Supreme Court Upholds Quashing of YES Bank’s ₹8,415 Cr AT-1 Bond Write-Off: Inside the Legal Fallout and 300 bps CET-1 Hit

The ruling, delivered by a bench comprising Justice Dipankar Datta and Justice Augustine George Masih, restores the claims of mutual funds, institutional investors, and retail bondholders who were completely wiped out during the bank’s emergency reconstruction in March 2020.

The Statutory Crux: Beyond the Administrator’s Mandate

The apex court’s ruling hinged on administrative law rather than the theoretical risk characteristics of AT-1 debt:

• Lack of Authority: The court found that the RBI-appointed administrator, Prashant Kumar, acted outside the legal boundaries of his mandate. The final government-notified Yes Bank Reconstruction Scheme 2020 did not confer the power to extinguish the bonds to zero.
• The Equity Asymmetry: The court critically noted the fundamental fairness violation where equity shareholders were allowed to retain fractional value (subject to a three-year lock-in), while higher-ranking AT-1 bondholders suffered total capital destruction.