Statutory reconstruction scheme and AT-1 bond write-off: post-reconstitution action without scheme authority was ultra vires and writ-reviewable.

A statutory reconstruction scheme under section 45 of the Banking Regulation Act, 1949 governed the AT-1 bond framework, and the Information Memorandum operated subject to the RBI's Master Circular. Because the final scheme omitted any authorisation for write-off and fixed 13 March 2020 as the effective date, the Administrator could not rely on contractual clauses to order a post-reconstitution write-off. The attempted write-off was therefore outside the scheme's authority and amenable to writ review. The contractual terms had statutory flavour, so the challenge was maintainable in writ jurisdiction.

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Issues: Whether the Administrator could lawfully write off the Additional Tier 1 bonds after the final reconstruction scheme under section 45 of the Banking Regulation Act, 1949 came into force, and whether the writ petition was maintainable in view of the contractual documents having statutory flavour.

Analysis: The Master Circular issued by the Reserve Bank of India under statutory powers governed the issue of AT-1 bonds and the relevant clauses of the Information Memorandum were derived from, and operated subject to, that framework. The final reconstruction scheme notified under section 45 of the Banking Regulation Act, 1949 omitted the draft clause dealing with write-off of the AT-1 bonds and fixed 13 March 2020 as the date on which the scheme came into force. Once the bank stood reconstructed on that date, the Administrator could not exercise a policy power to write off the bonds on the following day, because the scheme did not confer such authority and the act was required to occur, if at all, before reconstitution. The contractual terms therefore had statutory character and the challenge was maintainable in writ jurisdiction.

Conclusion: The write-off decision taken after the scheme had come into force was beyond the Administrator's authority and was liable to be quashed; the writ petition was maintainable and succeeded in favour of the petitioners.

Ratio Decidendi: Where a statutory reconstruction scheme under section 45 of the Banking Regulation Act, 1949 comes into force without authorising a bond write-off, the Administrator cannot invoke contractual clauses derived from the RBI's statutory circular to order a post-reconstitution write-off; such action is ultra vires the scheme and is amenable to writ review.

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