From AGR to Aircel: How the Supreme Court Wrote Spectrum Out of IBC

[Sumedha is a student at Maharashtra National Law University, Mumbai.]

The Supreme Court, in its recent decision in State Bank of India v. Union of India (Aircel), has finally settled the question of law that has plagued the telecom industries for nearly a decade, which is, whether the spectrum rights granted to a telecom service provider (TSP) can be considered under the pool of assets available for resolution under the Insolvency and Bankruptcy Code 2016 (IBC). While the National Company Law Appellate Tribunal (NCLAT) reasoned that spectrum rights are a natural resource, with the right to use them being subject to the IBC proceedings, it held that the dues remaining to be paid to the Department of Telecommunications (DoT) could not be wiped off by the resolution plan of the corporate debtor, as the tradability of the license was subject to the payment of dues and prior consent of the DoT, who held the same in public trust. The Supreme Court however, took a different approach, and held that the answer to the above question would be an unambiguous no, even when the spectrum sits on the TSP’s balance sheet as an intangible asset and being of central value to the corporate debtor, it cannot be subjected to proceedings under the IBC. This is not a standalone event, but the third leg of a story that began with an adjusted gross revenue (AGR) dispute, that made its way to the Supreme Court and now collides with a legislative fix that was drafted for a different legal landscape.

AGR Plants the Seed

The present case did not begin as a “spectrum in insolvency” dispute, but rather arose out of a long-running AGR litigation wherein the Supreme Court, in Union of India v. Association of Unified Service Providers of India (AGR-II), held that the TSPs’ outstanding dues fell into the ambit of AGR and directed them to clear the same in a time bound manner. However, before the same could be enforced by the DoT, they were informed that the several TSPs, including Aircel, had gone into corporate insolvency resolution process. Moratorium provisions under Section 14 of the IBC thus barred the recovery of the dues. The court thus, in its July 2020 order, stated that it would not interfere with the definition of AGR as had been previously decided upon, but flagged that the initiation of insolvency needed bona fide testing, given that the DoT’s dues across the several TSPs exceeded INR 38,964 crores. This suspicion that the IBC was being as a route to evade the payment of these dues rather than for genuine resolution of insolvency sowed the doctrinal seed for all that followed. By September 2020, the court framed specific questions on whether spectrum was a natural resource, whether it could be considered an “asset”, whether it could be subject to IBC proceedings, etc. for deliberation by the NCLAT. Thus, the Aircel case was not an isolated pronouncement on spectrum, but was AGR’s unfinished business procedurally continued through a different statute. 

NCLAT’s Halfway House

The NCLAT’s order, while deciding upon the questions framed by the Supreme Court, was internally inconsistent. It held that the spectrum was an intangible asset that could be subjected to IBC proceedings and that the DoT’s dues qualified as “operational debt” as per the IBC. However, at the same time, NCLAT also held that the spectrum could not be utilized without full clearance of past dues, which could not be wiped off by a resolution plan. This was justified by the appellate tribunal by reasons of the license agreement itself requiring the consent of DoT prior to any transfer of the license. While the provisions with respect to the clean slate doctrine had not been explicitly included in the bare text of the IBC when this order was pronounced, it existed through judicial pronouncements. It was not emphasised in the NCLAT’s order why the same shall not apply to spectrum license dues in the present case. The Supreme Court itself noted the difficulty of expecting a statutory appellate tribunal in ruling on the very jurisdiction of the IBC over a sovereign resource. 

The financial creditors capitalized on this internal inconsistency and appealed before the Supreme Court, arguing that the NCLAT’s findings rested on “mutually destructive premises”, as spectrum rights were held to be transferrable as well as non-transferrable simultaneously. This forced the Supreme Court to resolve the question definitely, rather than incrementally, possibly producing a ruling more absolute than the fact-specific order expected from NCLAT.

