The Supreme Court recently delivered a long-awaited victory to Yes Bank’s additional tier-1, or AT1, bondholders. It upheld the Bombay High Court’s decision, setting aside the write-off of Rs 8,415 crore worth of bonds during the bank’s rescue in March 2020.
One might have expected this to bring a six-year legal battle to an end. Instead, the bondholders are now writing to the RBI, SEBI, and the finance ministry, seeking their intervention. Axis Trustee, which represents the bondholders, has demanded that Yes Bank reinstate the bonds and clarify its position on unpaid coupons. Two weeks after the judgment was delivered, the bank’s response is that it is still assessing the judgment and its implications.
Courts possess coercive powers, including the power to punish wilful disobedience through contempt proceedings. But there are other feedback loops that should automatically get triggered by this. Indeed, if there is one category of litigant against whom a favourable judgment ought to be relatively easy to enforce, it is a listed, regulated company. Board oversight, share prices, and credit ratings are just some of the mechanisms to discipline corporate behaviour. Yet, the Yes Bank episode demonstrates the limitations of these mechanisms in securing a listed bank’s timely compliance with the law.
A never-ending litigation
In March 2020, as Yes Bank teetered on the brink of collapse, the RBI superseded its board and appointed an administrator under a reconstruction scheme prepared to rescue the bank. The RBI-appointed administrator proceeded to write down Rs 8,415 crore of bonds despite the scheme providing no such write-off powers. The bondholders challenged this decision.
On 20 January 2023, the Bombay High Court ruled in their favour, setting aside the write-off on the ground that the administrator had acted beyond his authority. But there was a catch. At Yes Bank’s request, the High Court stayed its own judgment for six weeks, allowing the bank and other respondents to appeal. On 3 March 2023, the Supreme Court extended that protection pending disposal of the appeals.
The case, and the stay, continued for more than three and a half years. Last month, the Supreme Court finally dismissed the appeals filed by Yes Bank, the RBI, and the Union government. By then, nearly six years and seven months had elapsed since the original write-off. According to the bondholders’ association, 12 of its members had died during the litigation.
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An open-ended stay order
The troubling feature of this chronology is that the bondholders had already won in January 2023. Yet, once Yes Bank and the RBI appealed the decision, the Supreme Court granted a stay, without reasons, pending the disposal of the appeal. A stay pending disposal of a case may be justified in a particular case. But a non-reasoned stay order that survives until final disposal can effectively deprive a successful litigant of relief for years.
More importantly, such open-ended stays distort the incentives to appeal. A bank that is not required to restore the bonds while litigation remains pending may benefit from the continued absence of those liabilities from its books. The longer the appeal takes, the longer that benefit lasts.
One might expect that, having benefited from this extended protection, Yes Bank would have prepared for the possibility of losing its appeal. The litigation was no surprise. The financial exposure was quantifiable. Yet, more than two weeks after the Supreme Court’s judgment, the bank resists disclosing a clear implementation schedule.
To be sure, setting aside the write-off requires restoration of the bonds on Yes Bank’s balance sheet. It does not require their immediate repayment at face value. Coupon payments are also governed by the relevant bond documents. With the scope for immediate repayment being restricted, the bank’s resistance to a clear implementation plan is even more puzzling.
Where are the feedback loops?
A listed company is not an ordinary judgment debtor. Its conduct is subject to at least three feedback mechanisms.
The first is the equity market. Yes Bank’s shares fell by about 14.5 per cent on the day of the Supreme Court judgment, against a 0.9 per cent rise in the NIFTY Bank index. The stock declined by another 16.4 per cent through 30 October, even as the broader banking index fell by only 2 per cent. While these movements cannot be attributed exclusively to the bank’s response to the judgment, they suggest that market discipline can price the cost of a judicial decision without necessarily disciplining the company’s response to it.
