Yes Bank Approaches Supreme Court In AT1 Bonds Case
The Bombay High Court had set aside the decision to write-off AT1 bonds and asked the private lender to reinstate them.
Yes Bank Ltd. has approached the Supreme Court challenging a Jan. 20 order of the Bombay High Court that quashed the write-off of the additional tier-1 bonds by the private lender, according to two people in the know.
The bank has argued that the its administrator, appointed by the Reserve Bank of India, had the power to fully write down AT-1 bonds worth Rs 8,415 crore on March 14, 2020, the people above said on the condition of anonymity as details are not public yet. BQ Prime has not reviewed a copy of the petition.
The challenge follows an order in which the Bombay High Court that set aside the decision to write down these bonds and stated that the bank would have to reinstate them.
"It appears that the administrator exceeded his powers and authority in writing off AT-1 bonds after the bank was reconstructed on March 13, 2020," Acting Chief Justice SM Modak had said in his detailed order.
The high court had given Yes Bank six weeks from the date of the order to file its challenge. In the absence of an appeal, the bank would have to reinstate the bonds.
According to the second person quoted above, a clutch of bondholders had filed a caveat with the Supreme Court after the high court order. The caveat ensures that whenever Yes Bank files its challenge, the apex court will not pass an interim order without hearing the bondholders.
As of now, Yes Bank's challenge has not been listed at the Supreme Court, the two people quoted above said. The RBI is considering becoming a party to this case as it seeks to provide the regulator's perspective, BQ Prime reported earlier.
The matter follows a March 14, 2020 letter by the Yes Bank administrator, which said that due to Yes Bank's deteriorating financial position and the need for the regulator to introduce a reconstruction scheme, the necessary triggers for writing down AT-1 bonds had been reached. Tthe administrator informed exchanges about the write-off.
To be sure, the court did not decide on the legality of the decision, but the order follows technicalities such as the time when the administrator decided to write down the bonds.
According to the high court, before March 14, 2020, the RBI and the central government had already cleared the final reconstruction plan to rescue Yes Bank, which did not mention the AT1 bond write-down.
"During this period, the administrator could not have taken such a policy decision as writing down the AT-1 bonds. Nor the RBI had authorized him to do so. The final reconstruction scheme also did not authorise the administrator to write off the AT-1 bonds," the court said.
After the high court order, Yes Bank Managing Director and Chief Executive Officer Prashant Kumar, who also acted as the administrator in March 2020, told reporters that the bank had strong legal grounds to file its challenge.
"In terms of the probability, we have very strong legal opinions in our favour. At this point in time, there is no reason to make any contingent provisions on our balance sheet," Kumar had said.
He added that in the worst-case scenario that the Bombay High Court is upheld and the bonds are reinstated, the decision to pay interest on these bonds would be at the bank's discretion.
"On the perpetual bond, it is the discretion of the bank to pay interest or not," Kumar had said in January. "At this point in time, I would not like to add anything further."
