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YES Bank Crisis: L&T Moves Bombay HC Against RBI's Decision to Invalidate Additional Tier 1 Bonds

Nitish Kashyap
12 March 2020 7:43 AM GMT
YES Bank Crisis: L&T Moves Bombay HC Against RBIs Decision to Invalidate Additional Tier 1 Bonds
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Larsen and Toubro have moved the Bombay High Court against the Reserve Bank of India's decision to invalidate the Additional Tier 1 bond of the crisis-hit YES bank as per a newly proposed reconstruction scheme.

L&T's writ petition under the Banking Regulation Act comes after Axis Trustee Services Limited (ATSL), the largest bondholder, already approached the High Court against RBI's plan to write off AT-1 bonds. Although the matter was mentioned before the bench of Justice KK Tated and Justice SV Kotwal and it was heard on Wednesday, Axis Trustee Services agreed to enter into negotiations with the central bank.

As per RBI's scheme, a proposal has been made to write off YES bank's AT-1 bonds that were outstanding till March 5.

Senior Advocate Janak Dwarkadas briefed by Manilal Kher Ambalal and Co. appeared for ATSL and mentioned the matter on Monday, which was heard yesterday. In the hand-delivered notice sent to the RBI, YES Bank and the Government Pleader, ATSL had expressed apprehension that RBI may proceed to notify the said scheme without hearing them.

According to ATSL's petition, some of the AT-1 holders are Nippon Mutual Fund, Reliance Nippon Life Insurance, UTI Mutual Fund and Franklin Mutual Fund.

The petition states-

"The exercise of powers under Section 45(4)(a) of the Banking Regulation Act, 1949 in the facts of the present case is wholly unreasonable, arbitrary and disproportionate. It is nothing but discrimination between 51% of equity shareholders and AT1 bondholders which is clearly violative of Article 14, 19(1)(g) as well as constitutional rights under Article 300A of the Constitution of India."

On the other hand, L&T's petition will be mentioned before the same bench at 4 pm on Thursday and is likely to be tagged along with ATSL's petition, which is to be heard tomorrow. L&T officers and supervisory staff provident fund is also one of the petitioners.

More than Rs. 8,000 crore is invested in YES Bank's AT-1 bonds by mutual funds, provident funds, insurance companies, retail investors etc. As per reports, L&T has an exposure of Rs. 100 crore to YES Bank's AT-1 bonds, whereas the L&T officers and supervisory staff provident fund has an exposure of Rs. 25 crore of exposure to the bonds. 

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