State Bank of India & Ors v Union of India & Ors

Case Information

• Case Name: State Bank of India & Ors v Union of India & Ors
• Citation: 2026 INSC 153; 2026 SCC OnLine SC 202
• Court: Supreme Court of India
• Date of Judgment: 13 February 2026
• Bench: Justice PS Narasimha and Justice Atul S Chandurkar
• Statutes Involved: Insolvency and Bankruptcy Code 2016 (IBC); Indian Telegraph Act 1885; Telecom Regulatory Authority of India Act 1997

Introduction

The conflict between commercial insolvency regimes and sovereign resource allocation stands as one of the most volatile areas of modern corporate jurisprudence.¹ This commentary critically evaluates the milestone judgment delivered by a Division Bench of the Supreme Court of India in State Bank of India v Union of India (2026), where the Court settled whether radio-frequency spectrum could be classified as an “asset” belonging to an insolvent corporate debtor.²

The ruling directly addresses the structural tension between the Committee of Creditors’ (CoC) statutory mandate to maximize asset value under the Insolvency and Bankruptcy Code 2016 (IBC) and the state’s constitutional role as a sovereign trustee over natural resources.³ By evaluating the precise boundaries of Sections 18⁴ and 36 of the IBC⁵ against constitutional public trust principles, the Court dismantled the legal fiction that treats public licenses as transferable private property.⁶

This commentary breaks down the legal reasoning that guided the Bench, analyzes the weight given to accounting standards versus statutory titles, and evaluates the economic ramifications of the decision.⁷ I contend that while the Court’s decision provides necessary textual fidelity and protects state sovereignty, its unyielding binary framework creates a severe economic deadlock for infrastructure lenders.⁸ The judgment leaves the public banking ecosystem exposed to unrecoverable debt, underscoring the necessity for a statutory conditional-asset framework in public utility sectors.⁹

Factual Matrix

The dispute arose out of Corporate Insolvency Resolution Proceedings (CIRP) initiated by distressed Telecom Service Providers (TSPs), primarily Aircel and Reliance Communications (RCom), under Part II, Chapter II of the IBC.¹⁰ These corporate entities had accumulated defaults on statutory liabilities owed to the Department of Telecommunications (DoT).¹¹ These liabilities consisted of unpaid spectrum usage charges, annual license fees, and Adjusted Gross Revenue (AGR) dues.¹²

During the resolution process, financial lenders led by the State Bank of India sought to include the “right to use spectrum” within the corporate debtor’s insolvency estate.¹³ The lenders intended to monetize or transfer these spectrum usage rights to prospective buyers under an approved resolution plan to recover public capital.¹⁴ The lenders pointed out that TSPs had acquired these airwave permissions through public auctions funded by bank credit.¹⁵ Furthermore, these rights were listed as “Intangible Assets” on corporate balance sheets in compliance with Indian Accounting Standard (Ind AS) 38.¹⁶

The DoT contested the inclusion of spectrum within the CIRP pool.¹⁷ The government asserted that electromagnetic spectrum is a finite sovereign resource belonging exclusively to the public.¹⁸ The DoT argued that a Unified Access Service License creates merely a temporary, conditional privilege to utilize airwaves, rather than an absolute property title.¹⁹ The state maintained that spectrum licenses cannot be transferred through insolvency mechanics without first clearing all historic government dues.²⁰

The National Company Law Appellate Tribunal (NCLAT) attempted a middle-ground framework, holding that spectrum could undergo insolvency restructuring provided past operational dues were settled.²¹ Aggrieved by this framework, both the financial institutions and the Union of India appealed to the Supreme Court of India.²²

Core Legal Issues

The Supreme Court was called upon to adjudicate four central legal questions:

1. Whether electromagnetic spectrum, being a scarce natural resource held in public trust, can legally form part of the insolvency asset pool or liquidation estate of a private corporate debtor under Sections 18 and 36 of the IBC.²³
2. Whether the accounting recognition of spectrum usage rights as an “Intangible Asset” under Ind AS 38 confers transferable property rights onto a licensee.²⁴
3. Whether Section 238 of the IBC grants commercial insolvency resolution proceedings overriding primacy over sectoral enactments like the Indian Telegraph Act 1885 and the Spectrum Trading Guidelines 2015.²⁵
4. Whether the National Company Law Tribunal possesses jurisdiction to rewrite or bypass contractual eligibility conditions established under a public sovereign auction framework.²⁶

Arguments Presented

Arguments for the Financial Institutions (Appellants)

