Spectrum rights in insolvency: limited intangible asset status, conditional moratorium protection, and priority of licensor dues over lender claims.

Spectrum is treated as a scarce natural resource held by the State in trust, while the telecom operator's right to use spectrum is a limited intangible asset that can fall within insolvency proceedings. The telecom licence and spectrum-use rights are subject to the interim resolution professional's control under the Insolvency and Bankruptcy Code, and moratorium protection applies only conditionally, subject to compliance with current dues. Dues under the licence and deferred spectrum instalments are characterised as operational dues, not financial debt, and the spectrum cannot be treated as a lender's security interest where licence conditions and trading guidelines require clearance of the licensor's dues. The ruling preserves the Government's priority and limits CIRP use to evade public dues.

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Issues: (i) whether spectrum is a natural resource held by the Government as trustee of the people and whether the right to use spectrum is an intangible asset of the telecom service provider capable of being brought within insolvency proceedings; (ii) whether telecom licence and right to use spectrum fall within the custody and control of the interim resolution professional and are protected by moratorium under the Insolvency and Bankruptcy Code, 2016; (iii) whether dues payable to the Department of Telecommunications under the licence and deferred spectrum payment instalments constitute operational dues and whether the spectrum could be treated as a security interest of lenders under the tripartite arrangement.

Issue (i): whether spectrum is a natural resource held by the Government as trustee of the people and whether the right to use spectrum is an intangible asset of the telecom service provider capable of being brought within insolvency proceedings.

Analysis: Spectrum was held to be a scarce natural resource belonging to the people, with the State holding it in trust and bound by constitutional principles and public trust obligations. The licence granted under the telegraph regime confers only a limited right to use spectrum for consideration and subject to continuing compliance with licence terms. That right was treated in the financial statements and regulatory materials as an intangible asset and as a present economic resource capable of yielding value. On that basis, the right to use spectrum was held to be an asset of the corporate debtor capable of forming part of insolvency resolution proceedings.

Conclusion: The issue was answered in favour of the Revenue to the extent that spectrum remains a public resource under the State's trusteeship, while the right to use spectrum is only a limited intangible asset of the corporate debtor and not ownership of the spectrum itself.

Issue (ii): whether telecom licence and right to use spectrum fall within the custody and control of the interim resolution professional and are protected by moratorium under the Insolvency and Bankruptcy Code, 2016.

Analysis: The Code defines property broadly and obliges the interim resolution professional and resolution professional to take control and custody of assets over which the corporate debtor has ownership rights, including intangible assets. The amended moratorium provision was read to protect licences, permits, concessions and similar grants from suspension or termination during CIRP so long as current dues are paid, because the object is to preserve the corporate debtor as a going concern. The Court's reasoning treated the right to use spectrum and telecom licence as assets that can be subjected to the Code's process, while noting that such protection is conditional and does not displace the public authority's regulatory powers outside the moratorium framework.

Conclusion: The issue was answered in favour of the Revenue on the point that the assets remain subject to the Code, while the moratorium protection is limited and conditional, not absolute.

Issue (iii): whether dues payable to the Department of Telecommunications under the licence and deferred spectrum payment instalments constitute operational dues and whether the spectrum could be treated as a security interest of lenders under the tripartite arrangement.

Analysis: Dues arising under the telegraph licence and spectrum assignment were held to be operational dues, not financial debt, because they arise from the grant and use of a public resource under the governing statutory and contractual framework. Deferred spectrum instalments also retained that character. The tripartite arrangement and spectrum trading guidelines were read to require clearance of the licensor's dues before transfer or trading, and the lenders' claimed security could not override the licensor's priority. The Court further held that CIRP cannot be used to wipe out such governmental dues or to permit transfer in breach of licence conditions and trading guidelines, particularly where the process appears designed to evade liabilities.

Conclusion: The issue was decided in favour of the Revenue. DOT dues were held to be operational dues, deferred spectrum instalments also formed part of operational dues, and the spectrum could not be treated as a security interest of lenders.

Final Conclusion: All referred questions were answered in a manner that preserved the Government's trustee role over spectrum, treated the right to use spectrum as an insolvency-relevant intangible asset, recognized the licensor's dues as operational dues, and denied lenders any overriding security interest over the spectrum. The appeals on the resolution plans were left to be taken up separately thereafter.

Ratio Decidendi: A licence to use spectrum is only a conditional intangible asset of the corporate debtor within insolvency law, and the statutory protections of the Code do not permit the wiping out of the Government's licence dues or the conversion of spectrum into a lender's security interest contrary to the licence conditions and regulatory guidelines.

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