Telecom Spectrum Not an Asset That Can Be Restructured Under IBC: Supreme Court

NCLAT view on spectrum as intangible asset

A resolution plan submitted by UV Asset Reconstruction Company and approved by the committee of creditors was later challenged by the Union government before the National Company Law Appellate Tribunal. The appellate tribunal had held that while spectrum remains a natural resource owned by the nation, the licensee’s right to use it constitutes an intangible asset and can be dealt with in insolvency, though not without clearing government dues.

Re-examining the issue, the Supreme Court framed the central question as whether insolvency law could be invoked to alter ownership or control over spectrum or dilute statutory obligations attached to its use.

Answering in the negative, the Bench relied on Article 39(b) of the Constitution, which requires material resources of the community to be distributed to subserve the common good and not be treated as private commercial assets divorced from public interest. It said the right to use spectrum flows from a licence granted under a special statutory regime and does not confer proprietary rights on the holder. The court described spectrum as a “material resource of the community.”

Government a trustee, not a transferor

The Court held that the IBC cannot be the guiding framework for restructuring ownership and control of spectrum. Entry into insolvency, it said, does not convert spectrum into a freely transferable commodity, nor can the moratorium be relied upon to escape or postpone payment of licence-related liabilities.

Calling for a harmonious interpretation of the IBC and the telecom framework, the Bench observed that the Government holds spectrum as trustee for the people, and that its control cannot be diluted through insolvency proceedings.

“TSPs have the right to use spectrum under licence granted to them. They cannot be said to be the owners in possession of the spectrum but only in occupation of the right to use spectrum. Ownership of spectrum belongs to Nation (people) with Government only being its Trustee. Possession correlates with the ownership right,” the Supreme Court judgement read.