TaxTMI 
TaxTMI 
2026 (2) TMI 790
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...., Ms. Aishwarya Gupta, Adv., Ms. Niharika Shukla, Adv., Mr. Anchit Jasuja, Adv., Mr. Eklavya Dwivedi, Adv., Mr. Yasir, Adv., M/S. Cyril Amarchand Mangaldas Aor, AOR For the Respondent(s) :Mr. R. Venkataramani, Attorney General for India (Arguing Counsel), Mr. K.M Nataraj, A.S.G., Mr. Digvijay Dam, Adv., Mr. Balaji Srinivasan, Adv., Mr. Akshay Amritanshu, Adv., Mr. Kanu Agrawal, Adv., Mr. S.k Singhania, Adv., Ms. Sansriti Pathak, Adv., Mr. Shashank Shekhar, Adv., Mr. Kartikay Aggarwal, Adv., Mr. Ameyavikrama Thanvi, Adv., Mr. Raman Yadav, Adv., Mr. Amrish Kumar, AOR, Mr. Rohan Batra, AOR, Mr. Dhruv Dewan, Adv., Mr. Rishabh Bhargava, Adv., Mr. Dhruv Sethi, Adv., Mr. Harsh Vardhan Arora, Adv., Ms. Sanjukta Roy, Adv., Ms. Shailza Agarwal, Adv., Mr. S. S. Shroff, AOR, Mr. Rakesh Dwivedi, Sr. Adv. (Arguing Counsel), Mr. Raunak Dhillon, Adv., Mr. Madhav Kanoria, Adv., Ms. Aishwarya Gupta, Adv., Ms. Niharika Shukla, Adv., Mr. Anchit Jasuja, Adv., Mr. Eklavya Dwivedi, Adv., Mr. Yasir, Adv., M/S. Cyril Amarchand Mangaldas Aor, AOR. JUDGMENT Contents I. Introduction 3 II. Prelude to the NCLAT's judgment: Facts leading to the filing of these appeals 4 III. ....
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....mportantly its "control" with all its attributes, including benefits, have to be secured for the citizens. 1.2. Our judgment is therefore in three parts. In the first part, we define the legal implications of spectrum and in the second part we identify its true legal province. In the third part, we examine treatment of an "asset" under IBC and in this context its application to telecommunication laws that govern ownership of spectrum. Finally, we could reach our conclusion, as naturally as water knows its slope, IBC cannot be the guiding principle for restructuring the ownership and control of spectrum. II. Prelude to the NCLAT's judgment: Facts leading to the filing of these appeals. 2. The Aircel Group entities - Aircel Limited, Aircel Cellular Limited and Dishnet Wireless Limited (hereinafter collectively referred to as "the corporate debtors") - were granted telecom licences by the DoT under Unified Access Service Licences (UASL) pursuant to Licence Agreements dated 05.12.2006, each valid for a term of twenty years. Domestic lenders, including the State Bank of India, extended rupee term loan facilities aggregating to Rs.13,729 crores under a Rupee Loan Facility Agreem....
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....an order on 20.07.2020 [In Re Mandar Deshpande, 2020 SCC OnLine 758.] observing as under: "We have heard the learned counsel appearing for the parties at length with respect to the prayer made by the Central Government and the time frame for making the payment as per the order passed by this Court. During course of hearing, again an attempt was made to wriggle out of our judgment and orders, which were passed by this Court under the guise of reassessment and recalculation. That is not at all permissible. In view of decision, there is no scope of raising any further dispute with respect to any item or to raise fresh dispute. No dispute can be raised with respect to dues and they have to be paid. New round of litigation is prohibited. In the second inning, we have heard the same after remand of the issues to the TDSAT. Thereafter, there is no question of entertaining any kind of dispute with respect to the payment and dues worked out. No dispute shall be entertained. The calculations which have been given and the amount to be recovered at pages 180181 of M.A.D. No. 9887 of 2020 (application for modification) in C.A. No. 63286399 of 2015 are taken to be as final amount and th....
