Sovereign control over spectrum survives, but that sovereignty does not confer an unrestricted power to revisit concluded bargains
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Jaiz Anuar
In February this year, the Supreme Court delivered its judgment in the Aircel matter. The Court held that spectrum remains a sovereign resource held by the State in trust for the public and that the Insolvency and Bankruptcy Code (IBC) cannot be used to treat spectrum as an asset available for resolution or liquidation merely because it appears as an intangible asset in a telecom company’s books.Four months later came the Bombay High Court’s decision on the One-Time Spectrum Charge. There, the Court told the Government something very different. Whatever its powers over spectrum may be, those powers do not permit it to revisit concluded allocations years later and impose fresh financial burdens that were never part of the original bargain.At first sight, the two decisions seem to pull in different directions. One emphasises sovereign control. The other emphasises the limits of sovereign power. But the apparent tension begins to dissolve when we ask a more basic question: what exactly was each court deciding?The dispute before the Bombay High Court was about whether the government could retrospectively alter the financial terms on which spectrum had already been allocated. Telecom operators had been allotted spectrum. They paid the prescribed licence fees and built their businesses on the basis of those arrangements.The controversy arose when the government sought to levy what came to be known as the One-Time Spectrum Charge. The charge was aimed at spectrum held beyond 6.2 MHz and was sought to be imposed retrospectively from 2008. It was founded on the view that operators holding spectrum beyond that threshold should pay an additional amount, calculated by reference to later-discovered market values and auction prices.The operators challenged the demand. Their argument was simple. The original licence framework contained no such obligation. Spectrum had been allocated, consideration had been determined and the parties had acted on that basis for years. The government could not reopen a concluded arrangement and demand additional consideration long after the event.The Bombay High Court’s reasoning rested on a proposition that is fundamental to both public law and commercial certainty. Even where the government acts in an area involving public resources, it cannot exercise its powers in a manner that is arbitrary, unpredictable or destructive of settled rights. A contractual arrangement cannot be transformed years later merely because the government has come to believe that a different bargain might have yielded greater revenue.The judgment is therefore about the limits of executive power. The Court was not denying that spectrum is a valuable public resource. What is rejected was the notion that the sovereign character of the resource gave the government an unrestricted ability to rewrite the economic terms of a completed allocation.The Aircel decisionThe question before the Supreme Court in Aircel was not whether the government could alter the financial terms of an existing licence. Nor was it concerned with retrospective changes. The dispute arose out of insolvency proceedings and required the Court to examine the relationship between telecom regulation and the Insolvency and Bankruptcy Code.A telecom company’s most valuable asset is often its ability to provide telecom services. That ability, in turn, depends upon the spectrum assigned to it and the licences under which it operates. If those rights cannot survive insolvency, the value of the business may collapse and the prospects of a successful resolution may diminish significantly.The Department of Telecommunications approached the matter differently. It argued that spectrum is not a commercial asset owned by the licensee. Spectrum is a natural resource held by the State in trust for the public. What a telecom operator receives is not ownership of the spectrum but a limited right to use it, subject to statutory and regulatory conditions. That right remains inseparably linked to the regulatory framework governing telecommunications.The Court emphasised that spectrum does not cease to be a sovereign resource merely because it is used for commercial purposes. Nor does it become part of the insolvency estate simply because it is reflected as an intangible asset in the books of a telecom company. The rights of a telecom licensee are derived from, and remain subject to, the regulatory regime under which the licence was originally granted.Viewed in that light, the Court concluded that the Insolvency and Bankruptcy Code cannot be used as a mechanism to compel the transfer of spectrum rights independently of the statutory framework governing telecommunications.The existence of insolvency proceedings does not displace the Government’s authority over the allocation and use of spectrum.Spectrum is not merely an economic resource. It is a public resource. Any private right in relation to spectrum exists only within the limits defined by law and by the terms on which the State permits its use.The common threadThe two decisions together reveal both the source and the limits of sovereign power over spectrum. The significance of that distinction is particularly evident in the sovereign function argument that often surfaces in insolvency debates.Aircel reaffirms that spectrum remains under governmental control and that a telecom operator acquires only a limited right to use it. The Bombay High Court, however, reminds us that sovereign control is not the same thing as unfettered discretion to alter the legal and economic incidents of a licence after rights have accrued and obligations have been performed.The State may regulate, supervise and control the use of spectrum, but it must do so within the framework of rights and obligations that it has itself created.Seen in that light, the two decisions are less in conflict than in conversation. One explains why the government possesses authority over spectrum. The other explains why that authority is not without limits.Read together, they suggest that sovereign control over spectrum survives, but that sovereignty does not confer an unrestricted power to revisit concluded bargains. Aircel explains the source of that power. The Bombay High Court explains its limits.The writer is a lawyer and former Judicial Member of the National Company Law TribunalPublished on June 19, 2026
