In the recent case of Franklin Templeton Trustee Services Pvt Ltd and Anr v. Amruta Garg and Others, the Supreme Court interpreted the phrase ‘the consent of the unitholders’ provided for Regulation 18(15)(c) of the SEBI Regulations.
The Issue discussed by the apex court was that whether ‘consent’ would mean the majority of the unitholders who exercise their right in the poll, or majority of all the unitholders of the scheme.
Answering this issue, the court observed that ‘consent’ would not only lead to an absurdity but also the impossibility because the mutual funds have thousands/lakhs of unitholders.
Thus, the ‘consent of the unitholders’ would mean the consent of the majority of unitholders who have participated in the poll and not the consent of the majority of all the unitholders of the scheme.
Further to this, the court also observed that more clarity and certainty is required in the Mutual Fund Regulations.
They stated that they would neither hesitate in stating the obvious, that modern regulatory enactments bear heavily on commercial matters and, therefore, must be precisely and clearly legislated as to avoid inconvenience, friction and confusion, which may, in addition, have adverse economic consequences.
The legislator in the present case must, therefore, reflect and take remedial steps to bring about clarity and certainty in the Mutual Fund Regulations.