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....om ownership. What is the distinction between possession and occupation? Whether possession correlates with the ownership right? A question also arises concerning the difference between trading and insolvency proceedings. Whether a licence can be transferred under the insolvency proceedings, particularly when the trading is subjected to clearance of dues by seller or buyer, as the case may be, as provided in Guideline Nos.10 and 11; whereas in insolvency proceedings dues are wiped off. Guideline No.12 is also assumed to be of significance in case spectrum is subjected to insolvency proceedings, which must be considered. 21. It is also required to be examined that when the Government has declined the permission to trade and has not issued NOC for trading on the ground of non-fulfilment of the conditions as stipulated in the licence agreement, the spectrum can be subjected to resolution proceedings which will have the effect of wiping off the dues of the Government, which are more than Rs 40,000 crores. Whereas the dues of the banks are much less. Whether obtaining the DoT's permission and its approval to the resolution plan would be a substitute for Trading Guideline No....
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...., and the legal consequences flowing therefrom. (ii) Whether the conferment of a right to use spectrum under a licence granted under Section 4 of the Telegraph Act, 1885 vests any ownership or proprietary interest in TSPs, or whether such right constitutes a limited, conditional and revocable privilege. (iii) What is the true nature of the relationship between ownership, possession and occupation in respect of spectrum, and whether possession or control of spectrum usage correlates with ownership rights. (iv) Whether spectrum, or the right to use spectrum under a licence, can be treated as an "asset" of the corporate debtor so as to fall within the ambit of Section 18 of the IBC. (v) Whether spectrum licences or spectrum usage rights can be transferred or traded in insolvency proceedings when such transfer, under the Spectrum Trading Guidelines, is expressly subject to prior governmental approval and clearance of past dues. (vi) Whether spectrum or spectrum usage rights can be treated as a security interest in favour of lenders by virtue of licence conditions or tripartite arrangements, and whether such security can be enforced under the....
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....ncludes right to use spectrum. j) Trading in intangible assets like use of spectrum derives strength from the terms and conditions of the Licence Agreement/ UASL, clause 6.3 whereof vests in Licensee a right to transfer or assign the Licence Agreement with prior written approval of the Licensor and subject to fulfillment of conditions which include payment of past dues in full till the date of transfer. On the other hand, Insolvency Proceedings arise out of default in discharge of financial or operational debt and are triggered for insolvency resolution of corporate persons, etc. in a time bound manner for maximization of value of assets of such persons. k) While a licence can be transferred as an intangible asset of the Licensee /Corporate Debtor under Insolvency Proceedings in ordinary circumstances, however as the trading is subjected to clearance of dues by Seller or Buyer, as the case may be, the Transferor/Seller or Transferee/Buyer being in default, would not qualify for transfer of licence under the insolvency proceedings. l) The spectrum cannot be utilized without payment of requisite dues which cannot be wiped off by triggering CIRP under I&B Co....
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....ution Professional of RCOM and RTL, advanced substantial submissions, all of which can be articulated as follows: 11.1 The NCLAT adopted inconsistent conclusions. Having held that spectrum usage rights constitute an intangible asset of the corporate debtor and that DoT dues are operational in nature, it nevertheless concluded that spectrum cannot be utilised unless past dues are cleared and that such dues survive the CIRP. These findings rest on mutually destructive premises and cannot co-exist within the scheme of the Code. 11.2 Having accepted that spectrum usage rights are assets and that DoT is an operational creditor, the NCLAT erred in relying upon the Tripartite Agreement and the Spectrum Trading Guidelines, 2015 to accord preferential treatment to DoT. This results in elevation of one operational creditor over others, contrary to the pari passu treatment mandated by Sections 30 and 53 of the Code. 11.3 Telecom licences, together with the right to use spectrum for a defined term, constitute valuable intangible assets of the corporate debtor. While spectrum remains a sovereign resource, the grant of a licence upon payment of consideration creates a legally enforceabl....
