Holding

Consent under Regulation 18(15)(c) is satisfied by a simple majority of the unitholders who actually vote in the poll, and such consent is sufficient to wind up the schemes.

Summary

The Supreme Court examined whether the term “consent of the unitholders” in Regulation 18(15)(c) of the SEBI (Mutual Funds) Regulations, 1996 requires the approval of a majority of all unitholders or merely a majority of those who actually voted in the poll. The Court held that consent means the affirmative vote of a simple majority of the unitholders who participated in the poll, and that no quorum is prescribed. It rejected the objectors' arguments that the e‑voting process, the appointment of KFin Technologies, and technical irregularities invalidated the poll results. The Court also clarified that Regulation 18(15)(c) applies even when trustees decide to wind up a scheme under Regulation 39(2)(a). Consequently, the objections to the poll were dismissed and the six Franklin Templeton mutual‑fund schemes were ordered to be wound up, with SBI Funds Management appointed to carry out liquidation and distribution to unitholders.

Issues considered

The meaning of ‘consent of the unitholders’ under Regulation 18(15)(c) – whether it requires majority of all unitholders or majority of those who vote.
Whether Regulation 18(15)(c) is applicable when trustees decide to wind up a scheme under Regulation 39(2)(a).
Whether a quorum is required for the consent under Regulation 18(15)(c).
The validity of the e‑voting process and the objections raised concerning KFin Technologies, the observer, and technical irregularities.
The propriety of proceeding with winding up and disbursement despite the objections of a minority of unitholders.

Legislation cited

Companies Act, 2013s. Section 103, s. Section 48, s. Section 55
SEBI (Intermediary) Regulations, 2008s. Regulation 35
Securities and Exchange Board of India Act, 1992
Securities and Exchange Board of India (Mutual Funds) Regulations, 1996s. Regulation 18(15)(c), s. Regulation 39(2)(a), s. Regulation 41(1)

Subjects

Mutual FundsWinding upUnitholder consentElectronic votingStatutory interpretationQuorumSEBICorporate governance

Judgment

[2021] 14 S.C.R.573 573

FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE A
LIMITED AND ANOTHER
v.
AMRUTA GARG AND OTHERS ETC.
(Civil Appeal Nos. 498-501 of 2021) B
FEBRUARY 12, 2021
[S. ABDUL NAZEER AND SANJIV KHANNA, JJ.]
Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 18(15)(c), 39(2)(a) – Winding up
C
of Mutual Fund Schemes – Consent of unitholders – Held: For the
purpose of clause (c) to Regulation 18(15), consent of the
unitholders would mean consent by majority of the unitholders who
have participated in the poll, and not consent of majority of all the
unitholders of the scheme – In the present case, the objections to
poll results rejected – Unitholders of the six schemes have given D
their consent by majority to wind up the six schemes – With the
consent of the parties, M/s. SBI Funds Management Private Limited
appointed to undertake the exercise of winding up, which would
include liquidation of the holdings/assets/portfolio and distribution/
payment to the unitholders – Winding up and disbursements to be
E
in terms of the directions in earlier orders dtd. 2nd February, 2021
and 9th February, 2021 and paragraph 41 herein – Other aspects
and issues including the questions whether Regulation 18(15)(c)
would apply when the trustee’s form an opinion that the scheme
should be wound up in accordance with Regulation 39(2)(a) and
the contention of the objecting unitholders regarding misfeasance, F
malfeasances, fraud and the effect thereof, not examined.
Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 18(15) (c) – Mutual Fund Schemes
– Winding up of – Consent of unitholders – Plea of the objecting
unitholders that consent would be binding only on those who have G
consented to winding up of the mutual fund schemes and cannot be
imposed on others – Held: Rejected – ‘consent’, in the context of
the clause, clearly refers to ‘consent of the majority of the
unitholders’, and not consent given by individual unitholders who
H
573
574 SUPREME COURT REPORTS [2021] 14 S.C.R.

A alone would be bound by their consent, that is, it excludes unitholders
who are not agreeable.
Interpretation of Statutes – Principles of interpretation – Held:
When there is choice between two interpretations, the Court would
avoid a ‘construction’ which would reduce the legislation to futility,
B and should rather accept the ‘construction’ based on the view that
draftsmen would legislate only for the purpose of bringing about
an effective result.
Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 18(15) (c) – Winding up of Mutual
C Fund Schemes – Consent of unitholders – Held: Regulation
18(15)(c) mandates and requires consent of the unitholders for
winding up, but does not prescribe any mode or manner for taking
consent – Therefore, by implication, the Regulation gives option of
holding a physical meeting, postal poll or e-poll.

D Words & Phrases – “consent” – Securities and Exchange
Board of India (Mutual Funds) Regulations, 1996 – Regulation
18(15) (c) – Held: ‘consent’ in sub-regulation (15) to Regulation
18 refers to affirmative consent to winding up by ‘the majority of
the unitholders’– Conversely, consent is denied when ‘majority of
the unitholders’ do not approve the proposal to wind up the scheme.
E
Directing winding up and disbursements, the Court
HELD: 1.1 In view of larger public interest, presently this
Court is only deciding the limited aspect of “unitholders’ consent
to winding up” [assuming that Regulation 18(15)(c) would apply
F even where the trustees form an opinion that a scheme should
be wound up under Regulation 39(2)(c)], and is persuaded to direct
winding up of the six schemes to ensure disbursement of funds
and liquidation of assets/securities. [Para 4][583-B-C]
1.2 The argument raised by some of the objecting
unitholders that consent would be binding only on those who have
G
consented to winding up of the mutual fund schemes and cannot
be imposed on others is rejected. The word ‘consent’, in the
context of the clause, clearly refers to ‘consent of the majority of
the unitholders’, and not consent given by individual unitholders
who alone would be bound by their consent, that is, it excludes
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FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 575
v. AMRUTA GARG

unitholders who are not agreeable. To accept the second or contra A
view, as pleaded by some of the objecting unitholders, would be
to negate the very object and purpose of clause (c) to sub-
regulation (15) Regulation 18. In fact, the submission, if accepted,
will make the Mutual Fund schemes and the winding up provisions
in the Mutual Fund Regulations unworkable as there would be
B
two different classes of unitholders – one bound by the consent,
and others who are not bound by consent. Consequently, the
scheme would not wind up. The intent behind the provision is to
bind even those who do not consent. The word/expression
‘consent’ in sub-regulation (15) to Regulation 18 refers to
affirmative consent to winding up by ‘the majority of the C
unitholders’. Conversely, consent is denied when ‘majority of
the unitholders’ do not approve the proposal to wind up the
scheme. [Paras 8, 9][585-E-H; 586-F-G]
Black’s Law Dictionary (10th Edition), Shackleton on
the Law and Practice of Meetings, 14th Edn. – referred D
to.
1.3 When there is choice between two interpretations, the
Court would avoid a ‘construction’ which would reduce the
legislation to futility, and should rather accept the ‘construction’
based on the view that draftsmen would legislate only for the E
purpose of bringing about an effective result. The Court must
strive as far as possible to give meaningful life to enactment or
rule and avoid cadaveric consequences. Reading prescription of
a quorum as majority of the unitholders or ‘consent’ as implying
‘consent by the majority of all unitholders’ in Regulation 18(15)(c)
of the Mutual Fund Regulations will not only lead to an absurdity F
but also an impossibility given the fact that mutual funds have
thousands or lakhs of unitholders. Many unitholders due to lack
of expertise, commercial understanding, relatively small holding
etc. may not like to participate. Consent of majority of all
unitholders of the scheme with further prescription that ‘fifty G
percent of all unitholders’ shall constitute a quorum is clearly a
practical impossibility and therefore would be a futile and
foreclosed exercise. In the case of unitholders, the number is
fluctuating and ever changing and, therefore, indefinite. Numbers
of unitholders can increase, decrease and change with purchase
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576 SUPREME COURT REPORTS [2021] 14 S.C.R.

