Spectrum and Sovereignty: Supreme Court Holds Telecom Licences Cannot Be Insolvency Assets

In a landmark judgment that resolves a fundamental conflict between two statutory regimes, the Supreme Court of India has decisively held that spectrum allocated to telecom service providers cannot be subjected to proceedings under the Insolvency and Bankruptcy Code, 2016. The Court ruled that spectrum is a natural resource owned by the people of India, held in trust by the Union Government, and that telecom licensees acquire only a limited, conditional, and revocable privilege to use it—not any proprietary interest that can form part of the insolvency estate.

The judgment in State Bank of India v. Union of India arises from the collapse of the Aircel Group, which owed the Department of Telecommunications over ₹9,800 crores in licence fees and spectrum usage charges. When the corporate debtor invoked the insolvency process, a fundamental question arose: can a telecom operator, by seeking bankruptcy protection, restructure its liabilities to the government and transfer spectrum to a new owner without clearing its past dues?

The Supreme Court's answer is a resounding no. In a meticulously reasoned opinion, the Court has demarcated the true legal province of spectrum, clarified the distinction between accounting treatment and legal ownership, and harmonized the operation of the IBC with the specialized telecommunications framework. This is a judgment of profound significance for the telecom sector, the banking industry, and the insolvency regime.

 I. The Genesis: Aircel's Collapse and the Reference to NCLAT

The Aircel Group entities—Aircel Limited, Aircel Cellular Limited, and Dishnet Wireless Limited—were granted Unified Access Service Licences by the DoT in 2006, each valid for twenty years. They acquired rights to use spectrum in the 900 MHz, 1800 MHz, and 2100 MHz bands through auctions conducted in 2010, 2014, 2015, and 2016, paying over ₹6,200 crores. Domestic lenders, led by the State Bank of India, extended rupee term loan facilities aggregating to approximately ₹13,729 crores under a Rupee Loan Facility Agreement dated 29th March, 2014.

When the corporate debtors failed to pay licence fees, and the DoT sought to recover these amounts, they invoked the IBC by filing applications under Section 10 for voluntary corporate insolvency resolution process. The National Company Law Tribunal, Mumbai Bench, admitted these applications in March 2018. A resolution plan submitted by UV Asset Reconstruction Company was approved by the Committee of Creditors in May 2019 and sanctioned by the NCLT in June 2020.

The DoT, aggrieved by the approval of the resolution plan, appealed to the NCLAT. During the pendency of these proceedings, this Court delivered its judgment in Union of India v. Association of Unified Telecom Service Providers of India, affirming the definition of Adjusted Gross Revenue as stipulated in the licence agreements and upholding the DoT's demand for outstanding licence fees. It was brought to the Court's notice that several TSPs, including the Aircel Group entities, were undergoing insolvency proceedings, and that recovery of dues was being resisted on account of the moratorium under Section 14 of the IBC.

By order dated 1st September, 2020, this Court formulated specific questions of law and referred them to the NCLAT for determination. The questions, broadly restated, were:

Whether spectrum is a natural resource held by the Union of India in public trust, and the legal consequences flowing therefrom. Whether the conferment of a right to use spectrum under a licence granted under Section 4 of the Telegraph Act, 1885 vests any ownership or proprietary interest in TSPs, or whether such right constitutes a limited, conditional and revocable privilege. What is the true nature of the relationship between ownership, possession and occupation in respect of spectrum, and whether possession or control of spectrum usage correlates with ownership rights. Whether spectrum, or the right to use spectrum under a licence, can be treated as an asset of the corporate debtor so as to fall within the ambit of Section 18 of the IBC. Whether spectrum licences or spectrum usage rights can be transferred or traded in insolvency proceedings when such transfer, under the Spectrum Trading Guidelines, is expressly subject to prior governmental approval and clearance of past dues. Whether spectrum or spectrum usage rights can be treated as a security interest in favour of lenders by virtue of licence conditions or tripartite arrangements, and whether such security can be enforced under the Code. Whether approval of a resolution plan under the IBC can substitute or override the requirements contained in the Spectrum Trading Guidelines, including Guidelines 10, 11 and 12, particularly where the Government has declined permission to trade on account of non-fulfilment of licence conditions. Whether invocation of CIRP, particularly voluntarily, raises issues of bona fides of the corporate debtor in triggering proceedings under the IBC.

The NCLAT, by its order dated 25th September, 2022, returned its findings on the questions referred. Both the financial creditors and the DoT assailed the NCLAT's conclusions before this Court, leading to the present batch of appeals.

 II. The Core Submissions: Two Irreconcilable Visions

The submissions advanced before the Supreme Court revealed two fundamentally irreconcilable visions of the legal nature of spectrum and the applicability of the IBC.

On behalf of the TSPs and financial institutions, led by Senior Advocate Rakesh Dwivedi, it was contended that the NCLAT adopted inconsistent conclusions. Having held that spectrum usage rights constitute an intangible asset of the corporate debtor and that DoT dues are operational in nature, it nevertheless concluded that spectrum cannot be utilised unless past dues are cleared and that such dues survive the CIRP. These findings, it was argued, rest on mutually destructive premises and cannot co-exist within the scheme of the Code. Having accepted that spectrum usage rights are assets and that DoT is an operational creditor, the NCLAT erred in relying upon the Tripartite Agreement and the Spectrum Trading Guidelines to accord preferential treatment to DoT, resulting in elevation of one operational creditor over others, contrary to the pari passu treatment mandated by Sections 30 and 53 of the Code.

