Delhi HC upholds interim protection for BharatPe’s shareholder rights, dismisses Unity Bank’s appeal

The Delhi High Court ruled that Unity Bank must obtain RIPL’s prior written consent before taking action on Reserved Matters. The decision upheld an interim order protecting Resilient Innovations Private Limited, or RIPL, under the Shareholders’ Agreement. It also affirmed the single judge’s earlier findings.

The court relied on Clause 8 of the Shareholders’ Agreement. That clause expressly bars action on Reserved Matters without the required consent. The bench rejected Unity’s claim that its request for consent resulted from an inadvertent error. Unity had asked RIPL for consent in writing, showing that it knew about the contractual requirement.

The ruling means Unity remains bound by the agreed governance process. The court also said the injunction does not obstruct any Reserve Bank of India directive. BharatPe said the bank’s board should follow the directions, exercise independent judgment, and respect shareholder and minority shareholder interests.

The Delhi High Court has now refused Unity Bank and its promoter permission to proceed on Reserved Matters without RIPL’s prior written consent on two occasions. The latest decision came from a division bench, which dismissed Unity Bank’s appeal and upheld the single judge’s interim protection for RIPL.

The repeated decisions matter because they confirm the same contractual rule. Clause 8 of the Shareholders’ Agreement requires prior written consent before action on Reserved Matters. The division bench also rejected Unity’s explanation that its request for consent had been an inadvertent error, noting that Unity had expressly sought RIPL’s approval in writing.

The court’s position remains that Unity cannot bypass the consent requirement. It also rejected Unity’s claim involving the Reserve Bank of India and said the injunction merely enforces Clause 8. The bank and its promoter therefore remain subject to the existing interim protection.

Reserved Matters are significant decisions that cannot be taken through ordinary company governance alone. A shareholders’ agreement identifies these matters and requires specified shareholders to approve them first. This gives those shareholders a formal say over decisions considered important to the company or the joint venture.

In this dispute, the key mechanism is Clause 8 of the Shareholders’ Agreement. The Delhi High Court said the clause explicitly bars action on Reserved Matters without RIPL’s prior written consent, and the court also referred to consent from RIPL and Centrum. Unity had sought RIPL’s approval in writing, confirming that the requirement was known.

The arrangement matters because it prevents one shareholder group from acting alone on protected issues. The court has twice stopped Unity Bank and its promoter from proceeding without the required consent. BharatPe said the agreed governance framework protects trust and minority shareholder interests.

Unity Bank argued that its request for RIPL’s consent on Reserved Matters had been made through an inadvertent error. The Delhi High Court rejected that explanation. The division bench described it as an “argument of desperation and nothing more,” making clear that it did not accept the claim as a way around the agreement.

The decisive fact was Unity’s written request. The court noted that Unity had expressly sought RIPL’s consent. That action showed the bank understood the Shareholders’ Agreement required approval before proceeding on Reserved Matters. Its later attempt to dismiss the request as accidental could not erase that written record.

The ruling reinforces the contractual obligation. Unity cannot treat a formal consent request as irrelevant after making it. The court upheld the protection for RIPL and said Clause 8 prevents action on Reserved Matters without prior written consent. Unity therefore remains bound by the governance process it acknowledged.

A company’s Articles of Association set out internal governance rules. In this dispute, however, the Delhi High Court found that the Shareholders’ Agreement could take precedence over relevant Articles provisions because Clause 8 begins with a non obstante clause. That wording gives the clause priority over conflicting provisions identified in the agreement.

The practical mechanism is direct. Clause 8 says Unity cannot act on Reserved Matters without prior written consent from RIPL and Centrum. The court held that this restriction applies even though Unity argued the Shareholders’ Agreement could not override the Articles of Association. The clause’s opening language was central to rejecting that argument.

The division bench endorsed the single judge’s findings and described the issue as “elementary.” It also dismissed Unity’s appeal. As a result, the consent requirement remains enforceable, and Unity cannot rely on the Articles of Association to bypass Clause 8’s protection.

Unity Bank must avoid taking any action on Reserved Matters unless it obtains the required prior written consent. The court specifically reaffirmed that consent must come from RIPL and Centrum. The ruling therefore restricts the bank from proceeding unilaterally on decisions covered by Clause 8 of the Shareholders’ Agreement.

The article does not list the individual Reserved Matters. It identifies the controlling mechanism instead: Clause 8 explicitly bars action on those matters without consent. Unity had requested RIPL’s approval in writing, but later called that request an inadvertent error. The court rejected that explanation and upheld the contractual restriction.

The current position is a continuing governance constraint. Unity and its promoter cannot dismiss the consent requirement to avoid contractual obligations. The court also said the injunction does not obstruct any Reserve Bank of India directive. It simply requires Unity to enforce Clause 8 and follow the agreed shareholder framework.

A shareholders’ agreement is a contract among shareholders that sets agreed governance rules, rights, and approval requirements. In a joint venture, it can define how important decisions are made and prevent one shareholder group from acting without the protections promised to another. The article presents the agreement as the basis of the 2021 joint venture.

In this dispute, Clause 8 is the key protection. It requires prior written consent from RIPL and Centrum before action on Reserved Matters. Unity had expressly asked RIPL for consent, but later described that request as an inadvertent error. The court rejected that explanation and held that the contractual requirement remained binding.

This structure can protect minority shareholder interests by preserving an agreed voice in important decisions. BharatPe said governance processes should not be set aside to favour one shareholder group. The court’s ruling reinforces that Unity must respect the framework and cannot bypass the consent rights written into the agreement.