A or redemption. Therefore, in the context of clause (c) of
Regulation 18(15), this Court would not, in the absence of any
express stipulation, prescribe a minimum quorum and read the
requirement of ‘consent by the majority of the unitholders’ as
consent by majority of all the unitholders. On the other hand, it
would mean majority of unitholders who exercise their right and
B
vote in support or to reject the proposal to wind up the mutual
fund scheme. The unitholders who did not exercise their choice/
option cannot be counted as either negative or positive votes as
either denying or giving consent to the proposal for winding up.
Keeping in view the object and purpose of the Regulation with
C the language used therein, a ‘construction’ which would lead to
commercial chaos and deadlock cannot be accepted. Therefore,
silence on the part of absentee unitholders can neither be taken
as an acceptance nor rejection of the proposal. Regulation
18(15)(c), upon application in ground reality, must not be
interpreted in a manner to frustrate the very law and objective/
D
purpose for which it was enacted. The underlying thrust behind
Regulation 18(15)(c) is to inform the unitholders of the reason
and cause for the winding up of the scheme and to give them an
opportunity to accept and give their consent or reject the proposal.
It is not to frustrate and make winding up an impossibility. [Paras
E 14-18][589-E-G; 590-A-C; 591-C, G-H; 592-A-B]
Principles of Statutory Interpretation by Justice G.P.
Singh, 14th Edition, at 50; Bennion on Statutory
Interpretation, 5th Edition; Halsbury’s Laws of England
1st Edition; Sutherland in Statutes and Statutory
F Construction, Volume 2, Third Edition at page no. 523,
in Note 5109 – referred to.
1.4 The Court would not read into Regulation 18(15)(c) a
need to have affirmative consent of majority of all or entire pool
of unitholders. The words ‘all’ or ‘entire’ are not incorporated
G and found in the said Regulation. Thus, consent of the unitholders
for the purpose of clause (c) to sub-regulation (15) of Regulation
18 would mean simple majority of the unitholders present and
voting. Regulation 18(15)(c) mandates and requires consent of
the unitholders for winding up, but does not prescribe any mode
or manner for taking consent. Therefore, by implication, the
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FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 577
v. AMRUTA GARG

Regulation gives option of holding a physical meeting, postal poll A
or e-poll. In physical meetings, voting may be by show of hands
or by holding a poll. Show of hands is quick and an easy way to
administer option but would not reflect and take into account the
relative number of units held by the unitholders. Unitholders with
fewer units have the same say as those with a greater number of
B
units. It is not a good option when the proposal is contested.
Poll, whether in a physical meeting, by way of a postal ballot or
e-poll, has an advantage as each unitholder has one vote for every
unit/share held. Therefore, in cases where there is huge disparity
between the units held, or possibility of contest/dispute, poll is
the preferred method for ascertaining preference of the C
unitholders. The value of poll lies in the fact that the weighted
voting strength based upon the number of units gives more
accurate and precise results. Majority consent of the investors/
unitholders should depend upon the number of units held by them.
Polls are akin to election. Poll results like the election results
D
are not to be lightly interfered with. More so, when it is fault of a
third party and not of the proposer/successful candidate. Poll
results like election results are not to be regarded as vitiated by
breach of rules or mistake, until and unless the breach or mistake,
it is proved has materially affected the result of the poll. This
general principle may be deviated from only when poll/election E
is conducted so badly that it is not substantially in accordance
with law as to elections, in which case it would not matter whether
the result was affected or not. When the poll or voting is on issues
or choices of commercial nature, normally it is not a part of the
judicial process for the court to ferret out flaws by examining
F
merits or wisdom of the unitholders who have voted. The court
is not equipped and should refrain from entering into such
oversights as doctrine of internal management, institutional
sovereignty and right to opt and decide come into play. The
unitholders are the best judge and are more conversant with their
own interests. All that is to be seen is that broad parameters of G
fairness in the administration, bona fide poll/election, and that
fundamental rules of reasonable management of public business
have not been breached. [Paras 19, 28][592-F; 595-F-H; 596-A-
F]
H
578 SUPREME COURT REPORTS [2021] 14 S.C.R.

A 1.5 The unitholders were given a chance and option to vote
and about 38% of the unitholders in numerical terms and 54% in
value terms had exercised their right to give or reject consent to
the proposal for winding up. In the absence or need for minimum
quorum, which is not provided or stipulated in the Regulations
nor mandated under law, the e-voting result cannot be rejected
B
on the ground that 38% of the unitholders in numerical terms
and 54% in value terms, even if the rejected votes are not
accounted for, had participated. This cannot be a ground to reject
and ignore the affirmative result consenting to the proposal for
winding up of the six mutual fund schemes. [Para 31][597-E-F]
C 2. KFin Technologies has been providing e-voting platform
services to listed public limited companies ever since the Ministry
of Corporate Affairs mandated them to secure approval of the
resolutions by the shareholders through electronic voting. The
e-voting platform of KFin Technologies is certified by the Ministry
D of Corporate Affairs approved certification agency, viz. STQC
Website Quality Certification Services. KFin Technologies has
conducted more than 4,500 e-voting events since 2013. To reject
the voting results on this rather specious submission would cast
doubts with serious repercussions on e-voting results of several
reputed companies. The objectors are unable to point out even a
E single instance where KFin Technologies has been indicted. In
the present case, the e-voting exercise was also supervised by a
team of technical experts, including Assistant Directors, CFSL,
Hyderabad. The Court is satisfied with the explanation given by
the trustees/AMC and KFin Technologies with reference to the
F observations in the report of the forensic experts from CFSL.
[Paras 33, 35][598-B-D; 602-C]
3. The notice for e-voting and meeting of the unitholders
has to be read in entirety. In the facts of the present case, the
notice for e-voting and the contents would not justify annulling
G the consent given by the unitholders for the winding up of the six
schemes. [Para 37][603-B]
4. In the present case, the procedure prescribed by
Regulation 41 is not required to be followed as the trustees

H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 579
v. AMRUTA GARG

themselves have stated that the process of winding up, which A
would include liquidation of the securities and distribution/
payment to the unitholders, should be undertaken by a third party.
The objectors had also made similar submissions. Accordingly,
with the consent of the parties, M/s. SBI Funds Management
Private Limited is appointed to undertake the exercise of winding
B
up, which would include liquidation of the holdings/assets/portfolio
and distribution/payment to the unitholders. [Para 40][609-B-C]
5. For the purpose of clause (c) to Regulation 18(15),
consent of the unitholders would mean consent by majority of
the unitholders who have participated in the poll, and not consent
of majority of all the unitholders of the scheme. In view of the C
findings and reasons stated, the objections to poll results is
rejected and it is held that the unitholders of the six schemes
have given their consent by majority to windup the six schemes.
Winding up and disbursements would be in terms of directions in
earlier orders dated 2nd February, 2021 and 9th February, 2021 D
and paragraph 41 herein. However, this order does not examine
and decide other aspects and issues including the questions
whether Regulation 18(15)(c) would apply when the trustee’s form
an opinion that the scheme should be wound up in accordance
with Regulation 39(2)(a) and the contention of the objecting
unitholders regarding misfeasance, malfeasances, fraud and the E
effect thereof. [Para 42][610-C-E]
State of Madhya Pradesh and Another v. Mahendra
Gupta and Others, (2018) 3 SCC 635 : [2018] 1
SCR 443; Shri Ishwar Chandra v. Shri Satyanarain
Sinha and Others (1972) 3 SCC 383 : [1972] 3 F
SCR 796; Fertilizer Corpn. Kamgar Union (Regd.) v.
Union of India (1981) 1 SCC 568 : [1981] 2 SCR 52;
Syed Hasan Raza Sahib Shamsul Ulama and two others
v. Mir Hasan Ali Sahib and two others AIR 1918 Mad
1131 – referred to. G
Morgan v. Simpson [1975] QB 151 – referred to.

H
580 SUPREME COURT REPORTS [2021] 14 S.C.R.

A Case Law Reference
[2018] 1 SCR 443 referred to Para 9
[1972] 3 SCR 796 referred to Para 13
[1981] 2 SCR 52 referred to Para 28
B CIVIL APPELLATE JURISDICTION: Civil Appeal No. 498-
501 of 2021.
From the Judgment and Order dated 24.10.2020 of the High Court
of Karnataka at Bangaluru in WP Nos. 8644, 8748, 8545 of 2020 and
WA No. 399 of 2020.
C
With
C.A. Nos. 502, 503, 508, 504-507, 509 of 2021
Tushar Mehta, SG, Harish Salve, Dr. Abhishek Manu Singhvi,
Ms. Meenakshi Arora, Ravindra Shrivastava, Arvind P. Datar, Sr. Advs.,
D Ashish Bhan, Mohit Rohatgi, Jasmeet Singh, Ashim Sood, Rajendra
Dangwal, Ms. Madhavi Khanna, Saif Ali, Nithyaesh Natraj, Vaibhav R.
Venkatesh, Gopal Singh, Arjun Garg, Abhinav Shrivastava, Karan Kohli,
Puneet Jain, Harshit Khanduja, Harsh Jain, Akshat Maheshwari,
Harshvardhan Sharma, Neeraj Sharma, Ms. Christi Jain, Pratap
Venugopal, Ms. Surekha Raman, Akhil Abraham Roy, Vijay Valsan, for
E M/s. K J John and Co, Shivam Singh, Sahil Raveen, Jaideep Khanna,
Manish Kumar, Rajat Nair, Ms. Garima Prasad, Ms. Priyanka Das, Arvind
Kumar Sharma, Anirudh Sriram, Ms. Supriya Juneja, Dheeraj Nair, Kumar
Kislay, Angad Baxi, Ms. Madhumita Bhattacharjee, Ms. Arti Jain,
Ms. Srija Choudhury, Sanjay Kapur, Ms. Megha Karnwal, V.M.Kannan,
F Sambit Panja, Arjun Bhatia, Advs. for the appearing parties.
The Judgment of the Court was delivered by
ORDER
SANJIV KHANNA, J.
G 1. Leave is granted in the above captioned Special Leave Petitions
which emanate from the judgment dated 24th October, 2020 by a Division
Bench of the Karnataka High Court, deciding three writ petitions and a
writ appeal, wherein the challenge in substance was to the winding up,
as well as the procedure for winding up, of six schemes of the Franklin
Templeton Mutual Fund, namely:
H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 581
v. AMRUTA GARG [SANJIV KHANNA, J.]

