Yes Bank Ltd vs Securities And Exchange Board Of India

The two appeals have been filed against a common order dated April 12, 2021 passed by the Adjudicating Officer (“AO†for convenience)

imposing penalty upon the bank and its employees. Therefore the appeals are being taken up together.

Certain complaints were received from the investors with regard to the issuance of AT-1 Bonds by Yes Bank Limited in respect of its selling.

Based on the investigation and possible violations of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practice

relating to Securities Market) Regulations, 2003 (“PFUTP Regulations†for convenience) a show cause notice dated October 28, 2020 was

issued. The short contention raised is, that the bonds were initially sold by the bank to the institutional investors and thereafter the same bonds were

sold by these institutional investors to other investors in the secondary market. The show cause notice alleges that the Relationship Manager of the

Bank had facilitated the subsequent sale in the secondary market. The allegation is, that while selling these bonds the Relationship Manager did not

inform the investors of the risk factor and therefore there was misrepresentation and fraud.

Upon hearing the learned counsel for the parties and upon a perusal of the impugned order we find that under the Banking Regulation Act, 1949 the

Central Government had declared a moratorium in March 2020 and thereafter propounded a scheme pursuant to which an Administrator has been

appointed. The bank is under a rehabilitation scheme and lots of monies are being pumped in order to revive the bank.

We also find that the Relationship Manager have not been booked. Prima facie, the question as to whether the buyers were informed of the risk

factor with regard to the AT-1 Bonds can be best explained by the Relationship Managers which were part of the investigation but were not the

noticees in these proceedings. On the other hand, the members of the Private Wealth Management Team have been made noticees and they have

been penalized by the impugned order. We also prima facie find that the risk factor was already existing on the website and it was in the knowledge of

everyone. Considering the aforesaid, prima facie a case is made out for grant of an interim order.

We direct the respondent to file a reply within 4 weeks from today. Three weeks thereafter to the appellants to file rejoinder. The matters would be

listed for admission and for final disposal on July 30, 2021.

Considering the aforesaid, we stayed the effect and operation of the impugned order against the appellants provided the appellant bank, namely,

Yes Bank Limited gives an undertaking on behalf of the bank as well as on behalf of the other appellants who were members of the Private Wealth

Management Team to the effect that in the event of failure of the appeal the bank would pay the penalty amount within two weeks from the date of

the order. Such undertaking shall be given to SEBI within 10 days from today. Misc. Applications for urgent hearing and stay are accordingly disposed

of.

Parties are directed to take instructions from the Registrar 48 hrs. before the date fixed in order to find out as to whether the matters would be

taken up for hearing through video conference or through physical hearing.

The present matters were heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor

a certified copy of this order could be issued by the Registry. In these circumstances, this order will be digitally signed by the Private Secretary on

behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Parties will act on production of a digitally

signed copy sent by fax and/or email.