State Bank Of India vs. Union Of India

REPORTABLE
IN THE SUPREME COURT OF INDIA
2026 INSC 153
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 1810 OF 2021
STATE BANK OF INDIA ...APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. …RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). 2227 OF 2021
WITH
CIVIL APPEAL NO(S). 4570 OF 2021
WITH
CIVIL APPEAL NO(S). 2263 OF 2021
WITH
CIVIL APPEAL NO(S). 4571 OF 2021
WITH
CIVIL APPEAL NO(S). 6546 OF 2021
Signature Not Verified
Digitally signed by
Jayant Kumar Arora
Date: 2026.02.13
16:23:32 IST
Reason:
1

J U D G M E N T
Contents
I. Introduction........................................................................................................3
II. Prelude to the NCLAT’s judgment: Facts leading to the filing of these
appeals................................................................................................................4
III. Submissions of the Learned Counsels.........................................................13
A. Submission on behalf of TSPs and financial institutions..........................13
B. Submissions on behalf of DoT/Union of India...........................................16
IV. Nature of Spectrum and the Constitutional Framework Governing the
Natural Resources...........................................................................................20
A. Spectrum as a Finite Natural Resource....................................................20
B. Concept of ownership over natural resources and its Constitutional
Underpinnings.................................................................................................21
V. Statute, Policy and Contractual Framework Governing Spectrum
Allocation, Licensing and Use........................................................................23
A. Statutory Framework of Spectrum............................................................23
B. ... The Successive Telecom Policies including unbundling of licensing
spectrum allocation.........................................................................................26
C. Guidelines for Trading of Access Spectrum by Access Service Providers,
2015..........................................................................................................31
D. Spectrum Licenses and Contract:.............................................................37
E. Tripartite Agreement..................................................................................42
VI. The Insolvency and Bankruptcy Code, 2016 ................................................44
A. First principles...........................................................................................44
B. Difficulty in Expecting NCLAT to rule on Spectrum...................................46
C. Implications of Treating Spectrum as an Asset by TSPs/Corporate Debtor
and the Financial Institutions....................................................................47
VII. Identification of True Legal Province of Spectrum: Reconciliatory
Interpretation of Two Statutory Regimes......................................................58
VIII. Conclusion.........................................................................................................67
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I. Introduction
1. The question for our consideration is whether telecom service
providers (TSPs), called upon to pay the license dues by the Department
of Telecommunication (DoT) can invoke moratorium on the basis of
voluntary corporate insolvency resolution process under Insolvency and
Bankruptcy Code, 2016 (IBC) for restructuring of their assets. The asset
in question is the Spectrum allocated to the TSPs through auction. The
endeavour to treat spectrum as an asset in the hands of TSPs gives rise
to a fundamental question as to its ownership, possession, use, transfer,
or assignment. Its definition and legal province are the subject matter of
our inquiry.
1.1. This issue is not as complicated as it seems. We could demystify
the legal challenge by first understanding spectrum as a material
resource, precisely as what our Constitution refers to as the material
resource of the community. If that be so, it is easy to find the path by
simply following the State policy to ensure that spectrum and its benefits
sub-serve 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 the citizens .
1.2. Our judgment is therefore in three parts. In the first part, we define
the legal implications of spectrum and in the second part we identify its
true legal province. In the third part, we examine treatment of an “asset”
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under IBC and in this context its application to telecommunication laws
that govern ownership of spectrum. Finally, we could reach our
conclusion, as naturally as water knows its slope, IBC cannot be the
guiding principle for restructuring the ownership and control of spectrum.
II. Prelude to the NCLAT’s judgment: Facts leading to the filing
of these appeals.
2. The Aircel Group entities - Aircel Limited, Aircel Cellular Limited
and Dishnet Wireless Limited (hereinafter collectively referred to as “the
corporate debtors”) - were granted telecom licences by the DoT under
Unified Access Service Licences (UASL) pursuant to Licence
Agreements dated 05.12.2006, each valid for a term of twenty years.
Domestic lenders, including the State Bank of India, extended rupee
term loan facilities aggregating to 13,729 crores under a Rupee Loan
₹
Facility Agreement dated 29.03.2014, followed by execution of
Indentures of Mortgage dated 02.05.2014 in favour of the lenders. In
spectrum auctions conducted by DoT during the years 2010, 2014, 2015
and 2016, the corporate debtor acquired rights to use spectrum in the
900 MHz, 1800 MHz and 2100 MHz bands upon payment of 6,249.27 ₹
crores.
3. Corporate debtors failed to pay licence fee. When DoT attempted
to recover these amounts, they invoked IBC by filing an application
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under Section 10 for voluntary corporate insolvency resolution process.
The application was admitted by the National Company Law Tribunal,
Mumbai Bench, vide order dated 12.03.2018 in respect of Aircel Limited,
appointing Vijaykumar V. Iyer as the Interim Resolution Professional. By
a subsequent order dated 19.03.2018, Aircel Cellular Limited and
Dishnet Wireless Limited were also admitted into CIRP.
4. Upon constitution of the Committees of Creditors (CoC) for Aircel
Cellular Limited and Dishnet Wireless Limited on 30.03.2018, claims
were invited from all stakeholders. The DoT was invited to participate in
the CoC meeting held on 06.06.2018, and thereafter filed its claim on
16.08.2018 in Form-F, asserting a claim of ₹ 9,894.13 crores as a
licensor, arising from Annual Licence Fee and Spectrum Usage Charges
payable under the Licence Agreements.
5. A resolution plan submitted by UV Asset Reconstruction Company
was approved by the CoC on 13.05.2019 and thereafter sanctioned by
the NCLT by order dated 09.06.2020. Aggrieved, DoT assailed the NCLT
order approving the resolution plan before the appellate tribunal, NCLAT.
6. During the pendency of the aforesaid proceedings, this Court
delivered its judgment in Union of India v. Association of Unified Telecom
1
Service Providers of India , affirming the definition of Adjusted Gross
Revenue (AGR) as stipulated in the licence agreements executed
1 (2020) 3 SCC 525. (Hereinafter ‘AUSPI (II))
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between the DoT and the TSPs. Pursuant thereto, the Union of India
filed M.A. (D) No. 9887 of 2020 on certain aspects relating to payment of
the AGR dues. In the course of consideration of the said application, it
was brought to the notice of this Court that several TSPs, including the
Aircel Group entities, were undergoing insolvency proceedings under the
IBC and in view of the moratorium recovery of amount is impermissible.
2
In the said proceedings, this Court passed an order on 20.07.2020
observing as under:
“ We have heard the learned counsel appearing for the parties
at length with respect to the prayer made by the
Central Government and the time frame for making the
payment as per the order passed by this Court. During course
of hearing, again an attempt was made to wriggle out of our
judgment and orders, which were passed by this Court under
the guise of reassessment and recalculation. That is not at all
permissible. In view of decision, there is no scope of raising
any further dispute with respect to any item or to raise fresh
dispute. No dispute can be raised with respect to dues and
they have to be paid. New round of litigation is prohibited. In
the second inning, we have heard the same after remand of
the issues to the TDSAT. Thereafter, there is no question of
entertaining any kind of dispute with respect to the payment
and dues worked out. No dispute shall be entertained. The
calculations which have been given and the amount to be
recovered at pages 180181 of M.A.D. No. 9887 of 2020
(application for modification) in C.A. No. 63286399 of 2015 are
taken to be as final amount and there can be no dispute raised
about it. No recalculation and selfassessment can be
undertaken.
….
However, when we consider the dues of Telecom Service
Providers under insolvency, we find that there are
several companies which have dues to the extent of Rs.
38,964.27 crores, which have gone under liquidation. Since
the dues are huge, we propose to examine the bonafides of the
initiation of the proceedings under the IBC. Let all the
2 In Re Mandar Deshpande, 2020 SCC OnLine 758.
6

documents of the companies viz. Aircel Group of
Companies, Reliance Communication/Reliance Telecom
Limited, Sistema Shyam Teleservices Ltd. and Videocon
Telecommunications Ltd. relating to liquidation and orders
passed in proceedings be placed on record within 10 days from
today.
We have closed the matter with respect to the prayer made for
making the payment in installments and the offer made by the
Government, the time frame thereto and how to secure the
amount. The order is reserved on that aspect.
However, we will hear the matter separately with respect to the
companies under liquidation and test the bonafides of
their action and how to ensure that the amount is recovered.
Let all the documents be placed on record within 10 days from
today and the matter be listed for hearing about
these companies on the above aspect on 10.08.2020. ”
3
7. In continuation of the above proceedings, this Court , by order
dated 01.09.2020, noted that the question whether spectrum could be
subjected to proceedings under the IBC raised issue of considerable
significance. Accordingly, specific questions of law were formulated and
referred for adjudication to NCLAT on 25.09.2022 with a direction to
consider the same after hearing all concerned parties and to return a
reasoned determination. The following were the questions framed and
referred by this Court:
“20. A question has been raised concerning ownership.
Whether TSPs can be said to be the owner based on the right
to use the spectrum under licence granted to them? Whether
a licence is a contractual arrangement? Whether ownership
belongs to the Government of India? Whether spectrum
being under contract can be subjected to proceedings under
Section 18 of the Code? The question also arises whether the
spectrum can be said to be in possession, which arises from
ownership. What is the distinction between possession
and occupation? Whether possession correlates with the
ownership right? A question also arises concerning the
3 Union of India v. Association of Unified Telecom Service Providers of India, (2020) 9 SCC 748.
7

difference between trading and insolvency proceedings.
Whether a licence can be transferred under the insolvency
proceedings, particularly when the trading is subjected to
clearance of dues by seller or buyer, as the case may be, as
provided in Guideline Nos.10 and 11; whereas in insolvency
proceedings dues are wiped off. Guideline No.12 is also
assumed to be of significance in case spectrum is subjected
to insolvency proceedings, which must be considered.
21. It is also required to be examined that when the
Government has declined the permission to trade and has not
issued NOC for trading on the ground of non-fulfilment of the
conditions as stipulated in the licence agreement, the spectrum
can be subjected to resolution proceedings which will have the
effect of wiping off the dues of the Government, which are
more than Rs 40,000 crores. Whereas the dues of the banks
are much less. Whether obtaining the DoT's permission and its
approval to the resolution plan would be a substitute for
Trading Guideline Nos. 10, 11, and 12?
22. A question also arises of bona fide nature of the
proceedings under the Code. In the backdrop facts of the
cases, question also arises whether spectrum licence is
subjected to proceedings under the Code, and it overrides the
provisions contained in the Telegraph Act, 1885, the Wireless
Telegraphy Act, 1933, and the Telecom Regulatory Authority of
India Act, 1997.
23. In view of the fact that the licence contained an agreement
between the licensor, licensee, and the lenders, whether on the
basis of that, spectrum can be treated as a security interest
and what is the mode of its enforcement. Whether the banks
can enforce it in the proceedings under the Code or by the
procedure as per the law of enforcement of security interest
under the Securitisation and Reconstruction of Financial Assets
and Enforcement of Securities Interest Act, 2002 (the
SARFAESI Act) or under any other law.
24. A question of seminal significance also arises whether the
spectrum is a natural resource, the Government is holding the
same as cestui que trust. In view of the nature of the resource,
it can be subjected to insolvency/liquidation proceedings.
Earlier licence was obtained on the payment of fees in advance
that was not beneficial to the TSPs, as such a new revenue
sharing regime was devised in 1999, and the Central
Government has an exclusive right under Section 4 of the
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Telegraph Act, 1885 in use of spectrum, it can part with on
certain statutory guidelines, its use is not permissible without
the payment of requisite fee.
25. Whether dues under the licence can be said to be
operational dues? It is also to be examined whether
deferred/default payment instalment(s) of spectrum acquisition
cost can be termed to be operational dues besides AGR dues.
Whether as per the revenue sharing regime and the provisions
of the Telegraph Act, 1885, the dues can be said to be
operational dues? Whether natural resource would be available
to use without payment of requisite dues, whether such dues
can be wiped off by resorting to the proceedings under the
Code and comparative dues of the Government, and secured
creditors and bona fides of proceedings are also the questions
to be considered.”
8. The questions referred can be restated as follows;
(i) Whether spectrum is a natural resource held by the Union of India in
public trust, and the legal consequences flowing therefrom.
(ii) Whether the conferment of a right to use spectrum under a licence
granted under Section 4 of the Telegraph Act, 1885 vests any ownership
or proprietary interest in TSPs, or whether such right constitutes a
limited, conditional and revocable privilege.
(iii) What is the true nature of the relationship between ownership,
possession and occupation in respect of spectrum, and whether
possession or control of spectrum usage correlates with ownership
rights.
9