(i) Franklin India Low Duration Fund (Number of Segregated A
portfolios – 2),
(ii) Franklin India Ultra Short Bond Fund (Number of Segregated
portfolios – 1),
(iii) Franklin India Short Term Income Plan (Number of
Segregated portfolios – 3), B

(iv) Franklin India Credit Risk Fund (Number of Segregated
portfolios – 3),
(v) Franklin India Dynamic Accrual Fund (Number of Segregated
portfolios – 3), and C
(vi) Franklin India Income Opportunities Fund (Number of
Segregated portfolios – 2).
2. The judgment under challenge inter alia interprets the Securities
and Exchange Board of India (Mutual Funds) Regulations, 1996 (‘Mutual
Fund Regulations/ Regulations’) framed by the Securities and Exchange D
Board of India (‘SEBI’) to hold that clause (c) to sub-regulation (15) of
Regulation 181 mandates consent of the unitholders for winding up of
mutual fund schemes even when the trustees form an opinion that the
scheme is required to be wound up in terms of clause (a) to sub-regulation
(2) of Regulation 392 of the Mutual Fund Regulations. To this extent, the
E
1
Regulation 18: Rights and obligations of the trustees
xx xx xx
(15) The trustees shall obtain the consent of the unitholders -
(a) whenever required to do so by the Board in the interest of the unitholders; or
(b) whenever required to do so on the requisition made by three-fourths of the unit-
holders of any scheme; or F
(c) when the majority of the trustees decide to wind up or prematurely redeem the
units.
2
Regulation 39: Winding up
(1) A close-ended scheme shall be wound up on the expiry of duration fixed in thescheme
on the redemption of the units unless it is rolled over for a further period under sub-
regulation (4) of regulation 33.
(2) A scheme of a mutual fund may be wound up, after repaying the amount due to the G
unit holders,—
(d) on the happening of any event which, in the opinion of the trustees, requires
the scheme to be wound up; or
(e) if seventy-five per cent of the unit holders of a scheme pass a
resolution that the scheme be wound up; or
(f) if the Board so directs in the interest of the unitholders.
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582 SUPREME COURT REPORTS [2021] 14 S.C.R.

A judgment under challenge substantially agrees with the unitholders, albeit
SEBI in its appeal before this Court contests this interpretation as
erroneous. In other words, SEBI propounds that clause (a) of sub-
regulation (2) to Regulation 39 is a standalone provision and the
unitholders’ consent is not required when the trustees upon happening of
an event form an opinion that the mutual fund scheme is to be wound up.
B
3. The objecting unitholders’3 (also referred to as objectors)
primary grievance relates to allegations of gross mismanagement, failure
and dereliction of duty by the Asset Management Company (‘AMC’)
and Franklin Templeton Trustee Services Private Limited (‘trustees’ or
‘board of trustees’); violation of the Securities and Exchange Board of
C India Act, 1992 (‘SEBI Act’); Mutual Fund Regulations; SEBI
harmonization norms; investment horizon profiles; manipulation of Net
Asset Value (NAV); disgorgement of wrongful payments etc. In
particular, it is alleged that more than Rs. 15,000 crores were withdrawn
from the six schemes two weeks prior to the decision for winding up.
D Objecting unitholders submit that a finding of fraud, on the part of the
trustees and AMC, would entitle them to restitution etc. Other issues
raised include the question of privilege regarding the forensic audit report.
4. While the objecting unitholders submit that the trustees’ decision
to wind up the six schemes is a smokescreen to conceal misfeasance
E and malfeasance, which issues along with the question of liability of the
trustees/AMC should be decided first or together; we have deliberately
decided to segregate and examine these issues subsequently. Pertinently,
after receipt of the forensic audit report, SEBI has issued show cause
notice which is pending adjudication. Common people invest in mutual

F
(3) Where a scheme is to be wound up under sub-regulation (2), the trustees shall give
notice disclosing the circumstances leading to the winding up of the scheme:—
(g) to the Board; and
(h) in two daily newspapers having circulation all over India, a vernacular
newspaper circulating at the place where the mutual fund is formed.
3
The term ‘objecting unitholders’ does not refer to all unitholders but only 15 unitholders,
G namely, Ms. Amruta Garg, Mr. Areez Khambatta, Mr. Persis Khambatta, Khambatta
Family Trust, Ms. Sanyam Jain, M/s. KAJ Associates, Ms. Sarika Mittal, M/s. Ultra
Walls & Floors, Ms. Aakansha Maheshwari, Ms. Priya Menghnani, Ms. Varnika
Menghnani, Mr. Sriram Gantasala, Mr. Ratnajit Bhattacharjee, Ms. Aarti Jain and Ms.
Kiran Rama, who had filed writ petitions and are present before this Court and will also
include Chennai Financial Markets and Accountability, an association which is not a
H unitholder.
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 583
v. AMRUTA GARG [SANJIV KHANNA, J.]

funds driven by factors such as simplicity in purchase and redemption of A
units, flexibility of holding and tenure, and liquidity by conversion into
money. In the light of this, immediate directions are required as embargo
prohibiting redemption of the units, effected by Regulation 404 from the
date of publication of notice under Regulation 39(3)(b) on 23 rd April
2020, for over ten months. Thereby the unitholders have suffered privation
B
and harassment. This, in same manner, also undermines public sentiments
and confidence vital for investments in mutual funds. Hence, in view of
larger public interest, presently we are only deciding the limited aspect
of “unitholders’ consent to winding up” [assuming that Regulation
18(15)(c) would apply even where the trustees form an opinion that a
scheme should be wound up under Regulation 39(2)(c)], and are C
persuaded to direct winding up of the six schemes to ensure disbursement
of funds and liquidation of assets/securities.
5. We have further taken note of the trustees’ submissions that:
(i) as on 15th January, 2021, NAV of five of the six schemes was higher
than their respective NAVs on 23rd April, 2020 and in one scheme it was D
marginally lower;5 (ii) five of the six schemes have turned cash positive;
(iii) accumulated distributable cash proceeds of Rs.9,122 crores [(as on
15th January 2021) and (subject only to provision for expenses in ordinary
course)] is immediately available for disbursement to unitholders; and
(iv) Assets Under Management (‘AUM’) of the six schemes has
increased from Rs.25,648 crores as on 23rd April, 2020 to Rs.26,343 E
crores as on 15th January, 2021. Lastly and importantly, during the course
of hearing on 2nd February, 2021, counsels for the objecting unitholders
have agreed to disbursal of Rs.9,122 crores amongst the unitholders,
which, it has been directed would be in proportion to the unitholders’
respective interest in the assets of the scheme, as suggested by SEBI. It F
is obvious that this disbursal to unitholders is possible only when we
accept that the six schemes should be wound up.

4
Regulation 40: Effect of winding up
On and from the date of the publication of notice under clause (b) of sub-
regulation (3) of regulation 39, the trustee or the asset management company as the case G
may be, shall —
(a) cease to carry on any business activities in respect of the scheme so wound up;
(b) cease to create or cancel units in the scheme;
(c) cease to issue or redeem units in the scheme.
5
The trustees state that NAV valuation of the portfolio securities is being computed by
an independent valuation agency as per SEBI guidelines and is being reported daily. H
584 SUPREME COURT REPORTS [2021] 14 S.C.R.

A 6. Before we advert to the order passed by this Court for eliciting
consent/approval from the unitholders, we deem it appropriate to first
reproduce sub-regulation (15) to Regulation 18 of the Mutual Fund
Regulations, which reads as under:
“Regulation 18: Rights and obligations of the trustees
B xx xx xx
(15) The trustees shall obtain the consent of the unitholders –
a) whenever required to do so by the Board in the interest of the
unitholders; or
C b) whenever required to do so on the requisition made by
three-fourths of the unit-holders of any scheme; or
c) when the majority of the trustees decide to wind up or
prematurely redeem the units.”
7. Interpreting the term ‘consent’ with reference to clause (c) of
D
sub-regulation (15) to Regulation 18, the judgment under challenge holds:
“221. Obviously, there can be a ‘consent’ of the unit-holders to a
proposed of winding up of a Scheme only if the majority of the
unit-holders give consent to do so. Sub-clause (c) of clause (15)
of Regulation 18 is silent on the nature of majority. Obviously, it is
E not a specific majority like three-fourth majority. Wherever three-
fourth majority of the unit-holders was intended, the Mutual Funds
Regulations say so. For example, sub-clause (b) of clause (15) of
Regulation 18 and sub-clause (b) of clause (2) of Regulation 39.
Therefore, it has to be a simple majority. For this purpose, we
F must make a reference to a decision of a Full Bench of the
Allahabad High Court in the case of Wahid Ullah
Khan v. District Magistrate, Nanital. In paragraph 32, the
Allahabad High Court held thus:
“32. The word “majority” speaks, of greater number out of the
G total number which cannot be a fixed number. In fact, the
starting point of majority is more than half, but any number
more than half still continues to be majority. Majority cannot
be said only confining to more than half. Majority of three-
fourths of the total number, two-thirds of the total number would
all come within the sphere of the word ‘majority’. A person is
H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 585
v. AMRUTA GARG [SANJIV KHANNA, J.]

