Delhi HC upholds BharatPe's shareholder rights, rejects Unity Bank appeal

The Delhi High Court has dismissed an appeal filed by Unity Small Finance Bank against an interim order restraining it from tabling, considering or approving a proposal to increase its authorised share capital without the prior written consent of its shareholders, Resilient Innovations Pvt Ltd, parent of fintech major BharatPe, and Centrum Financial Services.

A Division Bench of Justices C Hari Shankar and Vinod Kumar, in a November 5 judgment, found no reason to interfere with the July 24 order passed by Justice Tushar Rao Gedela. The interim order restrained Unity from tabling, considering, deliberating on or approving Agenda Item 18, which proposed an increase in the bank’s authorised share capital.

The proposal would have increased Unity's authorised share capital from Rs 4,000 crore to Rs 4,900 crore through the creation of an additional 90 crore preference shares. The move was intended to facilitate the conversion of existing warrants into compulsorily convertible preference shares (CCPS).

At the heart of the dispute is a shareholder agreement signed in October 2021, which sets out the rights of the bank’s two shareholders and the decisions that require their consent.

Why the capital increase became contentious

Centrum and Resilient, the parent company of fintech firm BharatPe, held 51% and 49% stakes in Unity, respectively, when the agreement was signed.

Under the Shareholders' Agreement (SHA), certain decisions classified as "Reserved Matters" require prior written consent from both shareholders. These include changes to the bank’s capital structure, such as issuing new shares or securities.

The proposed increase in authorised share capital was intended to facilitate the conversion of warrants worth Rs 90 crore issued by Unity in 2021. Resilient objected to the proposal, arguing that the bank could not take up the matter without obtaining the consent required under the SHA.

The proposed restructuring also had implications for the shareholders’ stakes. Resilient argued that the move could dilute its shareholding from 49% to 21%.

Unity, however, maintained that the capital increase was necessary to facilitate the warrant conversion and comply with conditions imposed by the Reserve Bank of India (RBI).

The RBI's licensing conditions required Centrum to bring down its shareholding to 40% or below and Resilient, treated as a person acting in concert with Centrum, to reduce its holding to 10% of the bank’s paid-up voting equity share capital within eight years of the commencement of operations. The deadline was October 31, 2026.

Why the High Court rejected Unity's appeal

The Division Bench held that the proposed capital restructuring fell within the definition of Reserved Matters under the SHA and therefore required prior written consent from Centrum and Resilient.

The court also pointed to three communications in which Unity had sought Resilient's written consent, dated October 23, 2025, May 1, 2026, and July 8, 2026. Resilient had refused to grant the consent.

Unity subsequently argued that references to the Reserved Matter and the requirement for consent in its communications were inadvertent errors.

The court was sharply critical of this explanation, calling it "merely an argument of desperation, and nothing more". It noted that Unity's own communications demonstrated that the bank was aware of its contractual obligations under the SHA.

The bench also relied on Clause 5.2 of the agreement, which makes the induction of additional capital subject to the provisions on Reserved Matters and requires shareholder consent for the issue of securities to third parties.

Unity had further argued that the RBI had directed it to remove references to Reserved Matters from its Articles of Association (AoA), and that the SHA could not override the AoA.

The court rejected this argument, holding that the deletion of the Reserved Matters provisions from the AoA did not affect the obligations under Clause 8 of the SHA. It noted that the clause contained a non-obstante provision giving it overriding effect.

The bench also clarified that the interim order did not prevent Unity from enforcing the warrants. It only required the bank to ensure that their enforcement complied with Clause 8 of the SHA.

BharatPe calls for governance safeguards

Welcoming the decision, a BharatPe spokesperson said Unity's board must comply with the court’s directions and exercise independent judgment in the interests of all stakeholders, including minority shareholders.

"The Board must ensure that the bank complies with the Court's directions in letter and spirit. We expect the Board to exercise independent judgment, free from undue influence, and act in the interests of the bank and all its stakeholders, including minority shareholders," the spokesperson said.

The spokesperson added that governance processes followed since the bank's inception should be respected and applied consistently, rather than set aside to favour one shareholder group over another.

The Division Bench’s decision upholds the interim protection granted to Resilient. It does not, however, finally resolve the underlying shareholder dispute, which remains part of proceedings under Section 9 of the Arbitration and Conciliation Act, 1996.