State Bank of India vs Union of India (2026): Supreme Court on Spectrum, Ownership & Insolvency Law
The Supreme Court of India in decided on 13 February 2026, delivered a landmark ruling clarifying whether telecom spectrum can be treated as an “asset” under the Insolvency and Bankruptcy Code, 2016 (IBC). The judgment, authored by Justice Pamidighantam Sri Narasimha, settles crucial questions regarding ownership of spectrum, operational dues, moratorium under IBC, and the doctrine of public trust.
This decision has far-reaching implications for telecom companies, financial institutions, insolvency professionals, and the Government of India.
Background of the Case
The case arose from insolvency proceedings initiated by Aircel Group entities after defaulting on licence fee and spectrum usage charges payable to the Department of Telecommunications (DoT).
During the Corporate Insolvency Resolution Process (CIRP), a critical question emerged: Can telecom spectrum be treated as an asset of the corporate debtor and subjected to insolvency proceedings?
The issue became more complex after earlier AGR (Adjusted Gross Revenue) rulings in which affirmed the liability of telecom service providers (TSPs) to pay statutory dues.
Key Legal Issues Before the Supreme Court
The Supreme Court examined multiple constitutional and statutory questions, including:
- Is spectrum a natural resource held in public trust?
- Do telecom companies “own” spectrum or merely have a limited right to use it?
- Can spectrum usage rights be treated as assets under Section 18 of the IBC?
- Are DoT dues “operational debts” under the IBC?
- Can insolvency proceedings wipe off government dues relating to spectrum?
Spectrum as a Natural Resource
The Court reaffirmed that spectrum is a finite natural resource and belongs to the people of India. The Government holds it in trust under the public trust doctrine. Relying on earlier constitutional bench decisions such as and the Court emphasized:
The State is the trustee of natural resources and must ensure their allocation subserves the common good under Article 39(b) of the Constitution.
Thus, spectrum cannot be treated as private property of telecom companies.
Ownership vs Right to Use
Under Section 4 of the Indian Telegraph Act, 1885, the Central Government enjoys exclusive privilege over telecommunication services. The Court clarified that:
- Telecom licensees do not acquire ownership of spectrum.
- They receive only a limited, conditional, and revocable right to use spectrum.
- This right is governed strictly by statutory conditions and licence agreements.
The Court distinguished between ownership, possession, and occupation. Telecom companies merely occupy the right to use spectrum; they do not possess proprietary title.
Can Spectrum Be an Asset Under IBC?
This was the central issue. Financial creditors argued that spectrum usage rights are intangible assets and fall within the insolvency estate under Section 18 of IBC.
However, the Union of India contended that:
- Spectrum is not owned by the corporate debtor.
- It cannot form part of liquidation estate under Section 36 of IBC.
- Resolution plans cannot override statutory licence conditions.
The Supreme Court held that while the right to use spectrum may have commercial value, it remains subject to sovereign control and statutory compliance. The IBC cannot be used as a mechanism to restructure ownership or control of a natural resource.
Status of DoT Dues – Operational or Otherwise?
The classification of licence fee and spectrum usage charges was heavily debated.
The NCLAT had earlier treated them as “operational dues.” However, the Supreme Court examined whether such dues arise from supply of goods or services, or from sovereign grant of privilege.
The Court leaned toward recognizing the unique sovereign character of spectrum allocation, indicating that government dues cannot simply be equated with ordinary commercial operational debts.
IBC vs Telecom Regulatory Framework
A significant aspect of the ruling is reconciliation between the IBC and telecom laws including:
- Indian Telegraph Act, 1885
- Wireless Telegraphy Act, 1933
- Telecom Regulatory Authority of India Act, 1997
The Court made it clear that the IBC does not override sovereign control over natural resources. Section 238 of IBC cannot be interpreted to nullify constitutional obligations under the public trust doctrine.
Impact on Financial Creditors and Banks
The decision significantly affects banks and financial institutions. They cannot treat spectrum as a conventional secured asset for enforcement under insolvency proceedings.
The Court emphasized that lenders cannot claim a superior right over spectrum when the Government retains priority under licence terms and statutory framework.
Doctrine of Public Trust Reaffirmed
The judgment strongly reinforces the doctrine laid down in :contentReference[oaicite:5]{index=5}, where natural resources are held by the State as trustee of the people.
Any attempt to dilute government dues through insolvency resolution would undermine constitutional mandates under Article 14 and Article 39(b).
Key Takeaways from the Judgment
- Spectrum is a national asset and natural resource.
- Telecom companies do not own spectrum.
- Right to use spectrum is conditional and regulated.
- IBC cannot be used to wipe off sovereign dues relating to natural resources.
- Resolution plans must comply with telecom regulatory conditions.
- Public trust doctrine overrides commercial restructuring mechanisms.
Conclusion
The 2026 Supreme Court ruling in State Bank of India vs Union of India marks a defining moment in Indian insolvency and telecom jurisprudence. It clarifies that economic recovery mechanisms under IBC cannot compromise constitutional principles governing natural resources.
This judgment strengthens regulatory certainty, protects public revenue, and ensures that spectrum—an invaluable national asset—remains under sovereign control for the benefit of the people.
For telecom companies, lenders, and insolvency professionals, this case serves as a crucial precedent shaping the future of spectrum governance and corporate restructuring in India.
For expert legal consultation on telecom litigation, insolvency matters, or regulatory compliance, contact Pavan Law Chambers.
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