SC 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) to repay lenders in the insolvency proceedings of Aircel and Reliance Communications (RCom).

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 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 detailed written judgment is awaited.

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.

RCom, Aircel and Videocon entered insolvency between 2018 and 2019, leaving behind unpaid statutory dues exceeding ₹40,000 crore.

At the heart of the dispute are two crucial questions: whether spectrum, as a sovereign natural resource, falls outside the ambit of insolvency law, and whether the licensed right to use spectrum can be monetised to repay creditors under the IBC.

The ruling clarifies that telecom spectrum – constitutionally recognised as belonging to the people of India – cannot be liquidated under the insolvency regime to maximise lender recoveries. It is expected to set a precedent for future telecom insolvency cases involving spectrum rights.

The Centre had argued that the IBC cannot override the state’s control over natural resources. It maintained that telecom companies do not own spectrum but are granted limited rights to use it, and that if statutory dues such as licence fees, spectrum usage charges or adjusted gross revenue remain unpaid, the spectrum must revert to the government.

Lenders, by contrast, contended that spectrum usage rights are commercially valuable and transferable with government approval, and that banks had relied on this assignability while extending loans. Preventing monetization, they argued, would sharply reduce recoveries and undermine the objective of insolvency resolution. Without spectrum monetization, they warned, Aircel and RCom could face liquidation, leading to significant losses for creditors.

Aircel filed for insolvency in 2018 amid heavy debt, mounting losses and intense competition following the entry of Reliance Jio. During the resolution process, parts of its assets were later acquired by UV Asset Reconstruction Company to maximise recoveries.

RCom entered insolvency in February 2019 after defaulting on debt of over ₹46,000 crore, with proceedings triggered by recovery action from Ericsson. During the Corporate Insolvency Resolution Process, lenders sought to monetize key assets, particularly spectrum usage rights.

However, the Department of Telecommunications opposed this, leading to the NCLAT’s 2021 ruling and the subsequent appeals before the Supreme Court.