(iv) Whether spectrum, or the right to use spectrum under a licence, can
be treated as an “asset” of the corporate debtor so as to fall within the
ambit of Section 18 of the IBC.
(v) Whether spectrum licences or spectrum usage rights can be
transferred or traded in insolvency proceedings when such transfer,
under the Spectrum Trading Guidelines, is expressly subject to prior
governmental approval and clearance of past dues.
(vi) Whether spectrum or spectrum usage rights can be treated as a
security interest in favour of lenders by virtue of licence conditions or
tripartite arrangements, and whether such security can be enforced
under the Code.
(vii) Whether approval of a resolution plan under the IBC can substitute
or override the requirements contained in the Spectrum Trading
Guidelines, including Guidelines 10, 11 and 12, particularly where the
Government has declined permission to trade on account of non-
fulfilment of licence conditions.
(viii) Whether invocation of CIRP, particularly voluntarily, raises issues of
bona fides of the corporate debtor in triggering proceedings under the
IBC.
9. By the order impugned before us NCLAT heard parties in detail
and returned the following conclusions on the questions referred;
“75. In conclusion we summarize our findings as under:
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a) Spectrum is a natural resource and the Government is
holding the same as cestui que trust.
b) Spectrum, being intangible asset of the Licensee/ TSPs/
TelCos/ Corporate Debtor, can be subjected to
insolvency/liquidation proceedings.
c) Dues of Central Government/ DOT under the Licence fall
within the ambit of Operational Dues under I&B Code.

d) Deferred/ default payment installments of spectrum
acquisition cost also fall within the ambit of Operational
Dues under I&B Code.

e) As per Revenue Sharing Regime and the provisions of
Indian Telegraph Act, 1885, the nature of dues payable to
Licenser continues to be ‘Operational Dues’ which are
payable primarily in terms of the Licence Agreement.
f) Natural Resource would not be available to use without
payment of requisite dues.
g) Triggering of Corporate Insolvency Resolution Proceedings
under I&B Code by the Corporate Debtor with the object of
wiping off of such dues, not being for insolvency resolution,
but with malicious or fraudulent intention, would be
impermissible.
h) TSPs have the right to use spectrum under licence granted
to them. They cannot be said to be the owners in
possession of the spectrum but only in occupation of the
right to use spectrum. Ownership of spectrum belongs to
Nation (people) with Government only being its Trustee.
Possession correlates with the ownership right.
i) Under Section 18 of the I&B Code, the Interim Resolution
Professional is bound to monitor the assets of the Corporate
Debtor and manage its operations, take control and custody
of assets over which the Corporate Debtor has ownership
rights including intangible assets which includes right to use
spectrum.
11

j) Trading in intangible assets like use of spectrum derives
strength from the terms and conditions of the Licence
Agreement/ UASL, clause 6.3 whereof vests in Licensee a
right to transfer or assign the Licence Agreement with prior
written approval of the Licensor and subject to fulfillment of
conditions which include payment of past dues in full till the
date of transfer. On the other hand, Insolvency Proceedings
arise out of default in discharge of financial or operational
debt and are triggered for insolvency resolution of corporate
persons, etc. in a time bound manner for maximization of
value of assets of such persons.
k) While a licence can be transferred as an intangible asset of
the Licensee /Corporate Debtor under Insolvency
Proceedings in ordinary circumstances, however as the
trading is subjected to clearance of dues by Seller or Buyer,
as the case may be, the Transferor/Seller or
Transferee/Buyer being in default, would not qualify for
transfer of licence under the insolvency proceedings.
l) The spectrum cannot be utilized without payment of
requisite dues which cannot be wiped off by triggering CIRP
under I&B Code.
m) The defaulting Licensees/ TelCos cannot be permitted to
wriggle out of their liabilities by resorting to triggering of
CIRP by seeking initiation of CIRP under Section 10 of I&B
Code, not for purposes of resolution but fraudulently and
with malicious intent of withholding the huge arrears
payable to Government, obtaining moratorium to abort
Government’s move to suspend, revoke or terminate the
Licences and in the event of a Resolution Plan being
approved, subjecting the Central Government to be
contended with the peanuts offered to it as ‘Operational
Creditor’ within the ambit of distribution mechanism
contemplated under Section 53 of I&B Code.”
n) Having regard to Clause 3.4 and 3.5 of the Tripartite
Agreement according priority/ first charge to DOT, the
spectrum cannot be treated as a security interest by the
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Lenders. In view of this finding, we need not consider the
mode of Enforcement of security interest.
10. Appeals and cross appeals have been filed assailing the said order
impugning the different conclusions arrived at by the NCLAT. The lead
appeal has been instituted by the State Bank of India, representing the
financial creditors of the corporate debtor, assailing certain conclusions
of the appellate tribunal on the questions referred. Similarly, the erstwhile
Resolution Professional of the corporate debtor laid identical challenge
to the findings. On the other hand, Union of India through the DoT,
challenged the impugned judgment on some fundamental grounds.
Appeals have also been filed by “outsiders”- the Resolution
Professionals of Reliance Telecom Limited (RTL) and Reliance
Communication Limited (RCOM), contending that the findings of the
NCLAT would have a direct bearing on, and adversely affect, the
adjudication of the pending applications seeking approval of the
resolution plans under the IBC.
III. Submissions of the Learned Counsels:
11. Submission on behalf of TSPs and financial institutions: Ld.
Sr. Counsel Rakesh Dwivedi, appearing on behalf of the State Bank of
India representing the CoC, submitted that the impugned judgment of
the NCLAT proceeds on fundamentally inconsistent premises and is
13

contrary to the scheme, object and overriding mandate of the IBC.
Further, Ld. Sr. Counsel Shyam Divan, appearing for the erstwhile
Resolution Professional, and Mr. Gopal Jain, Ld. Sr. Counsel appearing
for the Resolution Professional of RCOM and RTL, advanced substantial
submissions, all of which can be articulated as follows:
11.1 The NCLAT adopted inconsistent conclusions. Having held that
spectrum usage rights constitute an intangible asset of the corporate
debtor and that DoT dues are operational in nature, it nevertheless
concluded that spectrum cannot be utilised unless past dues are cleared
and that such dues survive the CIRP. These findings rest on mutually
destructive premises and cannot co-exist within the scheme of the Code.
11.2 Having accepted that spectrum usage rights are assets and that
DoT is an operational creditor, the NCLAT erred in relying upon the
Tripartite Agreement and the Spectrum Trading Guidelines, 2015 to
accord preferential treatment to DoT. This results in elevation of one
operational creditor over others, contrary to the pari passu treatment
mandated by Sections 30 and 53 of the Code.
11.3 Telecom licences, together with the right to use spectrum for a
defined term, constitute valuable intangible assets of the corporate
debtor. While spectrum remains a sovereign resource, the grant of a
licence upon payment of consideration creates a legally enforceable
right of commercial exploitation. The Tripartite Agreement and the
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Spectrum Trading Guidelines themselves recognise the transferability
and encumbrance of such rights, subject to regulatory approval.
11.4 Once treated as assets of the corporate debtor, the licence and
spectrum usage rights fall within the exclusive domain of the insolvency
framework. During CIRP, all assets vest in the custody of the resolution
professional for preservation and value maximisation. Their treatment
under a resolution plan lies within the commercial wisdom of the CoC
and is immune from judicial reappraisal except on limited statutory
grounds.
11.5 By virtue of Section 238, the Code prevails over any inconsistent
contractual or statutory instrument. To the extent that the UASL, the
Tripartite Agreement or the Spectrum Trading Guidelines impose
conditions inconsistent with the resolution process or the binding effect
of an approved plan, they must yield to the Code. Judicial precedent
consistently affirms that an approved resolution plan overrides prior
contractual and statutory claims.
11.6 Once DoT’s dues are admitted as operational debt, their treatment
stands crystallised and can be governed only by the approved resolution
plan. Conditioning post-resolution use or transfer of spectrum on
clearance of residual pre-CIRP dues amounts to an impermissible
reordering of priorities outside the statutory waterfall and violates
Sections 30(2)(b) and 31. DoT, having filed its claims and not challenged
15

their classification before the NCLT, is estopped from contending
otherwise
11.7 Secured lenders hold valid and subsisting security interests under
the loan and mortgage documents executed by the corporate debtors.
The NCLAT failed to give effect to these instruments and, in substance,
subordinated secured creditor rights by according priority to DoT dehors
the IBC, contrary to the legislative scheme of insolvency resolution.
11.8 The NCLAT exceeded its jurisdiction in imposing payment of
“requisite dues” as a precondition for use or transfer of spectrum. The
IBC vests all commercial decisions, including creditor treatment and
value distribution, in the collective wisdom of the CoC. Judicial
interference on equitable or regulatory considerations amounts to an
impermissible substitution of such wisdom, contrary to the law laid down
4
in K. Sashidhar v. Indian Overseas Bank and Committee of Creditors
5
Essar Steel India Ltd. v. Satish Kumar Gupta .
11.9 A clear demarcation must be maintained between DoT’s role as
regulator and its position as creditor. While regulatory powers may be
exercised prospectively in accordance with law, pre-CIRP dues resolved
under an approved plan cannot be revived under the guise of regulation.
The moratorium under Section 14 protects critical operating assets,
4 2019 (12) SCC 150.
5 2020 (8) SCC 531.
16

including spectrum usage rights, and bars enforcement of past claims
during CIRP and plan implementation.
12. Submissions on behalf of DoT/Union of India : Ld. Attorney
General R. Venkataramani, assisted by Ld. ASG Vikramjit Banerjee
assailed the impugned judgment of the NCLAT insofar as it holds that
spectrum constitutes an intangible asset of the corporate debtor
amenable to insolvency proceedings, that DoT dues are operational
debts, and that spectrum usage rights or licences are transferable under
the Code, 2016.
12.1 Spectrum is a scarce and finite natural resource owned by the
people of India, with legal title vesting exclusively in the Union of India,
which holds it in trust for the public. Licensees acquire no proprietary
interest in spectrum. The doctrine of public trust, as consistently affirmed
6
by this Court in Centre for Public Interest Litigation v. Union of India , as
well as Natural Resources Allocation, In Re, Special Reference No.1 of
7
2012 , governs its allocation and use.
12.2 The grant of spectrum under a licence does not effect a transfer of
property or title. It confers only a limited, conditional and revocable
privilege to use spectrum, subject to statutory requirements, licence
conditions and overriding public interest. The NCLAT, therefore, erred in
6 (2012) 3 SCC 1.
7 (2012) 10 SCC 1.
17

treating spectrum usage rights as assets of the licensee/corporate
debtor capable of transferred in insolvency or liquidation.
12.3 Section 4 of the Telegraph Act, 1885 vests exclusive privilege in
the Union to establish and operate telecommunication systems and to
grant licences on such terms and payments as it determines. The
licence, though contractual in form, emanates from sovereign statutory
power and does not create proprietary rights. Judicial precedents,
including AUSPI (II) (Supra) , reiterate the State’s obligation to retain
control over spectrum and secure fair value for its use.
12.4 The Notice Inviting Applications for spectrum auctions issued on
28.09.2012 and the Tripartite Agreement expressly clarify that licensees
acquire only a right to use spectrum and that transfer, renewal or
continuation remains subject to satisfaction of dues and compliance with
licence conditions. The rights of lenders are subordinate to sovereign
control and cannot override statutory mandates.
12.5 Treating spectrum as an asset of the corporate debtor is
inconsistent with Explanation to Section 18 and Section 36(4)(a)(iv) of
the Code, which exclude assets not owned by the debtor and contractual
arrangements conferring only a right of use. The resolution professional
cannot assume control over spectrum, which is neither owned nor
transferable as property by the licensee.
18

