Delhi High Court Holds Shareholders’ Agreement Prevails Over Warrant Terms, Grants Interim Protection to BharatPe
Facts
The petitioner, Resilient Innovations Private Limited (BharatPe), invoked Section 9 of the Arbitration and Conciliation Act, 1996, seeking urgent interim protection against Unity Small Finance Bank Ltd., Centrum Financial Services Ltd., and JBCG Advisory Services Pvt. Ltd.
BharatPe had invested approximately ₹746 crore in Unity Small Finance Bank and held 49% shareholding, while Centrum held 51% under a Shareholders’ Agreement (SHA) dated 26 October 2021.
The dispute arose after Unity Bank circulated a Board Agenda dated 18 July 2026, proposing:
- increase in the authorised share capital;
- amendment of Clause V of the Memorandum of Association (MoA); and
- steps facilitating conversion of previously issued warrants into Compulsorily Convertible Preference Shares (CCPS).
BharatPe contended that these proposals constituted “Reserved Matters” under the SHA and therefore could neither be discussed nor approved without its prior written consent.
Despite BharatPe refusing consent on multiple occasions, the respondents proposed to place the agenda before the Board meeting scheduled for 25 July 2026, compelling BharatPe to approach the Delhi High Court for interim relief pending arbitration.
Issues
The High Court considered:
- Whether amendment of the MoA and increase in authorised share capital constituted Reserved Matters under the Shareholders’ Agreement.
- Whether the respondents could place such agenda before the Board without BharatPe’s prior written consent.
- Whether BharatPe established a prima facie case warranting interim protection under Section 9 of the Arbitration and Conciliation Act.
- Whether the proposed Board resolution should be restrained pending arbitration.
Petitioner’s Arguments
BharatPe argued that:
- Clauses 6.11(d) and 8, read with Schedule 2 of the SHA, prohibited the Board from even discussing Reserved Matters without prior written consent of both shareholders.
- Amendment of the MoA and increase in authorised share capital squarely fell within Reserved Matters under paragraphs (a) and (f) of Schedule 2.
- The respondents themselves had acknowledged this contractual requirement by repeatedly seeking BharatPe’s written consent through communications dated 23 October 2025, 1 May 2026, and 8 July 2026.
- BharatPe had expressly refused consent on each occasion.
- Conversion of warrants into CCPS would substantially dilute BharatPe’s economic stake from 49% to approximately 21%, causing irreparable prejudice.
- The Shareholders’ Agreement expressly provided that in case of conflict, its provisions would prevail over the warrant terms.
Accordingly, BharatPe sought an injunction restraining the respondents from considering or acting upon the impugned agenda.
Respondents’ Arguments
The respondents contended that:
- the warrants had already been approved in 2021, and only their conversion into CCPS was now under consideration;
- conversion of warrants formed part of the original investment structure and did not amount to a Reserved Matter;
- the increase in authorised share capital was merely consequential and necessary to comply with RBI approvals governing Unity Small Finance Bank;
- failure to complete conversion before expiry of the warrant exercise period could result in forfeiture of approximately ₹900 crore worth of warrants;
- CCPS holders would not possess voting rights and therefore BharatPe would suffer no prejudice;
- BharatPe had participated in earlier resolutions concerning issuance of warrants and was therefore estopped from objecting at this stage.
The respondents therefore opposed grant of interim relief.
Analysis of the Law
Shareholders’ Agreement Controlled the Parties’ Rights
The Court examined the Shareholders’ Agreement and observed that:
- Clause 6.11(d) prohibited any Reserved Matter from even being discussed without prior written consent;
- Clause 8 imposed a mandatory requirement that Reserved Matters receive prior written approval from representatives of both shareholders;
- Schedule 2 specifically treated:
- amendment of the Memorandum or Articles affecting shareholder rights; and
- changes in capital structure,
as Reserved Matters.
The Court held that these provisions were clear, mandatory and left no scope for unilateral action.
Shareholders’ Agreement Prevails Over Warrant Conditions
The Court attached considerable importance to the express clause in the Warrant Terms stating that:
In the event of any conflict, the Shareholders’ Agreement shall prevail.
