SC says spectrum of bankrupt telecom operators can't be sold to repay lenders

Core Viewpoint - The Supreme Court ruled that telecom spectrum is a "material resource of the community" and cannot be treated as an ordinary asset under the Insolvency and Bankruptcy Code (IBC) for the repayment of lenders in the insolvency proceedings of Aircel and Reliance Communications (RCom) [1][4]. Group 1: Legal Framework and Ruling - The court stated that spectrum belongs to the people of India, with the government acting as a trustee, and that the IBC cannot override the statutory framework governing its allocation, control, and use as a public resource [2][8]. - The ruling clarifies that telecom spectrum, recognized as belonging to Indian citizens, cannot be liquidated under the insolvency regime to maximize lender recoveries, setting a precedent for future telecom insolvency cases involving spectrum rights [7] [9]. Group 2: Background and Context - The dispute arose from petitions filed by State Bank of India and the two insolvent telecom operators challenging a 2021 order of the National Company Law Appellate Tribunal (NCLAT), which ruled that spectrum could be transferred or sold under a resolution plan only after clearing all outstanding government dues [4][11]. - RCom, Aircel, and Videocon entered insolvency between 2018 and 2019, with unpaid statutory dues exceeding ₹40,000 crore [5]. Group 3: Arguments from Stakeholders - The Centre argued that the IBC cannot override the state's control over natural resources, asserting that telecom companies do not own spectrum but are granted limited rights to use it, and that unpaid statutory dues must result in the spectrum reverting to the government [8]. - Lenders contended that spectrum usage rights are commercially valuable and transferable with government approval, and that preventing monetization would sharply reduce recoveries and undermine the objective of insolvency resolution [9].