12.6 DoT dues do not fall within the definition of “operational debt”
under Section 5(21) of the Code. Licence fees and spectrum usage
charges arise from the grant of a sovereign privilege and represent
regulatory consideration, not payment for goods or services. The
relationship between the Union and the licensee is that of sovereign
licensor and licensee, not a commercial creditor-debtor relationship.
Treating such dues as operational debt would permit insolvency
proceedings to undermine statutory and regulatory control over natural
resources.
12.7 Alternatively, if right to use spectrum is held to be constituting
asset of the TSPs, then DoT would fall within ambit of “financial creditor”
since the definition of “financial debt” under Section 5(8) hinges on the
concept of time value of money . The right to use spectrum was granted
on a deferred payment basis, forming the very foundation of the TSPs
entitlement to use such spectrum. The deferment of consideration, in
exchange for the right to use a resource of enduring value, therefore
partakes the character of a financial arrangement, and such liability is
appropriately classifiable as a financial debt.
12.8 The summation of the submissions is hence that TSPs does not
“own” spectrum either in law or in fact, nor do they have absolute
possession. What they hold is a limited, a case specific, and conditional
right to use spectrum. The combined effect of the Telegraph Act, public
19

trust doctrine, judicial precedents, Tripartite Agreements and statutory
exclusions under Sections 18 and 36 of the IBC unequivocally
establishes that spectrum cannot form part of the assets of the corporate
debtor capable of transfer during CIRP or liquidation.
IV. Nature of Spectrum and the Constitutional Framework
Governing the Natural Resources:
A. Spectrum as a Finite Natural Resource :
13. In simple terms, spectrum may be understood as an invisible
rainbow of radio waves enabling wireless services such as phone calls,
television signals, Wi-Fi, and 5G internet. Physical science describes it
as the electromagnetic spectrum, encompassing the full range of
electromagnetic frequencies from radio waves to gamma rays. Spectrum
refers to a range of radio frequencies used for wireless communications,
such as mobile calls and internet services. The radio spectrum, which is
a finite portion of the electromagnetic spectrum, is particularly suited for
wireless communication. The electromagnetic spectrum is a finite, non-
renewable resource comprising frequencies ranging from extremely low
frequency (ELF) waves to gamma rays. The portion of spectrum usable
for wireless communications is inherently limited due to several factors
such as; (a) propagation characteristics , as different frequencies exhibit
varying propagation properties affecting their suitability for specific
applications, (b) interference , including co-channel and adjacent-channel
20

interference, which restricts the number of users that can share the
same frequency band, and (c) technological limitations , since existing
technology cannot efficiently utilise all frequencies, rendering certain
bands impractical for use.
13.1 The International Telecommunication Union (ITU), a specialised
agency of the United Nations responsible for global telecommunications
regulation, divides the world into three regions, each with specified
frequency allocations. The ITU has allocated various spectrum bands to
India for mobile telecommunications, satellite-based services, and other
applications such as broadcasting. The spectrum needs of our fast-
growing economy has been projected to be around 2000 MHz by 2030.
This is said to be far below the needs of defense, telecommunications
and other sectors. In CPIL (Supra) , this Court explained spectrum as;
“77. Spectrum has been internationally accepted as a scarce,
finite and renewable natural resource which is susceptible to
degradation in case of inefficient utilization. It has a high
economic value in the light of the demand for it on account of
the tremendous growth in the telecom sector. Although it does
not belong to a particular State, right of use has been granted
to the States as per international norms.”
14. Beyond its technical description, spectrum has consistently been
recognized as a public resource and it is precious also for the reason
that it is finite and limited.
B. Concept of ownership over natural resources and its
Constitutional Underpinnings :
21

15. Dealing with spectrum as a limited natural resource, this Court in
CPIL Case (Supra) had the occasion to deal with ownership and control
of the natural resource in the following terms;
“74. …Natural resources belong to the people but the State
legally owns them on behalf of its people and from that point of
view natural resources are considered as national assets, more
so because the State benefits immensely from their value.
75. The State is empowered to distribute natural resources.
However, as they constitute public property/national asset while
distributing natural resources the State is bound to act in
consonance with the principles of equality and public trust and
ensure that no action is taken which may be detrimental to
public interest. Like any other State action, constitutionalism
must be reflected at every stage of the distribution of natural
resources….”
16. Applying the doctrine of public trust, recognized in M. C. Mehta v.
8
Kamal Nath this Court held that spectrum as a natural resource of the
nation is administered by the Central Government as a Trustee. In a
nuanced approach, this position was reaffirmed by the Constitution
Bench in Natural Resources Allocation, In re (Supra) by holding that
while the State may adopt different modalities of allocation, it cannot part
with the natural resource when the policy of the State is not supported
by social or welfare purpose.
“149. …Alienation of natural resources is a policy decision,
and the means adopted for the same are thus, executive
prerogatives. However, when such a policy decision is not
backed by a social or welfare purpose, and precious and
scarce natural resources are alienated for commercial pursuits
of profit maximising private entrepreneurs, adoption of means
other than those that are competitive and maximise revenue
8 (1997) 1 SCC 388.
22

may be arbitrary and face the wrath of Article 14 of the
Constitution. Hence, rather than prescribing or proscribing a
method, we believe, a judicial scrutiny of methods of disposal
of natural resources should depend on the facts and
circumstances of each case, in consonance with the principles
which we have culled out above. Failing which, the Court, in
exercise of power of judicial review, shall term the executive
action as arbitrary, unfair, unreasonable and capricious due to
its antimony with Article 14 of the Constitution.”
17. The constitutional framework reinforces this understanding by
mandating that the ownership and control of this material resource of the
community be so distributed as best to subserve the common good.
Constitution obligates the State to ensure that access to and use of such
resource is regulated in a transparent, non-discriminatory manner, so
that, its benefit enure to the benefit of the nation, rather than being
treated as objects of private ownership or unfettered commercial
exploitation. This position is clear from the following passage in CPIL
(Supra) ;
“75. … while distributing natural resources the State is bound
to act in consonance with the principles of equality and public
trust and ensure that no action is taken which may be
detrimental to public interest. Like any other State action,
constitutionalism must be reflected at every stage of the
distribution of natural resources. In Article 39(b) of the
Constitution it has been provided that the ownership and
control of the material resources of the community should be
so distributed so as to best subserve the common good, but no
comprehensive legislation has been enacted to generally
define natural resources and a framework for their
protection….”
23

V. Statute, Policy and Contractual Framework Governing
Spectrum Allocation, Licensing and Use
A. Statutory Framework of Spectrum :
18. The Statutory regime governing spectrum is conceptualized in the
9
above referred constitutional principle and it is reflected in Section 4 of
the Indian Telegraph Act, 1885. Spectrum is vested and secured in the
custody of the Central Government not as a property but as the
exclusive privilege of establishing, maintaining and operating
telecommunication systems, and for granting licences. In Union of India
10
v. Association of Unified Telecom Service Providers of India this Court,
has interpreted Section 4 in the following manner:
“37. A bare perusal of sub-section (1) of Section 4 of the
Telegraph Act shows that the Central Government has the
exclusive privilege of establishing, maintaining and working
telegraphs. This would mean that only the Central Government,
and no other person, has the right to carry on
telecommunication activities.
9 4. Exclusive privilege in respect of telegraphs, and power to grant licenses .— [(1)] Within
[India], the Central Government shall have the exclusive privilege of establishing, maintaining and
working telegraphs:
Provided that the Central Government may grant a license, on such conditions and in
consideration of such payments as it thinks fit, to any person to establish, maintain or work a
telegraph within any part of [India]:
[Provided further that the Central Government may, by rules made under this Act and
published in the Official Gazette, permit, subject to such restrictions and conditions as it thinks fit, the
establishment, maintenance and working—
(a) of wireless telegraphs on ships within Indian territorial waters [and on aircraft within or
above [India], or Indian territoral waters], and
(b) of telegraphs other than wireless telegraphs within any part of [India].]
[Explanation.—The payments made for the grant of a licence under this subsection shall
include such sum attributable to the Universal Service Obligation as may be determined by the
Central Government after considering the recommendation made in this behalf by the Telecom
Regulatory Authority of India established under sub-section (1) of section 3 of the Telecom Regulatory
Authority of India Act, 1997 (24 of 1997)]…
10 (2011) 10 SCC 543. (Hereinafter, ‘AUSPI (I)’)
24