Accordingly, even though the warrants contemplated future conversion into CCPS, such conversion remained subject to compliance with the Shareholders’ Agreement wherever Reserved Matters were involved.
Respondents’ Own Conduct Supported BharatPe’s Case
The Court found significant that the respondents had themselves issued three communications seeking BharatPe’s written consent before proposing the impugned resolution.
If prior consent were genuinely unnecessary, there would have been no reason to repeatedly seek such approval.
The Court held that these contemporaneous documents contradicted the respondents’ present stand before the Court.
Amendment of the MoA Was Prima Facie a Reserved Matter
The Court observed that the proposed increase in authorised share capital necessarily required amendment of Clause V of the Memorandum of Association.
Since Schedule 2 expressly treated amendments affecting shareholder rights and changes in capital structure as Reserved Matters, the respondents could not bypass the contractual consent mechanism merely by describing the proposal as implementation of earlier warrant arrangements.
Interim Relief Under Section 9
At the interim stage, the Court emphasised that it was only required to examine whether:
- a prima facie case existed;
- balance of convenience favoured protection; and
- irreparable injury was likely.
The Court held that BharatPe had established a strong prima facie contractual right deserving interim protection until arbitral proceedings determined the parties’ rights finally.
Precedent Analysis
The Court principally interpreted the contractual framework between the parties rather than deciding the matter on external judicial precedents.
The judgment reinforces the following legal principles:
- Courts exercising jurisdiction under Section 9 of the Arbitration and Conciliation Act may grant interim protection to preserve contractual rights pending arbitration.
- Where sophisticated commercial parties have expressly agreed upon mandatory consent mechanisms, courts ordinarily enforce those contractual protections.
- A party’s contemporaneous conduct and documentary admissions carry significant evidentiary value while determining whether a prima facie case exists for interim relief.
Court’s Reasoning
The High Court found that:
- the proposed amendment to the Memorandum of Association and increase in authorised share capital prima facie constituted Reserved Matters;
- Clauses 6.11(d) and 8 of the Shareholders’ Agreement clearly prohibited even discussion of such matters without BharatPe’s prior written consent;
- the respondents’ own correspondence demonstrated their understanding that BharatPe’s consent was mandatory;
- the Shareholders’ Agreement expressly overrode inconsistent provisions contained in the warrant documentation;
- BharatPe had established a strong prima facie case warranting interim protection pending arbitration.
The Court therefore concluded that permitting the Board to proceed with the impugned agenda before adjudication would defeat the contractual safeguards negotiated by the parties.
Conclusion
The Delhi High Court granted interim protection to BharatPe.
The Court restrained the respondents from taking up or acting upon the impugned agenda relating to amendment of the Memorandum of Association and increase in authorised share capital without complying with the mandatory consent provisions contained in the Shareholders’ Agreement, pending further proceedings under the Arbitration and Conciliation Act.
Key Takeaways
- A Shareholders’ Agreement may prohibit even discussion of specified matters unless mandatory consent requirements are satisfied.
- Contractual consent rights negotiated between shareholders are enforceable through interim relief under Section 9 of the Arbitration and Conciliation Act.
- Amendment of a company’s Memorandum of Association and alteration of its capital structure may constitute Reserved Matters where the agreement expressly provides so.
- Documentary admissions and prior correspondence may strongly influence the Court’s assessment of a prima facie case.
- Where contractual documents expressly provide that one agreement prevails over another, courts ordinarily enforce that hierarchy pending arbitration.
Case Details
Case: Resilient Innovations Private Limited v. Unity Small Finance Bank Ltd. & Ors.
Court: Delhi High Court
Case Number: O.M.P.(I) (COMM.) 293/2026
Judge: Justice Tushar Rao Gedela
Reserved On: 23 July 2026
Date of Decision: 24 July 2026
Result: The Delhi High Court granted interim protection under Section 9 of the Arbitration and Conciliation Act, 1996, restraining the respondents from proceeding with the impugned Board agenda concerning amendment of the Memorandum of Association and increase in authorised share capital without complying with the mandatory consent provisions contained in the Shareholders’ Agreement.
