The Delhi High Court granted interim relief to fintech startup BharatPe by restraining Unity Small Finance Bank (SFB) from increasing its authorised share capital, pending resolution of a shareholding dispute. The court order dated July 24 prevents Unity SFB from approving proposals to raise its authorised share capital from ₹4,000 crore to ₹4,900 crore and amending its memorandum of association to convert certain warrants into compulsorily convertible preference shares (CCPS), according to inc42.com.
The dispute arises from a 2021 shareholders’ agreement between BharatPe’s parent company Resilient Innovations and Unity SFB promoter Centrum Financial Services, who jointly established the bank. BharatPe, holding a 49% stake in Unity SFB, argued that increasing authorised share capital is a reserved matter requiring its prior written consent. It claimed the move could dilute its stake to about 21%. Unity SFB countered that the warrants were approved and issued in 2021 and the proposal only sought to convert them into CCPS before their expiry on October 30 this year. The bank stated that CCPS do not carry voting rights at issuance and convert into equity later.
This legal intervention highlights tensions in fintech joint ventures involving shareholding rights and capital structure changes. BharatPe’s challenge reflects concerns over dilution and control in a competitive banking sector. Unity SFB’s attempt to convert warrants into CCPS is a common mechanism to raise capital without immediate voting dilution. The case underscores the importance of shareholder agreements in governing strategic decisions and capital increases in startups expanding into regulated financial services.
The court allowed Unity SFB’s board meeting to proceed on all other agenda items except the authorised share capital increase and related amendments. The next key date is October 30, when the warrants are set to expire if not converted. The interim relief will remain until the court adjudicates the dispute over the shareholding structure, as per inc42.com.