38. Interpreting the expression “exclusive privilege” of the State
Government under the State Excise Act to sell liquor, this Court
11
has held in State of Orissa v. Harinarayan Jaiswal.
“13. … The fact that the Government was the seller
does not change the legal position once its exclusive
right to deal with those privileges is conceded. If the
Government is the exclusive owner of those
privileges, reliance on Article 19(1)(g) or Article 14
becomes irrelevant. Citizens cannot have any
fundamental right to trade or carry on business in the
properties or rights belonging to the Government—
nor can there be any infringement of Article 14, if the
Government tries to get the best available price for its
valuable rights.”
This position of law has been reiterated by this Court in Har
12
Shankar v. Excise & Taxation Commr. and in subsequent
decisions of this Court.
39. The proviso to sub-section (1) of Section 4 of the Telegraph
Act, however, enables the Central Government to part with this
exclusive privilege in favour of any other person by granting a
licence in his favour on such conditions and in consideration of
such payments as it thinks fit. As the Central Government owns
the exclusive privilege of carrying on telecommunication
activities and as the Central Government alone has the right to
part with this privilege in favour of any person by granting a
licence in his favour on such conditions and in consideration of
such terms as it thinks fit, a licence granted under the proviso
to sub-section (1) of Section 4 of the Telegraph Act is in the
nature of a contract between the Central Government and the
licensee.
40. A Constitution Bench of this Court in State of Punjab v.
13 14
Devans Modern Breweries Ltd. relying on Har Shankar case
15
and Panna Lal v. State of Rajasthan has held in para 121 at
p. 106 that issuance of liquor licence constitutes a contract
between the parties. Thus, once a licence is issued under the
proviso to sub-section (1) of Section 4 of the Telegraph Act, the
licence becomes a contract between the licensor and the
licensee. Consequently, the terms and conditions of the licence
[(1972) 2 SCC 36] : (SCC p. 44, para 13)
11
[(1975) 1 SCC 737]
12
13 [(2004) 11 SCC 26]
14 [(1975) 1 SCC 737]
15 [(1975) 2 SCC 633]
25

including the definition of adjusted gross revenue in the licence
agreement are part of a contract between the licensor and the
licensee. We have to, however, consider whether the
enactment of the TRAI Act in 1997 has in any way affected the
exclusive privilege of the Central Government in respect of the
telecommunication activities and altered the contractual nature
of the licence granted to the licensee under the proviso to sub-
section (1) of Section 4 of the Telegraph Act.”
19. It is important to note that the exclusive privilege of the Central
Government under Section 4, enabling it to grant a license, subject to
such terms and conditions, specifically include payments towards of
Universal Service Obligations (USO). Section 9-D also empowers the
Central Government to establish and administer the Universal Service
Obligation Fund. Following this the Telecom Regulatory Authority of India
(TRAI) has formulated guidelines for utilization of funds for the specified
purposes. The purpose of referring to these provisions is to indicate that
the monies received towards parting with the privilege of exploiting
spectrum under Section 4 is intended to be ploughed back for
subserving the common good.
B. The Successive Telecom Policies including unbundling of
licensing spectrum allocation
20. Until the early 1990s, the establishment, operation and
maintenance of telecommunication services in India were the exclusive
preserve of the Union of India. A decisive shift occurred with the
th
announcement of the 24 July 1991 Economic Policy, pursuant to which
telecommunication sector progressively opened to private participation.
26

The liberalization process was institutionalized with the announcement of
the New Telecom Policy, 1994, under which licences were granted for
Cellular Mobile Telephone Services and Basic Telephone Services,
along with paging services across various cities and circles. These
licences were bundled with spectrum and awarded through a competitive
tendering process. However, the financial and operational challenges
faced by licensees under the fixed-fee regime prompted a re-evaluation
of policy.
20.1 The New Telecom Policy, 1999 formulated following a
comprehensive review, marked a paradigm shift from a fixed licence fee
model to a revenue-sharing regime. Existing licensees were permitted to
migrate to the new framework, with licence fees linked to a percentage
of AGR, and licences standardized to a 20-year term.
21. In furtherance of the Telecom Policy, Parliament also enacted the
Telecom Regulatory Authority of India Act, 1997. Relevant portion of the
preamble, as also the Statement of Objects and Reasons, indicating the
need to establish a telecom regulator is extracted below for ready
reference:
“An Act to provide for the establishment of the Telecom
Regulatory Authority of India and the Telecom Disputes
Settlement and Appellate Tribunal to regulate the
telecommunication services, adjudicate disputes, dispose of
appeals and to protect the interests of service providers and
consumers of the telecom sector, to promote and ensure
27

orderly growth of the telecom sector and for matters connected
therewith or incidental thereto.
Statement of Objects and Reasons.— In the context of the
National Telecom Policy, 1994, which amongst other things,
stresses on achieving the universal service, bringing the quality
of telecom services to world standards, provisions of wide
range of services to meet the customers demand at reasonable
price, and participation of the companies registered in India in
the area of basic as well as value added telecom services as
also making arrangements for protection and promotion of
consumer interest and ensuring fair competition, there is a felt
need to separate regulatory functions from service providing
functions which will be in keeping with the general trend in the
world. In the multi-operator situation arising out of opening of
basic as well as value added services in which private operator
will be competing with Government operators, there is a
pressing need for an independent telecom regulatory body for
regulation of telecom services for orderly and healthy growth of
telecommunication infrastructure apart from protection of
consumer interest. ”
22. The interplay between the power coupled with obligations of the
Union with respect to licensing on the one hand and jurisdiction of TRAI
to regulate the telecom sector is succinctly explained in AUSPI (I)
(Supra) as follows:
“ 41. Section 2(e) of the TRAI Act quoted above defines
“licensee” to mean any person licensed under sub-section (1)
of Section 4 of the Telegraph Act for providing specified public
telecommunication services and Section 2(ea) defines
“licensor” to mean the Central Government or the telegraph
authority who grants a license under Section 4 of the Telegraph
Act. Sub- section 2(k) defines “telecommunication service” very
widely so as to include all kinds of telecommunication activities.
These provisions under the TRAI Act do not affect the
exclusive privilege of the Central Government to carry on
telecommunication activities nor do they alter the contractual
nature of the license granted under the proviso to sub-section
(1) of Section 4 of the Telegraph Act.
28

43. These provisions in the TRAI Act show that
notwithstanding sub-section (1) of Section 4 of the Telegraph
Act vesting exclusive privilege in the Central Government in
respect of telecommunication activities and notwithstanding the
proviso to sub-section (1) of Section 4 of the Telegraph Act
vesting in the Central Government the power to decide on the
conditions of license including the payment to be paid by the
licensee for the license, TRAI has been conferred with the
statutory power to make recommendations on the terms and
conditions of the licence to a service provider and the Central
Government was bound to seek the recommendations of TRAI
on such terms and conditions at different stages, but the
recommendations of TRAI are not binding on the Central
Government and the final decision on the terms and conditions
of a license to a service provider rested with the Central
Government. The legal consequence is that if there is a
difference between TRAI and the Central Government with
regard to a particular term or condition of a license, as in the
present case, the recommendations of TRAI will not prevail and
instead the decision of the Central Government will be final and
binding.
44. In contrast to this recommendatory nature of the
functions of TRAI under clause (a) of sub-section (1) of Section
11 of the TRAI Act, the functions of TRAI under clause (b) of
sub-section (1) of Section 11 of the TRAI Act are not
recommendatory. This will be clear from the very language of
clause (b) of sub-section (1) of Section 11 of the TRAI Act
which states that TRAI shall discharge the functions
enumerated under sub-clauses (i), (ii) and (ix) under clause (b)
of sub-section (1) of Section 11 of the TRAI Act. Under clause
(c) of sub-section (1) of Section 11 of the TRAI Act, TRAI
performs the function of levying fees and other charges in
respect of different services and under clause (d) of sub-
section (1) of Section 11, the Central Government can entrust
to TRAI other functions. These functions of TRAI under clauses
(c) and (d) of sub-section (1) of Section 11 of the TRAI Act are
also not recommendatory in nature. That the functions of TRAI
under clause (a) are recommendatory while the functions of
TRAI under clauses (b), (c) and (d) are not recommendatory
will also be clear from provisos first to fifth which refer to the
recommendations of TRAI under clause (a) of sub-section (1)
of Section 11 of the TRAI Act and not to clauses (b), (c) and (d)
of sub-section (1) of Section 11 of the TRAI Act.
29

23. Further, structural reforms were followed with the introduction of
the Unified Access Services Licensing regime in 2003, pursuant to which
basic and cellular services were unified within service areas. Licensees
were given the option to migrate to the unified regime while retaining
their existing spectrum allocations, subject to revised licensing terms.
This reflected a move towards technological neutrality and operational
flexibility within a regulated framework.
24. A more fundamental change was introduced under the National
Telecom Policy, 2012, which consciously “de-linked” spectrum from
licensing. The shift was not one of relinquishment of control but of
restructuring the method through which the State would discharge its
obligations of securing the best price for spectrum by enabling private
participation in the development of telecom industry. Even after spectrum
being unbundled with licence and private enterprise permitted to develop
30

spectrum for provisioning services, the fundamental principle of Central
Government being the licensor under Section 4 continues. In AUSPI (II)
(Supra) , this Court held that the State has a duty to obtain fair value for
natural resources and to ensure compliance with licence conditions. It
was observed that;
“86. DoT has urged that the Central Government has exclusive
privilege under Section 4 of the Telegraph Act; thus, it is bound
to get the best price for natural resources. To part with the
exclusive privilege under the revenue-sharing regime is
extremely beneficial to the licensees. Thus, the State must get
the price for its valuable right as mandated under Article 14. In
our opinion, there is no doubt that the State is a trustee of the
natural resources and is obliged to hold it for the benefit of the
citizens but also to ensure equal distribution to subserve the
common good as observed under Article 39 of the Constitution
of India in Natural Resources Allocation, In re, Special
Reference No. 1 of 2012 [Natural Resources Allocation, In re,
Special Reference No. 1 of 2012, (2012) 10 SCC 1] . The
Government being the sole repository of all the resources in
the country, also has the exclusive power to determine the
licence conditions at which it parts with the exclusive right to
the resources. The Government has to make an effort to get
the best price for its valuable rights and cannot throw them
away, and there would be no arbitrariness in the same as
observed in State of Orissa v. Harinarayan Jaiswal.”
C. Guidelines for Trading of Access Spectrum by Access Service
Providers, 2015
25. Telecom Policy envisioned liberalization of spectrum to enable use
of spectrum in any band to provide any service in any technology as well
as to permit spectrum pooling. Following recommendations of TRAI,
Government also permitted spectrum trading to enable optimal utilization
of these material resources through appropriate regulatory framework.
31

This also facilitates ease of doing business in India by allowing free play
in the commercial decisions and leads to optimization of resources apart
from improving the spectral efficiency and quality of service. It is apt to
provide the perspective in which the Guidelines for Spectrum Trading
were issued. It is necessary refer to a portion of recommendation made
by TRAI;
“ 1.1 Historically, the use of radio spectrum has been highly
regulated. In most countries, the regulator has used command
and control mechanism to decide the allocation of spectrum.
However, over the past two decades, there has been a growing
consensus that because of a significant increase in the
demand for spectrum, the hitherto prevalent regulatory
paradigm would prove inadequate to deal with the situation in
hand. Spectrum license holders, needed flexibility to respond
quickly to changes in market demand and technology; the old
paradigm would only result in inefficient use of available
spectrum and creation of artificial scarcity. This is why
policymakers and regulators worldwide have devoted their
attention to new ways of spectrum regulation with an increasing
emphasis on evolving more flexible and market oriented
models to increase opportunities for efficient spectrum usage.
Spectrum managers are following diverse approaches for
sharing frequencies viz. spectrum sharing, spectrum leasing,
spectrum trading, as well as unlicensed spectrum combined
with the use of low power radios or advanced radio
technologies including ultra wideband and multi-model radios.
1.2 Spectrum trading contributes to a more economical and
efficient use of frequencies. This is because a trade will only
take place if the spectrum is worth more to the new user than it
was to the old user, reflecting the greater economic benefit the
new user expects to derive from its use. It allows the present
user to decide when and to whom the spectrum authorisation
will be transferred and what sum it will receive in return. The
market, not the regulator, determines the value. Spectrum
trading makes it possible for companies to expand more
quickly than would otherwise be the case. It also makes it
easier for a new market entrant to acquire spectrum in order to
enter the market.
32

