“The purpose of the AT-1 Bonds is imperative: it acts as a safety barrier to the Bank from collapsing altogether. That purpose could have been served had the RBI and YES BANK acted in accordance with the terms of the Master Circular.”

- A bench of Supreme Court in its judgment on YES Bank’s AT-1 bonds.

YES Bank AT1 Bond Write-Off Fails Supreme Court Test

When the top court, last week, quashed the write-off of YES Bank’s ₹84.16-billion Additional Tier-1, or AT-1, bonds during the bank’s restructuring in March 2020, it reinforced that financial rescues must operate within the law. The Supreme Court upheld the Bombay High Court’s finding that the bank’s administrator lacked the authority to write down the bonds under the final reconstruction scheme and said there was no reason to interfere with the high court’s ruling. While AT1 bonds are designed to absorb losses during financial distress, that risk does not give banks unrestricted powers to extinguish investors’ holdings, the court’s rationale showed. 

The ruling protects bondholders from decisions that exceed the authority granted by law and the applicable framework and questions not just the commercial lender but also the RBI in its conduct to permit the write off. However, the ruling also raises questions in the mind of observers about the predictability of India’s bank-resolution process, where restoring investor rights can complicate a lender’s recovery. The judgment underscores the need for clearer rules balancing financial stability with investor protection.

This still doesn’t look like the end to the issue given that the lender is expected to exercise its option of seeking a review of the judgment. A review is typically on a limited scope of fixing errors and is heard by the same set of judges that pass the verdict. And, in this case, a two-judge bench actually reopened the case months after reserving it to ask specific and pointed questions of the government and the central bank before arriving at this decision. So an interesting legal fight is up for display if the lender wants to re-argue the case under the garb of an apparent error in an otherwise meticulously reasoned judgment.

Key Rulings:

·         Supreme Court quashes the write off of AT1 bonds of Yes Bank. Says no reason to interfere with the Bombay High Court ruling on the issue noting that the administrator in the bank’s restructuring acted beyond his authority in ordering write off

·         Supreme Court has held that children also have a fundamental right to access the internet which cannot be curbed citing online harm

Courts:

·         Tens of petitions filed before the Supreme Court relating to the protest against Chief Election Commissioner Gyanesh Kumar and voter revision irregularities including pleas against police excesses, sexual harassment, prohibitory orders and detentions

o   Petitioners include opposition leaders, bar bodies, journalists, their associations, and individuals

o   Petitions seek reliefs ranging from audit of revised voter rolls, probe into police excesses in Delhi, petition against harassment of women and lawyers by security forces, plea against journalists and lawyers prevented from carrying out professional duties, among others as well as petitions against opposition parties for entering the top court and social media comments against the CJI

o   Top court directs senior police officer to be present in court over petition by women journalists alleging sexual harassment while covering the protest

·         Supreme Court orders Mumbai’s MMRDA to deposit ₹6.46 billion with the court registry in its case against Reliance Industries in relation to the alleged delay in BKC convention centre project. Top court to hear MMRDA’s appeal against quashing of its demand in November

·         Top Court urges awareness to be spread on adoption of safer options instead of firecrackers on Diwali, particularly in NCR

·         Supreme Court clarifies, yet again, that it has not adjudicated on the validity of Form 6 in Election commission’s new voter enrolment forms during the electoral roll overhaul exercise. Court says that at the time of its judgment, the form 6 was not part of the case before it so the court has neither approved it nor rejected it

·         Central government informs the Supreme Court that it has capped trade margins for cancer drugs at 30%

·         Popular rum brand Old Monk tells Bombay High Court that a ban on its sale in Maharashtra has costed the state revenue of 3.5 billion rupees

·         Supreme Court stays trial against Leader of Opposition Rahul Gandhi in the case over his remarks against PM Narendra Modi calling him “commander-in-thief”

·         Supreme Court dismisses MMTC’s appeal against settlement with National Spot Exchange for 19.5 billion rupees

·         Delhi High Court rejects SpiceJet’s petition seeking an extension to deposit 1.44 billion rupees

·         Adani Green Energy petitions Karnataka High Court against 1% property tax on solar power plants

·         Delhi High Court permits Britannia to use claims of “no added sugar, no maida, no palm oil” on its biscuit packs

·         Gujarat High Court dismisses petition by state to take back land that was allotted to Reliance industries three decades ago

·         Top Court seeks centre’s response on petitions seeking to limit access to social media for children

Quasi Courts:

·         National Green tribunal seeks centre’s response on plea challenging clearance for the data centre venture by Google and Adani in Vizag

·         SEBI confirms order against Rajesh Exports banning it from markets

·         NCLAT stays insolvency proceedings against Polycab India over dues of ₹27.8 million

Other:

·         Bar bodies across the country including Supreme Court AOR Association and Supreme Court Bar Association extend support for the lawyers manhandled and mistreated by the police during anti-CEC protests in Delhi

The Big Listings:

·         Oct 21: Securities Appellate Tribunal to continue hearing appeal by Jane Street challenging SEBI’s move to allegedly refuse access to important documents to the firm in the case against it

·         Oct 22: Bombay High Court to hear plea against CEC Gyanesh Kumar

·         Oct 26: NGT to hear plea against clearance for Google-Adani data centre in Vizag

·         Nov 12: Supreme Court to hear appeal by MMRDA against RIL in BKC convention centre case

* The dates of hearing can change and a concrete list is prepared just a day before

Legal Moves:

·         Centre appoints two judicial officers as additional judges at the Madras High Court

·         Rabindra Purohit made Vice President Legal at Blue Dart

·         Abhishek Sanyal leaves ELP to join CMS Induslaw as partner

·         Poojitha Babbepalli made partner at Saga Legal’s Hyderabad office