The Delhi High Court has restrained Unity Small Finance Bank from tabling, discussing or approving a board resolution to increase its authorised share capital, ruling that the bank cannot proceed without written permission from Resilient Innovations Private Limited, which operates BharatPe and owns 49% of the bank.

Granting interim relief to BharatPe, Justice Tushar Rao Gedela on Friday said that the matter falls within the scope of "Reserved Matters" under a Shareholders' Agreement, which requires written consent from BharatPe's parent entity before such issues can even be placed before the board.

The tussle began after the bank proposed increasing its authorised share capital from Rs 4,000 crore to Rs 4,900 crore. The proposal also sought to amend Clause V of the Memorandum of Association (MoA) to facilitate the conversion of existing warrants into Compulsorily Convertible Preference Shares (CCPS).

BharatPe argued that the proposed amendment falls within "Reserved Matters"; and that the warrent conversion would dilute its shareholding from 49% to 21%.

The order, which was reserved on July 23, was delivered on July 24 – just a day before the bank's board was due to meet. 

The reason behind the friction

In 2021, when Unity Small Finance Bank was set up, BharatPe invested about Rs 746 crore (around $100 million at that time) to pick up a 49% stake, while Centrum Financial Services, the bank's founding promoter, held the remaining 51%. 

On October 22, 2021, the bank had issued 90 crore warrants – priced at just one paisa (Re 0.01) each. JBCG Advisory Services – named after Centrum founders Jaspal Bindra and Chandir Gidwani – is described as part of Centrum's promoter group and holds warrants transferred to it by Centrum after executing a Deed of Undertaking dated October 28, 2022, binding it to the terms of the Shareholders' Agreement (SHA) dated October 26, 2021.

On November 1, 2021, BharatPe owner Resilient Innovations Pvt Ltd came in as the shareholder in the bank.

Centrum's counsel Sandeep Sethi argued that these warrants are due for conversion into Compulsorily Convertible Preference Share (CCPS) on October 30, 2026, for which Unity SFB would require “adequate authorised share capital” to issue the requisite number of CCPS. And, that the proposal was to increase the share capital from Rs 4000 crore to Rs 4900 crore.

He argued if the conversion does not take place, the warrants would lapse and “any amount paid towards them would stand forfeited by the company.”

Appearing for both Unity SFB and its largest shareholder Centrum Financial, Sethi argued that the exercise of warrants did not fall within the ambit of "Reserved Matters."

BharatPe, however, claimed that the transfer of those warrants to third parties itself required its consent, making it another breach of contract.

Centrum and Unity Bank argued that a "mutual waiver" letter dated June 10, 2024 between Centrum and BharatPe, stated that neither party was required to obtain consent before proceeding with third-party transfers and that they had mutually waived their rights and obligations under Clauses 12.1 and 12.4 of the SHA in connection with such transfers.

 “Thus, the submission that these are Reserved Matters is a bogey requiring rejection,” Sethi argued.

They also maintained that the conversion of warrants into CCPS would not affect BharatPe's 49% shareholding since CCPS holders do not possess voting rights.

JBCG's counsel, Rajshekhar Rao, submitted that if the warrants are not converted into CCPS on or before October 30, 2026, they would lapse and stand forfeited, "causing enormous financial losses to JBCG and all such warrant holders to the extent of Rs 900 crores." He further argued that JBCG, being a promoter, had invested Rs 300 crore in warrants, which, if not converted, would result in irreparable and irrecoverable financial loss.

The warrants have been transferred to as many as 181 third-party individuals.

BharatPe, represented by senior advocates Abhishek Manu Singhvi and Amit Sibal, told the court that the bank had sought its written consent on three occasions – October 23, 2025; May 1, 2026; and July 8, 2026 – to include the issue in the board agenda.

In its letter dated July 20, BharatPe asked Unity Bank to withdraw the "now challenged" Agenda Item No. 18 from the upcoming board meeting, arguing that it was contrary to and in breach of the SHA.

"Despite receipt of the said letter, Unity Bank neither responded nor provided any indication that Agenda Item No. 18 would be withdrawn."

The company argued that if their consent was not mandated, there would have been no requirement for Centrum to issue three communications, seeking written their consent.

Unity Bank's July 8 letter to BharatPe stated that the bank needed to increase its authorised share capital to facilitate the conversion of existing warrants. As part of the proposal, board approval for the increase in authorised share capital on July 25 would have been followed by an application to the Reserve Bank of India seeking approval and a no-objection certificate on July 28.

BharatPe's counsel argued that it was "clear as crystal that the respondents themselves are in no doubt that the written consent of the petitioner is necessary and mandatory in respect of issues which fall within the ambit of 'Reserved Matters'."

In the court, BharatPe argued that they sought details of the warrants from Centrum several times in the past, but those details were never disclosed. JBCG, which acquired the warrants at one paisa each, further transferred them to over 100 individuals and private entities. 

In the court, Unity and Centrum submitted the list of warrant holders. It appears that a significant number of warrants are held by the management of Unity Bank. 

Although the transfer of warrants required BharatPe's consent, no such consent was obtained. And, that is a “separate issue” altogether.

Warrants were issued in October 2021 before BharatPe became a shareholder. BharatPe said it was aware of them and was “comfortable” with the arrangement because the terms clearly stated that any transfer or conversion of those warrants would require the consent of both stakeholders.

The RBI granted the banking licence on October 12, 2021. The bank issued the warrants on October 22, the SHA was signed on October 26, and BharatPe became a shareholder on November 1. The deal was that any fundamental change in the shareholding status quo between Centrum and BharatPe would require the consent of both parties.

JBCG acquired Unity Bank warrants at one paisa (Re 0.01) each, while BharatPe acquired its 49% stake at around Rs 22 per share. While the face value of the bank's shares is Rs 10, but industry sources say the underlying value of the bank today is estimated to be close to Rs 30.

While the court has, for now, halted the proposed increase in authorised share capital, the dispute raises broader questions around governance, shareholder rights and promoter control in a regulated bank. How the RBI views the evolving dispute could become equally significant in the months ahead.

Responding to The Head and Tale queries, Unity Bank spokesperson said, “As the matter is sub judice, we decline to comment. The discussions are solely between the bank's promoter and a financial investor. The bank remains operationally unaffected, and continues to serve its customers and stakeholders as usual.”

BharatPe did not respond to our queries.