Axis Trustee Services Ltd, a debenture trustee of Yes Bank argued before the Bombay High Court on Tuesday that the Reserve Bank of India (RBI) cannot differentiate between the promoters and bondholders as a lot of mutual funds, pension funds as well individuals have invested in additional tier 1 (AT-1) bonds and they should not suffer due to write off by the banking regulator. After Axis, Indiabulls Housing Finance Ltd — another AT-1 bondholder of Yes Bank — too moved the HC against the RBI’s proposal to write-down the lender’s AT-1 bonds. A division Bench of justices SJ Kathawalla and RI Chagla Monday said in an interim order that any action pertaining to the bonds is subject to its further orders. Indiabulls, in its statement issued on March 8, had claimed that Yes Bank owes it nearly Rs 662 crore, which it had invested in AT-1 bonds in 2017 as a part of its treasury management. L&T Officers and Supervisory Staff Provident Fund Trust has also filed a plea against RBI and Yes Bank. Earlier, Axis Trustee Services had sought from the high court a relief against the proposal by the RBI as part of its plan to rescue Yes Bank, which has been under a moratorium since March 5. A debenture trustee is an entity that serves as a liaison between the company that issued debentures and debenture holders that are collecting interest payments. Tier 1 bonds are rated higher than equity but do not have a priority like secured creditors. Senior counsel Janak Dwarkadas, representing Axis Trustee, on Tuesday submitted that AT-1 bondholders have equally contributed to bank’s growth and while certain promoters have retained equity, bondholders are being made to suffer due to write-off of their investments. “Infusion of capital by private banks will change the status of Yes Bank from ‘deemed to be non-viable’ to a ‘viable bank’, which will indicate a ‘healthy status’ and allow it to make repayments. Therefore, AT-1 bondholders, who had equally contributed to the growth of the bank, must be allowed to participate in the future growth,” argued Dwarkadas. While the acting chief justice had issued directions to the lawyers to reduce congestion in the courts in wake of coronavirus outbreak, over 100 persons including senior lawyers were present in a packed court room in HC on Tuesday, which is presently hearing petitions filed by debenture trustee bondholders challenging write off of additional tier 1 bonds of Yes Bank. The bench led by Justice Kathawalla will continue hearing the debenture trustee’s plea on Wednesday.
