Supreme Court Ruling on Telecom Spectrum and Insolvency

The Supreme Court of India made a significant ruling regarding the transfer and sale of telecom spectrum under the Insolvency and Bankruptcy Code (IBC), impacting companies like Aircel Ltd, which ceased operations in February 2018 and filed for bankruptcy the same month.

Key Points of the Ruling

• Spectrum as a Public Resource: Telecom spectrum is deemed a scarce public resource and cannot be transferred or sold by companies under IBC. 
• Government's Stand: The Department of Telecommunications (DoT) argued that spectrum belongs to the people and should revert to the government. 
• IBC Limitations: IBC cannot restructure ownership and control of spectrum, as it is not an asset to be monetized in insolvency proceedings. 

Court's Observations

• Statutory Interpretation: The court criticized lenders' view that spectrum could be monetized, stating it is like "the tail wagging the dog." 
• Regulatory Control: The tripartite agreement between DoT, TSPs, and banks allows conditional spectrum transfer but under strict regulatory control. 
• Ownership and Rights: Spectrum licensing rights in TSPs' balance sheets do not indicate ownership, only control over economic benefits. 

Implications and Conclusions

• Boundary Between Laws: The ruling delineates the boundary between insolvency law and state control over natural resources. 
• Future Resolution Processes: It will shape value assessment and resolution plans in the telecom sector. 
• Petitioners' Appeal: The SBI-led committee's appeal against the National Company Law Appellate Tribunal’s order, which allowed spectrum transfer after clearing government dues, was dismissed.