Prior Written Consent is Mandatory for Board Decisions Concerning "Reserved Matters" Stipulated in a Shareholders’ Agreement

In brief

The question

1. Whether the proposed increase in Authorized Share Capital and amendment to Clause V of the MoA constitute "Reserved Matters" under the SHA requiring the Petitioner’s prior written consent.

The court held

The Court held that the Petitioner established a strong prima facie case and that the balance of convenience favoured restraining the Bank.

It also directed

The Court granted an ad-interim injunction restraining the Respondents from tabling, considering, or approving Agenda Item No. 18 in the Board meeting scheduled for July 25, 2026, or any subsequent meeting, without the Petitioner’s prior written consent; the Board was permitted to proceed with other agenda items.

01Facts

The Petitioner (BharatPe), holding a 49% stake in Respondent No. 1 (Bank), sought interim protection under Section 9 of the Arbitration and Conciliation Act, 1996.

pp. 1-2

The dispute arose when the Bank circulated a Board Meeting agenda for July 25, 2026, including Agenda Item No. 18, which proposed increasing the Authorized Share Capital and amending Clause V of the Memorandum of Association (MoA).

p. 3

The Petitioner contended that these are "Reserved Matters" under Clauses 6.11(d), 8, and Schedule 2 of the Shareholders’ Agreement (SHA) dated October 26, 2021, requiring its prior written consent.

p. 5

Despite the Petitioner explicitly refusing consent in three separate communications, the Bank intended to proceed with the resolution.

pp. 6-7

The Respondents argued that the measure was a regulatory necessity for converting existing warrants into Compulsorily Convertible Preference Shares (CCPS) and did not fall under "Reserved Matters".

pp. 9-11

02Issues

i.1. Whether the proposed increase in Authorized Share Capital and amendment to Clause V of the MoA constitute "Reserved Matters" under the SHA requiring the Petitioner’s prior written consent.

¶ 15

ii.2. Whether the Petitioner made out a prima facie case for an interim injunction to restrain the Board from considering the specific agenda item.

¶ 12, 25

03Law Applied

Section 9 of the Arbitration and Conciliation Act, 1996, which empowers courts to grant interim measures of protection.

p. 2

Clause 8 of the Shareholders' Agreement (SHA), which contains a non-obstante clause overriding other provisions regarding "Reserved Matters".

¶ 14.4

Definition of "Reserved Matters" in Schedule 2 of the SHA, which includes any amendment to the MoA affecting shareholder rights or changes in capital structure.

¶ 14.1, 14.2

The principle that in the event of conflict, the SHA prevails over subsequent instruments like Warrant Terms (Annexure A).

¶ 14.5

Provisions in the judgment · 6 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 9 Section 17

Companies Act, 2013 Section 2 Section 62

Banking Regulation Act, 1949 Section 22 Section 47

04Reasoning

The Court found that the Bank’s own conduct contradicted its legal arguments; the Bank had sought the Petitioner’s written consent on three occasions (2025-2026), expressly referring to the proposed resolution as a "Reserved Matter" under the SHA.

¶ 15.5, 22

The Court rejected the Respondents' argument that Clause 5.1 of the SHA (concerning initial investments) exempted this action from consent requirements, noting that any amendment to Clause V of the MoA is a fundamental change that falls squarely within Schedule 2 of the SHA.

¶ 17, 20

The Court held that the SHA's mandatory consent procedure for "Reserved Matters" was not a mere formality but a binding obligation that could not be bypassed by citing regulatory deadlines or a lack of impact on voting rights.

¶ 19, 21

The Petitioner’s apprehension of its shareholding diluting from 49% to 21% established a risk of irreparable loss.

¶ 25