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....019 (12) SCC 150., and Committee of Creditors Essar Steel India Ltd. v. Satish Kumar Gupta 2020 (8) SCC 531. 11.9 A clear demarcation must be maintained between DoT's role as regulator and its position as creditor. While regulatory powers may be exercised prospectively in accordance with law, pre-CIRP dues resolved under an approved plan cannot be revived under the guise of regulation. The moratorium under Section 14 protects critical operating assets, including spectrum usage rights, and bars enforcement of past claims during CIRP and plan implementation. 12. Submissions on behalf of DoT/Union of India: Ld. Attorney General R. Venkataramani, assisted by Ld. ASG Vikramjit Banerjee assailed the impugned judgment of the NCLAT insofar as it holds that spectrum constitutes an intangible asset of the corporate debtor amenable to insolvency proceedings, that DoT dues are operational debts, and that spectrum usage rights or licences are transferable under the Code, 2016. 12.1 Spectrum is a scarce and finite natural resource owned by the people of India, with legal title vesting exclusively in the Union of India, which holds it in trust for the public. Licensees acquire no proprie....
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....ting such dues as operational debt would permit insolvency proceedings to undermine statutory and regulatory control over natural resources. 12.7 Alternatively, if right to use spectrum is held to be constituting asset of the TSPs, then DoT would fall within ambit of "financial creditor" since the definition of "financial debt" under Section 5(8) hinges on the concept of time value of money. The right to use spectrum was granted on a deferred payment basis, forming the very foundation of the TSPs entitlement to use such spectrum. The deferment of consideration, in exchange for the right to use a resource of enduring value, therefore partakes the character of a financial arrangement, and such liability is appropriately classifiable as a financial debt. 12.8 The summation of the submissions is hence that TSPs does not "own" spectrum either in law or in fact, nor do they have absolute possession. What they hold is a limited, a case specific, and conditional right to use spectrum. The combined effect of the Telegraph Act, public trust doctrine, judicial precedents, Tripartite Agreements and statutory exclusions under Sections 18 and 36 of the IBC unequivocally establishes that sp....
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....high economic value in the light of the demand for it on account of the tremendous growth in the telecom sector. Although it does not belong to a particular State, right of use has been granted to the States as per international norms." 14. Beyond its technical description, spectrum has consistently been recognized as a public resource and it is precious also for the reason that it is finite and limited. B. Concept of ownership over natural resources and its Constitutional Underpinnings: 15. Dealing with spectrum as a limited natural resource, this Court in CPIL Case (Supra) had the occasion to deal with ownership and control of the natural resource in the following terms; "74. ...Natural resources belong to the people but the State legally owns them on behalf of its people and from that point of view natural resources are considered as national assets, more so because the State benefits immensely from their value. 75. The State is empowered to distribute natural resources. However, as they constitute public property/national asset while distributing natural resources the State is bound to act in consonance with the principles of equality and public trust....
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....f equality and public trust and ensure that no action is taken which may be detrimental to public interest. Like any other State action, constitutionalism must be reflected at every stage of the distribution of natural resources. In Article 39(b) of the Constitution it has been provided that the ownership and control of the material resources of the community should be so distributed so as to best subserve the common good, but no comprehensive legislation has been enacted to generally define natural resources and a framework for their protection...." V. Statute, Policy and Contractual Framework Governing Spectrum Allocation, Licensing and Use A. Statutory Framework of Spectrum: 18. The Statutory regime governing spectrum is conceptualized in the above referred constitutional principle and it is reflected in Section 4^1 of the Indian Telegraph Act, 1885. Spectrum is vested and secured in the custody of the Central Government not as a property but as the exclusive privilege of establishing, maintaining and operating telecommunication systems, and for granting licences. In Union of India v. Association of Unified Telecom Service Providers of India (2011) 10 SCC 543. (Hereinaf....
