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Madras HC upholds legal validity of RBI’s circular on Additional Tier 1 Capital Bond

October 7, 2020[2020] 120 taxmann.com 81 (Madras)
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FEMA, BANKING & INSURANCE : RBI Master Circular - Basel III Capital Regulations dated 1-7-2015 bearing RBI/2015-16/58 DBR No. BP.BC.1/21.06.201/2015-16, insofar as it relates to issuance and write off of Additional Tier 1 Capital Bonds, is not ultra-vires

• RBI is authorized to issue Master Circular in terms of the Banking Regulations Act; Master Circular - Basel III Capital Regulations issued by Reserve Bank of India dated 1-7-2015 bearing RBI/2015-16/58 DBR No. BP.BC.1/ 21.06.201/ 2015-16 insofar as it relates to issuance and write off of Additional Tier 1 Capital Bonds, is not ultra-vires or without authority of law.

• Given the nature and characteristics of Additional Tier 1 (AT 1) bonds, which was disclosed to investors, these AT 1 bonds constitute a distinct class and, therefore, it is not tenable to contend that Articles 14, 19, 21 and 300A of Constitution were violated.

• AT 1 bonds do not violate Companies Act, 2013, the Banking Regulation Act, the Contract Act or any other legislation.

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