Supreme Court Closes the Loop

The ruling of the Supreme Court drew directly from the premise of AGR-II, that spectrum is a finite natural resource held by the Union of India in public trust under Article 39(b), and a TSP’s license may only confer a “limited, conditional and revocable privilege” and never ownership. Section 18 and Section 36(4) of the IBC only include assets over which the corporate debtor has ownership rights, thus excluding spectrum as the accounting recognition under Ind AS 38 only reflects control over economic benefit and not legal title. These three cases trace one continuous doctrinal line that spectrum license dues owed to the State are not to be treated as ordinary commercial claims capable of being negotiated down inside a resolution plan.

The Catfight Beneath the Doctrine

Analysing this case independent of the constitutional reasonings leaves behind an oddity, that this was years of Supreme Court litigation between two arms of the same Union of India, i.e. public sector bank led lenders on one side, and the DoT on the other, with the DoT’s claims exceeding INR 90,000 crores across several TSPs against far smaller bank recoveries. The same has been termed a “catfight”, questioning why two government-controlled parties needed an adversarial, resource intensive litigation rather than resolving the conflict through inter-ministerial coordination. This raises a question about IBC’s design, as a statute meant to speed up resolution ended up being the site of a multi-year sovereign v/s sovereign turf war, with the actual company and its employees left in limbo.

The 2026 Amendments

The Insolvency and Bankruptcy Code (Amendment) Act 2026 (2026 Amendments), vide the insertion of Section 31(5) and 31(6) of the IBC have statutorily codified the clean slate doctrine, wherein licenses, permits, concessions or similar rights granted by a government or regulatory authority and forming part of an approved resolution plan cannot be suspended or terminated during their remaining term, as long as the stipulated conditions are conformed to. These provisions are applicable retrospectively to plans approved from 28 May 2016 that have not yet attained finality.

This carve out protects the Aircel matter, which attained finality on 13 February 2026. The timing means that the court’s decision was never tested against the clean-slate provisions the Parliament has since enacted. This does not mean that the clash does not exist, it just remains to be addressed in the next TSP, mining lessee, or petroleum licensee insolvency.

Section 31(5) presupposes that the license in question is a part of the pool of assets of the corporate debtor, but the Supreme Court has held otherwise. If spectrum is not an asset of the corporate debtor, Section 31(5)’s clean slate protection cannot be granted to the outstanding dues attached to it. This leads to two provisions, both good in law, that appear to talk past each other rather than to each other. This may be interpreted in two ways: 

1. Section 31(5) is inapplicable to spectrum-type rights, meaning that the Parliament’s license continuing guarantee is silent for all licenses over natural resources; or

2. Courts may read Section 31(5) as impliedly conditioning license continuity on prior approval by the concerned regulator, which means importing a DoT consent requirement that is not there in text.

The more textually honest reading would be the first one, which would mean that the 2026 Amendments already need a natural resource specific clarification to actually deliver on its stated purpose for this sector.

Recommendations

Since the 2026 Amendments are in force, the Parliament or the Central Government, through a further amendment or a clarificatory rule, should state expressly whether Section 31(5) extends to conditional, revocable rights over natural resources. Leaving such issues to litigation risks a repeat of the years long Aircel saga for the next TSP or mining insolvency. Given that this litigation was substantively PSU lenders against a government department, there should be a mandatory inter-governmental consultation protocol before public financial institutions and government departments proceed in adversarial litigation. As the Aircel judgement can be evidently read-across to mining, coal and petroleum licenses held on similarly conditional terms, IBBI should consider issuing sector-specific resolution guidelines for such debtors, similar to the ones issued for real estate sector and homebuyers.

Conclusion

The doctrine developed in these cases has outpaced institutional design. The 2026 Amendments were meant for an IBC in which natural resources were, arguably, still part of the resolution estate. Until Parliament and Insolvency and Bankruptcy Board of India catch up, TSP resolutions, as well as those of other natural resources, will sit in the gap that the Supreme Court has just defined.