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.... of liquor licence constitutes a contract between the parties. Thus, once a licence is issued under the proviso to sub-section (1) of Section 4 of the Telegraph Act, the licence becomes a contract between the licensor and the licensee. Consequently, the terms and conditions of the licence including the definition of adjusted gross revenue in the licence agreement are part of a contract between the licensor and the licensee. We have to, however, consider whether the enactment of the TRAI Act in 1997 has in any way affected the exclusive privilege of the Central Government in respect of the telecommunication activities and altered the contractual nature of the licence granted to the licensee under the proviso to sub-section (1) of Section 4 of the Telegraph Act." 19. It is important to note that the exclusive privilege of the Central Government under Section 4, enabling it to grant a license, subject to such terms and conditions, specifically include payments towards of Universal Service Obligations (USO). Section 9-D also empowers the Central Government to establish and administer the Universal Service Obligation Fund. Following this the Telecom Regulatory Authority of India (TRA....
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....h amongst other things, stresses on achieving the universal service, bringing the quality of telecom services to world standards, provisions of wide range of services to meet the customers demand at reasonable price, and participation of the companies registered in India in the area of basic as well as value added telecom services as also making arrangements for protection and promotion of consumer interest and ensuring fair competition, there is a felt need to separate regulatory functions from service providing functions which will be in keeping with the general trend in the world. In the multi-operator situation arising out of opening of basic as well as value added services in which private operator will be competing with Government operators, there is a pressing need for an independent telecom regulatory body for regulation of telecom services for orderly and healthy growth of telecommunication infrastructure apart from protection of consumer interest." 22. The interplay between the power coupled with obligations of the Union with respect to licensing on the one hand and jurisdiction of TRAI to regulate the telecom sector is succinctly explained in AUSPI (I) (Supra) as foll....
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....ctions enumerated under sub-clauses (i), (ii) and (ix) under clause (b) of sub-section (1) of Section 11 of the TRAI Act. Under clause (c) of sub-section (1) of Section 11 of the TRAI Act, TRAI performs the function of levying fees and other charges in respect of different services and under clause (d) of sub-section (1) of Section 11, the Central Government can entrust to TRAI other functions. These functions of TRAI under clauses (c) and (d) of sub-section (1) of Section 11 of the TRAI Act are also not recommendatory in nature. That the functions of TRAI under clause (a) are recommendatory while the functions of TRAI under clauses (b), (c) and (d) are not recommendatory will also be clear from provisos first to fifth which refer to the recommendations of TRAI under clause (a) of sub-section (1) of Section 11 of the TRAI Act and not to clauses (b), (c) and (d) of sub-section (1) of Section 11 of the TRAI Act. 45. The scheme of the TRAI Act therefore is that TRAI being an expert body discharges recommendatory functions under clause (a) of sub-section (1) of Section 11 of the TRAI Act and discharges regulatory and other functions under clauses (b), (c) and (d) of sub-sectio....
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.... to ensure equal distribution to subserve the common good as observed under Article 39 of the Constitution of India in Natural Resources Allocation, In re, Special Reference No. 1 of 2012 [Natural Resources Allocation, In re, Special Reference No. 1 of 2012, (2012) 10 SCC 1] . The Government being the sole repository of all the resources in the country, also has the exclusive power to determine the licence conditions at which it parts with the exclusive right to the resources. The Government has to make an effort to get the best price for its valuable rights and cannot throw them away, and there would be no arbitrariness in the same as observed in State of Orissa v. Harinarayan Jaiswal." C. Guidelines for Trading of Access Spectrum by Access Service Providers, 2015 25. Telecom Policy envisioned liberalization of spectrum to enable use of spectrum in any band to provide any service in any technology as well as to permit spectrum pooling. Following recommendations of TRAI, Government also permitted spectrum trading to enable optimal utilization of these material resources through appropriate regulatory framework. This also facilitates ease of doing business in India by allowing....
