SC Notices on Pleas of RBI, Others Against HC Order Quashing Yes Bank Administrator’s Decision To Write Off AT-1 Bonds

The Supreme Court on Friday issued notices to Axis Trustee Services Ltd on a batch of appeals filed by the Reserve Bank of India (RBI) and others challenging a Bombay High Court order quashing a decision of the Yes Bank Administrator to write off Additional Tier 1 (AT-1) bonds.

A bench headed by Chief Justice D Y Chandrachud took note of the submissions of Solicitor General Tushar Mehta, appearing for RBI, and senior advocate Kapil Sibal, representing Yes Bank, and extended the stay on the high court order quashing the decision of writing off AT-1 bonds.

The Bombay High Court, while quashing the decision of the Yes Bank Administrator, had however said its decision will be in abeyance so the central bank and Yes Bank may appeal against it in the apex court.

“Issue notice. The stay granted (by the Bombay HC on its decision) will continue,” said the bench, which also comprised justices P S Narasimha and J B Pardiwala.

AT-1 bonds have no maturity date. These debt instruments offer higher returns but also carry greater risk.

The bench asked the parties to file a list of dates and a common compilation of records and case laws for expeditious disposal of the matter and listed it for hearing on March 20.

The high court had on January 20 quashed the decision of the Yes Bank on March 14, 2020 to write off the bonds noting the Administrator did not have the authority to take such a decision.

The Yes Bank had written off AT-1 bonds worth Rs 8,415 crore as part of the bailout in March 2020.

The high court had in its judgment said the Final Reconstruction Scheme of the Yes Bank issued by the Reserve Bank of India did not engulf within its fold writing down/off the AT-1 bonds.

“The final scheme sanctioned by the Central government did not contain the clause or provision for writing down AT-1 bonds,” it had said.

The high court had further held when the RBI prepared the draft scheme for reconstitution of the bank, it had invited suggestions and objections and it appears the petitioners had raised objection to the writing down of AT-1 bonds and even suggested their conversion into shares.

The high court had, however, stayed its order for a period of six weeks.

The petitions before the high court had also sought directions against National Securities Depositories Limited and Central Depository Services to take steps to reverse the effect of any accounting, entries, noting, write-offs, cancellations, or any such steps that may have been undertaken pursuant to the impugned decision to write off the bonds.

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