It was further submitted that telecom licences, together with the right to use spectrum for a defined term, constitute valuable intangible assets of the corporate debtor. While spectrum remains a sovereign resource, the grant of a licence upon payment of consideration creates a legally enforceable right of commercial exploitation. The Tripartite Agreement and the Spectrum Trading Guidelines themselves recognise the licensee's right to transfer or assign the licence, subject to conditions, and this right forms part of the asset pool.

Once treated as assets of the corporate debtor, the licence and spectrum usage rights fall within the exclusive domain of the insolvency framework. During CIRP, all assets vest in the custody of the resolution professional for preservation and value maximisation. Their treatment under a resolution plan lies within the commercial wisdom of the CoC and is immune from judicial reappraisal except on limited statutory grounds. By virtue of Section 238, the Code prevails over any inconsistent contractual or statutory instrument. To the extent that the UASL, the Tripartite Agreement or the Spectrum Trading Guidelines impose conditions inconsistent with the resolution process or the binding effect of an approved plan, they must yield to the Code. Judicial precedent consistently affirms that an approved resolution plan overrides prior contractual and statutory claims.

It was also argued that once DoT's dues are admitted as operational debt, their treatment stands crystallised and can be governed only by the approved resolution plan. Conditioning post-resolution use or transfer of spectrum on clearance of residual pre-CIRP dues amounts to an impermissible reordering of priorities outside the statutory waterfall and violates Sections 30(2)(b) and 31. Secured lenders hold valid and subsisting security interests under the loan and mortgage documents executed by the corporate debtors. The NCLAT failed to give effect to these instruments and, in substance, subordinated secured creditor rights by according priority to DoT dehors the IBC, contrary to the legislative scheme of insolvency resolution. A clear demarcation must be maintained between DoT's role as regulator and its position as creditor. While regulatory powers may be exercised prospectively in accordance with law, pre-CIRP dues resolved under an approved plan cannot be revived under the guise of regulation.

On behalf of the DoT and Union of India, the learned Attorney General R. Venkataramani, assisted by learned ASG Vikramjit Banerjee, assailed the impugned judgment of the NCLAT insofar as it holds that spectrum constitutes an intangible asset of the corporate debtor amenable to insolvency proceedings, that DoT dues are operational debts, and that spectrum usage rights or licences are transferable under the Code.

It was contended that spectrum is a scarce and finite natural resource owned by the people of India, with legal title vesting exclusively in the Union of India, which holds it in trust for the public. Licensees acquire no proprietary interest in spectrum. The doctrine of public trust, as consistently affirmed by this Court in Centre for Public Interest Litigation v. Union of India, as well as Natural Resources Allocation, In Re, Special Reference No.1 of 2012, governs its allocation and use. The grant of spectrum under a licence does not effect a transfer of property or title. It confers only a limited, conditional and revocable privilege to use spectrum, subject to statutory requirements, licence conditions and overriding public interest.

Section 4 of the Telegraph Act, 1885 vests exclusive privilege in the Union to establish and operate telecommunication systems and to grant licences on such terms and payments as it determines. The licence, though contractual in form, emanates from sovereign statutory power and does not create proprietary rights. Judicial precedents, including AUSPI (II), reiterate the State's obligation to retain control over spectrum and secure fair value for its use. The Notice Inviting Applications for spectrum auctions issued on 28th September, 2012 and the Tripartite Agreement expressly clarify that licensees acquire only a right to use spectrum and that transfer, renewal or continuation remains subject to satisfaction of dues and compliance with licence conditions. The rights of lenders are subordinate to sovereign control and cannot override statutory mandates.

Treating spectrum as an asset of the corporate debtor is inconsistent with Explanation to Section 18 and Section 36(4)(a)(iv) of the Code, which exclude assets not owned by the debtor and contractual arrangements conferring only a right of use. The resolution professional cannot assume control over spectrum, which is neither owned nor transferable as property by the licensee. DoT dues do not fall within the definition of operational debt under Section 5(21) of the Code. Licence fees and spectrum usage charges arise from the grant of a sovereign privilege and represent regulatory consideration, not payment for goods or services. The relationship between the Union and the licensee is that of sovereign licensor and licensee, not a commercial creditor-debtor relationship. Treating such dues as operational debt would permit insolvency proceedings to undermine statutory and regulatory control over natural resources.

Alternatively, if right to use spectrum is held to be constituting asset of the TSPs, then DoT would fall within ambit of financial creditor since the definition of financial debt under Section 5(8) hinges on the concept of time value of money. The right to use spectrum was granted on a deferred payment basis, forming the very foundation of the TSPs entitlement to use such spectrum. The deferment of consideration, in exchange for the right to use a resource of enduring value, therefore partakes the character of a financial arrangement, and such liability is appropriately classifiable as a financial debt.

 III. The Nature of Spectrum and Constitutional Framework

The Supreme Court began its analysis by examining the fundamental nature of spectrum as a natural resource. It explained that spectrum may be understood as an invisible rainbow of radio waves enabling wireless services such as phone calls, television signals, Wi-Fi, and 5G internet. The radio spectrum is a finite, non-renewable resource comprising frequencies ranging from extremely low frequency waves to gamma rays. The portion usable for wireless communications is inherently limited due to propagation characteristics, interference constraints, and technological limitations.

The International Telecommunication Union, a specialised agency of the United Nations responsible for global telecommunications regulation, divides the world into three regions, each with specified frequency allocations. The ITU has allocated various spectrum bands to India for mobile telecommunications, satellite-based services, and other applications such as broadcasting. The spectrum needs of our fast-growing economy has been projected to be around 2000 MHz by 2030, which is said to be far below the needs of defense, telecommunications and other sectors.

