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by sayum
14 February 2026 7:49 AM
“As Naturally as Water Knows Its Slope, IBC Cannot Guide the Restructuring of Spectrum”, In a landmark judgment delivered on 13 February 2026, the Supreme Court of India decisively held that telecom spectrum, though reflected as an “intangible asset” in the books of Telecom Service Providers (TSPs), cannot be subjected to insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC).
A Bench comprising Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar ruled that spectrum is a scarce natural resource held in public trust by the Union of India and that “IBC cannot be the guiding principle for restructuring the ownership and control of spectrum.”
The Court dismissed appeals filed by State Bank of India, resolution professionals and other stakeholders, while partly allowing the appeal of the Union of India. The judgment clarifies the interplay between the telecom regulatory framework and insolvency law, firmly insulating sovereign control over spectrum from insolvency restructuring mechanisms.
Aircel’s Insolvency and the AGR Dues Controversy
The dispute arose in the aftermath of insolvency proceedings initiated by Aircel Group entities under Section 10 of the IBC. Aircel had acquired spectrum in multiple auctions and had outstanding licence fee and spectrum usage charges amounting to thousands of crores payable to the Department of Telecommunications (DoT).
Following the Supreme Court’s earlier decision affirming the definition of Adjusted Gross Revenue (AGR), telecom operators were required to pay substantial dues. Several TSPs, including Aircel, invoked insolvency proceedings, leading to a moratorium under Section 14 of the IBC.
The Union of India questioned the bona fides of such proceedings and raised a fundamental issue: whether spectrum could be treated as an asset of the corporate debtor and subjected to insolvency resolution, thereby potentially diluting or wiping off sovereign dues.
Recognising the constitutional and statutory implications, the Supreme Court referred key questions to the NCLAT. Though NCLAT held that spectrum could be treated as an intangible asset amenable to insolvency, the Supreme Court has now authoritatively reversed that position.
Spectrum as a Natural Resource: Public Trust and Constitutional Mandate
The Court began by demystifying the nature of spectrum, describing it as “an invisible rainbow of radio waves” enabling wireless communication but, more importantly, as a scarce and finite natural resource.
Relying on Centre for Public Interest Litigation v. Union of India and Natural Resources Allocation, In re, the Bench reiterated:
“Natural resources belong to the people but the State legally owns them on behalf of its people and from that point of view natural resources are considered as national assets.”
Invoking Article 39(b) of the Constitution, the Court emphasized that ownership and control of material resources must “subserve the common good – not uncommon good.” The Union holds spectrum not as a commercial vendor but as a constitutional trustee.
Thus, any attempt to restructure spectrum rights through insolvency mechanisms would have to be tested against the doctrine of public trust and constitutional limitations.
Telegraph Act: Exclusive Sovereign Privilege Under Section 4
A crucial pillar of the judgment is the interpretation of Section 4 of the Indian Telegraph Act, 1885.
The Court reaffirmed that the Central Government enjoys “exclusive privilege” to establish, maintain and operate telecommunication systems. A licence granted under Section 4 is a statutory contract emanating from sovereign authority.
Quoting AUSPI (I), the Court noted that a telecom licence is “in the nature of a contract,” but one whose terms are shaped and limited by constitutional mandates.
The licence:
The Court held that effective control remains with the Licensor, and the licensee’s interest is “circumscribed by regulatory oversight” and subject to compliance at all times.
Accounting Treatment vs. Ownership: Intangible Asset is Not Proprietary Title
A central argument of TSPs and lenders was that spectrum usage rights were recorded as “intangible assets” under AS 26 and Ind AS 38, and therefore constituted assets within the meaning of Sections 18 and 36 of the IBC.
The Court undertook a detailed analysis of accounting standards and clarified a vital distinction: recognition as an asset for accounting purposes is not equivalent to ownership in law.
The Bench observed:
“Recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition/transfer of ownership of the spectrum to TSPs.”
Accounting standards require “control” and “future economic benefits,” not ownership. However, IBC Sections 18 and 36 expressly include only assets over which the corporate debtor has ownership rights. Assets owned by third parties under contractual arrangements are excluded.
Since spectrum remains property of the Union, and the licence merely grants conditional usage, it cannot enter the insolvency pool.
Spectrum Trading Guidelines Cannot Be Bypassed Through IBC
The Court gave detailed attention to the Guidelines for Trading of Access Spectrum, 2015.
Guidelines 10, 11 and 12 mandate:
The Bench held that insolvency proceedings cannot override these mandatory regulatory safeguards.
“Dues payable to the Licensor, which must be cleared prior to spectrum trading, cannot be relegated to treatment under a Resolution Plan.”
The IBC cannot substitute telecom regulatory approvals, nor can a resolution plan neutralise sovereign control mechanisms embedded in telecom law.
Moratorium Under Section 14: Preserves Status Quo, Creates No New Rights
Relying on Embassy Property Developments v. State of Karnataka, the Court held that IBC adjudicatory bodies cannot exercise judicial review over sovereign decisions relating to natural resources.
The moratorium under Section 14:
The Court cautioned that insolvency cannot be used as a device to “wriggle out” of statutory obligations owed to the sovereign.
Harmonious Construction: IBC vs. Telecom Laws
Applying principles of statutory interpretation, the Bench held that while IBC is a complete code for insolvency, telecom laws constitute a complete code for spectrum governance.
The Court rejected the argument that Section 238 of the IBC (non obstante clause) overrides telecom laws.
The Bench remarked with striking clarity:
“Statutory interpretation adopted… by referring to spectrum as an asset… is like the tail wagging the dog.”
The dominant purpose of the Telegraph Act and related statutes is regulation of natural resources. IBC’s purpose is insolvency resolution. The latter cannot trench upon sovereign control over material resources.
The Supreme Court held:
“Spectrum allocated to TSPs and shown in their books of account as an ‘asset’ cannot be subjected to proceedings under Insolvency and Bankruptcy Code, 2016.”
Civil Appeals filed by SBI, Resolution Professionals, and UV Asset Reconstruction were dismissed. The Union of India’s appeal was allowed in part. Parties were directed to bear their own costs.
Sovereign Control Prevails Over Insolvency Mechanics
This judgment is a powerful reaffirmation of the public trust doctrine and constitutional stewardship over natural resources. It draws a sharp boundary between commercial insolvency law and sovereign regulatory power.
The ruling ensures that insolvency cannot become a strategic shield against statutory telecom dues, nor can resolution plans restructure rights in natural resources without compliance with telecom law.
By holding that spectrum lies outside the insolvency estate, the Supreme Court has protected the constitutional architecture governing allocation of material resources — ensuring that they “subserve the common good.”
Date of Decision: 13 February 2026