1.7 The Authority also observed that consolidation could also
be facilitated by allowing market forces to operate i.e. by
permitting spectrum trading as it allows far more specific and
targeted reallocations of spectrum than can be reached
through M&A activity. A TSP holding spectrum that is paid for
but in excess of its current requirements would then be able to
directly trade these holdings with another TSP which requires
additional spectrum for its operations. This would help to
ensure optimal allocative efficiency of this limited natural
resource, making the sector as a whole better off in the
bargain. Clarity on the policy framework with regard to
spectrum trading would help to unlock the full potential value of
16
spectrum that was proposed to be auctioned. ”
26. Accordingly, the Guidelines for Trading of Access Spectrum, issued
in 2015, enabled transfer of the right to use spectrum between a seller
and a buyer, while expressly prohibiting leasing. Such trading is confined
between licensees and is permissible only upon prior intimation of 45
days to the DoT. Guidelines No. 10, 11 and 12, relevant for our purpose
are reproduced hereinbelow for ready reference:
“10. Both the licensees shall also give an undertaking that they
are in compliance with all the terms and conditions of the
guidelines for spectrum trading and the license conditions and
will agree that in the event, it is established at any stage in
future that either of the licensee was not in conformance with
the terms and conditions of the guidelines for spectrum trading
or/and of the license at the time of giving intimation for trading
of right to use the spectrum, the Government will have the right
to take appropriate action which inter-alia may include
annulment of trading arrangement.
11. The seller shall clear all its dues prior to concluding any
agreement for spectrum trading. Thereafter, any dues
recoverable up to the effective date of trade shall be the liability
of the buyer. The Government shall, at its discretion, be entitled
to recover the amount, if any, found recoverable subsequent to
16 Recommendations on Working Guidelines for Spectrum Trading; (accessible at:
https://www.trai.gov.in/sites/default/files/2024-11/Recommendation_Spectrum_28012014.pdf)
33

the effective date of trade, which was not known to the parties
at the time of the effective date of trade, for the buyer or seller,
jointly or severally. The demands, if any, relating to licenses of
seller, stayed by the Court of Law, shall be subject to outcome
of decision of such litigation.
12. Where an issue, pertaining to the spectrum proposed to
be transferred is pending adjudication before any court of law,
the seller shall ensure that its rights and liabilities are
transferred to the buyer as per the procedure prescribed under
the law and any such transfer of spectrum will be permitted
only after the interest of the Licensor has been secured.”
27. A plain reading of the Spectrum Trading Guidelines demonstrates
that the Central Government, as Licensor, has retained comprehensive
supervisory and corrective control over spectrum trading. Guideline 10
expressly reserves to the Government the power to take appropriate
action, including annulment of a trading arrangement, where
undertakings furnished by the seller or buyer at the stage of prior
intimation are found to be false, misleading, incomplete, or not in
conformity with the Spectrum Trading Guidelines or the licence
conditions. This power is not confined to scrutiny at the threshold but
also extends to subsequent discovery of non-compliances. The
Guideline thus safeguards the Government’s role as licensor, controlling
access to spectrum at every time. Guideline 11 further reinforces this
control by mandating that all outstanding dues of the seller be cleared
prior to conclusion of any spectrum trading agreement, and by
transferring liability for dues arising up to the effective date of trade to
the buyer thereafter. Significantly, it vests discretion in the Government
34

to recover any subsequently discovered dues from either or both parties,
jointly or severally. These provisions collectively establish that spectrum
trading is not a private commercial arrangement, but a part of the
privilege vested in the Central Government under Section 4. Trading is
conditional subject to adherence to financial and regulatory obligations
owed to the State.
28. When these guidelines are read conjointly with the terms of the
Licence Agreement, it becomes manifest that absolute control over the
licence and spectrum vests with the Licensor, namely the DoT. The
licence, though granted for a fixed term, is subject to revocation,
suspension, or termination on enumerated grounds, including non-
payment of dues, public interest, or security considerations. The
Licensee has no independent right to assign or transfer the licence or
create third-party interests without prior written consent of the Licensor.
Any transfer or assignment is permissible only upon fulfillment of
prescribed conditions, foremost among them being complete clearance
of past dues by the transferor and an undertaking by the transferee to
discharge future liabilities. Clause 6 of the Licence Agreement, read with
Guidelines 10 and 11, places an embargo on any transfer or spectrum
trading where dues remain unpaid or consent is procured on the basis of
non-conforming undertakings. Even where transfer is sought pursuant to
a Tripartite Agreement with lenders, the Licensor’s approval remains
35

conditional upon strict compliance with contractual and regulatory
procedures. Consequently, where consent for spectrum trading or
licence transfer is obtained on the basis of incorrect or non-compliant
undertakings, the Government is statutorily empowered to annul the
arrangement. The obligation to clear dues prior to trading is absolute,
and default by either seller or buyer disqualifies them from effecting a
valid transfer, including under insolvency proceedings.
29. Guideline 12 does not dilute this position. Its plain language
indicates that where spectrum is subject to dispute in a pending
litigation, the seller must ensure that all rights and liabilities are
transferred to the buyer as per the prescribed procedure. The forum
before which an “issue pertaining to the spectrum proposed to be
transferred is pending adjudication”, cannot be the adjudicatory authority
or the NCLAT under IBC. The Spectrum Trading Guidelines cannot be
overridden or substituted by the insolvency resolution framework. Dues
payable to the Licensor, which must be cleared prior to spectrum trading,
cannot be relegated to treatment under a Resolution Plan. While a
licence and allocation of spectrum may, in abstract terms, constitute an
intangible asset, it is always subject to the telecommunication laws of the
nation, viz . the Telegraph Act, 1885, Wireless Telegraphy Act, 1993 and
the TRAI Act, 1997, followed by the rules, regulations, guidelines
including contractual obligations arising thereunder. A defaulting seller or
36

buyer, failing to comply with the mandatory requirements of the
Spectrum Trading Guidelines, cannot indirectly seek modification of
telecom dues by applying for corporate insolvency resolution process.
30. The Spectrum Trading Guidelines, 2015 are not mere executive
instructions but draw their legitimacy and enforceability from out of the
province of telecommunication laws and the regulatory framework within
which licenses are issued and operated. The conditions stipulated
therein, including those relating to eligibility, prior approvals, clearance of
dues and transfer restrictions, are mandatory and binding on all
licensees and transferees. The use, transfer or trading of spectrum is
permissible only in strict conformity with the Guidelines, and any
deviation would amount to a breach of licence conditions, the statute
and its policy. The operation of the laws concerning telecommunications
governing spectrum trading cannot be overridden or bypassed on the
basis of an interpretation adopted to the expression “asset” and its
treatment as also Section 238 of IBC. We have clarified and explained
this position in more detail in later part of our judgment.
D. Spectrum Licenses and Contract :
31. Having examined the telecommunication laws, the subordinate
legislation, including the rules, regulations and guidelines that govern
37

spectrum, we will now proceed to refer to the provisions of the contract,
that is, the license and also the tripartite agreement.
17
32. In Bharti Airtel Ltd. v. Union of India this Court had an occasion
to examine the provisions of the license agreement as a contract in the
context of the Government parting with the privilege of dealing with
spectrum under Section 4 of the Telegraph Act. It clarified that a license
granted under Section 4 is, in form, a contract between the licensor and
the licensee. However, the Court simultaneously emphasised that such a
contract is not an ordinary commercial agreement. It emanates from a
statutory grant of sovereign privilege and is indelibly shaped by
constitutional and public law obligations. The Court asked the right
question as to – what are the obligations of the licensor and answered it
in terms of private and public law perspective, or, arising under the
contract or the Constitution. It has been held that;
“37. The question which requires examination is — What are
the obligations of the licensor on receipt of such an
application? The obligations of the licensor flow from two
sources, (i) from the contract, (ii) from the Constitution of India
and the relevant provisions of the statute (Indian Telegraph Act,
1885). In the event of any conflict between the said two sets of
obligations, the further question would be which one of the
conflicting obligations prevail?
39. However, the licensor being the Union of India, its
discretion to stipulate terms and conditions is regulated by
certain constitutional mandates apart from stipulations of any
law applicable.
17 (2015) 12 SCC 1.
38

41. The licensor/Union of India does not have the freedom to
18
act whimsically. As pointed out by this Court in 2G Case in the
above-extracted paragraph, the authority of the Union is
fettered by two constitutional limitations: firstly, that any
decision of the State to grant access to natural resources,
which belong to the people, must ensure that the people are
adequately compensated and, secondly, the process by which
such access is granted must be just, non-arbitrary and
transparent, vis-à-vis private parties seeking such access.
42. By a statutory declaration made under Section 4 of the
Indian Telegraph Act, 1885, it is declared that the Government
of India shall have the exclusive “privilege for establishing,
maintaining and working telegraphs” (which includes
telephones). The proviso to Section 4 of the said Act authorises
the Government of India to grant licence to establish, maintain
and work telegraphs (which includes telephones) “on such
conditions and in consideration of such payments” as it thinks
fit. Telephones include both wired and wireless telephones like
cellular mobile phones, the establishment and working of which
necessarily requires access to spectrum which again is
controlled by the Government of India as it is already declared
to be a natural resource by this Court. It can thus, be seen that
no person other than the Government of India has any right to
establish, maintain and work telephones. It is the exclusive
privilege of the Government of India, which could be permitted
to be exercised by others by a grant from the Government of
India.
43. In other words, such licences are in the nature of largesse
from the State. No doubt, the authority of the State to distribute
such largess is always subject to the condition that the State
must comply with the conditions of Article 14 of the Constitution
i.e. the distribution must be on the basis of some rational policy.
Even the language of the proviso to Section 4 of the Telegraph
Act, which stipulates that the grant of licence should be “on
such conditions and in consideration of such payments as it
thinks fit”, must necessarily be understood that the conditions
must be rational and the payments forming the consideration
for the grant of licence must be non-discriminatory. The
conditions contained in the licences in question stipulate that
the term of the licence could be extended on mutually agreed
terms, if the Government of India deems it expedient. The
obligations of the Government of India flowing from the
Constitution as well as a statute necessarily require the
18 Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1.
39

