Axis Trustee files contempt plea against Yes Bank over AT-1 bonds

Axis Trustee's petition, filed on 6 November, seeks directions to enforce the judgment and restore the ₹8,415 crore worth of bonds.

Axis Trustee Services Ltd has filed a contempt petition in the Supreme Court against Yes Bank Ltd and certain officials and directors for allegedly failing to comply with the court’s 15 October judgment restoring ₹8,415 crore of additional tier-I (AT-1) bonds, it informed bondholders on Wednesday.

The petition, filed on 6 November, seeks directions for compliance with the judgment and restoration of the bonds.

In an email communication to bondholders, Axis Trustee said it had moved the court because it “had not received any concrete roadmap from the bank regarding restoration/reactivation of the bonds” and implementation of the judgment.

The Axis Bank Ltd subsidiary said it would pursue all remedies available under applicable law and the transaction documents “in the interest of bondholders”.

The filing follows a notice issued by Axis Trustee on 28 October, asking the bank to restore the bonds within three days and implement the Supreme Court judgment.

The notice said the bank had “neither initiated any corporate action nor taken any other step” to restore the bonds. “The bank cannot, under the guise of evaluating its options, withhold compliance with the said judgment,” it wrote.

Yes Bank's defence

Yes Bank, in its 30 October response, acknowledged the ruling and said it remained “fully committed to acting in accordance with the Supreme Court's judgment and applicable law”.

The private sector lender said it was examining the judgment’s implications, consequential actions and available legal remedies, that its board was cognizant of the matter and that it would take steps permissible under law.

The bank, however, said it “does not accept the characterization” of its conduct as wilful disobedience and called Axis Trustee’s assertions “baseless and without merit”.

The Supreme Court on 15 October dismissed appeals filed by Yes Bank, Reserve Bank of India and the Union government, upholding a Bombay high court ruling that had quashed the bank administrator’s March 2020 decision to write off the AT-1 bonds during the lender’s rescue.

“The payment of annual coupon rate shall remain unaffected by the outcome of these appeals,” the court said, adding that it must be made in accordance with the bonds’ information memoranda.

Recovery hopes

The judgment revived hopes of recovery for investors whose holdings were written off in 2020. However, nearly a month after the ruling, bondholders are still awaiting clarity on when the securities will be reinstated in their accounts.

For many investors, the bonds represented retirement savings and financial security. Some had shifted money from fixed deposits after relationship managers allegedly marketed the instruments as higher-return alternatives to traditional deposits without adequately explaining their risks.

The Yes Bank AT-1 Bondholders' Association, which represents around 400-450 affected investors, has said a substantial proportion of its members are senior citizens. Some members have died during the years of litigation, the association has said.

Restoring the bonds would revive investors’ rights attached to the instruments but would not make the principal immediately repayable, experts told Mint.

Any eventual recovery through a sale would depend on market liquidity and the price at which the bonds trade.