Spectrum allocated to TSPs and shown in books of account as asset cannot be subjected to proceedings under IBC, 2016.
In a recent judgment, Hon’ble Supreme Court has held that spectrum allocated to Telecom Service Provider (TSP) and shown in their books of account as an “asset” cannot be subjected to proceedings under Insolvency and Bankruptcy Code, 2016.
ABCAUS Case Law Citation:
5042 (2026) (02) abcaus.in SC
In the instant case, the question was as to 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 Spectrum allocated to the TSPs through auction.
The Hon’ble Supreme Court delivered judgment in three parts. The first part defines the legal implications of spectrum, the second part identify its true legal province and in third part, treatment of an “asset” was examined under IBC and in this context its application to telecommunication laws that govern ownership of spectrum.
In the instant case, the Aircel Group entities (Corporate Debtors) were granted telecom licences by the DoT. Domestic lenders, including Bank extended term loan facilities to the Corporate Debtors. In spectrum auctions conducted by DoT, the corporate debtor acquired rights to use spectrum upon specified payment.
When Corporate debtors failed to pay licence fee. When DoT attempted to recover these amounts, they invoked IBC by filing an application under Section 10 for voluntary corporate insolvency resolution process. The application was admitted by the National Company Law Tribunal.
The DoT was invited to participate in the CoC meeting and thereafter filed its claim arising from Annual Licence Fee and Spectrum Usage Charges payable under the Licence Agreements.
The resolution plan was approved by the CoC and thereafter sanctioned by the NCLT. Aggrieved, DoT assailed the NCLT order approving the resolution plan before the appellate tribunal, NCLAT.
Meantime in view of the decision in Association of Unified Telecom Service Providers of India, Hon’ble Supreme Court referred the question as to whether the question whether spectrum could be subjected to proceedings under the IBC?
The NCLAT inter alia held that Spectrum, being intangible asset of the Licensee/ TSPs/ Tel Cos/ Corporate Debtor, can be subjected to insolvency/liquidation proceedings and dues of Central Government/ DOT under the Licence fall within the ambit of Operational Dues under I&B Code. It was held that the spectrum cannot be utilized without payment of requisite dues which cannot be wiped off by triggering CIRP under I&B Code.
The Hon’ble Supreme Court observed that the scope and ambit of IBC is to speed up the process providing 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 the power to recover the dues.
The Hon’ble Supreme Court stated that 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 Hon’ble Supreme Court opined that 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, 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.
Accordingly, it was held by the Supreme Court held 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.
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