Spectrum Not an Asset Under IBC: Supreme Court's Landmark 2026 Ruling

Introduction: A Decisive Verdict on a National Resource

In a landmark decision on February 13, 2026, the Supreme Court of India ruled that telecom spectrum cannot be treated as a corporate asset under the Insolvency and Bankruptcy Code (IBC). The verdict, delivered by a bench of Justice PS Narasimha and Justice Atul Chandurkar, brings finality to a long-standing dispute between the Department of Telecommunications (DoT) and lenders to bankrupt telecom operators. The court affirmed that spectrum is a scarce public resource, and its ownership remains with the government, placing it beyond the reach of insolvency proceedings.

The Court's Constitutional Framing

The bench underscored that the issue was 'not as complex as it seems,' framing its analysis within a constitutional context. The judgment clarified that spectrum is a 'material resource of the community,' and its control and benefits must be secured for the public good. The court stated that the IBC, a general law for corporate insolvency, cannot be used to rewrite the specialized legal regime governing telecommunications. The ruling emphasized that the Indian Telegraph Act, 1885, grants the Union government exclusive privilege over telecommunication systems, and this statutory control cannot be diluted by insolvency law. The court observed that what telecom service providers (TSPs) acquire through auctions is a limited, conditional, and revocable privilege to use the spectrum, not ownership of it. The fact that it is shown as an 'intangible asset' in their balance sheets does not alter its fundamental legal character.

Background of the Aircel and RCom Dispute

The case originated from the insolvency proceedings of Aircel Limited and Reliance Communications (RCom), which entered voluntary insolvency in 2018 and 2019, respectively. The DoT had filed claims for unpaid dues, including licence fees and spectrum usage charges, amounting to thousands of crores. Lenders, led by the State Bank of India (SBI), argued that the right to use spectrum was a valuable intangible asset that should be part of the resolution plan, allowing it to be transferred to a new entity to facilitate the revival of the distressed companies. They contended that without the spectrum, there would be 'nothing left to resolve.' This stance was challenged by the Centre, which maintained that spectrum must revert to the government if dues are not cleared. The matter reached the Supreme Court after appeals were filed against a 2021 National Company Law Appellate Tribunal (NCLAT) order, which had permitted spectrum transfer only after all government dues were settled.

Immediate Impact on Insolvent Telcos

The judgment directly impacts the insolvency resolution of Aircel, RCom, and Videocon. The Supreme Court's decision clears the path for the DoT to reclaim the airwaves allocated to these defaulting operators. According to sources, the DoT will now examine the order and initiate proceedings to terminate the licences and take back the spectrum. This move effectively ends any possibility of these companies being revived as telecom operators through the IBC process, as their most critical asset is no longer available for restructuring. The reclaimed spectrum, however, is not expected to be included in the upcoming auction round as the process has already commenced.

A Major Setback for Lenders

The ruling is a significant blow to financial creditors, particularly banks that have substantial exposure to the bankrupt telcos. Lenders had hoped to recover a portion of their loans by monetizing the spectrum held by these companies. For instance, SBI's exposure to Aircel and RCom is estimated to be around ₹12,000 crore. With spectrum now off the table, banks are expected to face much deeper haircuts. The resolution plan for Aircel by UV Asset Reconstruction Co Ltd (UVARCL), for example, would have seen financial creditors with claims of ₹58,795 crore recover only ₹6,630 crore, an 89% haircut. This figure is now likely to worsen. The verdict will compel lenders to reassess risk and may lead to higher risk premia and stricter covenants for future lending to the capital-intensive telecom sector.

Key Data at a Glance

The Supreme Court's ruling has clarified several financial and legal positions concerning the telecom sector's insolvency cases. The table below summarizes the critical aspects of the dispute and its financial implications.

Legal and Market Analysis

Legal experts have noted that the judgment reinforces the principle of sovereign control over natural resources. It establishes a clear 'red line,' affirming that insolvency law cannot be used to bypass statutory dues owed to the government for the use of a public asset. Resolution plans for telecom companies must now be structured strictly in compliance with telecom statutes and will require DoT approval for any transfer of usage rights. The decision effectively means that the government does not have to wait in line with other creditors under the IBC's waterfall mechanism to reclaim spectrum. The insolvency process for the corporate entities may continue for other assets, but the core telecom asset reverts to the sovereign.

Conclusion: Redefining Telecom Insolvency

The Supreme Court's verdict provides much-needed legal clarity on the status of spectrum in insolvency proceedings. By declaring that spectrum is a public resource held in trust by the government, the court has prioritized national interest over the claims of corporate creditors. The ruling fundamentally alters the landscape for telecom resolutions in India, ensuring that access to this vital natural resource remains conditional on compliance with its governing statutes. The DoT is now expected to proceed with the cancellation of licences and reclamation of airwaves from the defaulting entities, closing a contentious chapter in India's telecom history.