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....ed reallocations of spectrum than can be reached through M&A activity. A TSP holding spectrum that is paid for but in excess of its current requirements would then be able to directly trade these holdings with another TSP which requires additional spectrum for its operations. This would help to ensure optimal allocative efficiency of this limited natural resource, making the sector as a whole better off in the bargain. Clarity on the policy framework with regard to spectrum trading would help to unlock the full potential value of spectrum that was proposed to be auctioned." [Recommendations on Working Guidelines for Spectrum Trading; (accessible at: https://www.trai.gov.in/sites/default/files/2024-11/Recommendation_Spectrum_28012014.pdf)] 26. Accordingly, the Guidelines for Trading of Access Spectrum, issued in 2015, enabled transfer of the right to use spectrum between a seller and a buyer, while expressly prohibiting leasing. Such trading is confined between licensees and is permissible only upon prior intimation of 45 days to the DoT. Guidelines No. 10, 11 and 12, relevant for our purpose are reproduced hereinbelow for ready reference: "10. Both the licensees shall a....
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....hat all outstanding dues of the seller be cleared prior to conclusion of any spectrum trading agreement, and by transferring liability for dues arising up to the effective date of trade to the buyer thereafter. Significantly, it vests discretion in the Government to recover any subsequently discovered dues from either or both parties, jointly or severally. These provisions collectively establish that spectrum trading is not a private commercial arrangement, but a part of the privilege vested in the Central Government under Section 4. Trading is conditional subject to adherence to financial and regulatory obligations owed to the State. 28. When these guidelines are read conjointly with the terms of the Licence Agreement, it becomes manifest that absolute control over the licence and spectrum vests with the Licensor, namely the DoT. The licence, though granted for a fixed term, is subject to revocation, suspension, or termination on enumerated grounds, including non-payment of dues, public interest, or security considerations. The Licensee has no independent right to assign or transfer the licence or create third-party interests without prior written consent of the Licensor. Any t....
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....rceability from out of the province of telecommunication laws and the regulatory framework within which licenses are issued and operated. The conditions stipulated therein, including those relating to eligibility, prior approvals, clearance of dues and transfer restrictions, are mandatory and binding on all licensees and transferees. The use, transfer or trading of spectrum is permissible only in strict conformity with the Guidelines, and any deviation would amount to a breach of licence conditions, the statute and its policy. The operation of the laws concerning telecommunications governing spectrum trading cannot be overridden or bypassed on the basis of an interpretation adopted to the expression "asset" and its treatment as also Section 238 of IBC. We have clarified and explained this position in more detail in later part of our judgment. D. Spectrum Licenses and Contract: 31. Having examined the telecommunication laws, the subordinate legislation, including the rules, regulations and guidelines that govern spectrum, we will now proceed to refer to the provisions of the contract, that is, the license and also the tripartite agreement. 32. In Bharti Airtel Ltd. v. Union....
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....The proviso to Section 4 of the said Act authorises the Government of India to grant licence to establish, maintain and work telegraphs (which includes telephones) "on such conditions and in consideration of such payments" as it thinks fit. Telephones include both wired and wireless telephones like cellular mobile phones, the establishment and working of which necessarily requires access to spectrum which again is controlled by the Government of India as it is already declared to be a natural resource by this Court. It can thus, be seen that no person other than the Government of India has any right to establish, maintain and work telephones. It is the exclusive privilege of the Government of India, which could be permitted to be exercised by others by a grant from the Government of India. 43. In other words, such licences are in the nature of largesse from the State. No doubt, the authority of the State to distribute such largess is always subject to the condition that the State must comply with the conditions of Article 14 of the Constitution i.e. the distribution must be on the basis of some rational policy. Even the language of the proviso to Section 4 of the Telegraph....
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....L dated 05.12.2006 executed between the DoT and Aircel Ltd. The licence was granted by the Government in exercise of its exclusive privilege under Section 4 of the Indian Telegraph Act, 1885, to provide Unified Access Services in the specified service area. The grant was non-exclusive, subject to payment of licence fees and strict compliance with the terms and conditions stipulated therein. The licensee unequivocally undertook to comply with all contractual obligations, acknowledging that the grant conferred only a regulated right to use spectrum and not any proprietary interest therein. 35. The terms of the Licence Agreement unequivocally restrict the autonomy of the licensee in dealing with the licence or spectrum. Clause 6 prohibits assignment, transfer, sub-licensing, partnership, or creation of any third-party interest without prior written consent of the licensor. Clause 6.3 carves out a limited exception permitting transfer or assignment only upon fulfilment of stringent conditions, including compliance with eligibility criteria, adherence to the Tripartite Agreement where applicable, and complete clearance of all past dues by the transferor, coupled with an undertaking b....
