Bombay HC Admits Yes Bank AT-1 Bondholders' Plea for Claims Worth Rs160 Crore
Moneylife Digital Team 25 March 2021
The Bombay High Court on Thursday admitted an interim application filed by Yes Bank AT1 Bond Holders Association for their claims worth Rs160 crore. While allowing the plea with specific prayer, the bench of justice AA Sayed and justice SP Tavade asked Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) to submit their reply on the interim petition before the next hearing on 26 April 2021. 
During the hearing, the counsel for Yes Bank referred its transfer petition (TP) pending before the Supreme Court (SC) and requested a postponement.
However, senior counsel Mustafa, representing the Association contended that the TP does not apply to present case and this petition can be heard since there is no bar by the SC. He also submitted that the plea pertains to the ineligible category with claims of Rs160 crore only.
The bench decided to admit the petition. During the hearing, the counsel for Axis Trustee Services Ltd, the debenture trustees for Yes Bank’s AT-1 (additional tier-1) bonds pointed out their two petitions pending since the past one year and if these could be clubbed with the current plea. The bench permitted this and sought for listing of the other two petitions along with the Association's.
The Association has filed a writ petition challenging legality and validity of RBI's decision to write off AT-1 bonds sold by Yes Bank to ineligible investors. The Association is seeking refund of amount paid by its members as consideration for sale and allotment of AT-1 bonds and interest on bonds that were due and payable but were not honoured, with an interest of 12%.
In its plea, the Association says, "…(our) members are individual retail investors most of whom are above 60 years of age, who have been wrongfully lured to invest in AT1 bonds issued by Yes Bank, which were meant for allotment only to institutional investors and corporate bodies and for which they were ineligible...The total investment of the members of the Association in the AT1 bonds would amount to about Rs160 crore."
"In several cases the investment in these bonds is the hard-earned life savings, on which the livelihood of these individual retail investors is dependent, " the petition says. 
When Yes Bank collapsed in early March last year and RBI wrote off the entire value (Rs8,415 crore) of the AT-1 bonds as a part of the hurriedly-put-together rescue package for the cash-strapped lender, all investors lost their money. Many of these investors were retired individuals who had parked a sizeable chunk of their life savings in these bonds at the behest of their relationship managers. 
AT1 bonds are issued by banks to shore up their core capital base to meet the Basel-III norms. These bonds are unsecured, perpetual in nature and so pay a higher coupon rate. But they are high risk and can be written down if the bank’s capital dips below threshold limits. 
RBI can also ask a bank that is dangerously on the edge to cancel its outstanding AT-1 bonds without consulting its investors, which is what happened in the case of the AT-1 bonds Yes Bank was holding when SBI bought a 48% stake in the Bank to save it.
Several news reports have detailed how Yes Bank executives had sold Yes Bank AT-1 bonds with five-year tenors at an interest rate of 9.5% per annum (pa) claiming that the “instrument is as safe as bank fixed deposit having no linkage to the riskier equity market.” Bank executives sold these instruments to investors pitching these perpetual bonds as ‘super FDs’ offering safety and relatively high return compared with regular fixed deposits. 
2 weeks ago
Can someone please share the address of the Yes Bank AT1 Bond Holders Association office bearers? Having been a victim myself, I need it urgently for including my name as an interested party. Please respond at [email protected] or by a message/WhatsApp at 9868857106. I shall be grateful.
2 years ago
Welcome development - it is indeed extremely shocking that the Financial Sector Regulator is shamelessly covering up its abysmal failure to ensure compliance with its rules and regulations by making investors pay - be it in case of Yes Bank, DHFL, Laxmi Vikas Bank etc.

In order to ensure that the Financial Sector Regulator delivers on its supervision and monitoring responsibilities and acts in a responsible manner, High Court should order it to compensate the investors for loss of principal.
2 years ago
The biggest question of current situation is Do we need regulators,courts & other quasi judicial bodies. If one goes by history never ever ordinary citizen, investors received any relief from these organisations. In fact they are burden on taxpayers. If one goes to recent FT mutual fund retail investor is looser if one goes by rewards of NCLT and other judicial bodies nowhere COMMON MAN's interest is served or seem to got justice. Pitiful condition.
Kamal Garg
Replied to vaibhavdhoka comment 2 years ago
Is this colonial hangover where all the administrators/regulators/jurists felt above the board, not accountable to any body and making decisions with impunity and unconcerning disgrace. This needs to change.
Kamal Garg
2 years ago
The whole case of writting-0ff of Yes Bank AT1 bonds is completely fraud and cheating on the common investors. Not only that the bonds were sold as "super FDs" of a large bank, but, the modus operandi of application/allotment was also questionable and illegal.
Even RBI is not clear on its stand what to do with AT1 bonds in the case of liquidity crunch faced by a bank. See the different approach RBI adopted while dealing with Yes Bank case and different approach while dealing with Laxmi Vilas Bank case (in case of LVB, initially, it wrote off only the equity share capital before allowing it to merge with a foreign bank but subsequently, it realized its folly of "double dealing" , i.e. different treatment in case of Yes Bank bonds and different treatment in case of LVB bonds, and therefore finally wrote-off LVB AT1-2 bonds also).
2 years ago
The modus operandi of YES Bank was not limited to what has been represented in the Court. The executives of YES Bank colluded with SECONDARY MARKET and selected Broker of their own and transferred the money to it by way of RTGS with out any instructions to do so. Why it is a fraud? The YES Bank employee took a blank payee cheque and filled it in the name of Broker with out consent. They infact cheated the retired CITIZEN by misleading. They canvassed the business telling it is secured than FDR with definate maturity date and Fixed interest income with slightly higher yield of 0.75% at that time. YES BANK Shared the document what ever securities they have purchased fraudulently in the name of individual has Fixed maturity date I.e 18.10.2022. Now YES Bank has taken U turn claiming that these are perpetual BONDS that is why they have written down at the instructions of RBI in March 2020 with out any notice. This is a fraud case and heavy penalties should be imposed as well as sufferer is compensated.
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