State Bank of India has filed a review petition in the Supreme Court seeking reconsideration of its ruling that telecom spectrum cannot be treated as an asset under the Insolvency & Bankruptcy Code. As Rishi Raj explains, this case has implications for lenders, telecom companies & the treatment of government dues
What is the case all about?
The dispute centres on whether telecom spectrum, allocated by the government to telecom operators, can be treated as an asset of the company and used in insolvency proceedings under the IBC. In its February 13, 2026 ruling, the Supreme Court (SC) held that spectrum is a natural resource held by the government in trust for the public and that telecom companies only have a limited right to use it, without ownership.
It said such rights cannot be treated as assets under the IBC and that insolvency proceedings cannot be used to restructure or extinguish government dues linked to spectrum. This effectively limited the ability of lenders to rely on spectrum-related rights during insolvency resolution.
A review petition is filed to point out errors in a judgement. State Bank of India (SBI), representing lenders to telecom companies such as Aircel, has challenged the SC’s interpretation through a review petition, the outcome of which will also have implications for cases like that of Reliance Communications.
The bank has contended that the judgement did not adequately consider key legal and factual issues and that its conclusions could adversely affect the insolvency framework and credit markets.
What are SBI’s main objections to the ruling?
SBI HAS ARGUED that the SC failed to adjudicate all material questions that were before it, including whether spectrum can be treated as a security interest and how government dues should be classified under IBC.
It also contends that the judgement incorrectly narrowed the scope of the dispute by focusing largely on whether insolvency was used to avoid payment of dues rather than addressing broader legal questions. Further, it points to what it describes as contradictory findings, where spectrum usage rights are recognised as an intangible asset in parts of the judgement but denied treatment as an asset under IBC.
SBI has argued that if spectrum and similar rights are not treated as assets, banks may reassess lending to sectors dependent on government licences, including telecom and infrastructure.
Why is spectrum critical for lenders?
According to SBI, telecom firms paid significant sums to acquire spectrum usage rights and recorded them as assets in their financial statements. Banks gave loans against these rights, backed by pacts that created security interests over licences and spectrum usage.
If spectrum-related rights are excluded from the insolvency framework, lenders argue that their ability to recover dues is weakened and their position as secured creditors is undermined.
What is the issue around security interests?
SBI has highlighted loan and mortgage agreements that created a charge over spectrum usage rights and licences. It has argued that these arrangements were recognised contractually and, in some cases, by the department of telecommunications (DoT) through tripartite deals.
Its review petition claims the judgement did not adequately consider this material, effectively weakening lenders’ secured creditor status in telecom insolvencies.
Hint of misuse of insolvency proceedings?
The February ruling suggested that telecom companies may have invoked insolvency proceedings to avoid paying licence dues. SBI disputes this, stating that insolvency proceedings were initiated due to genuine financial distress and were admitted by the National Company Law Tribunal after due scrutiny.
Dispute over the govt’s role
A key issue is the role of the DoT. During insolvency proceedings, it filed claims as a creditor, participated in the committee of creditors and engaged with the resolution process. SBI argues that having participated in the process, the government cannot subsequently claim that IBC does not apply to spectrum-related dues.
Broader legal issues raised
The case highlights a conflict between telecom laws, which treat spectrum as a sovereign resource, and the IBC, which seeks to maximise value of a company’s assets for creditors. The question is whether regulatory conditions and government dues can override the insolvency process, or whether IBC provisions should prevail once a company enters resolution.
What next?
The SC will decide whether to admit the review petition. If admitted, the Court may revisit its earlier reasoning. If dismissed, the February 2026 order will stand, setting a precedent for insolvency cases involving regulated sectors.