Yes Bank Crisis: L&T Moves Bombay High Court Against RBI’s decision to invalidate additional Tier 1 Bonds

Bombay Bar Association and Lawyers wrote to HC; requested to give them option to choose from virtual & physical hearings

Larsen and Turbo approached the Bombay High Court against the Reserve Bank of India’s decision of invalidating the Additional Tier 1 bond of crisis hit YES Bank as per the latest proposed reconstruction scheme. As per the latest scheme of the RBI, the Additional Tier 1 bond of YES Bank which was outstanding till 5th of March will be written off. Larsen and Turbo have approached the Bombay High Court against the said order.

Prior facts

The writ petition from Larsen and Turbo came after Axis Trustee Services Limited (ATSL), one of the largest bondholders of YES Bank, previously approached the High Court against the RBI’s plan to write off the AT-1 bond of YES Bank. The writ petition is filed under the Banking Regulations Act, 1949. The matter was heard by the bench comprising of Justice KK Tated and Justice SV Kotwal, it was heard on Wednesday where ATSL agreed to enter into negotiations with the Central Bank.

Key features

  • The petitioners contended that the exercise of the power provided under Section 45(4)(a) of the Banking Regulation Act, 1949 in the present facts is in totality unreasonable, arbitrary, and disproportionate.
  • They also contended that it discrimination between the 51% equity shareholders and AT-1 bondholders.

The writ petition

Axis Trustee Services Limited was represented by Senior Advocate Janak Dwarkadas who was briefed by Manilal Kher Ambalal and Co. The matter was mention on Monday and was heard on Wednesday by the Bombay High Court. ATSL had expressed that, RBI had proceeded with the plan without hearing ATSL; this was notified to RBI, YES Bank and the Government pleader through a hand-delivered notice sent by ATSL.

In the writ petition, filed by ATSL, they contended that, the exercise of the power provided under Section 45(4)(a) of the Banking Regulation Act, 1949 in the present facts would be wholly unreasonable, arbitrary and disproportionate. The petitioners also contended that the plan of RBI to write off AT-1 bond is nothing but discrimination between the 51% equity Shareholders and the AT-1 Bondholders which is a clear violation of fundamental rights under Article 14, 19(1)(g) and also violates constitutional rights provided under Article 300A of the Constitution of India.

Further, the writ petition by Larsen and Turbo was placed before the same bench of the Bombay High Court on Thursday, and it is most likely that it would be heard along with the writ petition by ATSL, which was to be heard today. The Larsen and Turbo supervisory and staff provident fund is also a petitioner in the matter. Investment of more than Rs. 8000 crore has been done in YES Bank’s AT-1 Bonds by way of mutual funds, provident fund, insurance companies, etc. as per the data, Larsen and Turbo has an exposure of estimate Rs. 100 crore to YES Bank AT-1 bond and Rs. 25 crore exposure for Larsen and Turbo supervisory and staff provident fund.

Edited by J. Madonna Jephi

Approved & Published – Sakshi Raje

Reference

1. LiveLaw, https://www.livelaw.in/news-updates/yes-bank-crisis-lt-moves-bombay-hc-against-rbis-decision-to-invalidate-additional-tier-1-bonds-153741?infinitescroll=1 (last visited 13th March, 2020)

Team @Law Times Journal
Hello. We are team members of Law Times Journal. Editorial members at Law Times Journal is a team of writers led by Vedanta Yadav. Want to become a writer at Law Times Journal? Send your current work/resume with title "Resume-Editor" at vedantayadav@lawtimesjournal.in