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Case: YES Bank Limited & Anr. v. Axis Trustee Services Limited & Ors.
Neutral Citation: 2026 INSC 1132
Date: 15 October 2026
Bench: Justice Dipankar Datta and Justice Augustine George Masih
Area of Law: Banking & Finance | Regulatory Law | Investor Protection
The Supreme Court has declined to interfere with the Bombay High Court’s decision invalidating the write-down of YES Bank’s Additional Tier-1 (AT-1) bonds during the bank’s reconstruction in March 2020.
The Court made an important distinction. The central issue was not whether AT-1 bonds were, in principle, capable of being written down under the applicable regulatory framework. The issue was whether the particular write-down had been carried out by the competent authority and in accordance with the governing legal and regulatory framework.
The Court held that it had not.
The Court examined the Banking Regulation Act, the RBI’s Basel III framework, the Information Memoranda governing the bonds and the statutory reconstruction scheme for YES Bank.
A provision contemplating write-down of the AT-1 bonds had appeared in the draft reconstruction scheme, but that provision did not form part of the final scheme notified by the Central Government.
The Administrator could not derive from a general power under the reconstruction framework a specific regulatory authority that had not been conferred upon him.
The Supreme Court therefore agreed that the write-down, in the manner in which it was undertaken, could not be sustained.
The appeals were dismissed.
The Court also clarified that payment of the annual coupon would remain governed by the relevant Information Memoranda and would not be defeated merely by the dismissal of the appeals.
The judgment also records concern about the exposure of individual investors to complex and high-risk AT-1 instruments.
AT-1 bonds are not equivalent to ordinary fixed deposits. Their regulatory design permits loss absorption in specified circumstances. The Court’s observations reinforce the need for appropriate scrutiny when such instruments are sold or distributed to individual investors.
The judgment does not hold that AT-1 bonds can never be written down.
Its significance lies elsewhere: even where a financial instrument permits extraordinary loss-absorption measures, those powers must be exercised by the legally competent authority, at the legally permissible stage and in accordance with the governing regulatory and contractual framework.
For banks, trustees, regulators and investors, the case underlines the importance of reading the instrument documentation together with the applicable statutory and regulatory regime.
Regulatory necessity does not dispense with legal authority. A financially consequential action may still fail if the person taking it lacks the power to do so in the manner adopted.
Primary source: Official Supreme Court judgment viewer.
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Disclaimer: This legal update is intended solely for general information and discussion of recent judicial developments. It does not constitute legal advice or create an advocate-client relationship. The application of any judgment depends upon the facts and legal circumstances of the individual matter. Persons requiring advice concerning a particular dispute should obtain professional legal advice.