The Court quoted with approval its observations in Centre for Public Interest Litigation v. Union of India, where it was held that spectrum has been internationally accepted as a scarce, finite and renewable natural resource which is susceptible to degradation in case of inefficient utilization. It has a high economic value in the light of the demand for it on account of the tremendous growth in the telecom sector. Although it does not belong to a particular State, right of use has been granted to the States as per international norms.

Applying the doctrine of public trust, recognized in M.C. Mehta v. Kamal Nath, this Court held that spectrum as a natural resource of the nation is administered by the Central Government as a Trustee. This position was reaffirmed by the Constitution Bench in Natural Resources Allocation, In re, by holding that while the State may adopt different modalities of allocation, it cannot part with the natural resource when the policy of the State is not supported by social or welfare purpose. Alienation of natural resources is a policy decision, and the means adopted for the same are thus, executive prerogatives. However, when such a policy decision is not backed by a social or welfare purpose, and precious and scarce natural resources are alienated for commercial pursuits of profit maximising private entrepreneurs, adoption of means other than those that are competitive and maximise revenue may be arbitrary and face the wrath of Article 14 of the Constitution.

The constitutional framework reinforces this understanding by mandating that the ownership and control of this material resource of the community be so distributed as best to subserve the common good. Article 39(b) of the Constitution provides that the ownership and control of the material resources of the community should be so distributed so as to best subserve the common good. The Court held that while distributing natural resources the State is bound to act in consonance with the principles of equality and public trust and ensure that no action is taken which may be detrimental to public interest. Like any other State action, constitutionalism must be reflected at every stage of the distribution of natural resources.

 IV. The Statutory and Contractual Framework

The Court conducted a comprehensive examination of the statutory regime governing spectrum. Section 4 of the Indian Telegraph Act, 1885 vests in the Central Government the exclusive privilege of establishing, maintaining, and operating telegraphs. A bare perusal of sub-section (1) of Section 4 of the Telegraph Act shows that the Central Government has the exclusive privilege of establishing, maintaining and working telegraphs. This would mean that only the Central Government, and no other person, has the right to carry on telecommunication activities. The proviso to Section 4, however, enables the Central Government to part with this exclusive privilege in favour of any other person by granting a licence in his favour on such conditions and in consideration of such payments as it thinks fit. As the Central Government owns the exclusive privilege of carrying on telecommunication activities and as the Central Government alone has the right to part with this privilege in favour of any person by granting a licence in his favour on such conditions and in consideration of such terms as it thinks fit, a licence granted under the proviso to sub-section (1) of Section 4 of the Telegraph Act is in the nature of a contract between the Central Government and the licensee.

Interpreting this provision, the Court in Union of India v. Association of Unified Telecom Service Providers of India had held that a licence granted under Section 4 is in the nature of a contract between the Central Government and the licensee. A Constitution Bench of this Court in State of Punjab v. Devans Modern Breweries Ltd. relying on Har Shankar and Panna Lal has held that issuance of liquor licence constitutes a contract between the parties. Thus, once a licence is issued under the proviso to sub-section (1) of Section 4 of the Telegraph Act, the licence becomes a contract between the licensor and the licensee. Consequently, the terms and conditions of the licence including the definition of adjusted gross revenue in the licence agreement are part of a contract between the licensor and the licensee.

It is important to note that the exclusive privilege of the Central Government under Section 4, enabling it to grant a license, subject to such terms and conditions, specifically include payments towards Universal Service Obligations. Section 9-D also empowers the Central Government to establish and administer the Universal Service Obligation Fund. Following this the Telecom Regulatory Authority of India has formulated guidelines for utilization of funds for the specified purposes. The monies received towards parting with the privilege of exploiting spectrum under Section 4 is intended to be ploughed back for subserving the common good.

The Court traced the evolution of telecom policy from the New Telecom Policy, 1994, under which licences were granted for Cellular Mobile Telephone Services and Basic Telephone Services, along with paging services across various cities and circles. These licences were bundled with spectrum and awarded through a competitive tendering process. However, the financial and operational challenges faced by licensees under the fixed-fee regime prompted a re-evaluation of policy. The New Telecom Policy, 1999 formulated following a comprehensive review, marked a paradigm shift from a fixed licence fee model to a revenue-sharing regime. Existing licensees were permitted to migrate to the new framework, with licence fees linked to a percentage of AGR, and licences standardized to a 20-year term.

In furtherance of the Telecom Policy, Parliament also enacted the Telecom Regulatory Authority of India Act, 1997. The interplay between the power coupled with obligations of the Union with respect to licensing on the one hand and jurisdiction of TRAI to regulate the telecom sector is succinctly explained in AUSPI (I). Section 2(e) of the TRAI Act defines licensee to mean any person licensed under sub-section (1) of Section 4 of the Telegraph Act for providing specified public telecommunication services and Section 2(ea) defines licensor to mean the Central Government or the telegraph authority who grants a license under Section 4 of the Telegraph Act. These provisions under the TRAI Act do not affect the exclusive privilege of the Central Government to carry on telecommunication activities nor do they alter the contractual nature of the license granted under the proviso to sub-section (1) of Section 4 of the Telegraph Act.

