In a jolt to lenders, SC bars spectrum sale under IBC

Subscribe to enjoy similar stories. The Supreme Court on Friday dashed banks' hopes of recovering money lent to bankrupt telecom operators such as Reliance Communications (RCom) and Aircel by ruling that airwaves cannot be sold under an insolvency process. Therefore, the future of the two operators and how UV Asset Reconstruction Co Ltd (UVARCL), the asset reconstruction company that had won the bids for them, will monetize them without selling the precious spectrum is now a gnawing question.

“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 (IBC), 2016," the judgment said. TSPs are telecom service providers, and in this case, Aircel and Rcom went bankrupt in 2018 and 2019, respectively. A bench comprising Justice P.S.

Narasimha and Justice Atul Chandurkar held that “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". In an over 60-page judgment, the court ruled that telecom spectrum cannot be treated as an asset under the IBC and cannot be sold or restructured during insolvency to repay lenders.

The bench clarified that the IBC applies only to assets that a company actually owns. Since spectrum remains government property, it cannot form part of the insolvency or liquidation estate. The ruling made it clear that insolvency law cannot override telecom law.