The Supreme Court has held that telecom service providers (TSPs) cannot invoke the moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) to avoid or restructure statutory licence dues payable to the government by treating spectrum as an “asset” of the corporate debtor.
The bench of Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar has observed that spectrum is a scarce and finite natural resource, part of the “material resources of the community”, whose ownership and control must subserve the common good under Article 39(b) of the Constitution.
The judgment came in a batch of civil appeals led by State Bank of India against the Union of India, arising out of insolvency proceedings involving Aircel group companies and similar telecom operators.
Background: Insolvency Proceedings and Spectrum Dues
The Aircel group entities had obtained Unified Access Service Licences (UASL) from the Department of Telecommunications (DoT) and acquired spectrum in various auctions between 2010 and 2016. Domestic lenders, led by SBI, extended loans exceeding ₹13,700 crore, secured by mortgages and other instruments.
When the Aircel entities defaulted on licence fees and spectrum usage charges, DoT initiated recovery proceedings. In response, the companies filed applications under Section 10 of the IBC for voluntary Corporate Insolvency Resolution Process (CIRP). The National Company Law Tribunal (NCLT) admitted the petitions and a moratorium under Section 14 came into force.
DoT lodged claims of nearly ₹9,900 crore as licensor dues. A resolution plan approved by the Committee of Creditors (CoC) and the NCLT was challenged by DoT before the National Company Law Appellate Tribunal (NCLAT).
Questions Referred for Determination
During earlier proceedings relating to Adjusted Gross Revenue (AGR) dues, the Supreme Court noted that large telecom operators were undergoing insolvency and claiming protection of moratorium. The Court therefore referred a series of substantial questions to the NCLAT, including:
- Whether spectrum is a natural resource held in public trust by the government.
- Whether TSPs acquire ownership or merely a right to use spectrum.
- Whether spectrum usage rights can be treated as an “asset” under Section 18 of the IBC.
- Whether licence and spectrum dues are operational debts.
- Whether spectrum can be transferred through insolvency resolution without clearing past government dues.
NCLAT’s Findings
The NCLAT concluded, among other things, that spectrum is a natural resource held by the government as trustee. TSPs do not own spectrum but only occupy a right to use it. DoT dues qualify as operational debt. Spectrum usage rights, being intangible assets, could in principle be dealt with in insolvency, but only subject to fulfilment of licence conditions, including clearance of dues. Insolvency proceedings cannot be used with a fraudulent or malicious intent to wipe off massive government dues.
These conclusions were challenged by financial creditors, resolution professionals and DoT alike.
Supreme Court’s Core Reasoning
The Supreme Court undertook a detailed examination of constitutional principles, telecom statutes and the IBC.
Relying on earlier precedents, including its judgments in the AGR litigation, the Court held that the Central Government has an exclusive privilege under Section 4 of the Telegraph Act, 1885 to establish and operate telecommunication systems and to grant licences. A telecom licence is contractual in form but emanates from sovereign power and does not confer proprietary ownership over spectrum. TSPs only enjoy a limited, conditional and revocable right to use spectrum, subject to statutory and licence conditions.
IBC Cannot Override Spectrum Regime
Rejecting the argument that spectrum usage rights are “assets” capable of being freely dealt with in insolvency, the Court observed that IBC cannot be used as a tool to restructure ownership or control of spectrum.
The Court held that explanation to Section 18 and Section 36(4)(a)(iv) of the IBC exclude from the insolvency estate assets not owned by the corporate debtor and contractual arrangements conferring only a right of use. Spectrum, being owned by the people of India and held in trust by the government, does not vest in the corporate debtor. Consequently, moratorium under Section 14 cannot prevent DoT from enforcing licence conditions or recovering statutory dues.
On Government Dues
While the NCLAT had characterised DoT’s claims as operational debt, the Supreme Court emphasised that licence fee and spectrum usage charges arise from the grant of a sovereign privilege, not from supply of goods or services in a commercial sense. Such dues cannot be extinguished or substantially diluted through a resolution plan in a manner that undermines statutory control over a natural resource.
Case Details
Case Title: SBI Versus UOI
Case No.: Civil Appeal No(S). 1810 Of 2021
Date: 13/02/2026
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