New Delhi, October 15 (TNA) The Supreme Court on Thursday upheld the Bombay High Court’s decision quashing Yes Bank’s ₹8,415-crore write-off of Additional Tier-1 (AT1) bonds issued during the lender’s 2020 reconstruction, delivering relief to institutional and retail bondholders.
A Bench comprising Justices Dipankar Datta and Augustine George Masih dismissed appeals filed by Yes Bank, the Reserve Bank of India and the Centre against the Bombay High Court’s January 2023 judgment.
The apex court held that the bank’s administrator did not have the authority to write off the AT1 bonds because the final reconstruction scheme did not contain a specific provision permitting such action.
The bonds were written down to zero in March 2020 as part of a government-backed rescue plan for Yes Bank. Investors challenged the decision, arguing that the write-off was contrary to the terms governing the securities and applicable regulatory provisions.
The Supreme Court noted that although a draft reconstruction scheme had contained a provision for writing off AT1 bonds, that provision was omitted from the final scheme notified on March 13, 2020. The administrator therefore could not exercise the power after the final scheme came into force.
The Court also examined whether the write-off complied with the Reserve Bank of India’s Master Circular and the information memorandum governing the bonds. It declined to interfere with the High Court’s findings that the action was invalid.
The ruling means that Yes Bank will be required to honour the AT1 bonds according to their prescribed terms, including coupon rates reported at 9.5% and 9%. The decision could expose the lender to substantial financial liabilities connected with the 2020 rescue.
Yes Bank’s shares came under sharp pressure following the judgment, falling as much as 10% to hit the lower circuit at ₹19.09 on Thursday, as investors assessed the possible impact of the ruling on the bank’s finances.
The judgment is considered a significant victory for AT1 bondholders, whose investments were wiped out during the restructuring. It also clarifies the limits on an administrator’s authority when implementing a bank reconstruction scheme.