Yes Bank challenges Bombay High Court’s order to write-down AT1 bonds worth Rs 8,400 crore: Explained
Yes Bank has approached the Supreme Court to challenge the order of the Bombay High Court which set aside the March 2020 decision of the private sector lender to write-down additional Tier 1 bonds (AT1) worth Rs 8,400 crore. Yes Bank maintains that its administrator, appointed by the Reserve Bank of India (RBI), had the power to fully write-down the bonds. However, on January 20, a division bench of the court held that the administrator exceeded his powers and authority in writing off the AT1 bonds after the bank was reconstructed on March 13, 2020.
The bank’s draft reconstruction scheme contained the clause that AT1 bonds would be written off, but the central bank made a modification to the draft scheme, deleting the clause of writing down the bonds, as permissible under section 45(6)(b) of the Banking Regulation Act of 1949. As a result, the bench said the final scheme sanctioned by the central government did not contain the clause or provision for writing down the bonds. After Yes Bank was reconstituted on March 13, 2020, the Bombay High Court held that the administrator could not have taken such a policy decision of writing off the debentures.
The bank has six weeks to challenge the order in the apex court. The write-down of bonds worth Rs 8,415 crore has impacted retail investors, including senior citizens who alleged that the instruments were mis-sold to them. The bond holders also included institutions such as 63 Moons technologies, Axis Trustee Services, and fund houses such as Nippon India Asset Management. AT1 bonds are hybrid instruments with features of both equity and debt.
In another development, the National Company Law Tribunal (NCLT) has directed to initiate insolvency proceedings against Zee Learn, following a petition filed by Yes Bank, which had claimed a default of Rs 468.99 crore by the Essel Group company.
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