[Soumya Dubey is a 3rd year B.A., LL.B. (Hons.) student at National Law University Odisha]
Recently, the Supreme Court delivered its judgment in State Bank of India v. Union of India 2026 INSC 153 (13 February 2026) clarifying that spectrum licences allotted to telecom service providers (‘TSPs’) cannot be treated as ‘assets’ within insolvency proceedings. While the judgment resolves the uncertainty with respect to the admissibility of licences in the insolvency process, it raises serious concerns for the future of the telecom sector.
This post analyses the judgment and examines the wider practical implications on the telecom sector. By drawing on the global comparative jurisprudence, it proposes a reconciliatory framework with spectrum licence as a conditional asset so as to balance the preservation of spectrum licence as a public resource and the Insolvency and Bankruptcy Code’s (‘IBC’) foundational aim of rehabilitation.
The Contemporary Crisis and the Doctrinal Vacuum
The significance of this ruling is most apparent when examined against the backdrop of India’s telecom sector’s insolvency crises triggered by the Supreme Court’s ruling in Union of India v. Association of Unified Telecom Service Providers of India. The Court upheld the Department of Telecommunication’s (‘DoT’s’) definition of adjusted gross revenue (‘AGR’) to be inclusive of non-core revenues such as interest, rentals and asset sales resulting in severe financial consequences for the TSPs. The accumulated arrears crippled major operators, mandating them to pay over Rs.1.4 lakh crore in licence fees and penalties.
The question of the status of spectrum licence within the insolvency estate first arose in the Aircel Corporate Insolvency Resolution Process before the National Company Law Tribunal (‘NCLT’), Mumbai in 2018. The NCLT recognised the ‘right to use’ spectrum as commercially valuable for the purposes of resolution, holding that the DoT could not suspend Aircel’s licences during the statutory moratorium under section 14 of the IBC.
In 2020, the Supreme Court referred specific questions on the asset-status of spectrum to the National Company Law Appellate Tribunal (‘NCLAT’). In Union of India v. Vijaykumar V Iyer, the NCLAT concluded that while spectrum, as a finite natural resource, is not legally owned by the licencee, the conditional right to use it constitutes a tradable intangible asset for insolvency purposes. The DoT’s outstanding dues were characterised as operational debt that could not be extinguished without payment, and lenders were held unable to treat spectrum as security or transfer it without satisfying those claims. Hence, spectrum remained within the insolvency estate, but dues-clearance operated as a threshold condition to any transfer.
The Constitutional Logic and its Implications on Stakeholders
Application of Public Trust Doctrine
As a finite and limited resource, electromagnetic spectrum constitutes a material resource of the community which is held by the Union in trust. The rationale behind the decision of the Court lies in the doctrine of public trust as established in Centre for Public Interest Litigation v. Union of India. Article 39(b) of the Constitution requires that the ownership and control of such resources should be spread in a way that will be most subservient to the interest of the people. The doctrine thus limits the right of the State to alienate these resources as well as the right of ownership of the person holding.
Distinction Between Ownership and the Right to Use
The spectrum licence is issued under the Indian Telegraph Act, 1885 (‘Telegraph Act’) and the Unified Licence framework. The Court clarified that the licence does not transfer the electromagnetic spectrum as such to the TSPs as property. Rather, TSPs simply gain a conditional privilege to utilise frequencies to a specific purpose within a certain time frame. This right can be suspended due to non-compliance and it cannot be assigned without regulatory approval.
This characterisation has crucial consequences under insolvency framework. Section 36 of the IBC constitutes the insolvency estate of the assets that are the property of or are vested in the corporate debtor. However, the Court held that the spectrum frequencies had always been under the dominium of the Union. Accordingly, the accounting fiction of recording spectrum as an intangible asset is replaced by its legal nature based on public law. Rejecting the NCLAT’s ruling that such dues are operational debt, the Supreme Court held that the same are regulatory obligations which cannot be suspended or restructured under the IBC.
The Court reasoned that while section 238 permits the IBC to override specific statutory provisions regulating financial transactions, it cannot extend to rewriting the foundational constitutional and regulatory regime governing a particular sector.
Government Licence under Insolvency
Mining
In Vasudevan v. State of Karnataka, the NCLT Chennai ruled that the State Government cannot terminate or refuse the renewal of mining lease during the corporate insolvency resolution process (‘CIRP’) as it violates the moratorium under section 14 of the IBC. However, the Supreme Court in Embassy Property Developments Pvt. Ltd. v. State of Karnataka clarified that extension of mining lease falls within the domain of public law and is entirely beyond the jurisdiction of NCLT under section 60(5) of the IBC.
