Delhi High Court Bars Unity Small Finance Bank From Considering Share Capital Increase Without BharatPe's Consent

The Delhi High Court on Friday held that Unity Small Finance Bank could not place before its board a proposal to increase its authorised share capital and amend its Memorandum of Association without the prior written consent of BharatPe, which owns a 49% stake in the bank.

Justice Tushar Rao Gedela granted interim relief to BharatPe (Resilient Innovations Private Limited), holding that the proposal fell within "Reserved Matters" under the parties' Shareholders' Agreement (SHA).

"If the SHA stipulates a particular procedure prescribed for amendment of the MoA/AoA or to the capital structure of the respondent no.1, the respondent ought to adhere strictly to that procedure or none at all," the court ruled.

The court restrained Unity Small Finance Bank, its majority shareholder Centrum Financial Services and JBCG Advisory Services from tabling, considering, deliberating, or approving the proposal without BharatPe's prior written consent. It clarified, however, that the Board meeting could proceed in respect of all other agenda items.

The dispute arose from a Shareholders' Agreement signed in October 2021, under which BharatPe invested about ₹746 crore to acquire a 49% stake in the bank. Centrum Financial Services holds the remaining 51%.

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

BharatPe argued that the proposed amendment to the Memorandum of Association and the corresponding change in the bank's capital structure were "Reserved Matters" under the Shareholders' Agreement. It contended that such a proposal could not even be placed before the Board without its prior written consent.

BharatPe also argued that the conversion would substantially dilute its shareholding.

The bank and its shareholders countered that the proposal merely facilitated the conversion of warrants issued in 2021 before they expired later this year. They argued that the exercise did not constitute a Reserved Matter. They also submitted that CCPS holders would not have voting rights.

The court was not persuaded. It held that the proposed amendment to the Memorandum of Association, read with the proposed change in the bank's capital structure, fell within the "Reserved Matters" under the Shareholders' Agreement. Under the agreement, such a proposal could not be taken up for discussion or approval by the Board without BharatPe's prior written consent.

Rejecting the respondents' reliance on the warrant conditions, the court held that the Shareholders' Agreement would prevail in the event of any inconsistency. It also noted that the bank had itself written to BharatPe on October 23, 2025, May 1, 2026 and July 8, 2026 seeking its consent. Those communications, the court said, were inconsistent with the respondents' stand that BharatPe's approval was unnecessary.

Holding that documentary evidence could not be displaced by contrary oral submissions, the court found that BharatPe had established a prima facie case.

It also held that the balance of convenience lay in BharatPe's favour and that the company would suffer irreparable injury if interim protection were denied. It accordingly granted interim relief restraining the Bank from taking up the proposal without BharatPe's prior written consent.

For Petitioner BharatPe: Senior Advocates Abhishek Manu Singhvi and Amit Sibal, with Advocates Mohit Goel, Sidhant Goel, Anuj Berry,Suradhish Vats, Aishna Jain, Shashwat Mukherjee and Ishaan Pratap Singh.

For Respondents 1 & 2—Unity Small Finance Bank and Centrum Financial Services: Senior Advocate Sandeep Sethi with Advocates Sanjay Gupta, Ateev Mathur,Jagriti Ahuja and Amol Sharma.

For Respondent 3-JBCG Advisory Services: Senior Advocate Rajshekhar Rao, with Advocates Sanjay Gupta, Ateev Mathur, Jagriti Ahuja, and Amol Sharma.