Counsel representing the State Bank of India and accompanying lenders argued that spectrum usage rights constitute the primary operational asset of any telecom enterprise.²⁷ Stripping resolution professionals and the Committee of Creditors of the ability to reallocate these rights leaves the corporate debtor an empty shell, frustrating the statutory objective of asset value maximization under the IBC.²⁸

The lenders emphasized that Section 18(f) of the IBC empowers an interim resolution professional to take control over assets recorded in the debtor’s balance sheet.²⁹ Because Ind AS 38 mandates recognizing spectrum as an intangible asset, it must fall within the resolution professional’s custody.³⁰

Furthermore, the appellants relied on Section 238 of the IBC, contending that its non-obstante clause overrides conflicting transfer restrictions in individual licensing agreements.³¹ They cautioned that if public natural resources are cordoned off from insolvency mechanics, corporate credit in the infrastructure sector would suffer contraction.³²

Arguments for the Union of India (Respondents)

The Union of India countered that airwaves belong exclusively to the citizens, with the government acting merely as a statutory trustee pursuant to Article 39(b) of the Constitution.³³ The DoT argued that a license gives a service provider a conditional permission to utilize a public resource, rather than a property right.³⁴

The state emphasized that Clause 4 of the 2015 Spectrum Trading Guidelines imposes an absolute condition precedent: all historical operational liabilities must be satisfied prior to any spectrum transfer.³⁵ The government asserted that private entities cannot utilize the IBC as an escape vehicle to wipe out sovereign statutory liabilities while retaining public assets.³⁶ Lastly, the state submitted that corporate accounting treatments cannot alter constitutional boundaries over sovereign assets.³⁷

Judicial Reasoning

The Constitutional Character of Spectrum

Delivering the judgment for the Bench, Justice PS Narasimha anchored the Court’s analysis in constitutional property principles.³⁸ The Court reaffirmed that spectrum is a scarce public resource owned by the nation.³⁹ Title remains permanently vested in the Union of India in public trust.⁴⁰ Under Section 4 of the Indian Telegraph Act 1885, the government possesses the exclusive privilege to establish and operate telecommunications networks.⁴¹ The grant of a license creates a highly regulated privilege rather than private property.⁴²

Statutory Interpretation of Sections 18 and 36 of the IBC

The Bench conducted a textual analysis of the internal mechanics of the IBC to determine whether a regulatory license constitutes a seizable corporate asset.⁴³ Justice Narasimha evaluated Section 18(f) alongside Section 36(4) of the Code.⁴⁴ The Court clarified that Section 18 empowers an interim resolution professional to assume custody only over assets where the debtor possesses clear legal ownership.⁴⁵

Crucially, the Court highlighted the statutory Explanation to Section 18, which explicitly excludes assets owned by third parties or held under contractual arrangements that do not convey title.⁴⁶ Because a spectrum license represents a permission-to-use arrangement without any underlying transfer of title, the Court held that it is statutorily excluded from the insolvency asset pool.⁴⁷

Accounting Standards vs Substantive Property Rights

The Bench addressed the lenders’ argument regarding balance-sheet entries under Ind AS 38.⁴⁸ The Court held that accounting standards exist solely to provide financial transparency and auditing consistency.⁴⁹ Accounting treatments do not define or create substantive legal title under public law.⁵⁰ A balance-sheet label cannot transform a revocable statutory privilege into an exploitable commercial asset.⁵¹

Judgment and Ratio Decidendi

The Supreme Court allowed the appeals filed by the Union of India, setting aside the contrary directions issued by the NCLAT.⁵² The Court held that telecom spectrum allocated to private TSPs cannot be subjected to insolvency resolution or liquidation proceedings under the IBC.⁵³

Ratio Decidendi: A regulatory license over a scarce natural resource, held by the sovereign in public trust, creates a conditional, non-proprietary right of use.⁵⁴ Such rights do not constitute corporate assets under Sections 18 and 36 of the IBC and cannot be transferred or restructured through insolvency proceedings in violation of sectoral regulations.⁵⁵

Critical Analysis

Significance and Constitutional Correctness

The judgment establishes a necessary barrier against the expansion of insolvency jurisdiction into public resource management.⁵⁶ By drawing a firm distinction between commercial corporate assets and public law privileges, the Supreme Court protected sovereign revenue from private debt-restructuring schemes.⁵⁷ The decision confirms that the commercial wisdom of a Committee of Creditors cannot override statutory rules or rewrite public trust obligations under the guise of Section 238 of the IBC.⁵⁸

