In a significant ruling that could reshape the telecom and insolvency landscape, the Supreme Court has held that telecom spectrum remains a national asset held in public trust and cannot be treated as a private asset during insolvency proceedings.
A Bench hearing appeals led by the State Bank of India and the Union Government ruled that the Insolvency and Bankruptcy Code (IBC) cannot be used to dilute or wipe out government dues arising from telecom licences.
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The judgment arose from a long-running dispute over whether telecom companies undergoing insolvency can treat spectrum - the invisible airwaves used for mobile services - as their own asset for restructuring debt.
Background of the Case
The case traces back to insolvency proceedings initiated by Aircel group companies after they defaulted on licence fee and spectrum usage payments owed to the Department of Telecommunications (DoT).
Financial lenders, including SBI, had extended thousands of crores in loans to these telecom firms. When recovery proceedings began, the companies invoked the IBC and entered corporate insolvency resolution.
The National Company Law Appellate Tribunal (NCLAT) had earlier ruled that while spectrum is a natural resource, the “right to use” spectrum constitutes an intangible asset of the telecom service provider. It also treated government dues as operational debt under the IBC.
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That finding triggered cross-appeals - banks sought broader rights over spectrum during insolvency, while the Union Government challenged the classification of its dues and the treatment of spectrum as an asset transferable under insolvency proceedings.
What the Court Examined
The Bench framed a central question: Can telecom spectrum, allocated under licence, be treated as an asset of the corporate debtor under Section 18 of the IBC?
The Court also examined:
- Whether telecom licence dues qualify as operational debt
- Whether spectrum usage rights can be transferred under insolvency without clearing past dues
- Whether lenders can claim a security interest over spectrum
- Whether the IBC overrides telecom laws under Section 238
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Court’s Observations: Spectrum Is a Public Trust
The Court began by explaining what spectrum is - a finite and valuable natural resource used for wireless communication.
Citing earlier rulings such as Centre for Public Interest Litigation v. Union of India and Natural Resources Allocation, In Re, Special Reference No.1 of 2012, the Bench reiterated that spectrum belongs to the people of India, with the government holding it as trustee.
“The State does not own spectrum as private property,” the Bench observed. “It holds it in trust for the public and must ensure it subserves the common good.”
The Court stressed that the government’s power under Section 4 of the Telegraph Act is an exclusive sovereign privilege. A telecom licence is not a transfer of ownership but a conditional and revocable permission to use spectrum.
Licence Is Conditional, Not Absolute
The Bench examined the Unified Access Service Licence agreements signed by telecom operators. These agreements:
- Prohibit transfer without prior government approval
- Require full clearance of past dues before spectrum trading
- Allow suspension or termination for non-payment
- Do not confer ownership rights
The Court noted that the right to use spectrum is “limited, regulated and defeasible.” It exists only so long as licence conditions are fulfilled.
Insolvency Code Cannot Override Telecom Law
A major issue was whether the moratorium under IBC can prevent the government from enforcing licence conditions or recovering dues.
Rejecting this argument, the Court said that the IBC cannot become “a tool to restructure ownership or control of a natural resource.”
“The Insolvency and Bankruptcy Code cannot be the guiding principle for restructuring the ownership and control of spectrum,” the Bench observed.
While the IBC aims to maximise asset value, the Court held that natural resources governed by constitutional principles cannot be treated like ordinary commercial property.
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On Government Dues
The Court rejected the view that telecom licence fees and spectrum usage charges are ordinary operational debts.
It held that these dues arise from the grant of a sovereign privilege and cannot be equated with payments for goods or services.
Allowing such dues to be diluted in insolvency would, the Court said, undermine the public trust doctrine and constitutional obligations under Article 39(b).
Decision
Allowing the Union Government’s appeal on core issues, the Supreme Court held that:
- Spectrum remains a national resource held in public trust
- Telecom companies do not own spectrum; they merely hold a limited right to use it
- Such rights are subject to statutory and contractual compliance
- Insolvency proceedings cannot override telecom laws governing spectrum
- Government dues tied to spectrum cannot be wiped out or subordinated through an insolvency resolution plan
The Court concluded that the Insolvency and Bankruptcy Code cannot be invoked to alter the ownership, control, or statutory conditions governing spectrum allocation.
Case Title: State Bank of India v. Union of India & Ors.
Case No.: Civil Appeal No. 1810 of 2021 (with connected matters)
Decision Date: February 13, 2026