said to have won by a majority of fifty thousand votes or thirty A
thousand votes. All speak about the extent of majority. A
majority may start from a number which is more than half and
would continue till the balance of the number excluding one
number. In the matter of votes if a resolution is carried either
in favour or against by all it is said to be unanimous. Majority is
B
used in contradiction to minority. Thus, there must exist a
minority vote. So, even where one vote is cast in favour or
against resolution the balance of the total number of votes cast
would all be a number of majority vote.”
222. The meaning assigned by the Allahabad High court to the
word majority appears to be most correct meaning. The Black’s C
Law Dictionary provides that a majority means a number that is
more than half of a total. Therefore, consent, as contemplated by
sub-clause (c) of clause (15) of Regulation 18 will have to be by
a simple majority of the unit-holders of a particular Scheme which
is decided to be wound up.” D
While we partly agree with the aforesaid observations, we would
like to emend the meaning given to the expression ‘the consent of the
unitholders’ for the purpose of clause (c) to sub-regulation (15) of
Regulation 18.
8. However, we begin by rejecting the argument raised by some E
of the objecting unitholders that consent would be binding only on those
who have consented to winding up of the mutual fund schemes and
cannot be imposed on others. The word ‘consent’, in the context of the
clause, clearly refers to ‘consent of the majority of the unitholders’, and
not consent given by individual unitholders who alone would be bound by F
their consent, that is, it excludes unitholders who are not agreeable. To
accept the second or contra view, as pleaded by some of the objecting
unitholders, would be to negate the very object and purpose of clause
(c) to sub-regulation (15) of Regulation 18. In fact, the submission, if
accepted, will make the Mutual Fund schemes and the winding up
provisions in the Mutual Fund Regulations unworkable as there would G
be two different classes of unitholders – one bound by the consent, and
others who are not bound by consent. Consequently, the scheme would
not wind up. The intent behind the provision is to bind even those who do
not consent.
H
586 SUPREME COURT REPORTS [2021] 14 S.C.R.

A 9. Black’s Law Dictionary (10 th Edition) defines the word
‘consent’ as “a voluntary yielding to what another proposes or
desires; agreement, approval, or permission regarding some act or
purpose, esp. given voluntarily by a competent person; legally
effective assent.” The dictionary also defines ‘general consent’ to mean
“adoption without objection, regardless of whether every voter
B
affirmatively approves.” Shackleton on the Law and Practice of
Meetings, 14th Edn., while defining majority, and the binding effect of
majority, has opined:
“
C Definition
7-30. Majority is a term signifying the greater number. In legislative
and deliberative assemblies, it is usual to decide questions by a
majority of those present and voting. This is sometimes expressed
as a “simple” majority, which means that a motion is carried by
D the mere fact that more votes are cast for than against, as distinct
from a “special” majority where the size of the majority is critical.
The principle has long been established that the will of a corporation
or body can only be expressed by the whole or a majority of its
members, and the act of a majority is regarded as the act of the
E whole.
A majority vote binds the minority
7-31. Unless there is some provision to the contrary in the
instrument by which a corporation is formed, the resolution of the
majority, upon any question, is binding on the majority and the
F corporation, but the rules must be followed.”6
The word/expression ‘consent’ in sub-regulation (15) to Regulation
18 refers to affirmative consent to winding up by ‘the majority of the
unitholders’. Conversely, consent is denied when ‘majority of the
unitholders’ do not approve the proposal to wind up the scheme.
G 10. However, the question which still remains to be answered is
whether ‘consent’ would mean majority of the unitholders who exercise
their right in the poll, or majority of all the unitholders of the scheme.
Connected with the question is the concern of quorum, which means the
6
See State of Madhya Pradesh and Another v. Mahendra Gupta and Others, (2018) 3
H SCC 635.
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 587
v. AMRUTA GARG [SANJIV KHANNA, J.]

minimum number of members of the entire body of members required to A
be present to legally transact business.
11. Shackleton in the above quotation has referred to distinction
between simple and special majority. More appropriate for our discussion
is William Paul White’s thesis ‘History and Philosophy of the Quorum
as a Device of Parliamentary Procedure’ published in 1967, in which B
he elucidates:
“Much of the controversy that has been historically associated
with the quorum can be traced to the problem of simply determining
just what is meant by a quorum. “From the very earliest times it
has been recognised as a general rule that a majority of a group is C
necessary to act for the entire group.” In the case of a public
body, the power or authority which establishes the body may also
determine what constitutes a quorum. Sturgis states that common
parliamentary law fixes the quorum as a “majority of the
members”. The constitution of the United States sets the quorum
requirement in the House of Representatives at a majority of the D
membership. But to state that a quorum is a majority of the
membership opens the way to potential conflict; which is precisely
what has happened on numerous occasions.”
After examining the various definitions of the term quorum, the
author observes that the definitions by themselves give no key as to how E
to determine what is minimum number or what constitutes majority. The
expression ‘majority’ can mean - (i) majority of total membership list;
(ii) exclude or include delinquent members; (iii) members present and
voting; or (iv) those present, voting and not voting. Different meanings,
he observed, have added to the confusion around the concept of the F
quorum. Albeit referring to the position in 1967, the author observed:
“As we have emerged into the modern era, it is not surprising that
by now the method, which has been legally agreed upon by the
courts, to determine minimum and majority, is well established.”
12. Clause (c) to sub-regulation (15) of Regulation 18 per se does G
not prescribe any quorum or specify the criterion for computing majority
or ratio of unitholders required for valid consent for winding up. Clause
(b) of Regulation 39(2), on the other hand, specifies that seventy-five
per cent of the unitholders of a scheme can pass a resolution that the
scheme be wound up. Similarly, Regulation 41(1) requires the trustees
H
588 SUPREME COURT REPORTS [2021] 14 S.C.R.

A to call a meeting to approve, by simple majority of the unitholders present
and voting, a resolution for authorising the trustees or any other person
to take steps for winding up of the scheme. Section 48 of the Companies
Act, 2013 states that where share capital of a company is divided into
different classes of shares, the rights attached to the shares of any class
may be varied with the consent in writing of the shareholders of not less
B
than three-fourths of the issued shares of that class. Sub-section (3) to
Section 55 of the Companies Act, 2013 in case of failure to redeem or
pay dividend refers to consent of holders of three-fourths in value of the
preference shares. Section 103 of the Companies Act, 2013 prescribes
minimum quorum for shareholder meetings.
C 13. In Shri Ishwar Chandra v. Shri Satyanarain Sinha and
Others,7 this Court on the question of quorum has held:
“If for one reason or the other one of them could not attend, that
does not make the meeting of others illegal. In such circumstances,
where there is no rule or regulation or any other provision for
D fixing the quorum, the presence of the majority of the members
would constitute it a valid meeting and matters considered there
at cannot be held to be invalid.”
This decision had also relied on the exposition on the subject of
quorum in the Halsbury’s Laws of England, Third Edition (Vol. IX, page
E 48, para 95), which reads:
“95. Presence of quorum necessary. The acts of a corporation,
other than a trading corporation, are those of the major part of the
corporators, corporately assembled. In other words, in the absence
of special custom or of special provision of the constitution, the
F major part must be present at the meeting, and of that major part
there must be a majority in favour of the act or resolution
contemplated. Where, therefore, a corporation consists of thirteen
members, there ought to be at least seven present to form a valid
meeting, and the act of the majority of these seven or greater
G number will bind the corporation. In considering whether the
requisite number is present, only those members must be included
who are competent to take part in the particular business before
the meeting. The power of doing a corporate act may, however,
be specially delegated to a particular number of members, in which
7
H (1972) 3 SCC 383
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 589
v. AMRUTA GARG [SANJIV KHANNA, J.]

case, in the absence of any other provision, the method of procedure A
applicable to the body at large will be applied to the select body.
If a corporate act is to be done by a definite body along, or
by definite body coupled with an indefinite body, a majority of the
definite body must be present.
Where a corporation is composed of several select bodies, B
the general rule is that a majority of each select body must be
present at a corporate meeting; but this rule will not be applied in
the absence of express direction in the constitution, if its application
would lead to an absurdity or an impossibility. ...”
(emphasis supplied) C

14. The concept of ‘absurdity’ in the context of interpretation of
statutes is construed to include any result which is unworkable,
impracticable, illogical, futile or pointless, artificial, or productive of a
disproportionate counter mischief8. Logic referred to herein is not formal
or syllogistic logic, but acceptance that enacted law would not set a D
standard which is palpably unjust, unfair, unreasonable or does not make
any sense.9 When an interpretation is beset with practical difficulties,
the courts have not shied from turning sides to accept an interpretation
that offers a pragmatic solution that will serve the needs of society10.
Therefore, when there is choice between two interpretations, we would E
avoid a ‘construction’ which would reduce the legislation to futility, and
should rather accept the ‘construction’ based on the view that draftsmen
would legislate only for the purpose of bringing about an effective result.
We must strive as far as possible to give meaningful life to enactment or
rule and avoid cadaveric consequences11.
F
15. We 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
consequences12. The legislator in the present case must, therefore, reflect
and take remedial steps to bring about clarity and certainty in the Mutual G
Fund Regulations.
8
See Bennion on Statutory Interpretation, 5 th Edition, at 969.
9
Ibid at 986.
10
Ibid at 971, quoting Griffiths LJ.
11
See Principles of Statutory Interpretation by Justice G.P. Singh, 14 th Edition, at 50.
12
See Bennion on Statutory Interpretation, 5 th Edition, at 980. H
590 SUPREME COURT REPORTS [2021] 14 S.C.R.

