State Bank of India (SBI) has moved the Supreme Court seeking a review of its recent judgment that held telecom spectrum cannot be treated as an asset under the Insolvency and Bankruptcy Code (IBC), following a similar plea by Reliance Communications (RCom). SBI also said that the ruling may not be limited to the telecom sector alone but could extend to other industries dependent on natural resources, such as mining and power and that this could weaken lenders’ confidence.
The bank (SBI), acting on behalf of creditors to the bankrupt Aircel group, said the judgment had a far-reaching impact on lenders in insolvency and liquidation proceedings. It argued that the verdict may potentially affect bank financing and risk assessment.
In its review petition, SBI flagged what it termed “patent errors” in the ruling and cautioned that the judgment could have far-reaching consequences for the banking sector.
What is the verdict all about?
The February 13 judgment had concluded that telecom service providers (TSPs) did not own spectrum. Resultantly, a Bench of Justices P.S. Narasimha and Atul Chandurkar held that Insolvency and Bankruptcy Code (IBC) excluded any assets over which a corporate debtor had no ownership rights. The court had said that spectrum was a scarce natural resource owned by the people of India, with legal title vesting exclusively in the Union of India, which held it in trust for the public.
The verdict was the result of events dating back to the grant of telecom licences to corporate debtors — Aircel Limited, Aircel Cellular Limited and Dishnet Wireless Limited — by the Department of Telecommunications under Unified Access Service Licences (UASL).
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