997; the Unified Access Services Licensing regime, 2003; and the National Telecom Policy, 2012, for the purpose of tracing the continuing fundamental principle that the Central Government remains the licensor with sovereign control over spectrum allocation and utilization.

4.6 The Hon'ble SC further examined the Guidelines for Trading of Access Spectrum, 2015 ("Guidelines"), which enable the transfer of the ‘right to use’ the spectrum between a seller and a buyer, subject to meeting certain pre-requisites stipulated therein. Drawing references to Guideline Nos. 10, 11 and 12 of the Guidelines, the Hon'ble SC emphasized, inter alia, the following principles:

• Spectrum trading is not a private commercial arrangement, but forms part of the privilege vested in the Central Government under Section 4 of the Telegraph Act;
• Absolute control over the licence and the spectrum vests with the licensor, namely the DoT;
• The licensee has no independent right to assign or transfer the licence or create third-party interests therein without prior written consent from the licensor.

4.7 The Hon'ble SC categorically held that the Guidelines cannot be overridden or substituted by the insolvency resolution framework and that the dues payable to the licensor cannot be relegated to treatment under a resolution plan. The Court further observed that while a licence and allocation of the spectrum may, in abstract terms, constitute an intangible asset, such characterization remains subject to the telecommunication laws along with the rules, regulations, guidelines, and contractual obligations arising thereunder. These statutory and regulatory obligations cannot be 1.1      bypassed merely on the basis of an interpretation adopted of the expression “asset” under the IBC or by recourse to Section 238 thereof.

C. Contractual implications and the nature of rights conferred by spectrum licences

4.8 The Hon'ble SC placed reliance on its judgment in Bharti Airtel Ltd. v. Union of India, (2015) 12 SCC 1, to observe that while the licence granted to the TSPs possesses contractual attributes, the licensor's powers and obligations do not arise solely from contract. These powers and obligations flow concurrently from the Constitution and the applicable statutes, which necessarily prevail over contractual stipulations.

4.9 The Court held that the allocation of spectrum access through a licence confers a limited, conditional and revocable privilege to use spectrum for specified purposes and for a defined duration. Such allocation does not translate into a transfer of ownership or creation of proprietary rights in favour of the licensee. Consequently, where the licensee has defaulted in payment of licence fees or failed to perform its obligations under the licence agreement, the very substratum of its right to use spectrum stands impaired.

4.10 The Hon'ble SC also examined the tripartite agreements entered into between the TSPs, the DoT, and financial institutions or lenders. The Court noted that such agreements provide a mechanism to enable the TSPs to secure financial assistance while simultaneously protecting the interests of the lenders. However, even under such arrangements, while the licence may be conditionally transferable to safeguard lender interests, such transfer remains subject to the licensor's paramount authority and regulatory control.

D. Whether the spectrum constitutes an "asset" for the purposes of the IBC

4.11 The Hon'ble SC examined the contention that spectrum licensing rights constitute an “asset” of the TSPs by virtue of their recognition as intangible assets in the balance sheets of TSPs in accordance with Accounting Standard (AS) 26 and Indian Accounting Standard (Ind AS) 38. The Court held that the recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of the recognition or transfer of ownership of the spectrum to the TSPs.

4.12 The Court observed that for the purposes of AS 26 and Ind AS 38, ownership is not an essential criterion for recognizing an object as an asset in a balance sheet. The accounting treatment of an item as an asset differs fundamentally from the legal understanding of property under the Transfer of Property Act, 1882 and the Sale of Goods Act, 1930. The traditional understanding of asset indicates title or ownership in the property or goods. The recognition of spectrum licensing rights in the balance sheet merely represents different sticks in the bundle of rights and falls short of conferring complete ownership of the spectrum upon the TSPs.

4.13 The Hon'ble SC further examined the provisions and scheme of the IBC, particularly Section 18(f) and the Explanation thereunder, and also Sections 36(3) and 36(4) read with the Bankruptcy Legislative Reforms Committee Report, 2015 (para 5.5.5), to hold that the IBC explicitly excludes those assets from the scope of the insolvency and liquidation framework over which a corporate debtor does not have ownership rights, or are assets owned by a third party that are merely in the possession of a corporate debtor. Therefore, under the IBC framework, spectrum licensing rights do not form part of the pool of assets available for insolvency or liquidation proceedings.