A 16. Reading prescription of a quorum as majority of the unitholders
or ‘consent’ as implying ‘consent by the majority of all unitholders’ in
Regulation 18(15)(c) of the Mutual Fund Regulations will not only lead
to an absurdity but also an impossibility given the fact that mutual funds
have thousands or lakhs of unitholders. Many unitholders due to lack of
expertise, commercial understanding, relatively small holding etc. may
B
not like to participate. Consent of majority of all unitholders of the scheme
with further prescription that ‘fifty percent of all unitholders’ shall
constitute a quorum is clearly a practical impossibility and therefore would
be a futile and foreclosed exercise.
17. Conscious of the problem of quorum and majority in indefinite
C electorate, 1st Edition of Halsbury’s Laws of England on the question of
quorum and meetings, had referred to the following principles:
“791. Where a corporation consists of a definite number of
corporate electors, a majority of that number must be present in
order to constitute a valid election. But where a corporation
D consists of an indefinite number of corporate electors, a majority
only of those existing at the time of the election need be present.
When an election is to be made by a definite body only, or
the electoral assembly is to consist of a definite and an indefinite
body, the majority of the definite body must, as a general rule, be
E present in order to render the election legal. It is not necessary
that a majority of the indefinite body should be present so long as
there is majority of the definite body. If a constituent part of a
corporation refuses to be present at an election, it cannot be held,
and an election by the remaining parts will be void. But electors
F present at an election and abstaining from voting are deemed to
acquiesce in the election made by those who vote.”
The aforesaid exposition, for the purpose of majority and quorum,
draws distinction between an electorate consisting of definite number
and an electorate composed of indefinite number. Justice Seshagiri Ayyar
G of the Madras High Court in his concurring judgment in Syed Hasan
Raza Sahib Shamsul Ulama and two others v. Mir Hasan Ali Sahib
and two others13 had drawn distinction between definite and indefinite
numbers in the following manner:

13
H AIR 1918 Mad 1131
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 591
v. AMRUTA GARG [SANJIV KHANNA, J.]

“…In the first class of cases, the number of the select body is A
fixed. In the second class of cases, the number is subject to
variation every year or at stated periods. For example, the number
of electors of a Temple Committee or the number for a Municipality
is liable to fluctuation. Residence for a particular period, or the
attaining of age of minors can bring in new electors. Whereas in
B
the case of a Select Committee, the number is fixed…”
In the case of unitholders, the number is fluctuating and ever
changing and, therefore, indefinite. Numbers of unitholders can increase,
decrease and change with purchase or redemption. Therefore, in the
context of clause (c) of Regulation 18(15), we would not, in the absence
of any express stipulation, prescribe a minimum quorum and read the C
requirement of ‘consent by the majority of the unitholders’ as consent
by majority of all the unitholders. On the other hand, it would mean
majority of unitholders who exercise their right and vote in support or to
reject the proposal to wind up the mutual fund scheme. The unitholders
who did not exercise their choice/option cannot be counted as either D
negative or positive votes as either denying or giving consent to the
proposal for winding up.
18. Investment in share market, though beneficial and attractive,
requires expertise in portfolio construction, stock selection and market
timing. In view of attendant risks, diversification of portfolio is preferred E
but this consequentially requires a larger investment. Mutual funds
managed by professional fund managers with advantages of pooling of
funds and operational efficiency are the preferred mode of investment
for ordinary and common persons. It would be wrong to expect that
many amongst these unitholders would have definitive opinion required
and necessary voting in a poll on winding up of a mutual fund scheme. F
Such unitholders, for varied reasons, like lack of understanding and
expertise, small holding etc., would prefer to abstain, leaving it to others
to decide. Such abstention or refusal to express opinion cannot be
construed as either accepting or rejecting the proposals. Keeping in view
the object and purpose of the Regulation with the language used therein, G
we would not accept a ‘construction’ which would lead to commercial
chaos and deadlock. Therefore, silence on the part of absentee unitholders
can neither be taken as an acceptance nor rejection of the proposal.
Regulation 18(15)(c), upon application in ground reality, must not be
interpreted in a manner to frustrate the very law and objective/purpose
H
592 SUPREME COURT REPORTS [2021] 14 S.C.R.

A for which it was enacted. We would rather accept a reasonable and
pragmatic ‘construction’ which furthers the legislative purpose and
objective. The underlying thrust behind Regulation 18(15)(c) is to inform
the unitholders of the reason and cause for the winding up of the scheme
and to give them an opportunity to accept and give their consent or
reject the proposal. It is not to frustrate and make winding up an
B
impossibility. Way back in 1943, Sutherland in Statutes and Statutory
Construction, Volume 2, Third Edition at page no. 523, in Note 5109, had
stated:
“Where a statue has received a contemporaneous and practical
interpretation and the statute as interpreted is re-enacted, the
C practical interpretation is accorded greater weight than it ordinarily
receives, and is regarded presumptively the correct interpretation
of the law. The rule is based upon the theory that the legislature
is acquainted with the contemporaneous interpretation of a statue,
especially, when made by an administrative body or executive
D officers charged with the duty of administering or enforcing the
law, and therefore impliedly adopts the interpretation upon re-
enactment.”
With some modifications, the principle can be applied in the present
case. Practical interpretation should be accorded greater weight than it
E ordinarily receives, and can be regarded as presumptively correct
interpretation as the draftsmen legislate to bring about a functional and
working result.
19. We would not read into Regulation 18(15)(c) a need to have
affirmative consent of majority of all or entire pool of unitholders. The
F words ‘all’ or ‘entire’ are not incorporated and found in the said
Regulation. Thus, consent of the unitholders for the purpose of clause
(c) to sub-regulation (15) of Regulation 18 would mean simple majority
of the unitholders present and voting.
20. In the first hearing before this Court on 3rd December, 2020,
G we had, without prejudice to the rights and contentions of the parties,
permitted the trustees to call a meeting of the unitholders to seek their
approval/consent for winding up. Steps in this regard were to be taken
within a period of one week from the date of the order. Pursuant to the
order, the trustees in their meeting held on 5th December, 2020 had
approved the notices to be sent to the unitholders of the six schemes. It
H was decided that the unitholders were to be provided e-voting facility
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 593
v. AMRUTA GARG [SANJIV KHANNA, J.]

from 09:00 a.m. on 26th December, 2020 till 06:00 p.m. on 28th December, A
2020. Meeting by way of video conferencing would be held on 29th
December, 2020 to seek approval of the unitholders, for or against the
winding up of the six schemes. The unitholders participating in the meeting
could opt to vote on 29th December, 2020, in the duration starting with
the commencement of the meeting till the conclusion of fifteen minutes
B
after the closure of the meeting.
21. By order dated 9th December, 2020, this Court had directed
SEBI to appoint an Observer for the e-voting by the unitholders scheduled
between 26th and 29th December, 2020. However, it was clarified that
the trustees were undertaking the exercise of e-voting and that SEBI
would appoint an Observer in terms of our directions. The results of the C
e-voting, it was directed, would not be declared and would be produced
before this Court in a sealed cover along with the report of the Observer
appointed by SEBI.
22. SEBI, vide its letter dated 18th December, 2020, had appointed
Mr. T.S. Krishnamurthy, former Chief Election Commissioner of India, D
to act as the Observer ‘regarding e-voting of the unitholders’ of the six
schemes. A Technical Assistance Team was also constituted by SEBI
to assist Mr. T.S. Krishnamurthy. The Technical Assistance Team
comprised the following persons:
(i) Mr. B.N. Sahoo, Chief General Manager, SEBI, Mumbai; E

(ii) Ms. Nayana Ovalekar, Chief Operating Officer, Central
Depository Services (India) Limited (CDSL), Mumbai;
(iii) Mr. K. Sriram, Practising Company Secretary and Scrutiniser,
Chennai; F
(iv) Mr. M. Krishna, Assistant Director, Central Forensic Science
Laboratory (CFSL), Hyderabad; and
(v) Mr. Ch E Sai Prasad, Assistant Director, CFSL, Hyderabad.
23. Order of this Court dated 18th January, 2021 records that
Mr. T.S. Krishnamurthy had submitted his report, and the e-voting results G
recorded therein were read out in the Court. The Registry was directed
to scan the report and make e-copies of the Observer’s report available
to the counsels for the parties, including Advocates-on-Record who had
filed applications for intervention/impleadment. Parties were given liberty
to file objections to the Observer’s report/e-voting results, with right to H
594 SUPREME COURT REPORTS [2021] 14 S.C.R.

