Aircel Case: SBI Moves Supreme Court to Review Spectrum Insolvency Order

The State Bank of India (SBI), acting on behalf of lenders to the bankrupt Aircel Group, has approached the Supreme Court. The bank is seeking a review of the apex court's February 13 judgment that barred telecom spectrum from being treated as a transferable asset under insolvency proceedings, according to multiple reports.

In a review petition filed on March 30, the bank cautioned that the ruling carries far-reaching consequences for the country's banking system and infrastructure financing.

SBI argued in its petition that the judgment contains errors that go to the root of the matter, and that it failed to address key legal questions that the court itself had framed earlier. Specifically, the bank said the ruling overlooked issues critical to lenders, including the treatment of spectrum usage rights and the classification of government dues under the Insolvency and Bankruptcy Code (IBC).

The Ruling That Triggered the Challenge

The February 13 order was delivered in the long-running insolvency dispute involving Aircel, its subsidiary Aircel Cellular, and Dishnet Wireless, all of which had voluntarily entered the insolvency process under Section 10 of the IBC. The companies had received telecom licences in 2006 under Unified Access Service Licence agreements and had later acquired spectrum through government auctions. During insolvency proceedings, the right to use this spectrum was treated as part of the companies' assets.

A bench led by Justice PS Narasimha and Justice Atul Chandurkar ruled in favour of the Department of Telecommunications (DoT), holding that spectrum is a limited and valuable national resource — a "material resource of the community" — and that its ownership and control must remain with the government for the benefit of citizens, as reported by Bar and Bench.

The court further held that the IBC cannot be used to alter who controls or owns such a resource, and that insolvency law cannot override telecom regulations governing spectrum.

The court structured its judgment in three parts, first examining the legal nature of spectrum, then identifying the key legal questions at stake, and finally analysing how insolvency law interacts with telecom regulations. Its conclusion was unambiguous. It said that spectrum is not ordinary corporate property, and even though it is allocated through auction, it remains a public resource that private companies cannot transfer during insolvency.

Resolution Processes in Limbo

The ruling has dealt a blow to the insolvency resolution processes of both Aircel and Reliance Communications (RCom). Aircel was admitted to the corporate insolvency resolution process in 2018, while RCom followed in 2019. Both cases have been mired in legal and technical hurdles, and the apex court's order has further stalled progress.

RCom's resolution professional had also filed a review petition against the February 13 order earlier last month, making SBI's petition the second major legal challenge to the ruling.

Lenders vs Government

The fundamental disagreement in this case is over the nature of spectrum rights. Lenders had argued that the right to use spectrum is an intangible asset — similar to other company assets — and should therefore be transferable to a successful bidder under the IBC process.

The government, on the other hand, maintained that spectrum is only given on licence and remains under state control at all times. If dues remain unpaid, it argued, spectrum must revert to the government rather than pass to a new owner.

The National Company Law Appellate Tribunal (NCLAT) had in 2021 taken a middle position, ruling that spectrum could be transferred but only after clearing government dues. That order was challenged before the Supreme Court by both the central government and an SBI-led committee of creditors, eventually leading to the February ruling that has now itself come under challenge.