Division Bench of Delhi High Court upholds interim protection of BharatPe's shareholder rights, dismisses Unity Bank's appeal

The Court has now, on two occasions, declined to permit the Bank and its promoter to proceed on Reserved Matters without RIPLs prior written consent, as required under the Shareholders Agreement (SHA). The Division Bench also called out Unity Bank's attempt to circumvent SHA obligations and termed it as an "argument of desperation".

Speaking on the courts decision a BharatPe spokesperson said, The Board must ensure that the Bank complies with the Courts directions in letter and spirit. We expect the Board to exercise independent judgment, free from undue influence, and act in the interests of the Bank and all its stakeholders, including minority shareholders. Governance processes followed since the Banks inception must be respected and applied consistently. They cannot be set aside to favour one shareholder group at the expense of another. We expect the Board to guide the Bank in honouring its contractual obligations and ensuring that its actions comply with the Courts directions.

We believe the Honble Division Benchs decision reinforces the importance of the agreed governance framework and the shareholder rights that formed the basis of the joint venture in 2021. Respect for these commitments is essential to maintaining trust between shareholders and protecting the institutions long-term interests, the spokesperson added.

The Delhi High Courts division bench while dismissing Unity Banks appeal upheld the interim protection granted to BharatPe (RIPL) under the Shareholders' Agreement (SHA).

The court observed that Unity Bank's explanation of seeking Reserved Matter consent as an inadvertent error was an argument of desperation and nothing more. The Court noted that Unity had expressly sought RIPL's consent in writing, demonstrating its awareness of the contractual requirement.

The court reaffirmed that Unity cannot take decisions on Reserved Matters without prior written consent of RIPL and Centrum. The Court observed that Clause 8 of the SHA explicitly prohibits any action on Reserved Matters without such consent.

The court rejected Unity's contention that the RBI had rejected the SHA. The Court observed that RBI had never objected to the SHA, which had been submitted to it for approval. It further held that the injunction does not obstruct any RBI directive and only requires enforcement of Clause 8 of the SHA.

The court further rejected Unity's argument that the SHA cannot override the Articles of Association (AOA). The Court noted that Clause 8 begins with a non obstante clause, giving it precedence over the relevant provisions of the AOA.

The court also endorsed the Single Judge's findings, observing that the matter was elementary: Clause 8 of the SHA expressly requires prior written consent of RIPL and Centrum before any decision or action is taken on a Reserved Matter.

The Division Bench in its decision has reinforced that Unity Bank is bound by the Reserved Matter provisions of the SHA. It cannot now dismiss its own written requests for shareholder consent as inadvertent errors to circumvent its contractual obligations. (ANI)