A others to file response/reply to the objections. It was also directed that
the Court would first decide the objections, the procedure to be followed
and the question whether the procedure under Regulation 41(1) in the
facts of the present case is mandated.
24. Order of this Court dated 25th January, 2021, clarified that the
B Court would first examine the objections to the e-voting results and the
issue/question whether or not disbursal/payment to the unitholders should
be made. Interpretation of Mutual Fund Regulations and other aspects
would be examined and decided thereafter. This order also granted liberty
to the objectors to file an application to place on record new facts, which
had statedly come to their knowledge on 25th January, 2021. Option to
C file response/reply to the application disclosing new facts was given to
the opposite parties.
25. The Observer’s report states that the six schemes put together
as on 3rd December, 2020 had 3,15,600 unitholders. The figure was
computed by consolidating folios on PAN basis. Out of this, 3,09,360
D unitholders, amounting to 98% of the total, had either given their e-mail
ID or mobile number. In respect of 6,754 unitholders, neither e-mail ID
nor mobile numbers were available. On 11th December, 2020, notices
via email were sent to 2,98,704 unitholders. On 17th December, 2020,
information by way of SMS was sent to 5,872 unitholders on their mobile
E numbers. On 17th December, 2020 information through SMS was sent
to 10,548 unitholders where no e-mail addresses were available.
However, delivery of 1,766 SMSs failed. Accordingly, the report observes
that login IDs and passwords were communicated to 3,09,052 unitholders
amounting to 97.92% of the total number of unitholders.

F 26. M/s. J. Sagar Associates, a law firm, was appointed as the
Scrutiniser for the e-voting process, its role being to oversee the conduct
of e-voting for all the six schemes in a fair and transparent manner. On
9th January, 2021, the Scrutiniser had submitted its report to the Observer
setting out the final results. The Observer in paragraph 36 of his report
has reproduced the results as set out in the Scrutiniser’s report, in a
G tabular form, which is as under:

H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 595
v. AMRUTA GARG [SANJIV KHANNA, J.]

A

B

27. The aforesaid results have been computed/tabulated on
unitholders’ vote on one vote per unitholder basis. The trustees have
also filed computation before us on the basis of one vote per unit held,
i.e. proportionate or value basis. If calculated on proportionate/value
basis, the percentage of votes cast in favour of winding up would increase C
as per the table given below:

D

E

28. Three other aspects may be noted:
(i) Regulation 18(15)(c) mandates and requires consent of the
unitholders for winding up, but does not prescribe any mode or F
manner for taking consent. Therefore, by implication, the
Regulation gives option of holding a physical meeting, postal poll
or e-poll. In physical meetings, voting may be by show of hands
or by holding a poll. Show of hands is quick and an easy way to
administer option but would not reflect and take into account the
relative number of units held by the unitholders. Unitholders with G
fewer units have the same say as those with a greater number of
units. It is not a good option when the proposal is contested. Poll,
whether in a physical meeting, by way of a postal ballot or e-poll,
has an advantage as each unitholder has one vote for every unit/
share held. Therefore, in cases where there is huge disparity
H
596 SUPREME COURT REPORTS [2021] 14 S.C.R.

A between the units held, or possibility of contest/dispute, poll is the
preferred method for ascertaining preference of the unitholders.
The value of poll lies in the fact that the weighted voting strength
based upon the number of units gives more accurate and precise
results. Majority consent of the investors/unitholders should depend
upon the number of units held by them14.
B
(ii) Polls are akin to election. Poll results like the election results
are not to be lightly interfered with. More so, when it is fault of a
third party and not of the proposer/successful candidate. Poll
results like election results are not to be regarded as vitiated by
breach of rules or mistake, until and unless the breach or mistake,
C it is proved has materially affected the result of the poll. This
general principle may be deviated from only when poll/election is
conducted so badly that it is not substantially in accordance with
law as to elections, in which case it would not matter whether the
result was affected or not.15
D (iii) When the poll or voting is on issues or choices of commercial
nature, normally it is not a part of the judicial process for the court
to ferret out flaws by examining merits or wisdom of the
unitholders who have voted. The court is not equipped and should
refrain from entering into such oversights as doctrine of internal
E management, institutional sovereignty and right to opt and decide
come into play.16 The unitholders are the best judge and are more
conversant with their own interests. All that is to be seen is that
broad parameters of fairness in the administration, bona fide poll/
election, and that fundamental rules of reasonable management
of public business have not been breached.
F
29. The objectors to the e-voting results are sixteen in number
and, as per details, they hold 20,02,114.041 units in the six schemes of
value of Rs. 8,69,28,507.62. In percentage terms, the share of objectors
in the total units is merely 0.024% and their share in the total AUM is
0.033%. (Chennai Financial Markets and Accountability, one of the parties
G and an objector, does not hold any unit in the six schemes. Trustees/
AMC have questioned the locus and the role of CFMA. We are not
14
Sections 107 to 110 of Companies Act, 2013 are express provisions and will accordingly
apply in case of meeting of shareholders.
15
See Morgan v. Simpson [1975] QB 151.
16
H See Fertilizer Corpn. Kamgar Union (Regd.) v. Union of India, (1981) 1 SCC 568.
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 597
v. AMRUTA GARG [SANJIV KHANNA, J.]

presently examining the said aspect which is left open to be examined A
and decided, if required, later.)
30. Faced with the aforesaid position, the objectors have submitted
that only 38% of the unitholders had voted. On the other hand, the trustees/
AMC have submitted that the votes cast represent approximately 54%
of the total number of units outstanding, i.e. nearly 54% of the unitholders B
on proportionate/value basis. Though we have not been provided with
scheme-wise break-up of the votes which should have been given, it
does not matter in view of the overwhelming consent for winding up of
the schemes. The trustees also state that a large number of corporate
votes were rejected by the Scrutiniser on technical grounds of absence
of corporate formalities for authorisation of the concerned C
representatives. The rejected votes represent 1,997 unitholders holding
approximately 68.10 crore units valued at Rs. 2,464 crores. Further, an
overwhelming majority of the rejected votes – Rs. 2,420 crores by value,
98.6% by units and 97.5% by number of unitholders – were in favour of
the scheme. Accordingly, if these rejected votes are taken into D
consideration, the total votes being polled in proportionate terms would
increase from approximately 54% to approximately 62%.
31. We do not think we are required to go into the said aspect in
great detail. As already held above, the unitholders were given a chance
and option to vote and about 38% of the unitholders in numerical terms E
and 54% in value terms had exercised their right to give or reject consent
to the proposal for winding up. In the absence or need for minimum
quorum, which is not provided or stipulated in the Regulations nor
mandated under law, the e-voting result cannot be rejected on the ground
that 38% of the unitholders in numerical terms and 54% in value terms,
even if we do not account for the rejected votes, had participated. This F
cannot be a ground to reject and ignore the affirmative result consenting
to the proposal for winding up of the six mutual fund schemes.
32. Primary objection raised relates to appointment of M/s. KFin
Technologies Pvt. Ltd. (‘KFin Technologies’) for providing e-voting
platform services. The submission being that KFin Technologies is an G
associate/sister of M/s. Karvy Stock Broking Limited. This company,
M/s. Karvy Stock Broking Limited, indicted by an adverse order dated
24th November, 2020 under Sections 11(1), 11(4) and 11B of the SEBI
Act read with Regulation 35 of SEBI (Intermediary) Regulations, 2008,
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598 SUPREME COURT REPORTS [2021] 14 S.C.R.

A is barred from accepting new clients on grounds of investor fraud,
falsification of records of investors/clients and misuse of client funds.
33. This argument does not impress us and cannot be a ground to
reject the results. KFin Technologies, it has been pointed out, has been
providing e-voting platform services to listed public limited companies
B ever since the Ministry of Corporate Affairs mandated them to secure
approval of the resolutions by the shareholders through electronic voting.
The e-voting platform of KFin Technologies is certified by the Ministry
of Corporate Affairs approved certification agency, viz. STQC Website
Quality Certification Services. KFin Technologies has conducted more
than 4,500 e-voting events since 2013. To reject the voting results on this
C rather specious submission would cast doubts with serious repercussions
on e-voting results of several reputed companies. The objectors are unable
to point out even a single instance where KFin Technologies has been
indicted. In the present case, the e-voting exercise was also supervised
by a team of technical experts, including Mr. M. Krishna and Mr. Ch E.
D Sai Prasad, Assistant Directors, CFSL, Hyderabad.
34. Faced with the aforesaid situation, learned counsel for the
objectors have drawn our attention to the report of the Assistant Directors,
CFSL, Hyderabad which has been enclosed as Annexure-11 to the
Observer’s report. The relevant portion of the analysis in the report of
E the forensic experts is as under:
“C. The Website ‘https://evoting.kfintech.com’ fulfills the
requirement of the e-Voting Website Quality Certification Scheme
Quality Level II as per the STQC Website Quality Certification
Services, MeitY, Govt. of India, New Delhi. The certificate bears
F the approval Number CQW/198 and valid up to 4th Feb, 2022.
OBSERVATIONS OF THE ANALYSIS
1) The E-Voting took place during the period 26th
December 2020 to 28th December 2020.
A. Analysis of the E-Votes cast has been performed on the basis
G
of E-Voting Logs, E-Voting Transaction Logs and the E-Voting
related data taken from the Master Data Base. The below
table provides the details of the E-Votes cast against each
Scheme.

