The Supreme Court of India, in Central Transmission Utility of India Limited v. Sumit Binani (2026 INSC 284), delivered a significant judgment on 23 March 2026 addressing the intersection of insolvency law and telecom regulation. The Court held that a security deposit maintained by the corporate debtor constituted its property and could not be unilaterally appropriated by a creditor towards pre-CIRP dues after the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) had taken effect. The Court further upheld the Union of India's position that spectrum cannot be subjected to insolvency or liquidation proceedings as an asset of the corporate debtor.
Background
The case arose in the context of the Corporate Insolvency Resolution Process (CIRP) of a company, where a creditor sought to set off a security deposit held by it against dues owed by the corporate debtor from the period prior to the commencement of CIRP. The question was whether such unilateral appropriation was permissible after the imposition of the moratorium under Section 14 of the IBC, which prohibits the recovery of any property occupied by or in the possession of the corporate debtor.
A related issue concerned the treatment of telecom spectrum under the insolvency framework. The Union of India argued that spectrum, being a scarce national resource allocated under the Indian Telegraph Act, 1885, is a licence and not a transferable asset that can be subjected to the insolvency resolution or liquidation process.
Key Holdings
The Supreme Court determined the following:
Security deposit as corporate debtor's property: The Court held that a security deposit furnished by the corporate debtor to a creditor remains the property of the corporate debtor. The creditor cannot unilaterally appropriate this deposit towards pre-CIRP outstanding dues once the moratorium under Section 14 takes effect.
Moratorium protection: The appropriation of a security deposit towards pre-CIRP dues amounts to recovery of property in contravention of the moratorium provisions. Such actions undermine the statutory purpose of the moratorium, which is to preserve the corporate debtor's assets during the resolution process.
Spectrum not an insolvency asset: The Court upheld the Union of India's contention that telecom spectrum, being a licence granted by the government under the Indian Telegraph Act, 1885, cannot be treated as an asset of the corporate debtor for the purposes of insolvency or liquidation proceedings under the IBC.
Sovereign resource characterisation: Spectrum was characterised as a scarce national resource over which the government retains sovereign authority, distinguishing it from ordinary commercial assets that form part of the corporate debtor's estate.
Implications for Practitioners
Insolvency practitioners and resolution professionals must ensure that creditors do not effect unilateral set-offs or appropriation of security deposits during CIRP. Where such appropriations have occurred post-moratorium, resolution professionals should take steps to recover the amounts as assets of the corporate debtor's estate.
For practitioners advising telecom companies undergoing insolvency, this judgment confirms that spectrum cannot be included in the asset pool available for resolution or liquidation. This significantly impacts the valuation of telecom companies under CIRP, as spectrum — often the most valuable resource of a telecom operator — falls outside the resolution framework.
Creditors holding security deposits of companies that enter insolvency should be advised that their claims must be submitted through the formal claims process under the IBC rather than through self-help remedies such as deposit appropriation. Pre-CIRP dues must be dealt with as part of the resolution plan or liquidation distribution.