During the Yes Bank additional tier 1 (AT1) bonds case on March 3, the Supreme Court ordered the stay of the Bombay High Court‘s decision that nullified Yes Bank’s write-off of bonds. The High Court had previously invalidated Yes Bank’s decision to write off Rs 84,15 crore of AT1 bonds in March 2020, but provided the bank with six weeks to challenge the ruling. The order was put on hold when the bank decided to appeal to the Supreme Court. During the hearing on March 3, the Supreme Court extended the stay and asked for responses from bondholders. Further proceedings are expected to occur, and the Supreme Court is predicted to issue its order on the case afterward.
Yes Bank faced potential collapse in early 2020 due to alleged fraud, financial irregularities, and non-performing assets (NPAs). In response, several banks saved the bank under the Reserve Bank of India‘s (RBI) guidance. Yes Bank was placed under a moratorium in March 2020, and a new board and management were appointed as part of a rescue plan. The RBI-administered reconstruction scheme mandated the writing down of Yes Bank’s AT1 bonds, which stunned AT1 bondholders who had accused the bank of misleading them about the bonds’ safety and returns. Consequently, they decided to challenge the bank’s decision in court.
An investigation by the Securities and Exchange Board of India (SEBI) revealed that the bank had missold these bonds to retail investors without informing them of the accompanying risks. The SEBI investigation also discovered that Yes Bank had promoted these bonds as “Super FD” and “as safe as FD” to investors. The Bombay High Court subsequently invalidated the decision to write off these bonds, citing the absence of a clause in the reconstruction scheme and that the administrator overstepped their authority.
The Supreme Court heard the case on March 3, with senior counsel Kapil Sibal representing Yes Bank, Solicitor General Tushar Mehta representing the RBI, and senior advocates Mukul Rohatgi and K V Vishwanathan representing bondholders. The case is scheduled for further hearings in late March.