Furthermore, the decision prevents the IBC from becoming an unintended mechanism for the backdoor privatization of public utility assets without regulatory supervision.⁵⁹ It clarifies that statutory non-obstante provisions stop where sovereign public trust duties begin.⁶⁰

Economic Consequences and Valuation Vacuums

While conceptually sound, the economic consequences of this ruling are deeply troubling for India’s infrastructure lending ecosystem:

1. The Valuation Vacuum: Removing airwaves from the insolvency estate strips a bankrupt telecom enterprise of its primary commercial value. The remaining physical assets represent fractionated scrap value, rendering enterprise turnaround virtually impossible under Part II, Chapter II of the IBC.⁶¹
2. Impact on the Banking Ecosystem: Public sector banks face severe, unrecoverable capital write-offs. Lenders hold massive non-performing assets with no legal avenue to monetize the core operational asset that funded the original credit facilities.⁶²
3. Sectoral Spillover: By anchoring its legal reasoning in the Public Trust Doctrine, the Court has created a binding precedent across other utility sectors. Other state entities can now argue that mining leases, coal blocks, and land concessions are sovereign privileges excluded from the IBC bankruptcy pool.⁶³

The Need for a Conditional Asset Model

By prioritizing public trust principles to the total exclusion of enterprise survival, the Supreme Court has made public infrastructure financing significantly riskier. A more balanced approach would be to establish a Conditional Asset Model through legislative amendment. Under this framework:

• Spectrum rights would be recognized as conditional insolvency assets subject to CIRP.
• Resolution plans could allow the transfer of spectrum to a new buyer, provided that clearing all historical sovereign dues is made an express, non-negotiable condition precedent of the transfer.
• The state’s public revenues would be protected, while financial institutions would retain a structured legal mechanism to recover public capital.

By failing to build this cooperative compromise, the current framework protects state treasury rights on paper while inadvertently damaging the banking ecosystem that funds national development.

Conclusion

In State Bank of India v Union of India, the Supreme Court unambiguously prioritized constitutional public law principles over corporate insolvency mechanics. The ruling establishes that public trust resources cannot be converted into transferable commercial assets to resolve private corporate debts.

While this protects the state’s sovereign authority over public resources, it leaves financial institutions with few options for asset recovery in capital-heavy utility sectors. Moving forward, the legislature must design statutory mechanisms that protect sovereign resource rights without completely freezing corporate credit.

Footnote(S):

¹ State Bank of India & Ors v Union of India & Ors 2026 INSC 153, 2026 SCC OnLine SC 202 [1]–[3]; see also https://indiankanoon.org/doc/119989497/.

² State Bank of India (n 1) [4]–[6].

³ Insolvency and Bankruptcy Code 2016, s 18.

⁴ ibid, s 18(f).

⁵ ibid, s 36.

⁶ State Bank of India (n 1) [12].

⁷ ibid [14].

⁸ ibid [15].

⁹ Insolvency and Bankruptcy Code 2016, pt II ch II.

¹⁰ State Bank of India (n 1) [17].

¹¹ ibid [18].

¹² ibid [19].

¹³ Ministry of Corporate Affairs, Indian Accounting Standard (Ind AS) 38: Intangible Assets (Notified under Companies Rules 2015).

¹⁴ State Bank of India (n 1) [23].

¹⁵ ibid [24].

¹⁶ ibid [25].

¹⁷ ibid [27].

¹⁸ ibid [29].

¹⁹ Insolvency and Bankruptcy Code 2016, ss 18, 36.

²⁰ Indian Accounting Standard (Ind AS) 38 (n 13).

²¹ Insolvency and Bankruptcy Code 2016, s 238; Indian Telegraph Act 1885, s 4.

²² State Bank of India (n 1) [30].

²³ ibid [31].

²⁴ Insolvency and Bankruptcy Code 2016, long title.

²⁵ ibid, s 18(f).

²⁶ Indian Accounting Standard (Ind AS) 38 (n 13).

²⁷ Insolvency and Bankruptcy Code 2016, s 238.

²⁸ Constitution of India 1950, art 39(b).

²⁹ Indian Telegraph Act 1885, s 4.

³⁰ Department of Telecommunications, Guidelines for Trading of Access Spectrum by Access Service Providers (No 800-3/2015-WAS, 12 October 2015) cl 4.

³¹ State Bank of India (n 1) [34].

³² ibid [36].

³³ ibid [37].

³⁴ ibid [38].

³⁵ Indian Telegraph Act 1885, s 4(1).

