SBI vs. Govt: Supreme Court Hears Telecom Spectrum Showdown for Lender Recovery!

Banking/Finance

|

Updated on 12 Nov 2025, 02:07 pm

State Bank of India (SBI), India's largest lender, has presented its case before the Supreme Court, arguing that telecom spectrum should be considered a monetizable asset within the insolvency process. This is intended to allow creditors, like SBI, to recover outstanding dues from bankrupt telecom operators. The government, however, maintains a firm stance that spectrum is a natural resource owned by the state and held in trust for the public. They argue it cannot be liquidated or transferred under the Insolvency and Bankruptcy Code (IBC) until all statutory government dues, such as license fees and spectrum usage charges, are fully settled.

The legal battle stems from appeals filed by lenders of the bankrupt Aircel Ltd. These lenders challenge a previous order by the National Company Law Appellate Tribunal (NCLAT) which supported the government's view. SBI's legal team argued that spectrum forms the basis of security for loans granted to telecom companies, citing tripartite agreements. Without treating it as collateral, financing would be impossible, leaving lenders with no recourse. The government, represented by the Attorney General, relied on specific sections of the IBC that exclude third-party assets held in trust from the insolvency estate. SBI retorted that the government, as a licence granter and party to agreements, is not a mere third party in this context.

Impact This case holds significant implications for the financial recovery prospects of lenders in the telecom sector and sets a crucial precedent for the treatment of government-controlled, valuable assets during corporate insolvency. It directly affects how banks can recover loans from distressed telecom companies. Rating: 8/10

Difficult Terms Telecom Spectrum: The range of radio frequencies used for wireless communication services, like mobile phone calls and internet. Assigning spectrum is a key function of governments. Insolvency Process: A legal framework for dealing with companies that are unable to repay their debts, aiming for either resolution or liquidation of assets. Insolvency and Bankruptcy Code (IBC): India's primary law governing insolvency and bankruptcy proceedings for companies and individuals. Intangible Asset: An asset that lacks physical substance but holds economic value, such as patents, trademarks, copyrights, or spectrum rights. Creditors: Individuals or entities to whom money is owed. Tripartite Agreement: A contract or agreement involving three distinct parties. Corporate Debtor: A company that is undergoing insolvency proceedings. Security Interest: A legal claim granted over a debtor's property to secure the repayment of a debt. National Company Law Appellate Tribunal (NCLAT): An appellate body that hears appeals against decisions made by the National Company Law Tribunal (NCLT). Statutory Dues: Amounts owed to government bodies as required by law, including taxes, license fees, and other charges. Resolution Plan: A proposal submitted during insolvency proceedings outlining how a company's debts will be restructured and how it will operate moving forward. Escrow Account: A temporary, secure holding account managed by a third party, used to facilitate financial transactions, especially in complex deals.