The Delhi High Court has held that where a shareholders’ agreement expressly provides that no “Reserved Matter” may even be taken up for discussion or approval without prior written consent of specified shareholders, a proposal involving amendment of the memorandum of association and change in capital structure falls prima facie within that reserved matters regime and cannot be tabled before the Board without such prior consent. This is especially so where the company’s own agenda note and prior correspondence expressly acknowledge that the matter is a reserved matter and seek consent accordingly.
The Court also laid down that where the warrant terms themselves state that the shareholders’ agreement will prevail in case of conflict, the company cannot rely on the warrant mechanics or regulatory backdrop to sidestep the consent requirement under the shareholders’ agreement at the interim stage. The Court treated the prior written consent requirement as mandatory, substantive and enforceable, not procedural or dispensable.
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A Single Judge Bench of Justice Tushar Rao Gedela made it clear at the outset that, since the matter was at the Section 9 interim stage, the issue was only whether BharatPe had established a prima facie case for urgent protection. The Court therefore focused on the language of the Shareholders’ Agreement, the warrant terms, and the impugned agenda note rather than undertaking a final determination on all disputed issues.
On reading of the Shareholders’ Agreement, the Court formed a prima facie view that the contractual scheme was clear and mandatory. Clause 6.11(d) provided that no reserved matter could be taken up for discussion or approval by the Board without written consent from both BharatPe and Centrum. Clause 8, framed in non obstante terms, further barred the company from taking any decision or action on reserved matters unless approved by an affirmative vote or prior written consent by at least one representative from each of BharatPe and Centrum. Schedule 2 specifically treated amendments to the memorandum or articles affecting shareholder rights, and changes in capital structure including new issue of shares or securities, as reserved matters.
The Court found that the warrant terms did not help the respondents at this stage. Annexure A expressly stated that if there was any conflict between the warrant terms and the Shareholders’ Agreement, the Shareholders’ Agreement would prevail. The Court therefore held prima facie that the warrant framework remained subject to the consent architecture under the Shareholders’ Agreement, including in relation to transfer and exercise-related consequences where the action involved a reserved matter such as amendment of the memorandum or change in capital structure.
The Court then examined the impugned Agenda Item No. 18 and found that its own language undermined the respondents’ argument. The agenda itself recorded that the proposal was to increase authorised share capital, amend Clause V of the memorandum, and seek prior RBI approval. More importantly, the agenda note itself acknowledged that any amendment to the memorandum or change in capital structure was a reserved matter under the Shareholders’ Agreement, and that approval of both BharatPe and Centrum was being sought. The Court described it as “intriguing” that the respondents were now arguing before the Court that the matter was not a reserved matter, despite having themselves treated it as one in their own documents and prior correspondence.
The Court also gave weight to the three written communications sent by the bank on 23 October 2025, 1 May 2026 and 8 July 2026. In those communications, the bank had expressly sought BharatPe’s affirmative consent for placing the increase in authorised capital and amendment of Clause V before the Board, and in one email had specifically described it as a “reserved matter” requiring written consent from both sides. BharatPe had refused consent in writing on all three occasions. For the Court, these contemporaneous documents strongly showed that the respondents themselves understood that prior consent was mandatory. The Court observed that such documentary admissions could not be neutralised by contrary oral submissions in court.
The respondents’ argument based on Clause 5.1 of the Shareholders’ Agreement also did not persuade the Court. The Court held that the real issue was not the downstream action after approval of the resolution, but the fact that amendment of the memorandum and change in capital structure were necessary preconditions for that action. Since those preconditions themselves fell within reserved matters, prior written consent of both shareholders was mandatory. The Court therefore rejected the contention that Clause 5.1 insulated the proposal from the reserved matters regime.
As to the RBI approval letters and the argument that non-compliance could invite penalties, the Court did not finally rule on that controversy at this stage. It held that these issues may require fuller examination after replies are filed, but even then the respondents could not bypass the contractual procedure laid down in the Shareholders’ Agreement. If the agreement prescribed a mandatory consent process for amending the memorandum or changing capital structure, that procedure had to be followed strictly first.
The Court also noted BharatPe’s apprehension that conversion of the warrants into CCPS would reduce its shareholding from 49% to 21%. At the interim stage, the Court accepted that this concern raised a serious issue requiring protection and that prior written consent under the Shareholders’ Agreement was not a mere formality. The Court further observed that Clause V of the memorandum is an integral and constitutive part of the company’s charter documents, and any amendment to it without the petitioner’s consent would be contrary to law and unsustainable in the contractual setting presented before the Court.
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Briefly, Resilient Innovations Private Limited, which operates under the BharatPe brand, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court against Unity Small Finance Bank Limited and others. BharatPe stated that it holds 49% shareholding in Unity Bank after investing about Rs. 746 crores, while Centrum Financial Services Limited holds 51%. BharatPe challenged Agenda Item No. 18 proposed for the Board meeting scheduled on 25 July 2026, under which Unity Bank proposed to increase its authorised share capital, amend Clause V of its memorandum of association, and seek RBI approval in that regard. BharatPe’s case was that these actions amounted to “Reserved Matters” under Clauses 6.11(d) and 8 read with Schedule 2 of the Shareholders’ Agreement dated 26 October 2021, and therefore could not even be taken up for discussion without its prior written consent.
BharatPe pointed out that the Shareholders’ Agreement specifically barred the company from taking up any reserved matter for discussion or approval without written consent from both BharatPe and Centrum. It argued that amendment of the memorandum and any change in capital structure clearly fell within Schedule 2 reserved matters. BharatPe also relied on three earlier communications dated 23 October 2025, 1 May 2026, and 8 July 2026, in which the bank itself had sought BharatPe’s affirmative consent before placing this proposal before the Board. BharatPe said it had expressly refused consent on each occasion, and therefore the respondents could not now proceed as if consent was unnecessary.
BharatPe further argued that the move was not a mere technical compliance step. According to it, conversion of the warrants into compulsorily convertible preference shares would materially dilute its holding from 49% to 21%, causing severe prejudice. BharatPe also argued that the warrants were not expiring immediately and that there was no such urgency as would justify bypassing the contractual consent framework under the Shareholders’ Agreement. It emphasized that the warrant terms themselves provided that, in case of conflict, the Shareholders’ Agreement would prevail.
The respondents opposed the petition by arguing that conversion of Warrants-Series 1 into CCPS was not a reserved matter at all. Their stand was that the warrants had already been approved and issued in 2021, and that the present step was only to facilitate conversion of already-issued warrants into CCPS before the 60-month exercise period ended on 30 October 2026. They argued that the increase in authorised capital was necessary because the bank needed enough headroom to issue the CCPS, and that the resulting CCPS would not carry voting rights. They also relied on Clause 5.1 of the Shareholders’ Agreement, RBI approval letters, the earlier EOGM resolution of 22 October 2021, prior transfers of warrants to third parties, and the risk of forfeiture of Rs. 900 crores worth of warrants if conversion did not occur in time.
