Telecom Spectrum as a Public Resource: Supreme Court Clarifies Limits of Insolvency Jurisdiction

Posted On - 31 March, 2026 • By - Gaurav Singh Gaur

Introduction

In State Bank of India v. Union of India & Ors.1, the Supreme Court examined the treatment of telecom spectrum within the framework of the Insolvency and Bankruptcy Code, 2016.

The Court addressed whether a telecom licensee’s right to use spectrum constitutes an asset forming part of the insolvency estate, and how the IBC interacts with the statutory regime governing allocation of natural resources.

Factual Background

Telecom service providers held rights to use spectrum under licences granted pursuant to statutory and regulatory frameworks. Defaults in payment of licence fees and spectrum-related dues led to insolvency proceedings.

The NCLAT held that the right to use spectrum could be treated as an intangible asset forming part of the insolvency estate, subject to regulatory approvals. This view was challenged by the Union of India.

Issues

  • Whether spectrum licences confer proprietary rights or merely conditional usage rights;
  • Whether the right to use spectrum constitutes an “asset” under Section 18 of the Insolvency and Bankruptcy Code, 2016;
  • Whether telecom dues qualify as “operational debt” under Section 5(21) of the Insolvency and Bankruptcy Code, 2016;
  • Whether an approved resolution plan can override statutory and regulatory restrictions governing spectrum.

Judgment

The Supreme Court held that:

  • Spectrum is a public resource, and licences grant only a limited, conditional, and non-proprietary right to use it;
  • The right to use spectrum does not amount to ownership and remains subject to statutory and regulatory control;
  • While such rights may have economic value, they cannot be treated as freely transferable assets in insolvency proceedings in disregard of governing law;
  • The powers of the resolution professional under Section 18 do not extend to assuming control in a manner that overrides statutory restrictions on transfer or assignment;
  • The IBC cannot be interpreted to supplant sectoral regulatory frameworks, particularly those governing allocation of natural resources.

Analysis

The Court relied on:

  • Section 4 of the Indian Telegraph Act, 1885
  • Article 297 of the Constitution of India

to affirm that spectrum is a sovereign-controlled public resource.

Licences grant:

  • a restricted right of use,
  • subject to conditions, duration, and regulatory oversight.

They do not confer proprietary or ownership rights.

Asset vs Regulatory Right

The Court drew a crucial distinction:

  • Economic/Accounting perspective: Spectrum rights may be treated as intangible assets
  • Legal perspective: Such rights are statutorily controlled privileges, not freely alienable property

Thus, inclusion in the insolvency estate is qualified and conditional, not absolute.

Interaction Between IBC and Sectoral Law

The Court harmonised:

  • Section 238 of the Insolvency and Bankruptcy Code, 2016
  • telecom regulatory framework

It held that:

  • Section 238 does not permit IBC to override mandatory public law restrictions;
  • Insolvency processes must operate within the boundaries of sectoral statutes.

Role of Resolution Professional

Under Section 18:

  • the resolution professional takes control and custody,
  • but subject to applicable law.

Therefore:

  • spectrum rights cannot be transferred, assigned, or dealt with without regulatory compliance and approval.

Operational Debt – Contextual Determination

The Court indicated that classification of telecom dues depends on:

  • their statutory origin, and
  • the nature of the underlying obligation.

Such claims cannot be mechanically categorised and must be assessed case-by-case.2

Public Trust Doctrine

The reasoning aligns with principles in Centre for Public Interest Litigation v. Union of India which recognise that natural resources:

  • are held in public trust, and
  • must be regulated in public interest.

Implications

  • For lenders: Security interests over spectrum-based businesses must factor in regulatory limitations
  • For resolution professionals: Resolution plans must ensure compliance with telecom licensing conditions
  • For telecom operators: Insolvency cannot be used to bypass statutory obligations or spectrum conditions
  • For regulators: Reinforces primacy of sectoral control over natural resources

Conclusion

The Supreme Court has clarified that while spectrum usage rights may hold economic value, they remain fundamentally statutory privileges governed by public law.

The IBC cannot be applied in a manner that converts such regulated rights into freely transferable insolvency assets, reaffirming the primacy of sectoral regulation in matters involving public resources.

  1. Civil Appeal No. 1810 of 2021. ↩︎
  2. (2012) 3 SCC 1. ↩︎