E. The interplay between the IBC and telecommunication sector laws

4.14 The Hon'ble SC observed that the IBC and the telecommunication laws constitute two distinct legal regimes with different subjects, purposes, statutory foundations, rights protected, and liabilities created. The Court emphasized that the jurisdiction of authorities under the IBC must yield when the same is in conflict with public law governing a specific sector.

4.15 The Court held that the jurisdiction of the National Company Law Tribunal(s) and the NCLAT is confined to matters that arise purely within the insolvency framework and does not extend to adjudicating the legality of sovereign actions taken under sector-specific legislation. The statutory regime under the IBC cannot intrude into the exclusive legal regime concerning exercise of sovereign and statutory powers such as in case of telecommunication laws, which is governed by a complete and self-contained code.

5.1 In conclusion, the Hon'ble SC held that the IBC is designed to expedite insolvency resolution and maximize the value of a corporate debtor's assets, with its focus primarily on the efficient resolution of the corporate debtor undergoing CIRP. In contrast, the telecommunication laws, namely the Telegraph Act, the Wireless Telegraphy Act, 1933, and the Telecom Regulatory Authority of India Act, 1997, together constitute a complete and self-contained code governing the telecommunications sector.

5.2 The Court observed that the Union of India, as owner and trustee of the spectrum, along with the Telecom Regulatory Authority of India as the sectoral regulator, occupies the entire field of telecommunications regulation. The IBC cannot be employed to intrude into or restructure telecom-specific rights and liabilities that are governed by a comprehensive sectoral framework.

5.3  The Hon'ble SC categorically ruled that merely because spectrum licensing rights can be treated as an “asset” on the basis of certain accounting attributes, does not bring the telecommunication laws within the sweep of the IBC. Each statute operates within its own domain, and constitutional courts must ensure that they function harmoniously without encroaching upon each other's legislative field.

5.4 Therefore, the Hon'ble SC held that the spectrum allocated to the TSPs and shown in their books of account as an “asset” cannot be subjected to proceedings under the IBC. The spectrum remains under the sovereign control of the Union of India as a trustee, and any transfer, assignment, or restructuring of spectrum rights must conform to the telecommunication laws and cannot be affected through CIRP or liquidation.

6.1 The decision marks an important doctrinal clarification on the limits of the IBC. While the IBC has repeatedly been interpreted as a comprehensive and overriding framework for corporate insolvency resolution, the Hon’ble SC emphasises that its sweep is not absolute. Insolvency resolution cannot be deployed to re-engineer rights and obligations arising from a complete sector-specific public law framework, particularly where sovereign control and regulatory objectives are implicated. The said judgment, therefore, delineates a boundary: the IBC resolves financial distress of corporate debtor(s), but it does not extinguish or restructure statutory entitlements embedded in larger sovereign and public interest considerations.

6.2 Significantly, the ruling also places a substantive qualification on the “commercial wisdom” of the Committee of Creditors (“CoC”). Although the approval of a resolution plan ordinarily lies within the exclusive domain of the CoC, such commercial decision-making cannot operate in disregard of overriding legal considerations. Where the subject matter of the resolution involves a scarce natural resource held by the State in public trust, creditor consensus cannot override statutory and constitutional obligations governing its use. The decision thus, underscores that value maximisation under the IBC remains subordinate to preservation of sovereign control over public resources.

6.3 In context of the telecom sector, the judgment is likely to materially affect the insolvency resolution landscape of the TSPs. By holding that spectrum usage rights cannot be treated as insolvency assets capable of restructuring, the Hon’ble SC has clarified that resolution plans in the telecom sector cannot be framed on the assumption that regulatory liabilities or conditions attached to the spectrum can be compromised through CIRP mechanism. Consequently, the feasibility and viability of resolution plans for telecom entities will now have to be evaluated against the continuing enforceability of licence conditions and statutory dues under the telecommunication regime.

6.4 The judgment signals that insolvency law must operate harmoniously with sectoral regulation: resolution mechanisms may reorganise the corporate debtor, but they cannot dilute the regulatory architecture governing access to national resources. It will be interesting to see as to how the principle laid in this case is applied (or evolves!) in context of insolvency resolution of other natural or public resources.