The ₹8,415 Crore Reckoning: Inside Yes Bank’s Supreme Court Review Petition on AT-1 Bonds

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│ CHRONOLOGY OF THE ₹8,415 CR AT-1 BOND DISPUTE │

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│ March 2020 │ Draft scheme proposed AT-1 write-off; Cabinet finalizes │

│ │ scheme with write-off clause CONSCIOUSLY DELETED. │

│ March 14, 20 │ RBI Administrator Prashant Kumar writes off ₹8,415 Cr bonds │

│ │ relying on Information Memorandum contractual covenants. │

│ Jan 20, 2023 │ Bombay High Court quashes the write-down as ultra vires. │

│ Oct 15, 2026 │ Supreme Court dismisses appeals by Yes Bank, RBI & Centre. │

│ Nov 13, 2026 │ Yes Bank files Article 137 Review Petition in Supreme Court.│

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The Supreme Court did not dismantle the prudential logic of Basel III hybrid instruments. Instead, it anchored its ruling strictly on administrative and statutory law:

• The Doctrine of Omission: The draft reconstruction scheme prepared by the RBI contained an express provision to extinguish AT-1 bonds. However, when the Central Government notified the final Yes Bank Limited Reconstruction Scheme, 2020, that clause was deliberately removed.
• Ultra Vires Execution: The apex court held that once the Central Government intentionally omitted the clause, the RBI-appointed Administrator could not exercise independent statutory authority under Section 45 of the Banking Regulation Act to execute the write-off. His action was deemed ultra vires (exceeding legal powers).

2. The Legal Hurdle of Article 137

Invoking Article 137 is one of the narrowest legal remedies available in Indian jurisprudence. Under Supreme Court Rules:

1. A review is not a rehearing of an appeal.
2. It is maintainable only if there is an "error apparent on the face of the record" or if new, undiscoverable evidence comes to light.
3. Review petitions are ordinarily considered in chambers by circulation without oral arguments, unless the bench exercises rare discretion to grant an open-court hearing.

By entering a review plea, Yes Bank is attempting to establish that the bench overlooked the contractual Information Memorandum (IM) signed by institutional buyers, which stated that AT-1 bonds carry perpetual risk and can be written off at the Point of Non-Viability (PONV) before equity dilution.

3. The Financial and Capital Adequacy Math

For Yes Bank, restoring ₹8,415 Crore is not merely an accounting adjustment—it carries systemic balance-sheet ramifications:

• The Coupon Liability Overhang: The bonds carried coupon rates between 9.5% and 10.5%. Over the 6.5 years between March 2020 and late 2026, accrued unpaid coupons could amount to an estimated ₹4,000–₹5,000 Crore, pushing the total gross financial liability toward ~₹13,000 Crore.
• Capital Ratios (CET-1 & Tier-1): Yes Bank's Common Equity Tier 1 (CET-1) ratio currently stands at healthy levels (~13.2%). If forced to account for back-dated liabilities or settle cash pay-outs, the hit to capital reserves would require an immediate dilutive equity infusion.

4. The M&A Equation: The SMBC Buyout Overhang

The review petition cannot be viewed in isolation from corporate dealmaking:

• Japan’s Sumitomo Mitsui Banking Corporation (SMBC) has submitted plans to acquire a controlling stake (~51%) in Yes Bank, intending to consolidate its Indian operations under the Yes Bank platform by FY29.
• State Bank of India (SBI) and a consortium of domestic banks (which bailed out Yes Bank with ₹10,000 Crore in 2020) are seeking an exit.
• The Valuation Standoff: An unresolved ₹8,415 Crore contingent claim creates a major pricing discount and indemnity dispute in the Share Purchase Agreement (SPA). By pursuing an Article 137 review, Yes Bank's management aims to buy time, secure judicial clarification, or force a court-directed mediated settlement.