Spectrum Belongs to the People, Says SC; Insolvency Law Cannot Decide Ownership
The Supreme Court has ruled that telecom spectrum is a public resource and its ownership and control cannot be decided under the Insolvency and Bankruptcy Code, 2016.
A Bench of Supreme Court of India comprising Justice PS Narasimha and Justice Atul Chandurkar held that spectrum is a “material resource of the community” under the Constitution. Therefore, it must be used for the common good and remain under the control of the State for the benefit of citizens.
What Did the Court Say?
Justice Narasimha, while pronouncing the judgment, clarified that the IBC cannot be used as a tool to restructure ownership or control over telecom spectrum. According to the Court, spectrum is not like an ordinary commercial asset. It is a natural and limited public resource that belongs to the people.
The Court divided its judgment into three parts:
- The legal nature of telecom spectrum
- Its true legal position under constitutional principles
- How it should be treated under the IBC in light of telecom laws
The Bench concluded that the IBC cannot guide decisions relating to ownership and control of spectrum.
What Was the Dispute About?
The case arose during insolvency proceedings of telecom companies such as Aircel and Reliance Communications.
The main question was whether telecom companies undergoing Corporate Insolvency Resolution Process (CIRP) could:
- Treat the right to use spectrum as part of their insolvency estate, and
- Claim protection under IBC’s moratorium to avoid paying licence dues to the government
Earlier, the National Company Law Appellate Tribunal had held that although spectrum belongs to the Union Government, the right to use it can be considered an intangible asset of the company. However, it also said that such rights cannot be transferred unless past dues are fully cleared.
Government’s Stand
The Union Government argued that spectrum is a natural resource vested in the Union under constitutional provisions and the Telegraph Act. It cannot be treated as a company’s property under the IBC.
The Attorney General contended that:
- The IBC is a procedural law.
- It cannot override special laws governing natural resources.
- Spectrum ownership always remains with the Union.
Therefore, it cannot be included as part of the insolvency estate of a telecom company.
Creditors’ Stand
On the other hand, lenders and resolution professionals argued that:
- The licence grants a valuable and transferable right to use spectrum.
- This right is recognised as an intangible asset in financial records.
- Banks extend loans based on this commercial value.
They also pointed out that the Department of Telecommunications had filed claims as an operational creditor under the IBC.
Supreme Court’s Final View
The Supreme Court agreed with the Union Government.
It held that spectrum is a constitutional “material resource of the community”. Its control and benefits must serve the public interest. Since ownership remains with the State, the IBC cannot determine or restructure its ownership and control.
The detailed reasoning will be available once the full judgment is uploaded. The case title is State Bank of India v. Union of India & Ors. along with connected matters.
This decision is significant for telecom companies, lenders, and insolvency professionals, as it clarifies that natural resources like spectrum stand on a different legal footing from regular corporate assets.