The scheme of the TRAI Act is that TRAI being an expert body discharges recommendatory functions under clause (a) of sub-section (1) of Section 11 of the TRAI Act and discharges regulatory and other functions under clauses (b), (c) and (d) of sub-section (1) of Section 11 of the TRAI Act. TRAI being an expert body, the recommendations of TRAI under clause (a) of sub-section (1) of Section 11 of the TRAI Act have to be given due weightage by the Central Government but the recommendations of TRAI are not binding on the Central Government. On the other hand, the regulatory and other functions under clauses (b), (c) and (d) of sub-section (1) of Section 11 of the TRAI Act have to be performed independent of the Central Government and are binding on the licensee subject to only appeal in accordance with the provisions of the TRAI Act.

Further structural reforms were followed with the introduction of the Unified Access Services Licensing regime in 2003, pursuant to which basic and cellular services were unified within service areas. Licensees were given the option to migrate to the unified regime while retaining their existing spectrum allocations, subject to revised licensing terms. This reflected a move towards technological neutrality and operational flexibility within a regulated framework.

A more fundamental change was introduced under the National Telecom Policy, 2012, which consciously de-linked spectrum from licensing. The shift was not one of relinquishment of control but of restructuring the method through which the State would discharge its obligations of securing the best price for spectrum by enabling private participation in the development of telecom industry. Even after spectrum being unbundled with licence and private enterprise permitted to develop spectrum for provisioning services, the fundamental principle of Central Government being the licensor under Section 4 continues. In AUSPI (II), this Court held that the State has a duty to obtain fair value for natural resources and to ensure compliance with licence conditions. It was observed that the Central Government has exclusive privilege under Section 4 of the Telegraph Act, thus, it is bound to get the best price for natural resources. To part with the exclusive privilege under the revenue-sharing regime is extremely beneficial to the licensees. Thus, the State must get the price for its valuable right as mandated under Article 14. There is no doubt that the State is a trustee of the natural resources and is obliged to hold it for the benefit of the citizens but also to ensure equal distribution to subserve the common good as observed under Article 39 of the Constitution of India. The Government being the sole repository of all the resources in the country, also has the exclusive power to determine the licence conditions at which it parts with the exclusive right to the resources. The Government has to make an effort to get the best price for its valuable rights and cannot throw them away.

 V. The Spectrum Trading Guidelines

Telecom Policy envisioned liberalization of spectrum to enable use of spectrum in any band to provide any service in any technology as well as to permit spectrum pooling. Following recommendations of TRAI, Government also permitted spectrum trading to enable optimal utilization of these material resources through appropriate regulatory framework. This also facilitates ease of doing business in India by allowing free play in the commercial decisions and leads to optimization of resources apart from improving the spectral efficiency and quality of service.

The Guidelines for Trading of Access Spectrum, issued in 2015, enabled transfer of the right to use spectrum between a seller and a buyer, while expressly prohibiting leasing. Such trading is confined between licensees and is permissible only upon prior intimation of 45 days to the DoT. Guideline 10 requires both the licensees to give an undertaking that they are in compliance with all the terms and conditions of the guidelines for spectrum trading and the license conditions and will agree that in the event, it is established at any stage in future that either of the licensee was not in conformance with the terms and conditions of the guidelines for spectrum trading or of the license at the time of giving intimation for trading of right to use the spectrum, the Government will have the right to take appropriate action which inter-alia may include annulment of trading arrangement.

Guideline 11 mandates that the seller shall clear all its dues prior to concluding any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of trade shall be the liability of the buyer. The Government shall, at its discretion, be entitled to recover the amount, if any, found recoverable subsequent to the date of trade from either of the parties jointly or severally.

Guideline 12 provides that where an issue, pertaining to the spectrum proposed to be transferred is pending adjudication before any court of law, the seller shall ensure that its rights and liabilities are transferred to the buyer as per the procedure prescribed under the law and any such transfer of spectrum will be permitted only after the interest of the Licensor has been secured.

A plain reading of the Spectrum Trading Guidelines demonstrates that the Central Government, as Licensor, has retained comprehensive supervisory and corrective control over spectrum trading. Guideline 10 expressly reserves to the Government the power to take appropriate action, including annulment of a trading arrangement, where undertakings furnished by the seller or buyer at the stage of prior intimation are found to be false, misleading, incomplete, or not in conformity with the Spectrum Trading Guidelines or the licence conditions. This power is not confined to scrutiny at the threshold but also extends to subsequent discovery of non-compliances. The Guideline thus safeguards the Government's role as licensor, controlling access to spectrum at every time.

Guideline 11 further reinforces this control by mandating that all outstanding dues of the seller be cleared prior to conclusion of any spectrum trading agreement, and by transferring liability for dues arising up to the effective date of trade to the buyer thereafter. Significantly, it vests discretion in the Government to recover any subsequently discovered dues from either or both parties, jointly or severally. These provisions collectively establish that spectrum trading is not a private commercial arrangement, but a part of the privilege vested in the Central Government under Section 4. Trading is conditional subject to adherence to financial and regulatory obligations owed to the State.

 VI. The Licence Agreement and Tripartite Arrangement

The terms of the Licence Agreement unequivocally restrict the autonomy of the licensee in dealing with the licence or spectrum. Clause 6 prohibits assignment, transfer, sub-licensing, partnership, or creation of any third-party interest without prior written consent of the licensor. Clause 6.3 carves out a limited exception permitting transfer or assignment only upon fulfilment of stringent conditions, including compliance with eligibility criteria, adherence to the Tripartite Agreement where applicable, and complete clearance of all past dues by the transferor, coupled with an undertaking by the transferee to discharge future liabilities.