H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 599
v. AMRUTA GARG [SANJIV KHANNA, J.]

A

B

C

D

E
B. 0.5% of the above votes have been selected randomly; scheme
wise and the same have been verified in the Master Database.
The screen captures of the same are provided at Annexure I
(Page Nos. 01 to 16). On verification the E-Voting Logs match
with the Master Database.
F
2) Analysis of the Instapoll Votes during the AGM VCs
conducted on 29th December 2020 indicate:
A. On 29th December 2020, AGM through video conferencing
for the SIX Schemes took place at scheduled time intervals.
The details are given below. G
B. It was informed by KFin Tech. that the customers who
had voted already during the E-Voting on 26th December
2020 to 28th December 2020 are not allowed to vote again
during the Insta Voting process.
H
600 SUPREME COURT REPORTS [2021] 14 S.C.R.

A C. The below table shows the details of Instapoll Votes Cast
against the each Scheme:

B

C

D
In particular, our attention was drawn to paragraphs 4 and 5 of
the report which records that complete database activity monitoring logs
were not provided and that, for many votes, the IP address captured
was the IP address of the Load Balancing Server of KFin Technologies.
E It was submitted by some of the objectors that the report given by KFin
Technologies should be sent to the forensic experts for their comments.
Paragraphs 3 to 5 of the analysis report of the forensic experts, reads:
“3) The event logs of the two Web Servers (P1WB1WV-1122
and P1WB1WV-1146) and the database servers (P1DBWV-1707)
F have been provided by the KFin Tech Pvt. Ltd. The analysis of
these event logs reveals no abnormal events indicating the normal
functionality of the systems.
4) The analysis of the E-Votes, Instapoll Votes cast on the basis
of the IP Addresses indicate that there are instances of casting
G multiple votes from the same IP Address. The details are provided
at Annexure I (Page Nos. 17 to 104). The customer details
(scheme wise) wherein the same IP address has been logged for
multiple E-Votes have been provided at Annexure I (Page Nos.
105 to 1988).

H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 601
v. AMRUTA GARG [SANJIV KHANNA, J.]

On analysis it is observed that for many of the votes the IP A
Address captured is 10.41.3.252, which is the IP Address of
the Load Balancing Server of KFin Tech. KFin Tech informed
that the capturing of the public IP Addresses of the incoming
requests for E-Votes was effective only after 26th December
2020 at 1231 Hrs. due to issues in implementing the
B
configuration. The details of these E-Votes are provided at
Annexure I (Page Nos. 1989 to 2928).
5) The complete Database Activity Monitoring Logs could not be
provided by the KFin Tech Pvt. Ltd.”
35. The trustees/AMC and KFin Technologies have disputed C
paragraph 5 of the report stating that database monitoring logs were
provided to the forensic experts. However, we need not go into the said
aspect, for, in our opinion, paragraph 4 of the report is being misread and
misunderstood by the objectors. It is correct that for some of the votes,
the IP address 10.41.3.252 as captured was that of the Load Balancing
Server of KFin Technologies. However, the report also records that D
KFin Technologies has explained that due to technical or implementation
issues it was able to capture public IP address of e-votes after 1231
hours on 26th December, 2020. Paragraph 4 states that details of the
customers, scheme-wise, where the same IP address has been logged
for multiple e-votes, had been provided to the forensic experts. Clearly, E
the details of each customer /unitholder where one or same IP address
was used for casting multiple votes was furnished. It is not the case of
the objectors that any of the unitholders/voters have complained of
impersonation or misuse of their identity. KFin Technologies has explained
that in total 1,17,416 votes were registered in the system. The source IP
address was captured in 88,293 cases. In 29,123 cases, votes with Load F
Balancing Server IP was captured in the IIS logs for which end-user IP
report in the firewall between 26th December 2020 (09:00 a.m. till 12:31
p.m.) was available. They have, by way of data flow diagram, elucidated
and explained the e-voting platform. The e-voting platform on valid login
would issue a one-time password which would be sent via e-mail or G
SMS to the unitholder. This one-time password was randomly and
automatically generated without human intervention. The unitholder was
required to enter the one-time password and thereupon cast their vote.
After the vote was cast, acknowledgement/ confirmation e-mail/SMS
was sent to the registered voter’s ID/mobile number. Further, the data
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602 SUPREME COURT REPORTS [2021] 14 S.C.R.

A stored in the database was one-way encrypted. E-voting window was
not open and the application would not allow the user or the unitholder to
enter any details. Importantly, the Observer’s report mentions that before
the e-voting, a thorough examination of the system was done by the
experts. The report (Annexure-11) records that to check, 0.5% of the
votes were selected randomly and on verification, e-logs were matched
B
with the master database. Further on examination and analysis of the
event logs of the two web servers no abnormal events were witnessed,
indicating normal functionality of the system. We are satisfied with the
explanation given by the trustees/AMC and KFin Technologies with
reference to the observations in the report of the forensic experts from
C CFSL.
36. The third objection to the e-voting results emanates from the
notice to the unitholders, which, it is inter alia submitted, misguides and
effectively prompts and canvasses the unitholders to give their consent
for winding up. Our attention was specifically drawn to the following
D paragraphs of the notice for e-voting and the meeting of the unitholders
to highlight the aforesaid submission:
“The Trustee has given due consideration to the judgment of the
Hon’ble High Court and preferred an appeal to the Hon’ble
Supreme Court of India on certain aspects of the judgement.
E However, with a view to proceed with orderly realization of value
form Scheme assets and distribution to Unitholders at the earliest,
the Trustee had sought permission of the Hon’ble Supreme Court
to seek the approval of Unitholders for winding up the Schemes,
which permission was granted by the Hon’ble Supreme Court on
December 3, 2020 without prejudice to the rights and contentions
F of all parties.
×× ×× ××
As disclosed in the Scheme Portfolio published on the
website (www.franklintempletonindia.com), Unitholders
G may note that a significant portion of the scheme assets is
held insecurities and the liquidity position of each security,
and consequently the value realized may vary depending
on the time available to generate liquidity. An orderly
liquidation would obtain better value for Unitholders.
×× ×× ××
H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 603
v. AMRUTA GARG [SANJIV KHANNA, J.]

For all the reasons explained above, the Trustee believes A
that it will be beneficial for Unitholders to vote ‘YES’ to
the proposed resolution.”
37. At the first blush there does appear to be merit in the contention,
albeit the notice for e-voting and meeting of the unitholders has to be
read in entirety. We must also account for the history leading to the e- B
voting process. It is but obvious that the trustees had already taken a
decision to wind up the six schemes. Regulation 39(3) requires the trustees
to disclose the circumstances leading to winding up of the schemes. The
trustees accordingly, in the notice for e-voting and meeting of the
unitholders, had furnished their explanation and reason for winding up of
the six schemes and had also stated as under: C

“The Trustee is providing the following explanation to help
Unitholders assess the pros and cons of the voting options available
to them. There can be no guarantee that the outcomes will be
exactly as the Trustee expects. We urge Unitholders to carefully
consider the following and seek appropriate advice and guidance D
in making this important decision.

E

F

G

H
604 SUPREME COURT REPORTS [2021] 14 S.C.R.

A

B

C

D

E
’’
The controversy relating to winding up of the six mutual fund
schemes has been in the public domain for a long time. The court would
also take judicial notice that the unitholders were aware and conscious
F of the litigation against the winding up, including the procedure. At the
same time, many in the general public may not be fully aware of the
commercial considerations and niceties relating to mutual funds and debt
securities market. This is the precise reason why most people do not
make direct investment in the securities market and prefer mutual funds.
Further, the trustees had earlier vide document No. 16 (enclosed at pages
G 1253 to 1255 in the appeal arising out of Special Leave Petition (C) No.
14288 of 2020) communicated the reasons for their decision to wind up
the six schemes. The relevant portions this notice read as under:
“The unprecedented lockdown of the Indian economy in the wake
of Covid-19 has impacted livelihoods and businesses across the
H country. Despite several measures by the Reserve Bank of India
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 605
v. AMRUTA GARG [SANJIV KHANNA, J.]

(RBI), the liquidity in certain segments of the corporate bond A
markets has fallen-off dramatically and has remained low for an
extended period.
In this scenario, mutual funds are facing unprecedented liquidity
challenges due to a variety of factors – rising redemption pressures
due to heightened risk aversion, mark to market losses following B
a spike in yields and lower trading volumes in the bond markets.
These factors have together caused a significant and worsening
liquidity crunch for open-end mutual fund schemes investing in
corporate credits across the credit rating spectrum.
Important Announcement: In this situation, we find that the C
ability to liquidate assets at a reasonable price to fund redemptions
for the schemes identified below is under severe stress and it is
no longer possible for certain schemes of Franklin Templeton to
generate adequate liquidity to fund daily redemptions. Accordingly,
we wish to inform you, that the Trustees of Franklin Templeton
Mutual Fund in India have, after careful analysis and review of D
the recommendations submitted by Franklin Templeton AMC, and
in close consultation with the investment team, voluntarily
decided to wind up its suite of six yield-oriented fixed
income funds, post cut-off time from April 23, 2020 (refer to
Annexure I- Notice to Investors) as they are of the considered E
opinion that an event has occurred, which requires these schemes
to be wound up. This decision has been taken in light of the severe
market dislocation illiquidity caused by the Coid-19 pandemic, and
in order to protect value for investors via managed sale of the
portfolio. The list of schemes being wound up is as follows:
F
1. Franklin India Ultra Short Bond Fund (FIUBF)
2. Franklin India Short Term Income Fund (FISTIP)
3. Franklin India Credit Risk Fund (FICRF)
4. Franklin India Low Duration Fund (FILDF)
G
5. Franklin India Dynamic Accrual Fund (FIDA)
6. Franklin India Income Opportunities Fund (FIIOF)
Factors leading to Winding-Up: The impact schemes of
Franklin Templeton were able to meet their redemption
H
606 SUPREME COURT REPORTS [2021] 14 S.C.R.

