The Supreme Court on Friday ruled that telecom spectrum is a 'material resource of the community' and cannot be treated as an ordinary asset under the Insolvency and Bankruptcy Code (IBC) to repay lenders in the insolvency proceedings of Aircel and Reliance Communications (RCom). According to reports from Mint, a bench comprising Justice P.S. Narasimha and Justice Atul Chandurkar held that spectrum belongs to the people of India, with the government acting as trustee, and that the IBC cannot override the statutory framework governing its allocation, control and use as a public resource. The court emphasized that 'the Insolvency and Bankruptcy Code does not permit adjustments to spectrum ownership' and that spectrum stays in the hands of the government being a crucial public resource.
The court observed orally that 'the path becomes clear by following state policy to ensure that spectrum and its benefits subserve common good, not uncommon good. For this purpose, its ownership and more importantly, its control with all its attributes, including benefits, have to be secured for its citizens.' As reported by Mint, the bench added that 'As naturally as water knows the slope, the IBC cannot be the guiding principle for restructuring the ownership and control of spectrum.' The detailed written judgment is awaited, with the ruling expected to set a precedent for future telecom insolvency cases involving spectrum rights.
The verdict came on a batch of petitions filed by State Bank of India and the two insolvent telecom operators challenging a 2021 order of the National Company Law Appellate Tribunal (NCLAT). According to Mint, RCom, Aircel and Videocon entered insolvency between 2018 and 2019, leaving behind unpaid statutory dues exceeding ₹40,000 crore. The ruling clarifies that telecom spectrum – constitutionally recognised as belonging to the people of India – cannot be liquidated under the insolvency regime to maximise lender recoveries. This decision represents a victory for the government and a setback for lenders to the defunct phone company Aircel.
The Union government has argued that the IBC cannot override the state's control over natural resources, maintaining that telecom companies do not own spectrum but are only granted limited rights to use it. As reported by Mint, if statutory dues such as licence fees, spectrum usage charges or adjusted gross revenue remain unpaid, the spectrum must revert to the government and cannot be sold in insolvency. Lenders, on the other hand, contend that spectrum usage rights are commercially valuable and transferable with government approval, warning that preventing monetisation would drastically reduce recoveries and defeat the objective of insolvency resolution. The latest ruling reinforces that spectrum allocated to telcos cannot be subjected to insolvency process.
According to Mint, Aircel filed for insolvency in 2018 after struggling with heavy debt, mounting losses and intense competition following the entry of Reliance Jio. RCom entered insolvency in February 2019 after defaulting on debt of over ₹46,000 crore, with proceedings triggered by recovery action from Ericsson. During the Corporate Insolvency Resolution Process, lenders sought to monetise key assets, particularly spectrum usage rights, but the Department of Telecommunications opposed this, leading to the NCLAT's 2021 ruling and subsequent appeals before the Supreme Court. The decision will have ramifications in the telecommunication sector where telecom firms such as Aircel Group of Companies have invoked moratorium on the basis of voluntary corporate insolvency resolution process under the Insolvency and Bankruptcy Code (IBC) for restructuring of their assets.