The licence further imposes operational and regulatory obligations on the licensee, including timely rollout of services, furnishing of information to the Licensor and TRAI, and prohibition on dealing with entities whose licences stand suspended or terminated. Clause 10 vests in the Licensor the power to suspend, revoke, or terminate the licence, inter alia, for breach of conditions, non-payment of dues, public interest, or security considerations, upon issuance of notice. These provisions underscore that continuation of the licence is contingent upon ongoing compliance with contractual and statutory obligations.

A cumulative reading of the Licence Agreement leaves no manner of doubt that effective and pervasive control over the licence and spectrum vests with the Licensor notwithstanding the fixed tenure of the licence and payment of consideration. The licensee's rights are circumscribed by regulatory oversight, disclosure obligations, restrictions on transfer, and the ever-present power of the Licensor to suspend or terminate the licence for breach, liquidation, or winding up of the licensee. The licence does not confer an unfettered or absolute right, but merely a conditional and defeasible permission to use spectrum, which remains subject to statutory control under the Telegraph Act and the regulatory framework administered by TRAI. The ability of the Licensor to withhold consent, impose conditions, and enforce compliance demonstrates that the licensee's interest is limited and subordinate to statutory and regulatory imperatives of telecommunication laws.

The Tripartite Agreement executed between the DoT, the TSP and the Bank is a contractual mechanism devised to enable TSPs to secure financial assistance and also to protect the interests of the Bank. Under this Agreement, the DoT agrees, in principle, to transfer or assign the licence by endorsement in favour of a Selectee identified by the lenders upon default by the TSP, provided the Selectee undertakes to discharge all liabilities and complies with the terms of the licence. The Agreement enables the licence to be treated as security for financial assistance advanced to the TSPs, permitting transfer or assignment only in the event of default and strictly in accordance with its terms.

Upon occurrence of a default, duly notified by the Agent acting on behalf of the Lenders, and failure of the TSP to cure such default within the stipulated period, the Lenders are empowered to invite and negotiate bids for takeover and transfer of the project along with all its assets, including the licence, to a Selectee who must assume all liabilities and obligations of the Licensee towards the Licensor. Even where the Licensor elects to transfer the licence to a person other than the Selectee, the Agreement mandates due consideration of both the Licensor's and the Lenders' outstanding dues. In the event no Selectee is found, the licence stands terminated, and the assets of the defaulting Licensee are to be disposed of, with the Licensor enjoying first charge over the proceeds, followed by adjustment of Lenders' dues, and any residual amount reverting to the Licensee. The Agreement thus underscores that while the licence may be conditionally transferable to safeguard lender interests, such transfer remains subject to the Licensor's paramount authority and regulatory control.

 VII. The Insolvency and Bankruptcy Code Framework

The IBC sought to fundamentally restructure the manner in which insolvency proceedings are undertaken in India, in response to the evident inadequacies of the earlier statutory regime governing insolvency and bankruptcy, which had proved ineffective in delivering timely and meaningful outcomes. The Code brought together the disparate insolvency laws into a unified legislative framework. It is anchored in a set of core principles, including expeditious resolution aimed at preservation and maximisation of economic value, reduction of information asymmetry between debtors and creditors, certainty in the order of priority for discharge of liabilities, and decision-making autonomy of stakeholders in commercial matters, subject to overarching legislative design and judicial supervision of the process.

Capturing the core principles of the Code, this Court in Swiss Ribbons v. Union of India noted that the Code is first and foremost, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. The primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting it from its own management and from a corporate death by liquidation.

 VIII. Spectrum as an Asset: Accounting Treatment vs. Legal Ownership

A nuanced argument was advanced by the TSPs and financial institutions that spectrum is recognized as an intangible asset in the books of account of the licensee, and that this recognition should determine its treatment under the IBC. The Court examined this contention in detail, drawing a crucial distinction between accounting treatment and legal ownership.

As per Section 129 of the Companies Act, 2013, financial statements shall give a true and fair view of the state of affairs of the company and comply with the accounting standards notified under Section 133. TSPs recognise spectrum licensing rights as an intangible asset in their balance sheet in compliance with the Accounting Standards. AS 26 on Intangible Assets which inter alia applies to rights under licensing agreements, defines an intangible asset as an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.

The elements of the definition of intangible assets under AS 26 are identifiability, control, and future economic benefits. An asset is separable if it can be distinguished from goodwill and can be used to rent, sell, exchange or distribute future economic benefits specific to it. However, separability is not a necessary condition for identifiability as long as the entity can identify the asset in some other way. Control indicates the power to obtain and restrict access to the future economic benefits from the resource through enforceable legal rights. However, legal enforceability of rights is not a necessary condition for exercising control. Future economic benefits may include revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the enterprise.

Similar elements of identifiability, control over resources and flow of future economic benefits are also provided in the definition of intangible assets under Indian Accounting Standard, Ind AS 38. Spectrum licensing rights are identifiable as they are separable and can be sold, transferred, licensed, or exchanged, either individually or together with the underlying contract. They arise from legal rights by way of government auctions or assignment. They confer power on TSPs to obtain economic benefits by providing telecom services and raise loans under tripartite agreements with the Bank and Department of Telecom. TSPs can also restrict access to such economic benefits based on the exclusivity conferred on them through the terms of the license. Hence, TSPs exercise control over the licensing rights. The expectation of future economic benefits from the licensing rights is also probable as TSPs develop infrastructure under the state policy and provide telecom services to the public. Thus, the spectrum licensing rights satisfy all the ingredients of an intangible asset.

