Hindustan Times ST (Mumbai) - Live
SC relief for Yes Bank in AT-1 bond write-off case
NEW DELHI: The Supreme Court on Friday put on hold the implementation of the Bombay high court order judgment that had set aside the write-off of Additional Tier-1 (AT-1) bonds worth ₹8,400 crore issued by Yes Bank.
Admitting the petition, a bench headed by Chief Justice of India Dhananjaya Y Chandrachud issued notice to the bondholders and others on the appeal filed by the private lender against the decision of the Bombay high court in January this year.
The bench, which included justice PS Narasimha, said that the six-week interim stay granted by the high court shall continue till its further orders, as it agreed to examine a bundle of legal issues surrounding the power of the administrator and the reconstruction of the bank.
During the proceedings, the court also observed that that small bondholders must not suffer, and thus directed Yes Bank to give a break-up of different classes of bondholders, based on the quantum of their exposure to the bonds.
The private lender and RBI have also been asked by the court to explain on the next date of hearing as to which legal provisions empower them to issue a complete write-off after.
Yes Bank and RBI, represented through senior counsel
Kapil Sibal and solicitor general Tushar Mehta respectively, argued that a write-off is essential for construction and if not permitted, could lead to Yes Bank, again becoming unviable. It argued that the State Bank of India (SBI) and seven other banks have invested public money into Yes Bank, based on the write-off. They also argued that the administrator, appointed by the central bank, had the power to fully write down AT-1 bonds.
Further, the apex bank submitted that bonds were high-interest-bearing, high-risk instruments, and the subscribers were “rich people” who understood the risks. It was also argued that the high court erred in acknowledging the correct date of reconstruction of the bank.
Appearing for a group of individual bondholders, senior advocate Mukul Rohatgi contended that writing off the bonds was not correct in law, complaining that RBI changed its stance in the matter over a period of time. Assisted by advocate Srijan Sinha, Rohatgi added that not all bondholders are “rich people” and that they cannot be made to wait indefinitely for payments.
The lender had issued the perpetual AT-1 bonds in three tranches in 2013, 2016 and 2017. In March 2020, a moratorium was imposed on the bank, superseding the then board of directors, and an administrator was appointed to manage the bank.
The AT-1 bonds were written off in March 2020 as part of a restructuring plan to rescue Yes Bank back. Equity holders, on the other hand, did not face a similar write-down, but 75% of their shares were subject to a lock-in for three years. The Reserve Bank of India had directed the Yes Bank administrator to write off these bonds as part of a restructuring scheme to save the lender from collapse, in a rescue led by the SBI.
A set of individual and institutional bondholders filed a petition before the Bombay high court challenging this decision. In January, the high court ruled against the write off, holding that the decision to write off the bonds was not valid as it was taken after the moratorium period of Yes Bank was completed.