Delhi High Court Upholds Shareholder Consent Requirement in Unity Bank Capital Dispute

Court dismisses appeal against interim restraint

The Delhi High Court has dismissed Unity Small Finance Bank’s appeal against an interim injunction preventing its board from considering a proposed increase in authorised share capital without the required consent of Resilient Innovations Private Limited. The Division Bench of Justices C. Hari Shankar and Vinod Kumar delivered its judgment on 5 November 2026. The dispute concerns the contractual approval process for reserved matters under a shareholders’ agreement, not a final determination of every dispute between the shareholders.

The agreement and disputed capital proposal

Unity, Resilient and Centrum Financial Services entered into a shareholders’ agreement on 26 October 2021. Under that arrangement, certain corporate decisions were designated reserved matters. Clause 6.11(d), read with Clause 8, restricted the board from even taking up such matters for discussion without the specified prior written consent. Clause 5.2 separately addressed additional securities and capital raising. The proposed board agenda concerned increasing authorised capital from ₹4,000 crore to ₹4,900 crore, including provision for additional preference shares. Unity sought to facilitate the conversion of warrants into compulsorily convertible preference shares. Resilient withheld the consent that the contractual mechanism required.

How the dispute reached the Division Bench

Resilient sought interim protection under Section 9 of the Arbitration and Conciliation Act, 1996. On 24 July 2026, a Single Judge restrained Unity from tabling, considering, deliberating upon or approving the disputed agenda item at its board meeting. The restraint was expressly ad interim, rather than a final decision in the underlying Section 9 proceeding. Unity appealed under Section 37(1)(b). The Division Bench considered whether appellate interference was justified in light of the agreement, the bank’s own records and the limited nature of the injunction.

The bank’s submissions and the court’s assessment

Unity argued that regulatory requirements concerning its shareholding and capital structure necessitated the proposed steps. It also relied on changes to its articles of association following Reserve Bank of India directions, contending that the shareholders’ agreement could not obstruct the proposal. These were the bank’s submissions, not findings accepted by the Court. The Bench observed that Unity’s own board agenda characterised the capital proposal as a reserved matter. It also examined three communications, dated 23 October 2025, 1 May 2026 and 8 July 2026, through which Unity had requested Resilient’s written consent. Resilient had refused that consent.

Why prior written consent mattered

The Division Bench treated the language of the agreement as decisive for the narrow interim controversy. It found that the prohibition covered discussion of reserved matters at the board level, not merely their eventual approval. Consequently, the absence of Resilient’s consent mattered before the proposed resolution could be tabled. The Court rejected Unity’s suggestion that its earlier requests for consent had resulted from inadvertent error. It also concluded that removing reserved-matter provisions from the articles did not, on these facts, eliminate the separate contractual obligation undertaken in the shareholders’ agreement. This reasoning was directed to the parties’ specific bargain and should not be read as a general exemption from banking regulation.

Regulatory compliance and the limited injunction

The judgment did not hold that Unity could disregard directions issued by the Reserve Bank of India. Rather, the Court distinguished compliance with regulatory obligations from the contractual procedure governing this particular board agenda. The interim restraint did not prevent ordinary board meetings or prohibit lawful steps toward regulatory compliance. It prevented consideration of the identified capital proposal without the contractual consent that had been withheld. That distinction is important: the decision neither approved nor rejected the economic merits of increasing the bank’s capital. It addressed whether the proposal could proceed through the particular corporate decision-making route while the consent dispute remained unresolved.

Scope of appellate review

The appeal also raised the standard for interfering with a discretionary interim order under the Arbitration and Conciliation Act. The Division Bench found no basis to disturb the Single Judge’s temporary protection. It emphasised the admissions in the agenda and correspondence and the clear contractual language. The result preserves the interim restriction while leaving the underlying Section 9 matter to be dealt with in accordance with law. A dismissal of an appeal against temporary relief must not be confused with a final arbitral award or a conclusive adjudication of all contractual claims.

Practical significance and next step

The ruling illustrates the practical force of reserved-matter clauses in negotiated shareholder arrangements, especially when a proposed capital change intersects with regulatory considerations. Corporate boards and counsel must examine both governing constitutional documents and separate contractual undertakings before scheduling decisions that require affirmative shareholder consent. For financial institutions, regulatory duties remain important, but the existence of those duties does not automatically resolve a distinct consent dispute. Following dismissal of the appeal, the Single Judge’s ad interim restriction continues according to its terms. The substantive interim proceeding and any further contractual dispute remain separate from this appellate ruling.