To recognise an intangible asset in the financial statements, the recognition criteria has to be met, that is, probable flow of future economic benefits attributable to the asset, and reliable measurement of the cost of the asset. The recognition provided in AS 26 and Ind AS 38 is the same. An intangible asset should be recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise, and the cost of the asset can be measured reliably. The probability of future economic benefits is to be assessed using reasonable and supportable assumptions that represent the best estimate of the set of economic conditions over its useful life. Further, an intangible asset should be measured initially at cost. In the case of a separate acquisition, the price that the entity pays normally reflects expectations of future economic benefits satisfying the probability prong of the recognition criteria. Further, the cost of such an asset can be measured reliably comprising its purchase price, non-refundable duties and taxes and any directly attributable expenditure for making the asset ready for its intended use.

Spectrum licensing represents a grant of right to use spectrum by the Government by way of transfer or administrative allocation. The flow of future economic benefits is probable due to its revenue-generating capacity from the provision of telecom services. Further, licensing rights are auctioned for a price or are administratively assigned for a licence fee. The cost of a spectrum licence can thus be measured reliably under the separate acquisition method comprising the acquisition cost, non-refundable duties and taxes and any expenditure incurred to make the asset ready for its intended use. As the recognition criteria is satisfied, TSPs record spectrum licensing as an intangible asset in their balance sheet.

However, the Court emphasized that the understanding of assets in the context of accounting standards is different from the traditional understanding of property, as in the case of the Transfer of Property Act, 1882 and the Sale of Goods Act, 1930, which require title or ownership in the property or goods. In Accounting Standards, asset is defined as a resource controlled by an enterprise from which future economic benefits are expected to flow. Paragraph 6.2 of AS 26 defines an asset as a resource controlled by an enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.

Crucially, the Framework for the Preparation and Presentation of Financial Statements in accordance with Ind AS clarifies that ownership is not an essential condition for recognition of an asset. Paragraph 57 of the Framework states that many assets, for example, receivables and property, are associated with legal rights, including the right of ownership. In determining the existence of an asset, the right of ownership is not essential. Thus, for example, property held on a lease is an asset if the entity controls the benefits which are expected to flow from the property. Although the capacity of an entity to control benefits is usually the result of legal rights, an item may nonetheless satisfy the definition of an asset even when there is no legal control.

Similar criteria are also provided in the New Conceptual Framework titled Conceptual Framework for Financial Reporting under Indian Accounting Standards, 2020. It defines an asset as a present economic resource controlled by the entity as a result of past events that has the potential to produce economic benefits. Control is described as that which links an economic resource to the entity. An entity thus controls an economic resource if it has the present ability to direct the use of the economic resource and obtain the economic benefits that may flow from it. The Framework gives the example that an entity may control a proportionate share in a property without controlling the rights arising from ownership of the entire property. In such cases, the entity's asset is the share in the property, which it controls, not the rights arising from ownership of the entire property, which it does not control.

This indicates that recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition or transfer of ownership of the spectrum to TSPs. It only indicates control over the future economic benefits flowing from the grant of the right to use the spectrum. Hence, even if the right to use spectrum exhibits property-like features such as longer licensing terms, exclusivity, transferability, tradability, and the like, they merely represent different sticks in the bundle of rights and fall short of conferring complete ownership of the spectrum on TSPs.

 IX. The IBC Framework: Ownership as the Touchstone

The Court then examined the provisions of the Insolvency and Bankruptcy Code to determine whether spectrum licensing rights can form part of the insolvency estate. The IBC explicitly excludes from the scope of insolvency and liquidation framework assets over which the corporate debtor does not have ownership rights. The legislative intent can be traced back to the Bankruptcy Legislative Reforms Committee Report, 2015, on which the IBC is based. The Report in Paragraph 5.5.5, in the context of assets in liquidation, clarifies that not all assets that are present within the entity can be considered for liquidation and it excludes assets held as a part of operational transactions, where the entity has rights over the assets but not the ownership.

Section 18(f) of the IBC provides that the Interim Resolution Professional shall take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including assets over which the corporate debtor has ownership rights which may be located in a foreign country, assets that may or may not be in possession of the corporate debtor, tangible assets whether movable or immovable, and intangible assets including intellectual property.

The Explanation to Section 18 specifically provides that for the purpose of this section, the term assets shall not include assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment, assets of any Indian or foreign subsidiary of the corporate debtor, and such other assets as may be notified by the Central Government in consultation with any financial sector regulator.

Similar provisions are also contained in Section 36 of the Code in relation to the liquidation estate. Section 36(3) provides that subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include any assets over which the corporate debtor has ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate debtor or an information utility or records in the registry or any depository recording securities of the corporate debtor or by any other means as may be specified by the Board, including shares held in any subsidiary of the corporate debtor, assets that may or may not be in possession of the corporate debtor including but not limited to encumbered assets, tangible assets whether movable or immovable, intangible assets including but not limited to intellectual property, securities and financial instruments, insurance policies, contractual rights, assets subject to the determination of ownership by the court or authority, any assets or their value recovered through proceedings for avoidance of transactions, any asset of the corporate debtor in respect of which a secured creditor has relinquished security interest, any other property belonging to or vested in the corporate debtor at the insolvency commencement date, and all proceeds of liquidation as and when they are realised.

Section 36(4) provides that the following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation assets owned by a third party which are in possession of the corporate debtor, including assets held in trust for any third party, bailment contracts, all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund, and all other assets as may be notified by the Central Government in consultation with any financial sector regulator.

