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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.V.Gangapurwala, S.M.Modak, JJ.
Axis Trustee Services Limited & Ors. – Appellants
Versus
Union Of India & Ors. – Respondents
Writ Petition No. 1000, 1001 of 2020, 785, 100, 220, 3324, 1997, 6589 of 2021,1069, 1518 of 2022, Interim Application No. 133, 535, 1767 of 2021, 189, 4046 of 2022, in Person Application (L) No. 4939, 4946 of 2020
Decided On : 20-01-2023
Writ petitions challenging the impugned decision of the Administrator of Yes Bank Ltd. to write off the Additional Tier 1 Debenture bonds. Petitioners contend that the impugned decision is in conflict with the Master Circular issued by the Reserve Bank of India and that the Administrator had no power to write off the bonds in purported 'implementation of the scheme'.
Fact of the Case:
Yes Bank Ltd., a private sector bank, faced financial difficulties and was placed under a moratorium by the Reserve Bank of India (RBI) on March 5, 2020. The RBI appointed an Administrator to oversee the bank's operations during the moratorium period. On March 13, 2020, the Central Government notified the Final Yes Bank Reconstruction Scheme, 2020, which provided for the reconstruction of the bank. The Administrator, by a letter dated March 14, 2020, informed the stock exchanges that the Additional Tier 1 (AT-1) bonds issued by the bank had been fully written down and extinguished with immediate effect.
Finding of the Court:
The Court held that the Administrator exceeded his powers and authority in writing off the AT-1 bonds after the bank was reconstructed on March 13, 2020. The Court found that the Final Reconstruction Scheme did not authorize the Administrator to write off the AT-1 bonds and that the Administrator could not have exercised his powers after the reconstitution of the bank. The Court also held that the impugned decision was in conflict with the Master Circular issued by the RBI and that the Administrator had no power to write off the bonds in purported 'implementation of the scheme'.
Issues: 1. Whether the Administrator of Yes Bank Ltd. had the power to write off the Additional Tier 1 (AT-1) bonds after the bank was reconstructed on March 13, 2020? 2. Whether the impugned decision was in conflict with the Master Circular issued by the Reserve Bank of India?
Ratio Decidendi: 1. The Administrator exceeded his powers and authority in writing off the AT-1 bonds after the bank was reconstructed on March 13, 2020. 2. The Final Reconstruction Scheme did not authorize the Administrator to write off the AT-1 bonds. 3. The Administrator could not have exercised his powers after the reconstitution of the bank. 4. The impugned decision was in conflict with the Master Circular issued by the RBI.
Final Decision: The Court set aside and quashed the impugned decision of the Administrator to write off the AT-1 bonds. The Court also stayed its order for a period of six weeks.
JUDGMENT
S.V.Gangapurwala, J. - Rule.
Rule made returnable forthwith. By consent of the parties, taken up for final disposal.
2. The substratum of the challenge is the communication dated March 14, 2020 under which the Administrator of the Yes Bank Ltd., informed the (Bombay Stock Exchange) BSE Limited and National Stock exchange the decision ('impugned decision') of the writing off of the Additional Tier 1 Debenture bonds.
3. The petitioner therein seeks that the impugned decision be set aside and quashed. It further seeks directions against the National Securities Depositories Limited and Central Depository Services to take such steps to reverse the effect of any accounting, entries, noting, write-offs, cancellations, or any such steps that may have been undertaken pursuant to the impugned decision to write off the Additional Tier 1 bonds.
4. Various writ petitions are filed to seek the same declaration. As all these writ petitions are based on similar set of facts and involve common questions of law, as such to avoid rigmarole, the petitions are decided together. For convenience purposes, the facts as mentioned in the Writ Petition No.785 of 2021 are referred to.
5. We have heard Senior Advocate Mr.Zal Andhyarujina for the petitioners in Writ Petition No.100 of 2021, Senior Advocate Mr.Vikram Nankani for the petitioners (in the Transferred Writ Petition No. 8069 of 2020: 63 Moon Technologies Limited v. RBI), Senior Advocate Mr.Sharan Jagtiani for the petitioners (in Writ Petition No.220 of 2020: Gaurav Mathawala v. Union of India), Senior Advocate Srijan Sinha and Mr. M. G. Doctor for the petitioners (in Writ Petition No.6589 of 2021), party-in-person (in Writ Petition (L) No. 1000 of 2020: L.V. Srinivasan v. Union of India), Senior Advocate Aspi Chinnoy for the respondent Administrator and the respondent Yes Bank, Senior Advocate Ravi Kadam for the respondent Reserve Bank of India.
6. The learned Advocate for the petitioners submitted against the Master Circular issued by the Reserve Bank of India has statutory force. The Reserve Bank of India under section 35A of the Banking Regulation Act, 1949 (Act of 1949) is empowered to issue directions as it may deem fit and the banking companies shall be bound to comply with such directions. Reliance is placed on the judgment of the Division Bench of the Madras High Court in the case of Piyush Bokaria and others v. Reserve Bank of India and others(2020) SCC Online Mad 2693. Party in person relied upon the judgment of the Karnataka High Court in the case of Velankani Information Systems vs. Secretary, Ministry of Home Affairs in Writ Petition No.6775 of 2020 and also the Division Bench judgment in the case of Karnataka Bank Ltd. v. Rekha Rao in Writ Appeal No.8541 of 1996.
7. According to the party in person, the write down of AT-1 bonds has affected the legal rights of a class of citizens and thus is amenable to writ jurisdiction. It is also further submitted that one of the petitioners i.e the Yes Bank AT-1 Bondholders Association in Writ Petition No. 1145 of 2020 had approached the Supreme Court with a writ petition and they had declined to entertain the same and directed the petitioner to approach the concerned High Court under Article 226.
8. It is further contended by the learned counsel for the Petitioners that the Information Memorandums are statutory contracts as Additional Tier 1 Bonds are common equity Tier 1 instruments that are regulated and governed under Basel Convention as contained in the Master Circular. The Master Circular is binding on the Yes Bank and the provisions, therefore have to be complied by them irrespective of whether all provisions thereof are incorporated in the Information Memorandums or not. The Information memorandums are statutory contracts. Reliance is placed on the judgment of the Apex Court in the case of India Thermal Power Ltd. v. State of Madhya Pradesh and others (2000) 3 SCC 379. It is further contended by the learned counsel for the petitioner th
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