Government of India to grant licences as rightly pointed by the
Tribunal (TDSAT) only “in public interest and for public good”.
48. The conditions of licences/contracts in whatever language
provided for consideration for the extension of a licence are
necessarily required to be interpreted in consonance with the
obligation of the licensor/Union of India under the Constitution
and the laws. Otherwise, the contract would be rendered void
for being inconsistent with public policy, the principle expressly
incorporated under Section 23 of the Contract Act, 1872.”
33. The distinction drawn in Bharti Airtel (Supra) is crucial; while the
licence has contractual attributes, the licensor’s powers and obligations
do not arise solely from contract. They flow concurrently from the
Constitution and the statute. In the event of conflict, obligations flowing
from constitutional and statutory mandate necessarily prevail over
contractual stipulations. Spectrum access, as explained in Bharti Airtel
(Supra) , is in the nature of State largesse. While such largesse must be
distributed in conformity with Article 14, ensuring fairness, transparency
and adequate compensation to the public, it does not translate into
transfer of ownership or creation of proprietary rights in favour of the
licensee. The grant of a telecom licence, including the right to use
spectrum, does not effect a transfer of ownership or proprietary interest.
What is conferred is a limited, conditional and revocable privilege to use
spectrum for specified purposes and for a defined duration.
34. It is undisputed that TSPs, including the Aircel entities, participated
and emerged as successful bidders, thereby obtaining the right to use
spectrum upon payment of consideration. The relationship is governed
40

by UASL dated 05.12.2006 executed between the DoT and Aircel Ltd.
The licence was granted by the Government in exercise of its exclusive
privilege under Section 4 of the Indian Telegraph Act, 1885, to provide
Unified Access Services in the specified service area. The grant was
non-exclusive, subject to payment of licence fees and strict compliance
with the terms and conditions stipulated therein. The licensee
unequivocally undertook to comply with all contractual obligations,
acknowledging that the grant conferred only a regulated right to use
spectrum and not any proprietary interest therein.
35. The terms of the Licence Agreement unequivocally restrict the
autonomy of the licensee in dealing with the licence or spectrum. Clause
6 prohibits assignment, transfer, sub-licensing, partnership, or creation of
any third-party interest without prior written consent of the licensor.
Clause 6.3 carves out a limited exception permitting transfer or
assignment only upon fulfilment of stringent conditions, including
compliance with eligibility criteria, adherence to the Tripartite Agreement
where applicable, and complete clearance of all past dues by the
transferor, coupled with an undertaking by the transferee to discharge
future liabilities. The licence further imposes operational and regulatory
obligations on the licensee, including timely rollout of services, furnishing
of information to the Licensor and TRAI, and prohibition on dealing with
entities whose licences stand suspended or terminated. Clause 10 vests
41

in the Licensor the power to suspend, revoke, or terminate the licence,
inter alia, for breach of conditions, non-payment of dues, public interest,
or security considerations, upon issuance of notice. These provisions
underscore that continuation of the licence is contingent upon ongoing
compliance with contractual and statutory obligations.
36. A cumulative reading of the Licence Agreement leaves no manner
of doubt that effective and pervasive control over the licence and
spectrum vests with the Licensor notwithstanding the fixed tenure of the
licence and payment of consideration. The licensee’s rights are
circumscribed by regulatory oversight, disclosure obligations, restrictions
on transfer, and the ever-present power of the Licensor to suspend or
terminate the licence for breach, liquidation, or winding up of the
licensee. The licence does not confer an unfettered or absolute right, but
merely a conditional and defeasible permission to use spectrum, which
remains subject to statutory control under the Telegraph Act and the
regulatory framework administered by TRAI. The ability of the Licensor
to withhold consent, impose conditions, and enforce compliance
demonstrates that the licensee’s interest is limited and subordinate to
statutory and regulatory imperatives of telecommunication laws. The
ownership, particularly as a trustee of the natural resource, by the
Licensor, coupled with the power to suspend or terminate the licence for
default in payment or performance, negates any claim of proprietary
42

ownership in the licensee. Where the licensee has defaulted in payment
of licence fees or failed to perform its obligations, the very substratum of
its right to use spectrum stands impaired.
E. Tripartite Agreement :
37. As we realised that the operation of our economic system to
distribute material resources of the community could well be subserved
through the participation of private enterprise, it became compelling to
involve the financial institutions also. In furtherance of the successive
telecom policies, to develop the telecommunication sector, DoT
collaborated with TSPs and financial institutions. This collaboration is
evidenced in the large number of Tripartite Agreements. One such
agreement governs the contractual relationship between DoT, the
corporate debtor and the State Bank of India, all three are appellants
and respondents before us. We will now proceed to examine the
implications of the Tripartite Agreement, details of which were shown to
us by Mr. Rakesh Dwivedi appearing for the State Bank of India.
38. The Tripartite Agreement executed between the DoT, the TSP and
the Bank is a contractual mechanism devised to enable TSPs to secure
financial assistance and also to protect the interests of the Bank
(Lender). Under this Agreement, the DoT agrees, in principle, to transfer
or assign the licence by endorsement in favour of a “Selectee” identified
43

by the Lender, subject to the DoT’s final and binding approval. That the
Lenders themselves are expressly barred from operating the licensed
services reinforces the principle that the licence remains a regulated
privilege rather than a freely alienable asset.
39. The Agreement enables the licence to be treated as security for
financial assistance advanced to the TSPs, permitting transfer or
assignment only in the event of default and strictly in accordance with its
terms. Upon occurrence of a default, duly notified by the Agent acting on
behalf of the Lenders, and failure of the TSP to cure such default within
the stipulated period, the Lenders are empowered to invite and negotiate
bids for takeover and transfer of the project along with all its assets,
including the licence, to a Selectee who must assume all liabilities and
obligations of the Licensee towards the Licensor. Even where the
Licensor elects to transfer the licence to a person other than the
Selectee, the Agreement mandates due consideration of both the
Licensor’s and the Lenders’ outstanding dues. In the event no Selectee
is found, the licence stands terminated, and the assets of the defaulting
Licensee are to be disposed of, with the Licensor enjoying first charge
over the proceeds, followed by adjustment of Lenders’ dues, and any
residual amount reverting to the Licensee. The Agreement thus
underscores that while the licence may be conditionally transferable to
44

safeguard lender interests, such transfer remains subject to the
Licensor’s paramount authority and regulatory control.
VI. The Insolvency and Bankruptcy Code, 2016
A. First principles
40. IBC sought to fundamentally restructure the manner in which
insolvency proceedings are undertaken in India, in response to the
evident inadequacies of the earlier statutory regime governing
insolvency and bankruptcy, which had proved ineffective in delivering
timely and meaningful outcomes. The Code, therefore, brought together
the disparate insolvency laws into a unified legislative framework. It is
anchored in a set of core principles, including expeditious resolution
aimed at preservation and maximisation of economic value, reduction of
information asymmetry between debtors and creditors, certainty in the
order of priority for discharge of liabilities, and decision-making
autonomy of stakeholders in commercial matters, subject to overarching
19
legislative design and judicial supervision of the process.
41. Capturing the core principles of the Code, 2016, this Court in
20
Swiss Ribbons (P) Ltd. v. Union of India noted;
“ 27. … The Code is first and foremost, a Code for
reorganisation and insolvency resolution of corporate debtors.
Unless such reorganisation is effected in a time-bound manner,
the value of the assets of such persons will deplete. Therefore,

45

maximisation of value of the assets of such persons so that
they are efficiently run as going concerns is another very
important objective of the Code. This, in turn, will promote
entrepreneurship as the persons in management of the
corporate debtor are removed and replaced by entrepreneurs.
When, therefore, a resolution plan takes off and the corporate
debtor is brought back into the economic mainstream, it is able
to repay its debts, which, in turn, enhances the viability of credit
in the hands of banks and financial institutions. Above all,
ultimately, the interests of all stakeholders are looked after as
the corporate debtor itself becomes a beneficiary of the
resolution scheme – workers are paid, the creditors in the long
run will be repaid in full, and shareholders/investors are able to
maximise their investment. Timely resolution of a corporate
debtor who is in the red, by an effective legal framework, would
go a long way to support the development of credit markets.
Since more investment can be made with funds that have
come back into the economy, business then eases up, which
leads, overall, to higher economic growth and development of
the Indian economy. What is interesting to note is that the
Preamble does not, in any manner, refer to liquidation, which is
only availed of as a last resort if there is either no resolution
plan or the resolution plans submitted are not up to the mark….
28. It can thus be seen that the primary focus of the legislation
is to ensure revival and continuation of the corporate debtor by
protecting the corporate debtor from its own management and
from a corporate death by liquidation. The Code is thus a
beneficial legislation which puts the corporate debtor back on
its feet, not being a mere recovery legislation for creditors. The
interests of the corporate debtor have, therefore, been
bifurcated and separated from that of its promoters/those who
are in management. Thus, the resolution process is not
adversarial to the corporate debtor but, in fact, protective of its
interests…. ”
42. Hence, the scope and ambit of IBC is to speed up the process
21
providing for insolvency , and achieving maximisation of value of the
asset of the entity undergoing CIRP.
B. Difficulty in Expecting NCLAT to rule on Spectrum
21 Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407.
46

43. Before we proceed to analyse the applicability of the Code, 2016
to the matter concerning telecommunication, we may first indicate the
difficulty which the NCLAT faced in answering the questions referred to it
by this Court. We may recall that this Court was hearing appeals against
the judgment of the Telecom Disputes Settlement and Appellate Tribunal
(TDSAT) with respect to the liability of TSP’s to pay licence fees
calculated on the basis of Annual Gross Revenues. Having finally
decided the controversy in calculating the licence fee in AUSPI ( II) , this
Court sought to ensure that TSP’s remit the outstanding DoT dues
expeditiously. It is in that context that the present controversy was raised
by some TSP’s by submitting that they had invoked proceedings under
IBC to corporate insolvency resolution and as such payments cannot be
recovered due to moratorium. Taking note of this unusual plea, this Court
formulated certain fundamental questions and asked NCLAT to give its
opinion on the fundamental question about applicability of IBC for
recovering telecom dues.
44. Expecting a statutory appellate authority under the IBC to answer
issues about applicability of IBC has its own problems. Though tribunals
constituted by statutes will exercise that much of jurisdiction as is
empowered by the statute, they have primary duty to examine and
determine a “jurisdictional fact.” However, the perspective in which the
statutory tribunals could examine the matter would be limited for more
47

than one reason. It has fallen upon us to examine the matter
independently by posing probing questions to the Ld. Attorney General
and the Senior Counsels assisting us. We have no hesitation to say that
they have risen to occasion and have rendered invaluable assistance.
C. Implications of Treating Spectrum as an Asset by
TSPs/Corporate Debtor and the Financial Institutions
45. Allocation of spectrum to TSPs, coupled with the policy to permit
trading of spectrum has given rise to the spectrum being treated as an
asset in the hands of TSPs. The expression “asset” pervades the
contractual terms and this is the sheet anchor of the TSPs/corporate
debtor and the Bank to contend that spectrum as an asset can be
restructured only through IBC and no other law. A nuanced argument is
advanced that there is no transfer of ownership at all and that its
ownership continues to vest in DoT. It is only in the context of
restructuring the asset, that the Interim Resolution Professional (IRP)
takes control of it and processes it as per the provisions of the IBC. This
is legitimate and inevitable for the reason that spectrum is an intangible
asset, thereby triggering the application of the special statute, the IBC,
which operates notwithstanding any other law to the contrary. Whether
the recognition of spectrum as an asset in the books of account of the
licensee/TSP, the corporate debtor, would also be the asset falling for
48

reconstruction under the Insolvency and Bankruptcy Code, 2016 is
therefore an issue for our consideration.
46. As per Section 129 of the Companies Act, 2013 the financial
statements shall give a true and fair view of the state of affairs of the
company and comply with the accounting standards as notified under
Section 133 of the Act by the Central Government on the
22
recommendation of the Institute of Chartered Accountants of India.
47. TSPs recognise spectrum licensing rights as an intangible asset in
their balance sheet in compliance with the Accounting Standards (AS).
AS 26 on Intangible Assets which inter alia applies to rights under
licensing agreements, defines an intangible asset as an identifiable non-
monetary asset, without physical substance, held for use in the
production or supply of goods or services, rental, or for administrative
23
purposes. Para 6.1 of AS 26 is as follows:
“6.1 An intangible asset is an identifiable non-monetary asset,
without physical substance, held for use in the production or
supply of goods or services, for rental to others, or for
administrative purposes.”
48. The elements of the definition of intangible assets under AS 26 are
24
as follows:
a) Identifiability – Asset is separable if it can be distinguished from
goodwill and can be used to rent, sell, exchange or distribute future
22 Section 129(1) and Section 133, Companies Act, 2013.
23 Para 6.1 , ICAI.
24 Paras 8, 11-13, 14-17 and 18 Accounting Standard (AS) 26, ICAI.
49

economic benefits specific to it. However, separability is not a
necessary condition for identifiability as long as the entity can
identify the asset in some other way
b) Control : It indicates the power to obtain and restrict access to the
future economic benefits from the resource through enforceable
legal rights. However, legal enforceability of rights is not a
necessary condition for exercising control
c) Future Economic Benefits (FEB): It may include revenue from the
sale of products or services, cost savings, or other benefits resulting
from the use of the asset by the enterprise
49. Similar elements of identifiability, control over resources and flow
of future economic benefits are also provided in the definition of
25 26
intangible assets under Indian Accounting Standard, Ind AS 38.
50. Spectrum licensing rights are identifiable as they are separable
and can be sold, transferred, licensed, or exchanged, either individually
or together with the underlying contract. They arise from legal rights by
way of government auctions or assignment. They confer power on TSPs
to obtain economic benefits by providing telecom services and raise
loans under tripartite agreements with the Bank and Dept. of Telecom.
TSP’s can also restrict access to such economic benefits based on the
exclusivity conferred on them through the terms of the license. Hence,
25 (Ind AS).
26 Paras 8, 10, 11-12, 13-16 and 17 , ICAI.
50