Hence, the IBC includes only those tangible or intangible assets within the insolvency framework over which the Corporate Debtor has ownership rights, including all rights and interests therein as recorded in the Balance Sheet. In conclusion, the framework of IBC is clear in excluding assets over which the corporate debtor has no ownership rights. Mere recognition of spectrum licensing rights as an intangible asset by TSPs in the Financial Statements is not conclusive of their ownership, as it only represents control over future economic benefits. Even assuming that licensing of spectrum rights is one among the bundle of rights, in the absence of transfer of title over the spectrum, no ownership rights are created in TSPs either in the spectrum or in its right to use as governed by licensing conditions. Hence, under the IBC framework, spectrum licensing rights is not a part of the pool of assets for insolvency or liquidation.

 X. Reconciling Two Statutory Regimes: Harmonious Construction

The Court addressed the fundamental conflict between the IBC and the telecommunications framework by invoking settled principles of statutory interpretation. Where two enactments appear to operate in conflict, the Court is enjoined to interpret the concerned legislations in a manner that gives effect to both, to the extent such reconciliation is reasonably possible. Only where such harmonious construction is not feasible does the Court proceed to determine which enactment must prevail. Conflicts of this nature may arise either between a general statute and a special statute, or between two statutes each possessing a special character.

The Court laid down the following principles. Where two enactments are attracted to the same factual matrix, the initial inquiry must be directed towards determining whether either statute is general or special in relation to the subject-matter in issue. This determination is not made in the abstract, but by examining the dominant subject-matter of the statute, viewed through the prism of its legislative intent. An enactment may, depending on the context, operate as a general law for certain purposes and as a special law for others. The optimal outcome is achieved where each statute is allowed to function within its designated sphere, without trenching upon the field occupied by the other. Bearing this in mind, the provisions of both enactments must be scrutinised to assess whether they can be construed in a manner that permits harmonious construction.

Where it is evident that one enactment is intended to function as a special law governing a defined subject, while the other is a general law operating in a broader or overlapping domain, the established principle embodied in the maxim generalia specialibus non derogant applies. In such circumstances, the general provision must give way to the special provision. In an eventuality where the contestation is between two special enactments, both having non-obstante clauses, the general rule is that the later enactment must prevail over the earlier one. However, this is not an absolute rule. In the event of a conflict between two special acts, the dominant purpose of both statutes would have to be analyzed to ascertain which one should prevail over the other. The primary effort of the interpreter must be to harmonise, not to create conflict. Where both the enactments have the non-obstante clause, the proper perspective would be that one has to see the subject and the dominant purpose for which the special enactment was made and in case the dominant purpose is covered by that contingencies, then notwithstanding that the Act might have come at a later point of time still the intention can be ascertained by looking to the objects and reasons.

The Court cited its decision in Embassy Property Developments v. State of Karnataka as a case in point to put substance into the view that the jurisdiction of authorities under the Code must take a backseat when the same is in conflict with public law. One of the issues before the Court in Embassy Property was with respect to Adjudicating Authority's power to question and decide upon State Government's decision, in exercise of its powers under the Mines and Minerals Act, rejecting extension of mining lease. In unequivocal terms, this Court held that where the decision of the Government of Karnataka to refuse the benefit of deemed extension of lease is in the public law domain, the correctness of the said decision can be called into question only in a superior court which is vested with the power of judicial review over administrative action. The NCLT, being a creature of a special statute to discharge certain specific functions, cannot be elevated to the status of a superior court having the power of judicial review over administrative action.

If NCLT has been conferred with jurisdiction to decide all types of claims to property of the corporate debtor, Section 18 would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. An asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term assets under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word assets, while Section 20 uses the word property together with the word value. Sections 18 and 25 do not use the expression property.

Another important aspect is that under Section 25 of the IBC, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings, the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60. Therefore, in the light of the statutory scheme as culled out from various provisions of the IBC, it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right.

A lot of stress was made on the effect of Section 14 of the IBC on the rights of the Government. But the Court held that the moratorium provided for in Section 14 could not have any impact upon the right of the Government to enforce its dues or licence conditions. The purpose of moratorium is only to preserve the status quo and not to create a new right. Therefore nothing turns on Section 14. Even Section 14 which prohibits during the period of moratorium the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor, will not go to the rescue of the corporate debtor, since what is prohibited therein is only the right not to be dispossessed, but not the right to have any other right.

The scope and ambit of IBC is to speed up the process providing for insolvency and achieving maximisation of value of the asset of the entity undergoing CIRP. The focus is on the company. On the other hand, the Telegraph Act, Wireless Telegraphy Act and TRAI Act form a complete and exhaustive code for all matters relating to telecom sector. This includes declaration of the nature of the rights and liabilities arising out of holding and using spectrum. Powers of the Union includes restructuring the telecom sector through policy decisions by introducing reforms, provisioning bailout packages for stabilizing the sector, prescribing conditions for grant of license, enabling treatment of spectrum as an asset in the books of account of TSP to raise loans, enable spectrum trading and power to prescribe consequence of failure to pay the dues and also the power to recover the dues. The regulatory jurisdiction for telecommunication sector through TRAI extends to making recommendations to Union in the field enumerated in Section 11 of the TRAI Act and to discharge the functions as laid down therein. Taken together, the Union as the owner and trustee of spectrum on the one hand and TRAI as the regulator on the other, occupy the entire province of telecommunications.

