Axis trustee files contempt objection against Yes Bank over AT-1 bonds | Today’s news
Axis Trustee Services Ltd has filed a contempt petition in the Supreme Court against Yes Bank Ltd and certain officers and directors for allegedly failing to comply with the court’s October 15 order of reinstatement ₹8,415 crore of additional tier-I (AT-1) bonds, it informed bondholders on Wednesday.
The petition, filed Nov. 6, seeks directions to comply with the judgment and restore bond.
In an email communication to bondholders, Axis Trustee said it approached the court because it “has not received any concrete plan from the bank regarding the restoration/reactivation of the bonds” and implementation of the judgment.
Axis Bank Ltd’s subsidiary said it will pursue all available remedies under applicable laws and transaction documents “in the interest of bondholders”.
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The filing follows a notice issued by the Axis administrator on October 28 asking the bank to restore the bonds within three days and implement the Supreme Court judgment.
The notice said the bank “has not initiated any corporate action or taken any other action” to reinstate the bonds. “The bank cannot refuse to comply with the said judgment under the guise of evaluating its options,” she wrote.
Yes, bank defense
In its response dated October 30, Yes Bank acknowledged the decision and said it was “fully committed to comply with the Supreme Court’s judgment and applicable laws.”
The private sector lender said it was reviewing the implications of the judgment, the next steps and available legal remedies, that its board was aware of the matter and that it would take action as permitted by law.
However, the bank said it “does not accept the characterization” of its actions as willful insubordination, calling the Axis administrator’s claims “baseless and without merit.”
The Supreme Court on 15 October dismissed the appeals filed by Yes Bank, the Reserve Bank of India and the Union government and upheld the Bombay High Court’s decision that set aside the bank administrator’s March 2020 decision to write off the AT-1 bonds during the lender’s bailout.
“The payment of the annual coupon rate will remain unaffected by the outcome of these appeals,” the court said, noting that it must be made in accordance with the bonds’ information memoranda.
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Hope for recovery
The ruling revived hopes of a recovery for investors whose stakes were written off in 2020. But nearly a month after the ruling, bondholders are still waiting for clarity on when the securities in their accounts will be restored.
For many investors, bonds represented retirement savings and financial security. Some moved money out of fixed deposits after bank managers allegedly sold the instruments as higher-yielding alternatives to traditional deposits without adequately explaining their risks.
Yes Bank AT-1 Bondholders’ Association, which represents around 400-450 affected investors, said a substantial part of its members are senior citizens. Some members died during the years of litigation, the association said.
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Reviving the bonds would revive investors’ rights attached to the instruments but would not make the principal immediately payable, Mint experts said.
Any potential recovery through sales would depend on market liquidity and the price at which the bonds trade.
