The intersection between public resource governance and corporate insolvency law came under authoritative judicial scrutiny in State Bank of India v. Union of India & Ors. (2026). The central issue before the Supreme Court was whether spectrum usage rights, acquired by telecom service providers through auction and licence, could be treated as an “asset” of the corporate debtor capable of being dealt with under the Insolvency and Bankruptcy Code, 2016.
The Court categorically rejected this proposition, holding that spectrum allocation lies outside the ambit of commercial insolvency resolution. It reasoned that spectrum is a finite natural resource held by the Union of India in public trust, and that the licence granted to telecom operators confers only a limited, conditional, and revocable right to use the resource, rather than any proprietary or transferable interest.
As a result, insolvency proceedings cannot be deployed as a mechanism to restructure, transfer, or extinguish statutory and regulatory dues arising from spectrum licences. This interpretation carries significant implications for insolvency jurisprudence, as it reinforces the primacy of sovereign regulatory control over natural resources, delineates clear limits on the reach of the IBC, and reshapes the risk assessment framework for lenders and private participants in regulated infrastructure sectors.
Factual Background and Procedural History
The controversy arose from the insolvency proceedings initiated by Aircel Group entities, which had obtained Unified Access Service Licences (UASL) and spectrum in multiple bands through auctions conducted by the Department of Telecommunications (DoT). These entities defaulted on substantial licence fee and spectrum usage charge liabilities while also owing significant sums to financial creditors led by the State Bank of India.
When DoT sought recovery, the corporate debtors invoked Section 10 of the IBC, triggering a voluntary Corporate Insolvency Resolution Process (CIRP). During CIRP, a resolution plan was approved by the Committee of Creditors and sanctioned by the NCLT, treating DoT as an operational creditor and subjecting its dues to haircut.
DoT challenged this outcome before the NCLAT, which delivered a nuanced ruling recognising spectrum as a natural resource but still treating spectrum usage rights as an intangible asset capable of insolvency treatment. This led to cross-appeals before the Supreme Court by lenders, resolution professionals, and the Union of India.
The Supreme Court framed foundational questions on ownership, possession, transferability, public trust, and the interface between telecom law and insolvency law, ultimately rejecting the asset-based insolvency treatment of spectrum.
Spectrum as a Natural Resource Under Constitutional Law
A. Spectrum as a Material Resource of the Community
The Court reaffirmed that radio spectrum is a finite, scarce natural resource, essential for national infrastructure, defence, and public communication. Drawing upon earlier landmark rulings such as Centre for Public Interest Litigation v. Union of India and Natural Resources Allocation, In re, the Court reiterated that natural resources belong to the people, with the State acting as a trustee.
Spectrum, therefore, cannot be equated with conventional commercial property. Its allocation must comply with Article 14 (non-arbitrariness) and Article 39(b) of the Constitution, which mandates that ownership and control of material resources be distributed to subserve the common good, not private profit.
B. Public Trust Doctrine and Spectrum Governance
Applying the public trust doctrine, the Court held that the Union Government holds spectrum not as an owner in the private law sense, but as a constitutional trustee. Any alienation, use, or transfer of spectrum must therefore:
- Serve a public purpose
- Ensure transparency and fairness
- Secure adequate compensation for the public
Allowing insolvency mechanisms to dilute licence conditions or extinguish public dues would amount to a breach of this trust obligation.
Statutory Framework Governing Spectrum Allocation
A. Telegraph Act, 1885 and Sovereign Privilege
The statutory foundation lies in Section 4 of the Indian Telegraph Act, 1885, which vests the exclusive privilege of establishing and operating telecommunication systems in the Central Government. Licences issued under this provision are statutory grants of privilege, not transfers of property.
The Court reaffirmed that although a licence has contractual features, it originates from sovereign power, and its terms are governed by constitutional and statutory imperatives rather than pure commercial autonomy.
B. TRAI Act and Regulatory Architecture
The Telecom Regulatory Authority of India Act, 1997 supplements this framework by creating a regulator to ensure orderly sectoral growth. However, the Court clarified that TRAI’s role does not dilute the Government’s ultimate control over licensing and spectrum allocation, nor does it convert spectrum usage rights into proprietary assets.
Licence, Ownership, Possession, and Occupation
A central conceptual contribution of the judgment lies in its distinction between ownership, possession, and occupation.
