YES Bank and RBI have filed an appeal in the Supreme Court against the Bombay High Court’s ruling favouring bondholders of the bank’s AT1 bonds worth ₹8,300 crore that were written down.
“They filed their appeal on Saturday (February 11) as a ‘special leave’ petition. Right now, it’s in defect which means there are certain procedural defects at the registry level. Once those are cleared, the case will be listed before SC,” said Srijan Sinha, Partner at Edictum Law & Co, representing the ‘YES Bank AT1 Bondholders’ Association’.
The process of mentioning and getting the case listed is likely to be completed by next week, following which it will be presented before the SC and admitted, industry experts said.
Bombay HC, had on January 20, set aside the administrator’s order to write down the bonds, saying that he had exceeded his powers and authority in doing so. It gave YES Bank six weeks to implement or appeal against the order. Meanwhile, bondholders filed a caveat with SC post the Bombay HC order anticipating an appeal.
“We’re on caveat so before it gets listed, it will have to be served upon us compulsorily,” Sinha told businessline.
In the HC hearing, bondholders had argued that there was a departure from RBI’s draft reconstruction scheme which had suggested the write-off, to the final reconstruction scheme notified by the Centre which suggested that the bond holdings shall subsist post reconstruction.
Seven writ petitions
A total of seven writ petitions were filed against YES Bank in the Bombay HC, including four institutional petitions and three by individual investors including the bondholders’ association which constitutes 400 individual investors. Larger investors include Axis Trustee Services, Kamlex Industries, Regent Exim International, Mathrawala and Sons Insurance Brokers, Nippon Mutual Fund, Franklin Templeton India, Barclays, Kotak Mutual Fund and 63 Moons, as per reports.
In addition to RBI and YES Bank, SEBI and intermediaries such as Karvy — that had facilitated the sale of these bonds to retail investors — were party to the case.
In the bank’s Q3 earnings call, MD and CEO Prashant Kumar had said the bank had strong legal grounds to file its challenge. “The judgment itself is not questioning the regulatory guidelines in term of writing down (AT1) bonds. I think there are questions in terms of the process,” he had then said, adding that in case the Bombay HC order is upheld and the bonds reinstated, the decision to pay interest would still be at the bank’s discretion owing to the nature of the bonds.
On the other hand, bondholders are optimistic that the SC will uphold the Bombay HC’s ruling given that the bonds were mis-sold to retail investors and senior citizens, who were assured of fixed returns on their investments. A probe by SEBI had found that YES Bank bank had sold these bonds to retail investors positioning them as ‘super FDs’ and without informing them of the risks.
“Our cards are on the table, we are hopeful but at the same time it has to be tested before the SC and the judges have to agree with the HC’s decision. At this stage we are confident, because it was a good order passed by the Bombay HC on logic and law, so we are hopeful,” Sinha said.