SC refuses to entertain plea against writing down of AT-1 bonds by Yes Bank

Says the issue can be raised before the concerned high court

The Supreme Court has refused to entertain a plea of over 340 persons challenging the writing down of additional tier-1 (AT-1) bondholders' Rs 8,419 crore investment in Yes Bank in March 2020 as part of a plan to revive the cash-strapped private bank.

The apex court said the issue can be raised before the concerned high court.

“We decline to entertain the petition under Article 32 of the Constitution since the petitioners are at liberty to adopt appropriate remedies available in law, including by virtue of a petition under Article 226 of the Constitution (before the High Court),” a bench comprising Justices D Y Chandrachud, Indu Malhotra and Indira Banerjee said.

AT-1 bonds are direct, unsecured and subordinated debt in the issuing bank and they rank below to the claims of all creditors and above to common equity with no fixed repayment date.

As part of the bailout package for the private bank, the AT-1 bond holders' investment was written-off citing existing rules which gave the new management of Yes Bank a huge breather to get the operations out of the restrictions imposed by RBI and the government, and start functioning normally.

Aggrieved by the decision, several pleas have been filed by bondholders and others in various high courts including that of in Bombay and Delhi.

Senior advocate Ajit Sinha, appearing for 343 bondholders, said the writing down of AT-1 bonds, secured by them in 2016 and 2017, be declared as illegal and the invested money through bonds be returned to the petitioners along with interest.

The bondholders had also sought the supply of data pertaining to the sale of AT1 Bonds by the institutional investors to the retail investors.

The senior lawyer said that the writing down of the AT-1 bonds was the gross abuse of process leading to a situation where the retail investors have been deprived of their investments and deposits.

Earlier, the Yes Bank had moved the top court seeking transfer of the petitions pending before various high courts and consumer forum to the Bombay High Court against its decision of March 14 to write down the AT-1 bonds.

The bank, which is now headed by SBI's former CFO Prashant Kumar, has showed a marginal improvement in the gross non-performing assets ratio at 16.80 per cent in the March quarter as against 18.87 per cent in the three months ended December 20.

To avoid a possible collapse of Yes Bank, RBI had sacked its management and placed the lender under an administrator on March 5 with a 30-day moratorium, which was later on curtailed to nearly two weeks.

The moratorium on the bank which restricted cash withdrawals limits to only Rs 50,000 was lifted after banking hours on March 18.

On March 13, the government notified the rescue plan drafted by the RBI.

As part of the 'Yes Bank Limited Reconstruction Scheme 2020', SBI and other investors made equity capital infusion to the tune of Rs 10,000 crore. Private lenders ICICI Bank, Axis Bank, Kotak Mahindra Bank, IDFC First Bank, Bandhan Bank, Federal Bank and mortgage lender HDFC Ltd have also infused capital of over Rs 3,000 crore in cash-starved Yes Bank to keep it afloat.