Delhi High Court upholds BharatPe’s veto rights in Unity SFB capital raise dispute

In a major legal victory for BharatPe, a division bench of the Delhi High Court on Thursday upheld the fintech firm’s shareholder and veto rights, ruling that Unity Small Finance Bank, its joint venture with Centrum Financial, cannot decide on reserved matters without BharatPe’s prior consent. In doing so, it upheld the interim protection granted to the fintech firm in July. The judgement was made public on Friday.

“The court has now, on two occasions, declined to permit the bank and its promoter to proceed on reserved matters without RIPL’s (Resilient Innovations Private Limited’s) prior written consent, as required under the shareholders’ agreement (SHA),” BharatPe said in a statement. RIPL is the parent company of BharatPe.

Bharat Pe and Centrum Financial joined hands in 2021 to set up Unity Small Finance, which commenced operations in November that year. Under the shareholders’ agreement, BharatPe holds a 49% stake in the bank and Centrum holds 51%.

The case pertains to a November 2025 proposal by the bank to increase its authorised share capital from ₹4,000 crore to ₹4,900 crore by converting existing warrants into compulsorily convertible preference shares (CCPS). BharatPe had argued that the proposed changes to the bank’s capital structure were ‘reserved matters’ under the shareholders' agreement and thus couldn't be placed before the board without BharatPe’s consent. It also said the conversion would lead to a substantial dilution in BharatPe’s shareholding from 49% to 21%.

The bank, including largest shareholder Centrum Financial’s council, countered that the proposal was only to convert the warrants, issued in 2021, before they expired later this year, and that this did not constitute a reserved matter. However, the Delhi High Court held in a single judge hearing in July that Unity SFB couldn’t increase its authorised share capital and amend its memorandum of association without the prior written consent of BharatPe.

Unity Small Finance appealed the decision, but a divisional bench dismissed the plea on Thursday. The court reaffirmed the need for prior consent and rejected Unity’s argument that the shareholders’ agreement couldn’t override the articles of association.

“This contention, as advanced by Unity, is predicated on the premise that, as per the directives of the RBI, the warrants were required to be enforced and that the learned single judge has effectively blocked their enforcement. The contention is obviously misplaced. 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,” the bench said in the judgement, which Mint has accessed.

In a statement on 6 November, BharatPe urged the bank’s board to ensure compliance with the court’s order, to exercise “independent judgment, free from undue influence”, and act in the interests of the bank and all stakeholders, including minority shareholders.

“Governance processes followed since the bank’s inception must be respected and applied consistently. They cannot be set aside to favour one shareholder group at the expense of another,” it said, adding that the bench’s decision reinforced the agreed governance framework and the shareholder rights that formed the basis of the joint venture in 2021.

Under Reserve Bank of India rules, Unity SFB must list on the stock exchanges within five years of starting operations—by next year—and ensure no single shareholder owns more than a 10% stake ahead of the initial public offering (IPO).

Driven by a passion for news and commitment to accurate and ethical reporting, Anshika Kayastha has been covering the full spectrum of BFSI—from banks and NBFCs to fintechs, insurance, payments, regulators, personal finance and money markets for the past 13 years. <br><br>Based in Mumbai, her work at Mint spans comprehensive and insightful stories on sectoral trends, regulatory and policy shifts, corporate strategies, governance, and innovation. With a particular interest in fintech, she keeps a close watch on emerging players, disruptive business models, and the evolving regulatory landscape. <br><br>Prior to joining Mint in July 2024, Anshika honed her craft at The Hindu BusinessLine and Informist Media, to deliver incisive, well-sourced reporting on the forces shaping India's financial services. She holds a degree in media and communication from Symbiosis University. <br><br>When she's not tracking the latest RBI circular or tenaciously pursuing the next story, Anshika is most at home in the mountains of Himachal Pradesh. Warm, social, and endlessly curious, she's a self-confessed credit card enthusiast, and brings that same energy to offbeat TV series, puzzles, beach vacations, and competitive game nights.

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