Supreme Court Rules Spectrum Is Not An “Asset” under IBC; Upholds Sovereign Control Over Natural Resources

The Hon’ble Supreme Court, in its judgment dated February 13, 2026, addressed the fundamental question of whether TSPs can invoke a moratorium under the Insolvency and Bankruptcy Code, 2016 (IBC) for the restructuring of spectrum allocated to them through auctions.

The matter arose from the insolvency proceedings of the Aircel Group, which had moved for voluntary corporate insolvency after failing to pay significant licence fees to the Department of Telecommunications (DoT). While the National Company Law Appellate Tribunal (NCLAT) had initially concluded that spectrum could be subjected to insolvency as an “intangible asset,” it concurrently held that such use was contingent upon clearing past dues. This led to a series of appeals by the State Bank of India (representing lenders) and the DoT.

The Appellants (TSPs and Lenders) contended that once spectrum is recorded as an “intangible asset” in a company’s balance sheet under Accounting Standards (AS 26), it falls within the exclusive domain of the IBC framework for preservation and value maximization. They argued that Section 238 of the IBC should override any inconsistent provisions in telecom licences or trading guidelines.

The Union of India countered that spectrum is a scarce sovereign resource held in public trust. They asserted that Section 4 of the Telegraph Act, 1885 vests the exclusive privilege of telecommunications in the Central Government, and a licence is merely a contractual “largesse” that does not transfer title.

The Hon’ble Supreme Court, while dismissing the appeals filed by the financial institutions and TSPs, held as follows:

1. Public Trust Doctrine: Spectrum is a finite natural resource, and the State, as a trustee for the community, must ensure its use subserves the “common good” [1.1, 51, 55].

2. Nature of Licence: A telecom licence is a limited, conditional privilege and not a proprietary interest; ownership remains with the Nation.

3. Accounting vs. Legal Ownership: Mere recognition of spectrum as an “asset” in financial statements for accounting purposes (under Ind AS 38 or AS 26) does not confer legal ownership or title.

4. IBC Statutory Exclusions: Under Sections 18 and 36 of the IBC, the insolvency framework expressly excludes assets owned by third parties that are in the possession of the debtor under contractual arrangements.

5. Primacy of Telecom Laws: The IBC cannot be permitted to make inroads into the telecom sector to rewrite rights and liabilities that operate under an exclusive legal regime (Telegraph Act and Telecom Regulatory Authority of India Act).

6. Regulatory Control: Spectrum trading and transfers are strictly governed by Spectrum Trading Guidelines, which require the absolute clearance of dues prior to any transfer.

The ruling clarifies that the “commercial wisdom” of a Committee of Creditors cannot substitute for statutory and regulatory compliance regarding natural resources. Ultimately, the Court held that the IBC is not the guiding principle for restructuring the ownership and control of spectrum.

Importantly, the Court noted that allowing TSPs to use the IBC to “wipe off” government dues exceeding Rs. 40,000 crores while protecting much smaller bank debts would be a “malicious or fraudulent” use of the statute.