Franklin Templeton: Consent of Majority Shareholders Needed for Winding Up Funds, Says SC
The Supreme Court on Wednesday said consent of majority shareholders is required when trustees seek winding up of the debt mutual fund (MF) schemes. However, the top court emphasised that the consent would be obtained post publication of notices.
The top court's judgement came on a plea by Franklin Templeton challenging Karnataka High Court order which restrained winding up of its six debt schemes without obtaining the consent of its investors by a simple majority.
The top court also upheld the validity of the mutual fund regulations and in case of violation and a wrong decision by the trustees to wind up, the Securities and Exchange Board of India (SEBI) under Section 11B has the power to go into these matters, in exceptional cases.
A bench comprising justices S Abdul Nazeer and Sanjiv Khanna said the provisions of Section 53B have not been examined and it is clarified that the withholding of the judgement was to prevent the proceedings before SEBI from being prejudiced in any matter.
The bench made it clear that the Court has not gone into the facts, instead only examined the law in a theoretical exercise in interpretation. "So, we have not examined the facts at all. Those will be left open," noted the bench.
The Supreme Court took notice of the news reports that SEBI has passed an order in the proceedings before it, and this order is now pending in a challenge before the SAT (Securities Appellate Tribunal). The top court has posted the matter for further proceedings in October 2021, with liberty to the parties to move for early hearing in case of any urgency in the matter.
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