- Ownership remains with the people of India, represented by the State.
- Possession, in the juridical sense, correlates with ownership and is absent in licensees.
- Occupation, or limited use, is what TSPs enjoy under licence conditions.
The Court held that telecom operators are not owners in possession, but merely occupants of a regulated privilege. This distinction is crucial because insolvency law under the IBC operates only upon assets owned by the corporate debtor.
Spectrum and the Insolvency and Bankruptcy Code, 2016
A. Scope of “Assets” Under the IBC
Section 18 of the IBC requires the Resolution Professional to take custody of assets owned by the corporate debtor. The Court relied on the Explanation to Section 18 and Section 36(4)(a)(iv) to emphasise that assets where the debtor has only a right to use, without ownership, are excluded from the insolvency estate.
Spectrum usage rights fall squarely within this exclusion.
B. Rejection of Asset Characterisation
The Court decisively rejected the argument that spectrum usage rights are intangible assets of the corporate debtor. Treating spectrum as an insolvency asset would:
- Undermine sovereign control
- Allow statutory dues to be wiped off through CIRP
- Permit indirect transfer of a public resource without regulatory compliance
Such outcomes, the Court held, are incompatible with the structure and purpose of the IBC.
Spectrum Trading v. Insolvency Resolution
A. Spectrum Trading Guidelines, 2015
The Court undertook a detailed analysis of the Spectrum Trading Guidelines, 2015, particularly Guidelines 10, 11, and 12. These guidelines permit spectrum trading only:
- With prior government approval
- After full clearance of past dues
- Subject to continued regulatory oversight
B. Insolvency Cannot Substitute Regulatory Approval
A key holding of the Court is that IBC proceedings cannot substitute or override spectrum trading conditions. While insolvency resolution aims at value maximisation, it cannot be used to:
- Bypass licence conditions
- Transfer spectrum without clearing dues
- Extinguish public revenue obligations
Thus, insolvency law cannot operate as an alternative route for spectrum transfer.
Nature of DoT (Department of Telecommunications) Dues: Not Mere Operational Debt
The Court rejected the classification of DoT dues as ordinary operational debt. Licence fees, spectrum usage charges, and deferred spectrum payments arise from the grant of a sovereign privilege, not from the provision of goods or services in a commercial sense.
Allowing such dues to be treated at par with trade creditors would distort the insolvency framework and erode the State’s regulatory authority over natural resources.
Tripartite Agreements and Lender Security
Financial creditors argued that tripartite agreements between DoT, TSPs, and lenders created enforceable security interests over spectrum. The Court firmly rejected this contention.
It held that:
- Priority clauses in favour of DoT negate any lender security interest.
- Spectrum cannot be mortgaged or enforced under SARFAESI or IBC.
- Lenders assume regulatory risk when financing licence-based sectors.
Thus, commercial lending cannot override statutory control over spectrum.
Bona Fides and Abuse of Insolvency Process
The Court also expressed concern over the bona fides of voluntary insolvency filings by telecom companies seeking moratorium protection to stall regulatory action.
It warned that invoking CIRP with the dominant intent of evading licence obligations constitutes an abuse of the insolvency framework and cannot be permitted.
Conclusion
The Supreme Court’s decision firmly establishes that spectrum allocation and spectrum usage rights do not fall within the domain of commercial insolvency resolution under the Insolvency and Bankruptcy Code, 2016. By characterising spectrum as a finite natural resource held by the Union of India in public trust, the Court clarifies that telecom service providers acquire only a limited, conditional, and revocable right to use spectrum under a statutory licence, and not any proprietary or ownership interest capable of being treated as an insolvency asset.
The licence, though contractual in form, emanates from the sovereign power of the State under the Indian Telegraph Act, 1885 and remains governed by constitutional obligations, regulatory control, and public interest considerations.
Consequently, insolvency proceedings cannot be invoked to restructure, transfer, or extinguish statutory dues owed to the Department of Telecommunications, nor can an approved resolution plan override mandatory licence conditions or spectrum trading guidelines. Allowing spectrum to be absorbed into the insolvency estate would undermine the public trust doctrine, erode sovereign control over natural resources, and convert insolvency law into an instrument for bypassing regulatory obligations.
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