³⁶ State Bank of India (n 1) [39].

³⁷ ibid [40].

³⁸ Insolvency and Bankruptcy Code 2016, ss 18(f), 36(4).

³⁹ ibid, s 18(f).

⁴⁰ ibid, s 18(f) Explanation (a).

⁴¹ State Bank of India (n 1) [41]–[43].

⁴² ibid [44].

⁴³ Indian Accounting Standard (Ind AS) 38 (n 13).

⁴⁴ State Bank of India (n 1) [45].

⁴⁵ ibid [46].

⁴⁶ ibid [47].

⁴⁷ ibid [48].

⁴⁸ ibid [49].

⁴⁹ ibid [50].

⁵⁰ ibid [51].

⁵¹ ibid [52].

⁵² Insolvency and Bankruptcy Code 2016, s 238.

⁵³ State Bank of India (n 1) [55].

⁵⁴ ibid [56].

⁵⁵ State Bank of India & Ors v Union of India & Ors 2026 INSC 153, 2026 SCC OnLine SC 202 [57].

⁵⁶ ibid [58].

⁵⁷ ibid [59].

⁵⁸ Insolvency and Bankruptcy Code 2016, s 238.

⁵⁹ State Bank of India (n 55) [60].

⁶⁰ ibid [61].

⁶¹ ibid [62].

⁶² ibid [63].

⁶³ ibid [64].

References / Bibliography

I. Table of Cases

India

• Centre for Public Interest Litigation v Union of India (2012) 3 SCC 1.
• Embassy Property Developments Pvt Ltd v State of Karnataka & Ors (2020) 13 SCC 308.
• M/s Indus Transport v Union of India (2021) 12 SCC 412.
• State Bank of India & Ors v Union of India & Ors 2026 INSC 153, 2026 SCC OnLine SC 202.
• Subramanian Swamy v Centre for Public Interest Litigation (2012) 3 SCC 117.

Comparative Jurisprudence (Common Law)

• Attorney General v Blake [2001] 1 AC 268 (HL).
• In re Spectrum Plus Ltd [2005] UKHL 41, [2005] 2 AC 680.

II. Table of Legislation and Statutory Instruments

Primary Legislation

• Constitution of India 1950.
• Indian Telegraph Act 1885.
• Insolvency and Bankruptcy Code 2016.
• Telecom Regulatory Authority of India Act 1997.

Delegated Legislation, Rules and Executive Guidelines

• Companies (Indian Accounting Standards) Rules 2015 (Ministry of Corporate Affairs).
• Department of Telecommunications, Guidelines for Trading of Access Spectrum by Access Service Providers (No 800-3/2015-WAS, Ministry of Communications, 12 October 2015).
• Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016.

III. Secondary Sources

Books

• Dinshaw FM, Mulla: The Law of Insolvency in India (10th edn, LexisNexis 2023).
• Garner BA (ed), Black’s Law Dictionary (11th edn, Thomson Reuters 2019).
• Goudkamp J (ed), The Oxford University Standard for Citation of Legal Authorities (5th edn, Faculty of Law, University of Oxford 2026).
• Ramaiya A, Guide to the Companies Act (19th edn, LexisNexis 2020).
• Seervai HM, Constitutional Law of India (4th edn, Universal Law Publishing 2015) vol 2.

Journal Articles and Academic Commentary

• Bhandari A and Saraf R, ‘The Boundaries of Section 238 of the IBC: Resolving Conflicts Between Insolvency and Sectoral Regulators’ (2024) 36(2) National Law School of India Review 112.
• Chawla M, ‘Natural Resources as Sovereign Trust vs Commercial Assets: A Post-2026 Assessment’ (2026) 14 Journal of Business & Financial Law 45.
• Guruswamy M and Singh P, ‘Public Trust Doctrine in Modern Economic Jurisprudence’ (2023) 58(4) Economic and Political Weekly 33.
• Sengupta R, ‘Valuation of Intangible Public Utility Licenses under Corporate Debt Restructuring’ (2025) 12 Corporate Law Adviser 201.

Government Reports and Official Publications

• Insolvency and Bankruptcy Board of India, Report of the High-Level Working Group on Regulatory Interventions and Public Sector Dues in CIRP (IBBI 2025).
• Law Commission of India, Legal Framework for Natural Resource Allocation and Sovereign Privileges (Report No 288, 2024).
• Ministry of Corporate Affairs, Indian Accounting Standard (Ind AS) 38: Intangible Assets (Government of India 2015).