Delhi HC Grants BharatPe Interim Relief In Unity SFB Shareholding Dispute

The Delhi High Court has granted interim relief to fintech startup BharatPe by restraining Unity Small Finance Bank (SFB) from taking up a proposal to increase its authorised share capital, pending adjudication of a dispute over the bank’s shareholding structure. 

In an order dated July 24, the court restrained Unity SFB from “tabling, considering, deliberating or approving” proposals to increase its authorised share capital from ₹4,000 Cr to ₹4,900 Cr and amend its memorandum of association (MoA) to facilitate the conversion of certain warrants into CCPS. However, it allowed the bank’s board meeting to proceed on all other agenda items. 

The dispute stems from a shareholders’ agreement signed in 2021 between BharatPe’s parent Resilient Innovations and Unity SFB promoter Centrum Financial Services after the two jointly set up the bank. 

BharatPe, which holds a 49% stake in Unity SFB, argued that increasing the authorised share capital is a “reserved matter” under the shareholders’ agreement and therefore requires its prior written consent. The startup also claimed that the proposed move could dilute its shareholding in the bank to about 21%. 

Opposing the plea, Unity SFB argued that the warrants had already been approved and issued in 2021 and that the proposal merely sought to convert them into CCPS before they expire on October 30 this year. The bank contended that CCPS do not carry voting rights at the time of issuance and would convert into equity only at a later stage, meaning BharatPe’s voting rights would not be immediately affected. 

According to a report by Economic Times, BharatPe had declined to participate in earlier warrant issuances despite the bank requiring additional capital.

Without expressing any view on the merits of the dispute, the High Court held that BharatPe had made out a prima facie case and restrained Unity SFB from taking up the agenda items relating to the proposed increase in authorised share capital and the consequential amendment to its MoA until further orders.  

The court directed Unity SFB to file its response within four weeks, after which BharatPe will have another four weeks to file its rejoinder. The matter will next be heard on October 28. 

Notably, it was reported last year that BharatPe was exploring options to monetise its investment in Unity SFB. The fintech unicorn was said to be looking to sell up to 25% of its stake in the bank as part of efforts to strengthen its balance sheet. 

BharatPe and Centrum Financial Services jointly set up Unity SFB in 2021 after the the RBI approved the reconstruction of the troubled Punjab and Maharashtra Cooperative (PMC) Bank. 

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