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....mmunication sector, DoT collaborated with TSPs and financial institutions. This collaboration is evidenced in the large number of Tripartite Agreements. One such agreement governs the contractual relationship between DoT, the corporate debtor and the State Bank of India, all three are appellants and respondents before us. We will now proceed to examine the implications of the Tripartite Agreement, details of which were shown to us by Mr. Rakesh Dwivedi appearing for the State Bank of India. 38. The Tripartite Agreement executed between the DoT, the TSP and the Bank is a contractual mechanism devised to enable TSPs to secure financial assistance and also to protect the interests of the Bank (Lender). Under this Agreement, the DoT agrees, in principle, to transfer or assign the licence by endorsement in favour of a "Selectee" identified by the Lender, subject to the DoT's final and binding approval. That the Lenders themselves are expressly barred from operating the licensed services reinforces the principle that the licence remains a regulated privilege rather than a freely alienable asset. 39. The Agreement enables the licence to be treated as security for financial assistanc....
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....st, a Code for reorganisation and insolvency resolution of corporate debtors. Unless such reorganisation is effected in a time-bound manner, the value of the assets of such persons will deplete. Therefore, maximisation of value of the assets of such persons so that they are efficiently run as going concerns is another very important objective of the Code. This, in turn, will promote entrepreneurship as the persons in management of the corporate debtor are removed and replaced by entrepreneurs. When, therefore, a resolution plan takes off and the corporate debtor is brought back into the economic mainstream, it is able to repay its debts, which, in turn, enhances the viability of credit in the hands of banks and financial institutions. Above all, ultimately, the interests of all stakeholders are looked after as the corporate debtor itself becomes a beneficiary of the resolution scheme - workers are paid, the creditors in the long run will be repaid in full, and shareholders/investors are able to maximise their investment. Timely resolution of a corporate debtor who is in the red, by an effective legal framework, would go a long way to support the development of credit markets. Since....
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....t applicability of IBC for recovering telecom dues. 44. Expecting a statutory appellate authority under the IBC to answer issues about applicability of IBC has its own problems. Though tribunals constituted by statutes will exercise that much of jurisdiction as is empowered by the statute, they have primary duty to examine and determine a "jurisdictional fact." However, the perspective in which the statutory tribunals could examine the matter would be limited for more than one reason. It has fallen upon us to examine the matter independently by posing probing questions to the Ld. Attorney General and the Senior Counsels assisting us. We have no hesitation to say that they have risen to occasion and have rendered invaluable assistance. C. Implications of Treating Spectrum as an Asset by TSPs/Corporate Debtor and the Financial Institutions 45. Allocation of spectrum to TSPs, coupled with the policy to permit trading of spectrum has given rise to the spectrum being treated as an asset in the hands of TSPs. The expression "asset" pervades the contractual terms and this is the sheet anchor of the TSPs/corporate debtor and the Bank to contend that spectrum as an asset can be res....
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....t indicates the power to obtain and restrict access to the future economic benefits from the resource through enforceable legal rights. However, legal enforceability of rights is not a necessary condition for exercising control c) Future Economic Benefits (FEB): It may include revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the enterprise 49. Similar elements of identifiability, control over resources and flow of future economic benefits are also provided in the definition of intangible assets under Indian Accounting Standard, [(Ind AS).] Ind AS 38. [Paras 8, 10, 11-12, 13-16 and 17, ICAI.]. 50. Spectrum licensing rights are identifiable as they are separable and can be sold, transferred, licensed, or exchanged, either individually or together with the underlying contract. They arise from legal rights by way of government auctions or assignment. They confer power on TSPs to obtain economic benefits by providing telecom services and raise loans under tripartite agreements with the Bank and Dept. of Telecom. TSP's can also restrict access to such economic benefits based on the exclusivity conferred o....
