JSA Successfully Represents YES Bank Before Supreme Court In Appeal Against Direction To Reinstate Securities
Supreme Court set aside the direction issued by NSE Clearing Limited requiring YES Bank to reinstate securities it had liquidated in its capacity as a Professional Clearing Member.
JSA Advocates and Solicitors (JSA) successfully represented YES Bank Limited (YES Bank) before the Supreme Court of India in an appeal that challenged the order of the Securities Appellate Tribunal (SAT) dated December 15, 2023, which had upheld a direction issued by NSE Clearing Limited (NCL)requiring YES Bank to reinstate securities it had liquidated in its capacity as a Professional Clearing Member (PCM).
The case raised a unique question regarding the scope of a clearing corporation’s disciplinary powers.
YES Bank was the PCM for Action Financial Services (India) Limited (AFSL), a Trading Member (TM). During the market disruption caused by the COVID-19 pandemic in March 2020, Action defaulted on its margin obligations, compelling YES Bank to liquidate the collateral securities furnished by Action.
NCL thereafter initiated proceedings against YES Bank, ultimately directing it to reinstate the client securities and pay a monetary penalty. The SAT upheld this direction, prompting YES Bank to approach the Supreme Court.
By its judgment dated September 2, 2026, the Supreme Court allowed YES Bank’s appeal, setting aside both the SAT Order and the NCL Order, and holding that there was no statutory violation committed by the PCM.
The judgment is significant since it clarifies the limits of a clearing corporation’s disciplinary powers, holding that the power to direct restitution must be traced to specific statutory provisions and cannot be equated with the general power to impose a “penalty” under applicable statutes.
This decision will act as an important precedent for market intermediaries and provides clarity on the boundaries of regulatory enforcement.
The matter was jointly led by the Securities Litigation and Advisory team, comprising Pulkit Sukhramani, Partner and Juan D’souza, Senior Associate and the Disputes team Divyam Agarwal, Partner; Pallavi Kumar, Partner, and Priya Chauhan, Associate.