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YES Bank Limited & Anr. v. Axis Trustee Services Limited & Ors. (with connected Civil Appeals)

Civil Appeal · 2026 INSC 1132Decided 15 Oct 2026
Civil Appeal No. 3182 of 2025
Justice Dipankar Datta · Justice Augustine George Masih

Background

YES Bank issued AT-1 bonds worth Rs. 8,415 crore in 2016-17, with Axis Trustee Services as trustee. When the bank's finances collapsed, the Central Government imposed a moratorium and the RBI appointed an Administrator. A Reconstruction Scheme was notified to revive the bank, but unlike the draft version, the final notified Scheme dropped the clause authorizing write-down of the AT-1 bonds. Despite this, the Administrator unilaterally wrote the bonds down to zero the very next day, citing RBI's Master Circular. Bondholders challenged this before the Bombay High Court, which struck it down.

Decision Breakdown

The Supreme Court upheld the High Court's ruling. It held that administrative action must be judged by the facts and law as they stood on the date it was taken, so later events (like the bank's recovery) couldn't cure the illegality. The final Reconstruction Scheme had deliberately dropped the write-down clause after RBI itself recommended doing so in light of bondholder objections, so the Administrator had no basis to act otherwise. Under the Master Circular, only YES Bank itself or the RBI (at the point of non-viability, a non-delegable RBI prerogative) could trigger a write-down, never a step the RBI actually took here, so the Administrator exceeded his statutory powers.

Lesson Learnt

A statutory functionary cannot exercise a power the law vests specifically in a named authority merely out of administrative convenience: courts test such action's legality against the facts as they stood on the day it was taken. High-risk instruments like AT-1 bonds carry real risk of total loss if the legal process around them is mishandled.

Official source (sci.gov.in)View Judgment (PDF)

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