TSPs exercise control over the licensing rights. The expectation of future
economic benefits from the licensing rights is also probable as TSPs
develop infrastructure under the state policy and provide telecom
services to the public. Thus, the spectrum licensing rights satisfy all the
ingredients of an intangible asset.
51. To recognise an intangible asset in the financial statements, the
recognition criteria has to be met, i.e., probable flow of future economic
benefits attributable to the asset, and reliable measurement of the cost
of the asset. The recognition provided in AS 26 and Ind AS 38 is the
27
same. The recognition criteria as per AS 26 is reproduced below:
“19. The recognition of an item as an intangible asset requires
an enterprise to demonstrate that the item meets the:
(a) definition of an intangible asset (see paragraphs 6-18); and
(b) recognition criteria set out in this Standard (see paragraphs
20-54).
20. An intangible asset should be recognised if, and only if:
(a) it is probable that the future economic benefits that are
attributable to the asset will flow to the enterprise; and
(b) the cost of the asset can be measured reliably.”
52. The probability of future economic benefits is to be assessed using
reasonable and supportable assumptions that represent the best
28
estimate of the set of economic conditions over its useful life. Further,
29
an intangible asset should be measured initially at cost. There are
30
different methods for the acquisition of intangible assets, including:
27 Paras 19-23 Accounting Standard (AS) 26, ICAI and Paras 18-24 Indian Accounting Standard 38,
ICAI.
28 Para 21 Accounting Standard (AS) 26, ICAI and Para 22 Indian Accounting Standard 38, ICAI.
29 Para 23 Accounting Standard (AS) 26, ICAI and Para 24 Indian Accounting Standard 38, ICAI.
30 Paras 24-26, 27-32, 33, and 34 Accounting Standard (AS) 26, ICAI and Paras 25-32, 33-43, 44
and 45-47 Indian Accounting Standard 38, ICAI.
51

a) Separate Acquisition; or
b) Acquisition by way of government grants.
53. In the case of a separate acquisition, the price that the entity pays
normally reflects expectations of future economic benefits satisfying the
probability prong of the recognition criteria. Further, the cost of such an
asset can be measured reliably comprising its purchase price, non-
refundable duties and taxes and any directly attributable expenditure for
31
making the asset ready for its intended use.
54. Spectrum licensing represents a grant of right to use spectrum by
the Government by way of transfer or administrative allocation. As
discussed above, the flow of future economic benefits is probable due to
its revenue-generating capacity from the provision of telecom services.
Further, licensing rights are auctioned for a price or are administratively
assigned for a licence fee. The cost of a spectrum licence can thus be
measured reliably under the separate acquisition method comprising the
acquisition cost (auction price or licence fee), non-refundable duties and
taxes and any expenditure incurred to make the asset ready for its
intended use. As the recognition criteria is satisfied, TSPs record
spectrum licensing as an intangible asset in their balance sheet.
55. It is to be noted that the understanding of assets in the context of
accounting standards is different from the traditional understanding of
31 Paras 24-26 Accounting Standard (AS) 26, ICAI and Paras 25-32 Indian Accounting Standard 38,
ICAI.
52

property, as in the case of the Transfer of Property Act, 1882 and the
Sale of Goods Act, 1930, which indicate title or ownership in the property
or goods. In Accounting Standards, asset is defined as a resource
controlled by an enterprise from which future economic benefits are
32
expected to flow. Para 6.2 of AS 26 on the definition of asset is
reproduced below:
“6.2 An asset is a resource: (a) controlled by an enterprise as a
result of past events; and (b) from which future economic
benefits are expected to flow to the enterprise.”
56. Thus, AS 26 and Ind AS 38 recognise intangible assets if the
aspect of control over economic benefits is satisfied and the cost can be
measured reliably. Ownership is not recognised as an essential condition
to recognise an asset in the balance sheet. This is also clarified by the
Framework for the Preparation and Presentation of Financial Statements
33
in accordance with Ind AS. This Framework is not a standard and does
not override any specific standards. However, it sets out the concepts
that underlie the preparation and presentation of financial statements
34
and guides the formulation of Ind AS. Para 57 of the Framework is
extracted below:
“57. Many assets, for example, receivables and property, are
associated with legal rights, including the right of ownership. In
determining the existence of an asset, the right of ownership is
not essential; thus, for example, property held on a lease is an
asset if the entity controls the benefits which are expected to
32 Para 6.2 Accounting Standard (AS) 26, ICAI and Para 8, Indian Accounting Standard 38, ICAI.
33 Para 57,
34 Paras 1-4 .
53

flow from the property. Although the capacity of an entity to
control benefits is usually the result of legal rights, an item may
nonetheless satisfy the definition of an asset even when there
is no legal control. For example, know-how obtained from a
development activity may meet the definition of an asset when,
by keeping that know-how secret, an entity controls the
benefits that are expected to flow from it.”
57. Similar criteria are also provided in the New Conceptual
Framework titled Conceptual Framework for Financial Reporting under
35
Indian Accounting Standards (Ind AS), 2020 (‘Conceptual Framework’).
It defines an asset as a present economic resource controlled by the
entity as a result of past events that has the potential to produce
36
economic benefits. Control is described as that which links an
37
economic resource to the entity. An entity thus controls an economic
resource if it has the present ability to direct the use of the economic
38
resource and obtain the economic benefits that may flow from it. The
example given in Para 4.19 of the Conceptual Framework on the aspect
of ownership is reproduced below:
“… For example, an entity may control a proportionate share in
a property without controlling the rights arising from ownership
of the entire property. In such cases, the entity’s asset is the
share in the property, which it controls, not the rights arising
from ownership of the entire property, which it does not
control.”
58. This indicates that recognition of spectrum licensing rights as an
intangible asset in the balance sheet is not determinative of
35 The Conceptual Framework is applicable w.e.f. 01.04.2020 for standard setting activity and w.e.f.
01.04.2021 for preparing financial statements.
36 Paras 4.3-4.5 and 4.9 Conceptual Framework, 2020, ICAI.
37 Para 4.19, Conceptual Framework, 2020, ICAI.
38 Para 4.20, Conceptual Framework, 2020, ICAI.
54

recognition/transfer of ownership of the spectrum to TSPs. It only
indicates control over the future economic benefits flowing from the grant
of the right to use the spectrum. Hence, even if the right to use spectrum
exhibits property-like features such as longer licensing terms, exclusivity,
transferability, tradability, etc., they merely represent different sticks in
the bundle of rights and falls short of conferring complete ownership of
39
the spectrum on TSPs.
59. IBC explicitly excludes from the scope of insolvency and liquidation
framework, assets over which corporate debtor does not have ownership
rights. The legislative intent can be traced back to the Bankruptcy
Legislative Reforms Committee Report, 2015, on which the IBC is
based. The Report in Para 5.5.5, in the context of assets in liquidation,
clarifies that not all assets that are present within the entity can be
considered for liquidation and it excludes assets held as a part of
operational transactions, where the entity has rights over the assets but
not the ownership.
60. The IRP under section 18(f) of IBC, shall take control and custody
of assets, including intangible assets over which the corporate debtor
An analogy can also be drawn to Section 301 of the Communications Act, 1934, as amended by
39
the Telecom Act, 1996 in the United States, which provides that a radio licence confers the right to use
the licence for limited periods but does not confer ownership. It further provides that such a license
does not confer any rights beyond the terms, conditions, and periods of the license, indicating the
restrictive nature of the right. Section 301 of the Telecommunication Act is reproduced:
“Sec. 301. [47 U.S.C. 301] license for radio communication or transmission of energy:
It is the purpose of this Act, among other things, to maintain the control of the United States
over all the channels of radio transmission; and to provide for the use of such channels, but
not the ownership thereof, by persons for limited periods of time, under licenses granted by
Federal authority, and no such license shall be construed to create any right, beyond the
terms, conditions, and periods of the license…..””
55

40
has ownership rights as recorded in the balance sheet. Explanation to
Section 18 specifically provides that for the purpose of this section,
assets shall not include those assets owned by a third party but are in
possession of the corporate debtor held under trust or under other
41
contractual agreements. Relevant portion of Section 18(f) is
reproduced below:
“ 18. Duties of interim resolution professional.— The interim
resolution professional shall perform the following duties,
namely
….
(f) take control and custody of any asset over which the
corporate debtor has ownership rights as recorded in the
balance sheet of the corporate debtor, or with information utility
or the depository of securities or any other registry that records
the ownership of assets including—
(i) assets over which the corporate debtor has ownership rights
which may be located in a foreign country;
(ii) assets that may or may not be in possession of the
corporate debtor;
(iii) tangible assets, whether movable or immovable; (iv)
intangible assets including intellectual property;
Explanation.—For the purposes of this [section], the term
“assets” shall not include the following, namely:—
(a) assets owned by a third party in possession of the
corporate debtor held under trust or under contractual
arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the corporate
debtor; and
(c) such other assets as may be notified by the Central
Government in consultation with any financial sector regulator.”
(emphasis supplied)
61. Similar provisions are also contained in Section 36(3) of the Code
in relation to the liquidation estate. Section 36(4) provides that the
40 Section 18(f), Insolvency and Bankruptcy Code, 2016.
41 Explanation to Section 18, Insolvency and Bankruptcy Code, 2016.
56

liquidation estate shall exclude assets owned by a third party in
possession of the corporate debtor, including under other contractual
arrangements which do not stipulate transfer of title but only the use of
42
the assets. Section 36(3) and (4) are reproduced as;
“ 36. Liquidation Estate
(3) Subject to sub-section (4), the liquidation estate shall
comprise all liquidation estate assets which shall include the
following:—
(a) any assets over which the corporate debtor has ownership
rights, including all rights and interests therein as evidenced in
the balance sheet of the corporate debtor or an information
utility or records in the registry or any depository recording
securities of the corporate debtor or by any other means as
may be specified by the Board, including shares held in any
subsidiary of the corporate debtor;
(b) assets that may or may not be in possession of the
corporate debtor including but not limited to encumbered
assets;
(c) tangible assets, whether movable or immovable;
(d) intangible assets including but not limited to intellectual
property, securities (including shares held in a subsidiary of the
corporate debtor) and financial instruments, insurance policies,
contractual rights;
(e) assets subject to the determination of ownership by the
court or authority;
(f) any assets or their value recovered through proceedings for
avoidance of transactions in accordance with this Chapter;
(g) any asset of the corporate debtor in respect of which a
secured creditor has relinquished security interest;
(h) any other property belonging to or vested in the corporate
debtor at the insolvency commencement date; and
(i) all proceeds of liquidation as and when they are realised.
(4) The following shall not be included in the liquidation estate
assets and shall not be used for recovery in the liquidation:—
(a) assets owned by a third party which are in possession of the
corporate debtor, including—
(i) assets held in trust for any third party;
(ii) bailment contracts;
(iii) all sums due to any workman or employee from the
provident fund, the pension fund and the gratuity fund;
42 Section 36(4)(iv), Insolvency and Bankruptcy Code, 2016.
57

