The State Bank of India (SBI) has approached the Supreme Court seeking a review of its landmark February 13, 2026, judgment, which ruled that telecom spectrum cannot be treated as a corporate asset under the Insolvency and Bankruptcy Code (IBC).
Acting on behalf of a consortium of lenders to the bankrupt Aircel group, SBI warns that the current ruling could severely undermine the banking system’s ability to recover loans from regulated sectors.
Core Arguments of the Review Petition
According to the petition filed on March 30, 2026, SBI has flagged several “patent errors” in the original judgment:
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Asset Classification: SBI argues the court failed to address whether Spectrum Usage Rights (as opposed to the spectrum itself) constitute a valid security interest that lenders can monetize.
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Narrow Focus: The bank contends the court focused too heavily on whether telecom companies used insolvency to “avoid” dues, rather than adjudicating on the rights of lenders who financed these companies based on spectrum-linked value.
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Incomplete Adjudication: SBI claims the ruling overlooked how government dues should be classified (as operational or secured debt) under the IBC framework.
Why Lenders are Concerned
The February ruling established that spectrum is a sovereign natural resource held in public trust, and the Department of Telecommunications (DoT) maintains absolute control over its transfer. This has significant implications:
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Recovery Prospects: Without the ability to treat spectrum rights as assets, lenders lose their primary “value lever” for recovering debts from failing telecom firms (e.g., the ₹13,000 crore owed by Aircel).
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Risk Appraisal: SBI warned that banks might have to “fundamentally overhaul” their credit appraisal frameworks. If spectrum cannot be used as collateral, lending to the telecom sector—and other sectors relying on state-granted rights like mining and infrastructure—becomes significantly riskier.
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Cascading Impact: The bank argues the ruling creates a precedent where statutory powers of the State can “neutralize” the IBC, potentially discouraging future investments in infrastructure projects that rely on government licenses.
Context of the Original Ruling
The Supreme Court’s February 2026 decision (State Bank of India v. Union of India) famously used the “tail wagging the dog” metaphor to criticize the idea that accounting for spectrum as an “intangible asset” on a balance sheet should allow it to fall under the IBC. It held that the DoT’s sovereign rights under the Telegraph Act cannot be overridden by a resolution plan.
The Supreme Court is now expected to decide whether to admit SBI’s review petition for a fresh hearing.