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.... comprising its purchase price, non-refundable duties and taxes and any directly attributable expenditure for making the asset ready for its intended use. [Paras 24-26 Accounting Standard (AS) 26, ICAI and Paras 25-32 Indian Accounting Standard 38, ICAI.]. 54. Spectrum licensing represents a grant of right to use spectrum by the Government by way of transfer or administrative allocation. As discussed above, the flow of future economic benefits is probable due to its revenue-generating capacity from the provision of telecom services. Further, licensing rights are auctioned for a price or are administratively assigned for a licence fee. The cost of a spectrum licence can thus be measured reliably under the separate acquisition method comprising the acquisition cost (auction price or licence fee), non-refundable duties and taxes and any expenditure incurred to make the asset ready for its intended use. As the recognition criteria is satisfied, TSPs record spectrum licensing as an intangible asset in their balance sheet. 55. It is to be noted that the understanding of assets in the context of accounting standards is different from the traditional understanding of property, as in ....
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....ial statements.] It defines an asset as a present economic resource controlled by the entity as a result of past events that has the potential to produce economic benefits. [Paras 4.3-4.5 and 4.9 Conceptual Framework, 2020, ICAI.] Control is described as that which links an economic resource to the entity. [Para 4.19, Conceptual Framework, 2020, ICAI.] An entity thus controls an economic resource if it has the present ability to direct the use of the economic resource and obtain the economic benefits that may flow from it. [Para 4.20, Conceptual Framework, 2020, ICAI.] The example given in Para 4.19 of the Conceptual Framework on the aspect of ownership is reproduced below: "... For example, an entity may control a proportionate share in a property without controlling the rights arising from ownership of the entire property. In such cases, the entity's asset is the share in the property, which it controls, not the rights arising from ownership of the entire property, which it does not control." 58. This indicates that recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition/transfer of ownership of the spec....
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....y; Explanation.-For the purposes of this [section], the term "assets" shall not include the following, namely:- (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator." (emphasis supplied) 61. Similar provisions are also contained in Section 36(3) of the Code in relation to the liquidation estate. Section 36(4) provides that the liquidation estate shall exclude assets owned by a third party in possession of the corporate debtor, including under other contractual arrangements which do not stipulate transfer of title but only the use of the assets. [Section 36(4)(iv), Insolvency and Bankruptcy Code, 2016.] Section 36(3) and (4) are reproduced as; "36. Liquidation Estate (3) Subject to sub-section (4), the liquidation estate shall comprise all liquidation estate assets which shall include the following:- (a) any assets over which the corpo....
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.... their ownership, as it only represents control over future economic benefits. Even assuming that licensing of spectrum rights is one among the bundle of rights, in the absence of transfer of title over the spectrum, no ownership rights are created in TSPs either in the spectrum or in its right to use as governed by licensing conditions. Hence, under the IBC framework, spectrum licensing rights is not a part of the pool of assets for insolvency or liquidation. VII. Identification of True Legal Province of Spectrum: Reconciliatory Interpretation of Two Statutory Regimes 64. When confronted with a situation where two statutory enactments appear to operate in conflict, this Court is enjoined to interpret the concerned legislations in a manner that gives effect to both, to the extent such reconciliation is reasonably possible. Only where such harmonious construction is not feasible does the Court proceed to determine which enactment must prevail. Conflicts of this nature may arise either between a general statute and a special statute, or between two statutes each possessing a special character. Over time, this Court has evolved settled principles to guide the resolution of such ....
