The Supreme Court of India has ruled in favour of the Department of Telecommunications (DoT), holding that telecom spectrum cannot be transferred as part of an insolvency resolution plan under the Insolvency and Bankruptcy Code (IBC).
Delivering the judgment, the bench observed that the matter was not as complex as it seems and upheld the centre’s stance that spectrum is a scarce and public natural resource that belongs to the community. It said ownership, control and the associated benefits of spectrum must remain secured for citizens. The court clarified that the IBC cannot be used as the governing framework for restructuring or altering the ownership and control of such a public resource.
Further, reading from the verdict, the bench noted that the key issue was whether telecom service providers liable to pay licence fees to the DoT could invoke the moratorium under the corporate insolvency resolution process to restructure assets such as spectrum.
The case involved spectrum allocated through auctions, with the court stating that treating spectrum as a corporate asset raises fundamental questions regarding its ownership, possession, usage and transferability.
The judgment was structured in three parts, covering the legal nature of spectrum, the core legal questions involved, and the treatment of assets under the IBC in relation to telecom laws governing spectrum. The court concluded that the IBC cannot guide the restructuring of ownership and control of spectrum.
The dispute revolved around whether spectrum held by insolvent telecom companies could be treated as an asset and transferred to a successful resolution applicant under the IBC. While lenders argued that the right to use spectrum is an intangible asset that should pass on with the resolution plan, the DoT maintained that spectrum, being a public resource, must revert to the government if dues remain unpaid.