(iv) other contractual arrangements which do not stipulate
transfer of title but only use of the assets;”
(emphasis supplied)
62. Hence, IBC includes only those tangible or intangible assets within
the insolvency framework over which the Corporate Debtor has
ownership rights, including all rights and interests therein as recorded in
the Balance Sheet.
63. In conclusion, the framework of IBC is clear in excluding assets
over which the corporate debtor has no ownership rights. Mere
recognition of spectrum licensing rights as an intangible asset by TSPs
in the Financial Statements is not conclusive of their ownership, as it
only represents control over future economic benefits. Even assuming
that licensing of spectrum rights is one among the bundle of rights, in the
absence of transfer of title over the spectrum, no ownership rights are
created in TSPs either in the spectrum or in its right to use as governed
by licensing conditions. Hence, under the IBC framework, spectrum
licensing rights is not a part of the pool of assets for insolvency or
liquidation.
VII. Identification of True Legal Province of Spectrum:
Reconciliatory Interpretation of Two Statutory Regimes
64. When confronted with a situation where two statutory enactments
appear to operate in conflict, this Court is enjoined to interpret the
concerned legislations in a manner that gives effect to both, to the extent
58

such reconciliation is reasonably possible. Only where such harmonious
construction is not feasible does the Court proceed to determine which
enactment must prevail. Conflicts of this nature may arise either between
a general statute and a special statute, or between two statutes each
possessing a special character. Over time, this Court has evolved settled
principles to guide the resolution of such inter se inconsistencies which
are as;
(I) Where two enactments are attracted to the same factual matrix, the
initial inquiry must be directed towards determining whether either
statute is general or special in relation to the subject-matter in issue.
This determination is not made in the abstract, but by examining the
dominant subject-matter of the statute, viewed through the prism of its
legislative intent. An enactment may, depending on the context, operate
as a general law for certain purposes and as a special law for others.
The optimal outcome is achieved where each statute is allowed to
function within its designated sphere, without trenching upon the field
43
occupied by the other. Bearing this in mind, the provisions of both
LIC of India v. DJ Bahadur, (1981) 1 SCC 315. Relevant paragraph is as follows:
43
“ 52 . In determining whether a statute is a special or a general one, the focus must be
on the principal subject-matter plus the particular perspective. For certain purposes, an Act may be
general and for certain other purposes it may be special and we cannot blur distinctions when dealing
with finer points of law. In law, we have a cosmos of relativity, not absolutes — so too in life….
57 . What is special or general is wholly a creature of the subject and context and may
vary with situation, circumstances and angle of vision. Law is no abstraction but realises itself in the
living setting of actualities. Which is a special provision and which general, depends on the specific
problem, the topic for decision, not the broad rubric nor any rule of thumb. The peaceful coexistence
of both legislations is best achieved, if that be feasible, by allowing to each its allotted field for play.
Sense and sensibility, not mechanical rigidity gives the flexible solution……”
59

enactments must be scrutinised to assess whether they can be
44
construed in a manner that permits harmonious construction.
(II) Where it is evident that one enactment is intended to function as a
special law governing a defined subject, while the other is a general law
operating in a broader or overlapping domain, the established principle
embodied in the maxim generalia specialibus non derogant applies. In
such circumstances, the general provision must give way to the special
45
provision.
(III) In an eventuality where the contestation is between two special
enactments, both having non-obstante clauses, the general rule is that
46
later enactment must prevail over the earlier one.
(IV) However, this is not an absolute rule. In the event of a conflict
between two special acts, the dominant purpose of both statutes would
have to be analyzed to ascertain which one should prevail over the
other. The primary effort of the interpreter must be to harmonise, not
Gobind Sugar Mills Ltd. v. State of Bihar, (1999) 7 SCC 76. Relevant paragraph is as fllows:
44
“ 10 . While determining the question whether a statute is a general or a special one,
focus must be on the principal subject-matter coupled with a particular perspective with reference to
the intendment of the Act…. ”
45 State of Gujarat v. Patel Ramjibhai Danabhai, (1979) 3 SCC 347; Commercial Tax Officer,
Rajasthan v. Binani Cements Ltd., (2014) 8 SCC 319; Vodafone Idea Cellular Ltd. v. Ajay Kumar
Agarwal, (2022) 6 SCC 496.
46 Sarwan Singh & Anr. v. Shri Kasturi Lal, (1977) 1 SCC 750. Relevant portion of the judgment is as
follows:
“ 20… ..When two or more laws operate in the same field and each contains a non-
obstante clause stating that its provisions will override those of any other law, stimulating and incisive
problems of interpretation arise. Since statutory interpretation has no conventional protocol, cases of
such conflict have to be decided in reference to the object and purpose of the laws under
consideration….
21. For resolving such inter se conflict, one other test may also be applied though the
persuasive force of such a test is but one of the factors which combine to give a fair meaning to the
language of the law. That test is that the later enactment must prevail over the earlier one…..”
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47
excise. Hence, where both the enactments have the non obstante
clause then in that case, the proper perspective would be that one has to
see the subject and the dominant purpose for which the special
enactment was made and in case the dominant purpose is covered by
that contingencies, then notwithstanding that the Act might have come at
a later point of time still the intention can be ascertained by looking to
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the objects and reasons.
65. This Court’s decision in Embassy Property Developments (P) Ltd.
49
v. State of Karnataka is a case in point to put substance into the view
that the jurisdiction of authorities under the Code, 2016 must take a
backseat when the same is in conflict with public law. One of the issues
before the Court in Embassy Property (Supra) was with respect to
Adjudicating Authority’s power to question and decide upon State
Government’s decision, in exercise of its powers under the Mines and
Minerals (Regulation and Development) Act,1957, rejecting extension of
mining lease. In unequivocal terms, this Court held that where the
47 S. Vanitha vs Deputy Commissioner, Bengaluru Urban District & Ors. (2021) 15 SCC 730. Relevant
portion of the judgment is as follows:
“ 34 …Principles of statutory interpretation dictate that in the event of two special acts
containing non obstante clauses, the later law shall typically prevail. In the present case, as we have
seen, the Senior Citizen’s Act 2007 contains a non obstante clause. However, in the event of a
conflict between special acts, the dominant purpose of both statutes would have to be analyzed to
ascertain which one should prevail over the other. The primary effort of the interpreter must be to
harmonise, not excise… .”
48 Bank of India v. Ketan Parekh, (2008) 8 SCC 148. Relevant portion of the judgment is as follows:
“ 28. …But cases might arise where both the enactments have the non obstante
clause then in that case, the proper perspective would be that one has to see the subject and the
dominant purpose for which the special enactment was made and in case the dominant purpose is
covered by that contingencies, then notwithstanding that the Act might have come at a later point of
time still the intention can be ascertained by looking to the objects and reasons... ”
49 (2020) 13 SCC 308.
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50 (2018) 1 SCC 407.
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during the subsistence of the lease. Therefore, what was
granted to the corporate debtor was not an exclusive
possession of the area in question, so as to enable the
resolution professional to invoke Section 14(1)(d). Section
14(1)(d) may have no application to situations of this nature.”
66. The scope and ambit of IBC is to speed up the process providing
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for insolvency , and achieving maximisation of value of the asset of the
entity undergoing CIRP. The focus is on the company. On the other
hand, Telegraph Act, Wireless Telegraphy Act and TRAI Act forms a
complete and exhaustive code for all matters relating to telecom sector.
This includes declaration of the nature of the rights and liabilities arising
out of holding and using spectrum. Powers of the Union includes
restructuring the telecom sector through policy decisions by introducing
reforms, provisioning bailout packages for stabilizing the sector,
prescribing conditions for grant of license, enabling treatment of
spectrum as an asset in the books of account of TSP to raise loans,
enable spectrum trading and power to prescribe consequence of failure
to pay the dues and also the power to recover the dues. The regulatory
jurisdiction for telecommunication sector through TRAI extends to
making recommendations to Union in the field enumerated in (i) to (viii)
of Section 11(1)(a) of the TRAI Act and to discharge the functions as laid
down in (i) to (ix) of Section 11(1)(b). Taken together, the Union as the
owner and trustee of spectrum on the one hand and TRAI as the
regulator on the other, occupy the entire province of telecommunications.
51 Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407.
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67. The statutory regime under IBC cannot be permitted to make
inroads into telecom sector and re-write and restructure the rights and
liabilities arising out of administration, usage, and transfers of spectrum
which operate under exclusive legal regime concerning
telecommunications. The disharmony caused by applying IBC to the
telecom sector which operates under a different legal regime was never
intended by the Parliament.
68. Statutory interpretation adopted by the corporate debtors for
applying IBC to the material resource of the nation, the spectrum by
referring to it as an asset in its books of account, the License Agreement,
Tripartite Agreement, or the Spectrum Trading Guidelines is like the tail
wagging the dog. Statutory interpretation cannot be based on a myopic
approach of reading the definition clauses out of its context. Merely
because spectrum can be treated as an “asset” on the basis of certain
attributes, such as possession and usage, lease and assignment, claim
and liability or credit and debt, the entirety of the telecom sector cannot
be brought under the sweep of IBC. The two statutes have different
subjects to deal with, different purposes to subserve, different laws to
abide, protect different rights and create different liabilities. It is
necessary for the constitutional courts to recognise their respective
provinces and to ensure that they operate with harmony and without
conflict.
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VIII. Conclusion:
69. For the reasons stated above;
(A) We hold that Spectrum allocated to TSPs and shown in their books
of account as an “asset” cannot be subjected to proceedings under
Insolvency and Bankruptcy Code, 2016.
(B) Civil Appeal No. 1810 of 2021 filed by State Bank of India, Civil
Appeal No. 2227 of 2021 filed by (successful resolution applicant of
corporate debtor) UV Asset Reconstruction Co. Ltd., Civil Appeal No.
2263 of 2021 filed by the IRP of the corporate debtor/ M/s Aircel Group
entities, and Civil Appeal Nos. 4570 and 4571 of 2021 filed by the IRP of
RCOM and RTL respectively are dismissed.
(C) Civil Appeal No. 6546 of 2021 filed by Union of India, through
Department of Telecommunication is allowed in part.
(D) Parties shall bear their own costs.
………………………………....J.
[PAMIDIGHANTAM SRI NARASIMHA]
………………………………....J.
[ATUL S. CHANDURKAR]
NEW DELHI;
FEBRUARY 13, 2026
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