Telecom Spectrum as a Community Resource: Analysing the Supreme Court’s Position Ownership and Control under the Insolvency and Bankruptcy Code

I. Introduction

There is something quietly striking about State Bank of India & Ors v Union of India & Ors¹, decided by the Supreme Court of India in February 2026. For years, telecom operators treated spectrum usage rights as commercially valuable assets, lenders extended credit against them, and accountants placed them on balance sheets. Yet the Court’s answer, when it finally arrived, was constitutionally grounded and clear: spectrum is not something a private party can own, restructure, or transfer without the sovereign’s consent. The State had never parted with it.

Table of Contents

The Aircel Group and entities associated with Reliance Communications filed voluntary applications under s 10 of the Insolvency and Bankruptcy Code 2016² at precisely the moment when the Department of Telecommunications was pressing for recovery of outstanding licence fees and spectrum usage charges running into thousands of crores. The State Bank of India, leading the financial creditors, argued that spectrum usage rights were intangible assets within the insolvency estate. The Union of India maintained that spectrum belongs to the people and that no insolvency framework can override the sovereign’s continuing ownership. The Supreme Court agreed.

1. State Bank of India & Ors v Union of India & Ors 2026 INSC 153. ↩

2. Insolvency and Bankruptcy Code 2016 (India), s 10. ↩

II. The Legal Framework

The electromagnetic spectrum has sat within the sovereign’s domain since the colonial period. Section 4 of the Indian Telegraph Act 1885³ vests in the Central Government an exclusive privilege over the working of telegraphs, a term covering radio frequencies. The Indian Wireless Telegraphy Act 1933⁴ makes possession of wireless equipment without a government licence a criminal offence. These provisions do not merely regulate spectrum use; they constitute the State as the exclusive gatekeeper. No entitlement to use any frequency exists independently of such a licence, and that licence is an act of permission, not a sale of property.

Competitive auctions replaced the earlier first-come-first-served allocation after the 2G Case, but the legal character of what was being distributed did not change. The Spectrum Trading Guidelines of 2015⁵ introduced a secondary transfer mechanism hedged by government approval. Section 18(1)(f)⁶ of the Insolvency and Bankruptcy Code requires the Interim Resolution Professional to take control of assets owned by the corporate debtor, while s 36(4)⁷ excludes third-party assets. These rights were recognised as intangible assets under Ind AS 38⁸.

3. Indian Telegraph Act 1885 (India), s 4. ↩

4. Indian Wireless Telegraphy Act 1933 (India), s 3. ↩

5. Department of Telecommunications, Spectrum Trading Guidelines (2015). ↩

6. Insolvency and Bankruptcy Code 2016 (India), s 18(1)(f). ↩

7. Insolvency and Bankruptcy Code 2016 (India), s 36(4). ↩

8. Indian Accounting Standard (Ind AS) 38. ↩

III. Case Law Analysis

The constitutional foundation lies in Article 39(b)⁹, which directs the State to distribute the ownership and control of the material resources of the community so as best to subserve the common good. Spectrum is paradigmatically such a resource: finite, essential, and incapable of private creation. In Secretary, Ministry of Information and Broadcasting v Cricket Association of Bengal¹⁰, the Court held that airwaves are public property to be regulated in the public interest. In MC Mehta v Kamal Nath¹¹, the Court formalised the public trust doctrine, holding that the State holds natural resources as a trustee for the public and that this trust cannot be defeated by transferring those resources to private parties.

The most authoritative precedent is Centre for Public Interest Litigation v Union of India¹², in which the Court had held that spectrum is a scarce national asset belonging to the people and held in trust by the Union. If the spectrum belongs to the people, no licensee acquires ownership at the point of allocation, however much it pays at auction.The 2G Case did not address insolvency, but its constitutional principle admits of only one answer when that question is posed.. State Bank of India supplied that answer. The jurisdictional boundary was mapped in Embassy Property Developments Pvt Ltd v State of Karnataka¹³, where the Court held that insolvency tribunals cannot override public law decisions.

9. Constitution of India, Art 39(b). ↩

10. Secretary, Ministry of Information and Broadcasting v Cricket Association of Bengal (1995) 2 SCC 161. ↩

11. MC Mehta v Kamal Nath (1997) 1 SCC 388. ↩

12. Centre for Public Interest Litigation v Union of India (2012) 3 SCC 1. ↩

13. Embassy Property Developments Pvt Ltd v State of Karnataka (2019) SCC OnLine SC 1542. ↩

IV. Critical Evaluation

The financial creditors’ reliance on s 18(1)(f) and Ind AS 38⁸rests on a category error. The Code’s reference to the balance sheet is evidentiary, not definitional. Section 36(4) confirms this: assets belonging to third parties are excluded from the estate even where the corporate debtor has recognised their value in its accounts. Ind AS 38 is a financial reporting standard; it cannot determine who owns what as a matter of property law. If accounting recognition were determinative, every petroleum exploration block and mining licence capitalised by any corporate debtor would become available for restructuring through insolvency, a result Art 39(b) plainly forbids.

The argument that s 238 of the IBC’s non-obstante clause displaces the Telegraph Act framework misunderstands what such a clause does. Section 238 resolves conflicts between the IBC and commercial statutes, such as SARFAESI 2002,14 without overriding constitutional principles governing public resources. The Telegraph Act answers a prior question: Does the corporate debtor own spectrum? Once the answer is no, s 238 has nothing to resolve. The most troubling feature of the Aircel facts, however, is not the legal argument the financial creditors advanced but the sequence of events that made it necessary to advance it. The voluntary CIRP applications were filed precisely when the Department of Telecommunications was escalating recovery of approximately ₹9,894 crore in outstanding dues, triggering the moratorium under s14 with no judicial consideration of whether those claims were commercial or sovereign.

V. Conclusion

The judgment is constitutionally sound and analytically correct on every point it decides. The balance sheet argument fails because accounting recognition is not a source of legal title. The loss to financial creditors reflects a mispricing of risk, and the correction belongs in reformed lending practice rather than a revision of constitutional principle. Two legislative interventions are now required. Parliament should amend s 14 to carve sovereign regulatory enforcement proceedings out of the moratorium, eliminating the strategic incentive to use voluntary CIRP as a shield against government recovery actions. Parliament should also create a supervised statutory pathway for the conditional transfer of spectrum usage rights in insolvency, with full payment of government dues and DoT approval as non-negotiable conditions precedent.

The judgment has correctly established that the insolvency framework cannot commandeer a community resource. The legislative task now is to ensure that constitutional clarity does not leave the telecommunications sector without a workable resolution mechanism because the absence of such a mechanism serves neither the public interest nor the creditors that the IBC was designed to protect.