The Supreme Court on Friday ruled in favour of the Department of Telecommunications (DoT), holding that telecom spectrum cannot be transferred as part of an insolvency resolution plan under the Insolvency and Bankruptcy Code (IBC).
Delivering the verdict, the top court observed that the issue was “not as complex as it seems.” A bench of Justice PS Narasimha and Justice Atul Chandurkar, upholding the Centre’s stand, underscored that spectrum is a scarce and public natural resource that belongs to the community, and that its ownership and control — along with all associated benefits — must remain secured for citizens.
“Its ownership, and more importantly, its control with all its attributes, including benefits, have to be secured for its citizens,” the bench noted.
The court made it clear that the IBC cannot serve as the guiding framework for restructuring or altering ownership of such a resource.
Reading out portions of the judgment, the bench observed that the core issue was whether telecom service providers, required to pay licence fees to the DoT, could invoke the moratorium under the IBC’s Corporate Insolvency Resolution Process (CIRP) to restructure their assets.
The asset in question was spectrum allocated through auction. The court said the attempt to treat spectrum as a corporate asset raised fundamental questions about its ownership, possession, use and transferability.
The judgment was structured in three parts — first defining the legal character of spectrum, then identifying the core legal issues, and finally examining how assets are treated under the IBC and how that framework interacts with telecom laws governing spectrum. The court concluded that “as naturally as water knows the slope, IBC cannot be the guiding principle for restructuring the ownership and control of spectrum.”
The ruling came on a batch of appeals filed by the Centre, the SBI-led Committee of Creditors (CoC) of the Aircel group and others challenging an April 2021 order of the National Company Law Appellate Tribunal (NCLAT). The appellate tribunal had held that spectrum could be transferred under an insolvency resolution plan only after clearing all government dues.
The dispute centred on whether spectrum held by insolvent telecom companies could be treated as an asset and passed on to a successful resolution applicant under the IBC. Lenders had argued that the right to use spectrum constituted an intangible asset that should move with the resolution plan. The DoT, however, maintained that spectrum, as a public resource, must revert to the government if dues remain unpaid.