The statutory regime under IBC cannot be permitted to make inroads into telecom sector and rewrite and restructure the rights and liabilities arising out of administration, usage, and transfers of spectrum which operate under exclusive legal regime concerning telecommunications. The disharmony caused by applying IBC to the telecom sector which operates under a different legal regime was never intended by the Parliament. Statutory interpretation adopted by the corporate debtors for applying IBC to the material resource of the nation, the spectrum, by referring to it as an asset in its books of account, the License Agreement, Tripartite Agreement, or the Spectrum Trading Guidelines is like the tail wagging the dog. Statutory interpretation cannot be based on a myopic approach of reading the definition clauses out of its context. Merely because spectrum can be treated as an asset on the basis of certain attributes, such as possession and usage, lease and assignment, claim and liability or credit and debt, the entirety of the telecom sector cannot be brought under the sweep of IBC. The two statutes have different subjects to deal with, different purposes to subserve, different laws to abide, protect different rights and create different liabilities. It is necessary for the constitutional courts to recognise their respective provinces and to ensure that they operate with harmony and without conflict.

 XI. The Final Verdict

For the reasons stated above, the Supreme Court held that spectrum allocated to TSPs and shown in their books of account as an asset cannot be subjected to proceedings under the Insolvency and Bankruptcy Code, 2016. Civil Appeal No. 1810 of 2021 filed by State Bank of India, Civil Appeal No. 2227 of 2021 filed by UV Asset Reconstruction Co. Ltd., Civil Appeal No. 2263 of 2021 filed by the IRP of the corporate debtor and M/s Aircel Group entities, and Civil Appeal Nos. 4570 and 4571 of 2021 filed by the IRP of RCOM and RTL respectively were dismissed. Civil Appeal No. 6546 of 2021 filed by Union of India through Department of Telecommunication was allowed in part. Parties were directed to bear their own costs.

 XII. Key Takeaways

Spectrum is a natural resource held in public trust, belonging to the people of India, with the Union Government holding it as a trustee. This foundational principle governs all aspects of spectrum allocation, use, and transfer. Telecom licensees acquire only a limited, conditional, and revocable privilege to use spectrum. They do not acquire any proprietary interest or ownership rights, regardless of the consideration paid at auction.

Recognition of spectrum licensing rights as an intangible asset in the balance sheet, in compliance with Accounting Standards, is not determinative of ownership. It merely reflects control over future economic benefits and does not confer title. The Insolvency and Bankruptcy Code explicitly limits the scope of assets that can be subjected to insolvency resolution or liquidation to those over which the corporate debtor has ownership rights. Assets held under contractual arrangements conferring only a right of use are excluded.

The Guidelines for Trading of Access Spectrum impose binding conditions on any transfer of spectrum usage rights. Clearance of past dues is an absolute precondition, and the Government retains the power to annul any trading arrangement found to be non-compliant. While the Tripartite Agreement enables lenders to treat the licence as security and facilitates transfer to a Selectee upon default, such transfer remains subject to the Licensor's paramount authority and regulatory control.

Licence fees and spectrum usage charges arise from the grant of a sovereign privilege and represent regulatory consideration, not payment for goods or services. They are not operational debts under Section 5 of the IBC. The moratorium under Section 14 preserves the status quo but does not create new rights. It cannot be invoked to resist recovery of government dues or to claim renewal or continuation of a licence in defiance of licence conditions.

The Telegraph Act, the Wireless Telegraphy Act, and the TRAI Act form a complete and exhaustive code for all matters relating to the telecom sector. The IBC cannot be permitted to make inroads into this exclusive legal regime. When two statutory enactments appear to conflict, courts must endeavor to interpret them in a manner that gives effect to both. Only where such reconciliation is impossible does the court proceed to determine which enactment must prevail.

 XIII. Conclusion

The Supreme Court's judgment in State Bank of India v. Union of India is a masterful exposition of the true legal nature of spectrum and its relationship with the insolvency framework. It rejects the myopic approach of reading definition clauses out of context and emphasizes that statutory interpretation cannot be based on isolated provisions divorced from the broader legislative scheme.

The Court's analogy is apt and memorable: statutory interpretation adopted by the corporate debtors for applying IBC to the material resource of the nation, the spectrum, by referring to it as an asset in its books of account, the License Agreement, Tripartite Agreement, or the Spectrum Trading Guidelines is like the tail wagging the dog. An asset in accounting parlance is not synonymous with property in law. Control over future economic benefits is not the same as ownership. A right to use, however valuable, is not a right to own.

The two statutes have different subjects to deal with, different purposes to subserve, different laws to abide, protect different rights, and create different liabilities. It is necessary for constitutional courts to recognize their respective provinces and to ensure that they operate with harmony and without conflict.

For the telecom sector, this judgment provides clarity and certainty. Spectrum, as a material resource of the community, will continue to be governed by the specialized regime designed to ensure its efficient, equitable, and public-interest-oriented utilization. Licensees cannot, by invoking insolvency proceedings, restructure their liabilities to the government or transfer spectrum to new owners without clearing past dues.

For the insolvency regime, the judgment delineates its boundaries. The IBC is a powerful tool for resolution and revival, but it operates within the limits defined by its own provisions. Assets over which the corporate debtor has no ownership rights stand outside its purview.

For the banking industry, the judgment underscores the importance of understanding the true nature of the security they hold. Tripartite Agreements with the DoT provide a mechanism for transfer of licences upon default, but such transfer is conditional and subject to the Licensor's paramount authority.

In the ultimate analysis, the judgment is a reaffirmation of the constitutional principle that natural resources belong to the people and must be administered for the common good. Spectrum, like air and water, is a public good. It cannot be reduced to a commodity to be traded in insolvency markets without regard to the larger public interest.

Judgment Name: State Bank of India v. Union of India & Ors. (Civil Appeal No. 1810 of 2021 with connected appeals), Supreme Court of India, decided on February 13, 2026.