Delhi High Court rejects Unity Small Finance Bank's appeal against BharatPe in share capital dispute

The Delhi High Court has dismissed an appeal filed by Unity Small Finance Bank against an interim order restraining it from placing a proposal to increase its authorised share capital before its Board without the consent of BharatPe's parent company, Resilient Innovations Private Limited. [Unity Small Finance Bank Vs Resilient]

A Division Bench of Justice C Hari Shankar and Justice Vinod Kumar held that Unity was bound by its shareholders' agreement with Resilient and Centrum Financial Services, which required prior written consent for changes to the bank's capital structure.

"There is obviously no ground, whatsoever, for us to interfere with the impugned judgment of the learned Single Judge," the Court observed.

"That, quite clearly, is merely an argument of desperation, and nothing more," the Bench added.

The dispute arose from a shareholders' agreement executed in October 2021 between Unity, Resilient and Centrum, which held 49% and 51% shareholding, respectively, in the bank.

Under the agreement, decisions involving changes to the bank's capital structure were classified as Reserved Matters, requiring prior written consent from both shareholders.

Unity proposed increasing its authorised share capital from ₹4,000 crore to ₹4,900 crore to facilitate the conversion of existing warrants into compulsorily convertible preference shares (CCPS).

Resilient opposed the proposal and approached the High Court under Section 9 of the Arbitration and Conciliation Act.

On July 24, a Single Judge restrained Unity from tabling or considering the proposal at its Board meeting scheduled for July 25.

Unity challenged the injunction before the Division Bench.

Unity argued that the capital increase was necessary to comply with the Reserve Bank of India's (RBI) requirements concerning dilution of shareholding.

Unity also contended that the RBI had directed the deletion of Reserved Matters from its Articles of Association and that the shareholders' agreement could not override the Articles.

However, the Division Bench rejected these arguments.

The Court noted that Unity's own Board agenda acknowledged that the proposed capital increase was a Reserved Matter requiring shareholder consent.

Unity had also sought Resilient's consent on three occasions between October 2025 and July 2026.

The Bench rejected Unity's explanation that these communications had been issued inadvertently.

"We echo the chagrin," the Court said, agreeing with the Single Judge's criticism of Unity's contradictory stand.

It further held that deleting Reserved Matters from the Articles of Association did not extinguish the contractual obligations under the shareholders' agreement.

The Court clarified that the injunction did not prevent Unity from holding Board meetings or complying with RBI directions. It merely required the bank to obtain contractual consent before considering the disputed proposal.

Finding no grounds to interfere with the Single Judge's discretionary interim order, the Bench dismissed the appeal.

Senior Advocate Mukul Rohatgi, along with Advocates Sanjay Gupta, Ateev Mathur and Jagriti Ahuja from SNG & Partners appeared for Unity Small Finance Bank.

Senior Advocates Gopal Subramanium and Amit Sibal, along with Advocates Mohit Goel, Anuj Berry, Sidhant Goel, Aishna Jain, Ishaan Pratap Singh, Pawan Bhushan, Shashwat Mukherjee, Suradish Vatts, Siddhant Juyal, Ramyani Sood and Darpan Sachdeva from Sim & San appeared for Resilient Innovations Private Limited (BharatPe).

Senior Advocate Sandeep Sethi, along with Advocates Ajay Monga and Amol Sharma, appeared for Centrum Financial Services Limited.

Senior Advocate Raj Shekhar Rao, along with Advocates Ashish Agarwal and Nalin Dhingra, appeared for JBCG Advisory Services Private Limited.

[Read Judgment]