The Supreme Court has reserved its verdict on whether telecom spectrum can be treated as an asset under the Insolvency and Bankruptcy Code. The ruling will significantly impact the Aircel–RCom insolvencies and future telecom resolutions.
Thank you for reading this post, don't forget to subscribe!
NEW DELHI: The Supreme Court of India has reserved its judgment in appeals challenging the National Company Law Appellate Tribunal’s ruling in the insolvency cases of Aircel and Reliance Communications. The central issue is whether the right to use telecom spectrum granted under a licence can be considered an asset of the corporate debtor and dealt with during insolvency under the Insolvency and Bankruptcy Code (IBC).
A bench of Justice P.S. Narasimha and Justice Atul Chandurkar heard extensive submissions from Attorney General R. Venkataramani for the Union of India, senior counsel representing the former resolution professionals of Aircel and RCom, and counsel for the Committee of Creditors led by the State Bank of India.
Union of India’s Argument
The Union of India argued that the IBC, being a procedural statute, cannot override statutory controls governing natural resources. The Attorney General submitted that spectrum is a sovereign asset and remains under the exclusive control of the Central Government by virtue of Section 4 of the Telegraph Act. Telecom licensees, he said, receive only a limited permission to use spectrum and do not acquire any proprietary or assignable interest.
Since the Government remains the owner, spectrum cannot form part of the insolvency estate under the IBC, which excludes property belonging to third parties. He also maintained that spectrum dues cannot be treated as operational debt and cannot be distributed through the insolvency waterfall mechanism, stressing that spectrum is a community resource and the public must be compensated when a licensee defaults.
Arguments from Lenders and Resolution Professionals
Opposing this stance, Senior Advocate Rakesh Dwivedi, appearing for SBI and the Committee of Creditors, argued that the Government’s exclusive privilege under the Telegraph Act is regulatory and does not remove the licence rights from the scope of the IBC. According to him, spectrum use rights have commercial value and are part of the property rights of the licensee.
He pointed out that the licence terms themselves permit assignment with approval, and banks relied on this assignability while extending loans under the Tripartite Agreement. He argued that the Government cannot be treated as an unrelated third-party owner when it played a central role in enabling and structuring telecom operations.
He further referred to a 2023 Supreme Court judgment recognising intangible development rights as assets under the IBC, asserting that spectrum cannot be artificially separated from such rights.
NCLAT’s Position Under Appeal
The NCLAT had held that although spectrum belongs to the nation and is held by the Government in trust, the right to use spectrum granted under a telecom licence is an intangible asset of the operator. It ruled that this right can be managed by a resolution professional during the Corporate Insolvency Resolution Process.
At the same time, the Tribunal made it clear that the right is not freely transferable and that all spectrum-related dues to the Government must be cleared before any assignment of licence or spectrum rights. It stressed that insolvency proceedings cannot become a mechanism to dilute statutory dues owed to the Government.
Case Title:
State Bank of India v. Union of India & Ors.
Civil Appeal No. 1810/2021
Click Here to Read Our Reports on NCLT
