Supreme Court says spectrum of bankrupt telecom operators can't be sold to repay lenders

NEW DELHI/MUMBAI: 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).

The decision came in the insolvency proceedings of Aircel and Reliance Communications (RCom), where lenders had sought to monetize spectrum to recover dues.

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 dispute centred on whether telecom operators could treat spectrum usage rights as an asset under the IBC and shield them from government recovery during insolvency.

The court observed orally, “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 naturally as water knows the slope, the IBC cannot be the guiding principle for restructuring the ownership and control of spectrum,” the bench added.

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), which had ruled that spectrum could be transferred or sold under a resolution plan only after clearing all outstanding government dues.

The bench had reserved its judgment in November 2025 after hearing detailed arguments from the central government, lenders, resolution professionals and the Committee of Creditors.

In its more than 60-page judgment, the top court held that spectrum allocated to telecom service providers cannot form part of the insolvency or liquidation estate because companies do not own it. Even when recorded as an intangible asset in company accounts, operators possess only a limited right to use spectrum under licence conditions.

“We hold that 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,” the judgment said.

The court clarified that the IBC applies only to assets owned by a company and cannot override telecom law or the government’s regulatory control over spectrum.

The judgment said the government retains full control over spectrum trading and may recover dues from either or both parties where required. “These provisions collectively establish that spectrum trading is not a private commercial arrangement,” the court observed.

The bench also held that government dues cannot be subordinated in insolvency proceedings. “Dues payable to the Licensor…must be cleared prior to spectrum trading,” it said.

The ruling effectively endorses the government’s position, rejects the pleas of Aircel and its group entities as well as lenders and resolution professionals, and sets aside the NCLAT’s 2021 order.

Legal experts said the judgment underscores that telecom insolvencies cannot be resolved independently of sectoral regulation.

“The ruling clearly signals that telecom insolvencies cannot be resolved in silos. Resolution professionals, lenders and licensors, particularly the government, must be treated as joint stakeholders in the resolution process. Insolvency outcomes in a sector like telecom are inseparable from licensing, regulatory continuity and public interest considerations,” said Mukesh Chand, senior counsel at Economic Laws Practice.

Chand added that telecom insolvencies should be resolved on a going-concern basis through a change in management backed by regulatory approvals, noting that while the IBC can facilitate resolution, it cannot override regulatory consent or public trust obligations.

Ankita Singh, founder of Sarvaank Associates, said the ruling means the IBC can no longer serve as a “clean slate” to bypass adjusted gross revenue (AGR) liabilities. Lenders, she said, now face a situation where their key collateral – spectrum – cannot be monetized unless government dues are settled first.

Emailed queries to UV Asset Reconstruction Co. Ltd (UVARCL), Aircel’s resolution applicant, remained unanswered till press time.

Spectrum: Ownership and insolvency

Telecom spectrum refers to the radio frequencies used by mobile phones and wireless networks to transmit voice and data. The government auctions these frequencies for fixed periods, granting operators the right to use them. Spectrum determines network coverage, speed and service quality, making it the backbone of the telecom industry.

When telecom companies borrow from banks, lenders often treat spectrum usage rights as a key commercial asset. The Department of Telecommunications, however, maintains that spectrum is a national resource owned by the people, with the government acting as trustee, and that companies hold only limited usage rights rather than ownership.

This tension becomes critical when a telecom operator enters insolvency and lenders seek to sell spectrum to recover dues.

RCom, Aircel, and Videocon Telecommunications entered insolvency between 2018 and 2019, leaving unpaid statutory dues exceeding ₹40,000 crore. The government argued that spectrum cannot be transferred unless all outstanding dues are cleared.

Aircel and its subsidiaries were granted 20-year licences in 2006 and acquired spectrum through auctions between 2010 and 2016 for ₹6,249.27 crore. In 2014, lenders led by State Bank of India extended loans worth ₹13,729 crore. After defaults, insolvency proceedings began in 2018, with the government filing claims of ₹9,894.13 crore.

Under Aircel’s resolution plan approved by the National Company Law Tribunal in June 2020, UVARCL was to acquire assets, including spectrum, for ₹6,630 crore. Lenders were set to take an 89% haircut on dues of ₹58,670 crore, while operational creditors, including government claims of ₹17,462 crore, were to receive only ₹28.5 crore, or 0.16% of admitted claims. UVARCL was expected to realize ₹800–1,300 crore through the sale of spectrum in the 1800 MHz and 2100 MHz bands.

In the case of Reliance Communications, more than 53 lenders have claims of ₹57,382 crore and expected recoveries of ₹20,000–23,000 crore from asset sales, including spectrum. State Bank of India alone has exposure of about ₹12,000 crore across the two companies. Banks argued that spectrum should be treated as an intangible asset capable of monetization.