Aviation
If an air operator certificate (‘AOC’) lapses and the successful resolution applicant (‘SRA’) fails to renew it, the resolution plan is often deemed unviable or non-implemented. In State Bank of India v. The Consortium of Murari Lal Jalan and Florian Fritsch, the Supreme Court invoked Article 142 of the Constitution to order liquidation of Jet Airways. The AOC was a central point of contention as its repeated lapse and the consortium’s inability to maintain it were key factors leading to the liquidation order. Notably, prior to the order, the Directorate General of Civil Aviation (DGCA) granted conditional, short-term extension of the AOC in order to facilitate the CIRP.
Hence, under Indian law, government licences across sectors are treated as regulatory privileges rather than standard corporate assets under insolvency.
The Telecom Sector’s Structural Peculiarity and the Rescue Paradox
Unlike traditional industries, such as mining or aviation, where the value of a company mainly comes from tangible assets, a telecom operator invests its primary capital in the acquisition of the spectrum licences through auction. The Consultation Paper on Auction of Spectrum recognises that the spectrum licences are critical intangible assets for telecom operations. A licence is not merely an operational permit. Rather, it grants access to frequencies which in turn aids the operator in maintaining a network, retaining subscribers, and generating revenue. In this regard, the licence is the core of the going-concern value of the firm.
The above aspect was emphasised in Aircel Ltd v. UOI. The tribunal stated that the existence of the licence is critical to draw resolution applications in insolvency. In its absence, the firm is virtually left as a shell company, having no viable business to jump-start. Therefore, the most severe structural challenge of the judgment is that it creates what can be referred to as a ‘partial insolvency’.
The TSP is officially liable to insolvency under the IBC, but deprived of the most commercially important right in order to proceed with such insolvency. The Reserve Bank of India has also recognised the significance of spectrum licences and has considered them as intangible assets that can promote lending in the telecommunication industry.
With the spectrum licences entirely out of the insolvency estate, financial creditors, often led by public sector banks, face significantly lower recovery prospects. Moreover, pursuant to this ruling, banks and financial institutions are likely to re-evaluate the risk and valuation of telecom loans, which could lead to tighter credit availability, particularly for stressed or smaller operators. Many distressed companies may be forced into liquidation rather than restructuring, defeating the IBC’s stated purpose of ‘promoting availability of credit’ and keeping companies as a ‘going concern’.
Lessons from Abroad: Global Jurisprudence on Spectrum in Insolvency
India’s ‘carve out’ approach categorically excludes spectrum licences from insolvency proceedings. This position departs from the general practice in comparative jurisdictions where legal frameworks tend to integrate regulatory oversight within the insolvency process.
In the United Kingdom (‘UK’), spectrum licences are viewed as permissions granted by Ofcom which may form a part of the debtor’s assets during liquidation. In Re Avanti Communications Ltd, satellite infrastructure and associated regulatory licences were treated as assets capable of being secured under a fixed charge and secured creditors could enforce security interest over those assets subject to regulatory approvals. Spectrum licences are subject to the pervasive control of the regulator. Hence, the UK adopts a conditional approach wherein the licence is revocable at the discretion of Ofcom.
The United States (‘US’) adopts an integrationist approach under Chapter 11 of the US Bankruptcy Code. Section 525(a) of the Bankruptcy Code prohibits governmental units from revoking licences solely because a debtor has not paid a dischargeable debt. In FCC v. NextWave Personal Communications Inc., the US Supreme Court ruled that the Federal Communications Commission (‘FCC’) violated section 525(a) by revoking spectrum licences held by the bankruptcy debtor. The Court held that the FCC could not cancel licences solely based on a debtor’s failure to pay dischargeable debt, affirming that such actions fall under the protection of bankruptcy law. The judgment clearly establishes that regulatory agencies must pursue their legitimate interests through the insolvency framework rather than around it.
Way Forward
While the current ruling upholds sovereign control over natural resources, it undermines the broader public interest in market competition, employment, and the preservation of viable telecom infrastructure.
Spectrum licences should be treated as conditional assets within the insolvency estate, included for the purposes of going-concern valuation and resolution plan formulation. However, the same should be subject to mandatory DoT approval before any transfer or vesting in a resolution applicant can be effected. The DoT should be institutionalised as a statutory regulatory participant in the CIRP for TSPs.
An amendment to regulation 36A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 could require the resolution professional to notify the DoT at commencement of CIRP, provide it with copies of all resolution plans involving spectrum, and allow it a defined period to communicate regulatory conditions or objections. The adjudicating authority would be required to consider the DoT’s position before approving any plan involving spectrum transfer. The transfer may be governed through the guidelines for renewal as notified under the Telecommunication Act, 2023.
Further, the Parliament should amend section 31(4) of the IBC to include a similar provision requiring approval from DoT as it provides for Competition Commission of India in case of mergers. A plan purporting to transfer spectrum without DoT consent would be void under this provision. This preserves the economic reality of what the enterprise is worth without compromising the Union’s control over who ultimately holds the licence. This institutional model preserves the IBC’s going-concern objectives while ensuring that sovereign regulatory interests are heard and addressed within the process, rather than used to foreclose the process at the outset.
– Soumya Dubey