Delhi High Court Upholds Restraint On Unity SFB Considering Share Capital Increase Without BharatPe's Consent

The Delhi High Court has recently dismissed an appeal filed by Unity Small Finance Bank Limited against an interim order restraining it from tabling a proposal to increase its authorised share capital without the prior written consent of Resilient Innovations Private Limited, the company that operates BharatPe.

A Division Bench of Justice C. Hari Shankar and Justice Vinod Kumar observed:

“The fact that the subject matter of Agenda Item 18 was a 'Reserved Matter' thus standing admitted, the Agenda Item could not be permitted to be tabled for consideration by the Board of Unity without the prior written consent of Resilient. Said consent having been expressly refused, the learned Single Judge cannot be said to be in error in interdicting tabling of Agenda Item 18 as an ad interim measure.”

Unity, Resilient and Centrum Financial Services Limited entered into a Shareholders' Agreement (SHA) on October 26, 2021, under which Resilient and Centrum held 49% and 51% shareholding in Unity, respectively.

In 2021, Unity issued warrants worth ₹90 crore, which were transferred to 181 third party individuals and were convertible into Compulsorily Convertible Preference Shares (CCPS). Under the RBI's approval conditions, Centrum was required to reduce its shareholding to below 40%, while Resilient's shareholding had to be brought down to 10% of the paid up voting equity share capital within eight years of commencement of Unity's banking operations. The deadline was October 31, 2026.

To facilitate conversion of the warrants into CCPS, Unity proposed increasing its authorised share capital from ₹4,000 crore to ₹4,500 crore and amending Clause V of its Memorandum of Association (MoA). It sought Resilient's and Centrum's consent for placing the proposal before the Board.

Resilient refused consent. Nevertheless, Unity circulated the agenda for its July 25, 2026 Board meeting, including Agenda Item 18 proposing the increase in authorised share capital and consequential amendment to the MoA.

Resilient objected to the proposal, contending that it could not be taken up without its prior written consent under the SHA. With the Board meeting imminent, it approached the High Court under Section 9 of the Arbitration and Conciliation Act seeking to restrain Unity from considering or approving Agenda Item 18 without its consent.

The Single Judge restrained Unity from tabling, considering, deliberating or approving the proposed resolution under Agenda Item 18, while permitting the Board meeting to proceed in respect of other agenda items. Aggrieved, Unity approached the Division Bench.

The Bench noted that Clause 6.11(d) of the SHA prohibited the Board from taking up any Reserved Matter for discussion without written consent from Centrum and Resilient.

Observing that the subject matter of Agenda Item 18 was a Reserved Matter, the Court found that no consent was granted by Resilient to the tabling of the said item.

The Bench rejected Unity's contention that Agenda Item 18 did not constitute a Reserved Matter. It noted that Unity's own communications had acknowledged that the proposal required prior consent and had specifically sought Resilient's approval before placing it before the Board.

The Court further held that Agenda Item 18 fell squarely within Clause (f) of Schedule 2 of the SHA, as it proposed changes to Unity's capital structure, including issuing shares to third parties and reducing Resilient's shareholding.

It noted that the SHA was executed after the RBI's communication and was itself submitted to the RBI for approval. Since the RBI had raised no objection to Clause 8 or the Reserved Matters framework, Unity could not rely on RBI directions to avoid its obligations under the SHA.

The Bench also held that the proposal attracted Clause 5.2 of the SHA, which governed the issuance of additional securities beyond the initial investment and required the consent of Centrum and Resilient for issuing securities to third parties.

The Court also rejected Unity's contention that the interim injunction interfered with compliance with RBI directions.

“The learned Single Judge has not interdicted enforcement of the warrants, but has merely directed, effectively, that their enforcement had to be in terms of Clause 8 of the SHA. No directive of the RBI stands breached thereby.” it clarified

Accordingly, the Court dismissed the appeal.

For Appellant: Senior Advocate Mukul Rohtagi, Advocates Sanjay Gupta, Ateev Mathur and Jagriti Ahuja

For Respondents: Senior Advocates Gopal Subramanium, Amit Sibal, Sandeep Sethi, Raj Shekhar Rao, Advocates Mohit Goel, Anuj Berry, Sidhant Goel, Aishna Jain, Ishaan Pratap Singh, Pawan Bhushan, Shashwat Mukherjee, Suradish Vatts, Siddhant Juyal, Ramyani Sood, Darpan Sachdeva, Ajay Monga, Amol Sharma, Ashish Agarwal and Nalin Dhingra