Supreme Court upholds quashing of Yes Bank’s Rs 8,415-crore Additional Tier-1 bonds write-off

The bank said it would make further disclosures as may be required after examining the order. (File Photo)

The Supreme Court on Thursday upheld the quashing of the Yes Bank’s Rs 8,415-crore Additional Tier-1 (AT-1) bond write-off. Following the ruling, the lender’s shares plunged 14.43% to Rs 18.15 on the stock exchanges. The bank said it was examining the judgment and its implications before making any further disclosures, as required.

In a disclosure to the stock exchanges, Yes Bank said the judgment, pronounced on October 15, arose from appeals against the Bombay High Court’s January 20, 2023 decision setting aside the write-down of the AT-1 bonds. The bank said it would make further disclosures as may be required after examining the order. It also stated that, apart from the Supreme Court judgment and information already available in the public domain, it was not aware of any undisclosed information or event concerning the bank that could explain the movement in its securities.

The write-off dates back to March 2020 when Yes Bank informed the stock exchanges on March 14 that it had written off the AT-1 bonds under the applicable contractual and regulatory framework.

Subsequently, writ petitions were filed before the Bombay High Court challenging the decision.

AT-1 bonds are unsecured perpetual instruments issued by banks to strengthen their capital base. They have no maturity date and carry higher risks than traditional bonds. They rank below other debt but above common equity. On May 26, 2020, the bank informed the exchanges that Axis Trustee Services Limited, on behalf of the AT-1 bondholders, had filed a petition challenging the write-off and that the matter was sub judice. On January 20, 2023, the Bombay High Court set aside the decision to write down the bonds. The operation of the judgment was stayed for six weeks at the bank’s request, and Yes Bank said it was preparing to appeal before the Supreme Court based on legal advice.

The bank informed the exchanges on March 4, 2023, that special leave petitions had been filed before the Supreme Court. It also said the apex court, through an order dated March 3, 2023, had extended the stay granted by the Bombay High Court, subject to its final orders.

The Bombay High Court had held that the final reconstruction scheme sanctioned by the Central government did not contain a provision for writing down the AT-1 bonds. It also observed that the bank’s administrator could not have taken the decision after the bank was reconstituted under the reconstruction scheme.