Summary:
The Supreme Court of India has ruled in favour of the Department of Telecommunications (DoT), holding that telecom spectrum cannot be transferred under a resolution plan framed under the Insolvency and Bankruptcy Code (IBC). The Court affirmed that spectrum is a limited public natural resource owned by the community, and therefore its ownership, control, and associated benefits must remain protected for public interest. It clarified that the IBC cannot be used to modify or restructure rights over such a public resource. Addressing whether insolvent telecom companies could treat spectrum as a transferable corporate asset during insolvency proceedings, the Court rejected lenders’ arguments that spectrum usage rights qualify as intangible assets capable of transfer. Instead, it upheld the DoT’s position that spectrum must revert to the government if licence dues remain unpaid, reinforcing that insolvency law cannot override telecom regulatory principles governing spectrum allocation and control.
The Supreme Court of India has delivered a ruling in favour of the Department of Telecommunications (DoT), determining that telecom spectrum cannot be transferred under an insolvency resolution plan formulated pursuant to the Insolvency and Bankruptcy Code (IBC).
In pronouncing its decision, the bench remarked that the issue was less complicated than it initially appeared and endorsed the Centre’s position that spectrum constitutes a limited and public natural resource owned by the community. The court emphasized that ownership, control, and the benefits arising from spectrum must remain protected for the public. It further clarified that the IBC cannot serve as the governing mechanism for modifying or restructuring the ownership and control of such a public resource.
Referring to the judgment, the bench stated that the central question was whether telecom service providers obligated to pay licence fees to the DoT could rely on the moratorium available under the corporate insolvency resolution process to reorganize assets such as spectrum.
The matter concerned spectrum assigned through auctions, with the court observing that categorizing spectrum as a corporate asset gives rise to fundamental concerns regarding its ownership, possession, use, and transfer.
The ruling was organized into three segments, addressing the legal character of spectrum, the principal legal issues at stake, and the treatment of assets under the IBC in the context of telecom laws governing spectrum. Ultimately, the court held that the IBC cannot be applied to restructure ownership and control of spectrum.
At the heart of the dispute was whether spectrum held by insolvent telecom companies could be regarded as an asset and transferred to a successful resolution applicant under the IBC. While lenders contended that the right to use spectrum constitutes an intangible asset that should pass under a resolution plan, the DoT argued that, as a public resource, spectrum must revert to the government if outstanding dues remain unpaid.