The second mechanism is the credit rating system. On 16 October, CRISIL estimated that reinstating the bonds would reduce Yes Bank’s common equity tier-1 capital ratio by approximately 250 basis points, to 11.5 per cent. If the bank paid coupons for all previous periods, the ratio could decline further to around 10 per cent. Yet CRISIL concluded that the judgment was not expected to have a material impact on Yes Bank’s overall credit profile.
While this assessment may be perfectly sound, it does set up a paradox: If payment of coupons is unlikely to imperil the bank’s financial health, why would Yes Bank resist this despite a court judgment? On the other hand, doesn’t the possibility that a bank might not pay its coupons raise questions about its treatment of creditors?
The third, and perhaps most important, mechanism is the board of directors. Where is Yes Bank’s board in all this? What have its independent directors been doing since the judgment? Did the auditors examine the financial implications of an adverse judgment while the appeals were pending? Were appropriate contingent-liability disclosures made? Was an implementation plan prepared for the possibility that the Supreme Court would uphold the High Court judgment?
These are puzzles, not allegations. Even as every disputed liability need not be provisioned, it is hard to imagine how a dispute involving Rs 8,415 crore triggered no provisioning or board-level attention during its six year journey.
Contrast this with the response of the HDFC Bank’s board to the overnight resignation of its chairman, Atanu Chakraborty, earlier this year amid governance concerns. The board proactively set up communication channels with analysts, commissioned an independent legal review, and disclosed its findings publicly. Whatever one thinks of the substance of HDFC Bank’s response, its board visibly took ownership of the issue. In Yes Bank’s case, public communications have largely consisted of management statements and exchange filings explaining that the judgment is under assessment. There has been no comparable public explanation from its independent directors of how they are overseeing implementation.
What comes after judgment day
The Yes Bank episode is not the first instance of corporate India dilly-dallying compliance with a court judgment. It only reinforces the systemic problems with the enforcement of court judgments that direct payments to be made by one party to another. In 2019, the Supreme Court held Reliance Communications’ senior executives guilty of contempt for failing to honour payment undertakings given to the Court in the Ericsson dispute. Earlier, the Sahara litigation demonstrated how repeated failures to comply with directions to refund investors could trigger the detention of corporate officials. But the contempt of court is not an automatic enforcement mechanism. It requires its own proceedings; wilful disobedience must be established, and not every failure to satisfy a civil decree necessarily amounts to contempt.
Indeed, even absent contempt, a decree does not automatically translate to payment or performance in most civil cases. Payment must be secured through separate proceedings called ‘execution cases’. Execution cases are even more prolonged. In December 2025, Pavithra Manivannan, Gokul Sunoj, and I published an empirical study of roughly 20,000 execution petitions filed before the Bombay High Court between 2017 and 2024. Of the 43 per cent execution petitions that were disposed in our data, the median time to disposal was 650 days, while the average was 914 days. More surprisingly, the overwhelming majority of execution cases were dismissed, settled, or withdrawn. While this does not tell us how many decree-holders ultimately recovered their money, they demonstrate how far the formal disposal of an execution petition can be from a straightforward record of successful enforcement.
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A measurement problem
Yes Bank’s bondholders have now obtained favourable judgments from both the Bombay High Court and the Supreme Court. Yet, they are still seeking regulatory intervention to secure the practical consequences of those judgments. If even a listed bank, surrounded by shareholders, regulators, credit rating agencies, and independent directors, cannot be expected to give prompt and transparent effect to a judicial decision, what hope does an ordinary decree-holder have?
The persistent delay in enforcement of court judgments highlights another measurement problem. India’s courts devote enormous attention to pendency and disposal. But perhaps we have been measuring the wrong endpoint. A judgment that cannot be implemented without another round of litigation is not the end of a dispute. For the successful litigant, it may simply be the beginning of another one.
Bhargavi Zaveri-Shah is the co-founder and CEO of The Professeer. She tweets @bhargavizaveri. Harsh Vardhan is a management consultant and researcher based in Mumbai. Views are personal.
(Edited by Prasanna Bachchhav)