When public trust meets insolvency law

The insolvency estate encompasses enforceable rights and interests, no less than ownership of property

- MS SAHOO & RAGHAV PANDEY

The Supreme Court’s judgment of February 13, 2026, in the State Bank of India versus Union of India fundamentally reshapes the interaction between state and market.

The court has ruled that spectrum is a natural resource held in public trust, and the right to use it does not form part of the insolvency estate of a telecom service provider (TSP). This ruling effectively places the most valuable asset of a TSP beyond the reach of a resolution plan. The likely consequence is the liquidation of stressed TSPs and the fragmentation of the insolvency framework, contrary to legislative design.

Though grounded in high constitutional concerns over natural resources, the ruling rests on a conceptual overextension. The Public Trust Doctrine (PTD) is applied without sufficient regard to the evolution of the modern regulatory state and market economy. If extended across sectors, the reasoning could exclude from the insolvency estate all licensed natural resources and associated usage rights, thereby driving stressed, licence-dependent enterprises into liquidation.

The PTD emerged to protect communal access to resources such as air and water, as a check against the privatisation of the commons. Its application to telecommunications, however, requires greater nuance. In this sector, the state has translated the PTD into a detailed statutory and contractual framework of auctions, licences, and contracts. That framework explicitly permits the allocation, trading, and transfer of spectrum-usage rights.

When the state auctions spectrum, it does not abandon the public trust; it operationalises the use through market mechanisms. A sovereign resource is converted into a regulated, tradeable economic entitlement, juridically embodied in the licence. For the Insolvency and Bankruptcy Code (IBC), 2016, it is this statutory-contractual construct that matters, not the doctrine in abstraction.