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....Code, 2016 must take a backseat when the same is in conflict with public law. One of the issues before the Court in Embassy Property (Supra) was with respect to Adjudicating Authority's power to question and decide upon State Government's decision, in exercise of its powers under the Mines and Minerals (Regulation and Development) Act,1957, rejecting extension of mining lease. In unequivocal terms, this Court held that where the dispute relates to the exercise of statutory or sovereign power by the State, particularly in matters involving public interest and natural resources, such issues fall outside the domain of the insolvency adjudicatory framework. In Embassy Property, this Court emphasised that IBC cannot be invoked to usurp or neutralise powers vested in the State under special statutes, nor can insolvency proceedings be used to compel the State to act contrary to its statutory obligations. The jurisdiction of the NCLT and NCLAT is confined to matters that arise purely within the insolvency framework and does not extend to adjudicating the legality of sovereign actions. The following observations of this Court in Embassy Property (supra) lucidly explain why matters involving....
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....term "assets" under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word "assets", while Section 20(1) uses the word "property" together with the word "value". Sections 18 and 25 do not use the expression "property". Another important aspect is that under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Sections 25(1) and 25(2)(b) reads as follows: "25. Duties of resolution professional.-(1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), the resolution professional shall undertake the following actions: ....
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....in Part III of the Schedule. The liberties, powers and privileges reserved to the Government, despite the grant, are indicated in Part IV. This Part IV entitles the Government to work on other minerals (other than iron ore and red oxide) on the same land, even during the subsistence of the lease. Therefore, what was granted to the corporate debtor was not an exclusive possession of the area in question, so as to enable the resolution professional to invoke Section 14(1)(d). Section 14(1)(d) may have no application to situations of this nature." 66. The scope and ambit of IBC is to speed up the process providing for insolvency [Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407.], and achieving maximisation of value of the asset of the entity undergoing CIRP. The focus is on the company. On the other hand, Telegraph Act, Wireless Telegraphy Act and TRAI Act forms a complete and exhaustive code for all matters relating to telecom sector. This includes declaration of the nature of the rights and liabilities arising out of holding and using spectrum. Powers of the Union includes restructuring the telecom sector through policy decisions by introducing reforms, provisio....
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....d Bankruptcy Code, 2016. (B) Civil Appeal No. 1810 of 2021 filed by State Bank of India, Civil Appeal No. 2227 of 2021 filed by (successful resolution applicant of corporate debtor) UV Asset Reconstruction Co. Ltd., Civil Appeal No. 2263 of 2021 filed by the IRP of the corporate debtor/ M/s Aircel Group entities, and Civil Appeal Nos. 4570 and 4571 of 2021 filed by the IRP of RCOM and RTL respectively are dismissed. (C) Civil Appeal No. 6546 of 2021 filed by Union of India, through Department of Telecommunication is allowed in part. (D) Parties shall bear their own costs. ---------------------- Notes: 1. 4. Exclusive privilege in respect of telegraphs, and power to grant licenses.- [(1)] Within [India], the Central Government shall have the exclusive privilege of establishing, maintaining and working telegraphs: Provided that the Central Government may grant a license, on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain or work a telegraph within any part of [India]: [Provided further that the Central Government may, by rules made under thi....
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....subject and context and may vary with situation, circumstances and angle of vision. Law is no abstraction but realises itself in the living setting of actualities. Which is a special provision and which general, depends on the specific problem, the topic for decision, not the broad rubric nor any rule of thumb. The peaceful coexistence of both legislations is best achieved, if that be feasible, by allowing to each its allotted field for play. Sense and sensibility, not mechanical rigidity gives the flexible solution......" 4. Gobind Sugar Mills Ltd. v. State of Bihar, (1999) 7 SCC 76. Relevant paragraph is as fllows: "10. While determining the question whether a statute is a general or a special one, focus must be on the principal subject-matter coupled with a particular perspective with reference to the intendment of the Act...." 5. State of Gujarat v. Patel Ramjibhai Danabhai, (1979) 3 SCC 347; Commercial Tax Officer, Rajasthan v. Binani Cements Ltd., (2014) 8 SCC 319; Vodafone Idea Cellular Ltd. v. Ajay Kumar Agarwal, (2022) 6 SCC 496. 6. Sarwan Singh & Anr. v. Shri Kasturi Lal, (1977) 1 SCC 750. Relevant portion of the judgment is as follows: "20.........