Delhi HC Slams Unity Bank's 'Argument of Desperation', Upholds BharatPe Rights
Delhi High Court dismisses Unity Bank's appeal, ruling it cannot bypass BharatPe's consent on Reserved Matters under the Shareholders' Agreement.
In a significant legal victory for the fintech giant, the Division Bench of the Delhi High Court has upheld the interim protection of BharatPe shareholder rights, dismissing an appeal filed by Unity Bank. The court reaffirmed that Unity Bank and its promoters cannot proceed with "Reserved Matters" without obtaining prior written consent from BharatPe (RIPL), as mandated by their Shareholders’ Agreement (SHA).
Court Rejects 'Inadvertent Error' Claim
The legal battle centered on whether Unity Bank could bypass the consent requirements laid out in the SHA. In a scathing observation, the Division Bench dismissed Unity Bank's claim that seeking consent for Reserved Matters was merely an "inadvertent error." The court termed this justification as an "argument of desperation and nothing more."
The judges noted that Unity Bank had previously and expressly sought RIPL's written consent, which proved that the bank was fully aware of its contractual obligations. Consequently, the court ruled that the bank cannot now pretend these requirements were a mistake to circumvent its legal duties.
The Core of the Dispute: Clause 8 and the SHA
The court's decision leaned heavily on the specifics of the Shareholders' Agreement, specifically Clause 8. The key findings include:
- Mandatory Consent: Clause 8 explicitly prohibits any action on Reserved Matters without the prior written consent of both RIPL and Centrum.
- Precedence over AOA: Unity Bank argued that the SHA could not override the Articles of Association (AOA). However, the court rejected this, noting that Clause 8 contains a "non obstante clause," which gives it precedence over the AOA's provisions.
- RBI's Position: The bank's contention that the Reserve Bank of India (RBI) had rejected the SHA was also dismissed. The court observed that the RBI had never raised an objection to the agreement, which had been submitted for approval.
The court further clarified that the injunction in place does not hinder any RBI directives; it simply ensures that the contractual obligations of the SHA are enforced.
BharatPe Welcomes the Verdict
Following the ruling, a spokesperson for BharatPe expressed satisfaction with the decision, stating that it reinforces the governance framework and shareholder rights established during the joint venture's inception in 2021.
"The Board must ensure that the Bank complies with the Court’s 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," the spokesperson stated.
BharatPe emphasized that the governance processes followed since the bank's beginning must be respected and cannot be discarded to benefit one specific shareholder group at the expense of others.
A Win for Corporate Governance
By endorsing the findings of the Single Judge, the Division Bench described the matter as "elementary." The ruling sends a clear message that contractual commitments in joint ventures are binding and cannot be dismissed as errors when they become inconvenient for one party. The court has now, on two separate occasions, blocked Unity Bank from ignoring the consent of its partners on critical decision-making matters.