By Jayshree P Upadhyay

MUMBAI (Reuters) -The Bombay High Court on Friday quashed the write-off of additional Tier-1 (AT1) bonds issued by Yes Bank Ltd, according to a court order.

The bonds were written off as part of a restructuring plan to rescue Yes Bank in March 2020. Equity holders, on the other hand, did not face a similar write-down, but 75% of their shares were subject to a lock-in for three years.

Additional Tier-1 bonds are high-yield securities that typically have loss-absorbing features, meaning they can be written off if a lender's capital falls below a crucial level, which was invoked in Yes Bank's case.

The court did not go into the merits on the nature of these bonds and ruled that there were procedural lapses in the decision to write down the bonds.

However, the court offered relief to bondholders with exposure of 84.5 billion rupees ($1.04 billion) to these bonds.

The court ruled the decision to write off the bonds was not a part of the final restructuring scheme and the administrator did not have the authority to make the decision.

"It appears that administrator exceeded his powers and authority in writing off AT-1 bonds after the bank was reconstructed on March 13, 2020," according to the court order.

Individual and institutional bondholders had filed several petitions in the Court, arguing that the bonds were mis-sold and could not be written off when equity was not.

"The Bombay High Court had allowed the bondholders' petition against the write-off and the decision to write off the AT1 bonds has been quashed," said Srijan Sinha, an advocate who appeared on behalf of the association of individual bondholders.

The bank can choose to appeal in the Supreme Court.

Yes Bank did not immediately offer comments on the order. An email sent to RBI was not answered immediately. ($1 = 81.1310 Indian rupees)

(Reporting by Jayshree P Upadhyay in Mumbai and Tanvi Mehta in New Delhi; Editing by Savio D'Souza and Krishna Chandra Eluri)