A obligationacross all market conditions and even during the initial
phase of the Covid-19 pandemic lockdown despite redemption
pressures and increased market illiquidity. However, the extension
of the lockdown has heightened redemption volumes and reduced
inflows to unsustainable levels. The schemes even resorted to
borrowings within permissible limits in line with market practice
B
to fund redemptions during this time but given the situation, we
felt that it would not be prudent to leverage the schemes further.
While the respective valuations of these schemes have been
marked promptly and conservatively thus far, continuous
redemption pressures in the backdrop of a severe dislocation in
C the corporate bond markets would place great strain on our ability
to ensure equitable treatment of all investors.
Further, given the current unprecedented situation even the
committed borrowing lines maintained by the funds are inadequate
to meet the demand for sustained narrowing across the schemes.
D We explored the possibility of suspending redemptions until market
conditions stabilize without winding up the schemes. However,
conditions for such a suspension under the current regulatory
framework, such as a maximum suspension period of 10 working
days (in 90 days) and the requirement to honour redemptions up
E to INR 2 lakh per day per investor, rendered this approach unviable
to meet the severe sustained impact of the current crisis (refer
Annexure III-FAQ for options considered besides winding up).
The Trustees were hence left with no option except to initiate the
winding up of the schemes with a view to protect the interests of
F unitholders, Winding up the schemes was determined to be the
best way to ensure a fair and equitable distribution of monies to
unitholders while minimizing erosion in value for investors.”
It is also the contention of the trustees that they were required to
justify and explain the reasons for winding up of the six schemes and
G hence the notice was worded in this manner. The notice had also informed
the investors that there would be suspension of subscription and
redemption post the cut-off time from 23rd April, 2020. All Systematic
Investment Plans, Systematic Transfer Plans and Systematic Withdrawal
Plans into and from the above-mentioned funds stood cancelled post the
cut off time from 23 rd April, 2020. The notice had also furnished
H
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 607
v. AMRUTA GARG [SANJIV KHANNA, J.]

information and clarification regarding distribution of monies from the A
Fund Assets, inter alia stating that following the decision to wind up the
six schemes, the trustees would proceed for orderly realization and
liquidation of the underlying assets with the objective of preserving value
for unitholders. Their endeavour would be to liquidate the portfolio holdings
at the earliest opportunity, to enable an equitable exit for all investors in
B
the ‘unprecedented circumstances’. We do not think, in the facts of the
present case, the notice for e-voting and the contents would justify
annulling the consent given by the unitholders for the winding up of the
six schemes.
38. We will now refer to and deal with some of the other objections
to the consent/e-voting results which, in our opinion, are merely assertions, C
or at best minor irregularities, which do not have any substance. These
contentions are:
(i) Mr. T.S. Krishnamurthy’s appointment as the Observer by
SEBI vide its letter dated 18th December, 2020 was made
public belatedly on 26th December, 2020; D

(ii) Notice for e-meeting dated 6th December, 2020 issued under
the name of Mr. Alok Sethi, Director of the Trustees, was not
digitally signed by him. However, Mr. Alok Sethi had digitally
signed the notice subsequently on 28th December, 2020;
E
(iii) M/s. J. Sagar and Associates should not have been appointed
as the Scrutiniser to oversee the conduct of the e-voting and
the Observer Mr. T.S. Krishnamurthy should have acted as
the Scrutinser;
(iv) KFin Technologies was appointed for providing electronic F
platform for e-voting vide meeting of the Board of Directors
of the trustees dated 29th April, 2020 and thereafter the
agreement dated 8th June, 2020 was entered into, but this
agreement was digitally signed on 30th June, 2020. Similarly,
M/s. J. Sagar and Associates, the law firm, was appointed as
the Scrutiniser by letter of engagement dated 13th May, 2020 G
and the law firm had conveyed its willingness to act as the
Scrutiniser. However, the resolution by the Board of Directors
of the trustees was approved by circulation on 21st May, 2020.
Further addendum to their letter of engagement was issued
on 22nd December, 2020; and
H
608 SUPREME COURT REPORTS [2021] 14 S.C.R.

A (v) Notices for e-voting did not specify with clarity whether e-
voting was possible on any technology platform, viz. laptop/
desktop or smartphone, etc., though such facility was available.
39. These contentions are mere nitpicks and would hardly justify
rejection of the consent to winding up which has been expressed by
B more than 95% of the unitholders who had voted. Mr. T.S. Krishnamurthy
was appointed as the Observer by SEBI in view of the directions given
by this Court to ensure fairness and transparency. He was not to conduct
the meeting or the process, but only to oversee and give his report on the
entire process. Being an independent observer, his observations and
comments vide the report would help resolve any debate, doubt or
C questions. The observer is the eyes and ears, which the Court could
rely. Mr. T.S. Krishnamurthy in his report has mentioned that many calls,
messages and e-mails were received by him expressing difficulty in voting,
non-receipt of passwords and difficulty in reaching the helplines. He
had, therefore, conveyed these messages to the trustees and KFin
D Technologies. Based on the response, the number of helplines were
increased. Missed calls were returned and answered. The Observer’s
report vide Annexure-10 refers to the complaints/calls made to Mr. T.S.
Krishnamurthy and also records that these were redressed. No unitholder
has expressed or stated that they could not vote or their queries were
not answered. Absence or lack of digital signatures on the notice is a
E technical and not a substantive objection. Moreover, the trustees have
explained that in view of the objection raised by the Technical Assistance
Team, Mr. Alok Sethi had digitally signed a copy of the notice for the
purpose of the record. This digitally signed notice was made available
to the Technical Assistance Team. M/s. J. Sagar and Associates and
F KFin Technologies had been earlier appointed by the trustees possibly
for compliance of clause (c) to Regulation 18(15) of the Regulations.
Agreements earlier in point of time with KFin Technologies and M/s. J.
Sagar and Associates would not, in any manner, be an irregularity. Further,
Mr. T.S. Krishnamurthy was not to himself count the votes as this exercise
had to be undertaken essentially by the Scrutiniser, M/s. J. Sagar and
G Associates. To conduct the e-voting, for the purpose of consent, the
trustees had engaged services of KFin Technologies and M/s. J. Sagar
and Associates. M/s J. Sagar and Associates being a law firm, it is
obvious, are not experts in information technology. Necessarily, they
would rely on the data and details made available by KFin Technologies.
H We have already dealt with the question of integrity and authenticity of
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED 609
v. AMRUTA GARG [SANJIV KHANNA, J.]

the e-voting data and that it was checked by two technical experts who A
are Assistant Directors at CFSL, Hyderabad. The comments of the
forensic experts have been examined and considered in detail.
40. In the present case, we do not think the procedure prescribed
by Regulation 4117 is required to be followed as the trustees themselves
have stated that the process of winding up, which would include liquidation B
of the securities and distribution/payment to the unitholders, should be
undertaken by a third party. The objectors had also made similar
submissions. Accordingly, with the consent of the parties, we have
appointed M/s. SBI Funds Management Private Limited to undertake
the exercise of winding up, which would include liquidation of the holdings/
assets/portfolio and distribution/payment to the unitholders. C

41. As per the consolidated affidavit filed by the trustees and
AMC, securities equivalent to more than Rs.17,000 crores are yet to be
realised. This is a substantial amount. The trustees and SEBI were not
at ad idem and have given different time frames within which they felt
the securities can be liquidated. However, both the trustees and SEBI, D

17
Regulation 41: Procedure and manner of winding up
(1) The trustee shall call a meeting of the unitholders to approve by simple
majority of the unitholders present and voting at the meeting resolution for
authorising the trustees or any other person to take steps for winding up of the
scheme. E
Provided that a meeting of the unitholders shall not be necessary if the
scheme is wound up at the end of maturity period of the scheme.
(2) (a) The trustee or the person authorised under sub-regulation (1) shall dispose
of the assets of the scheme concerned in the best interest of the unitholders of that
scheme.
(b) The proceeds of sale realised under clause (a), shall be first utilised towards
discharge of such liabilities as are due and payable under the scheme and after F
making appropriate provision for meeting the expenses connected with such winding
up, the balance shall be paid to the unitholders in proportion to their respective
interest in the assets of the scheme as on the date when the decision for winding up
was taken.
(3) On the completion of the winding up, the trustee shall forward to the Board
and the unitholders a report on the winding up containing particulars such as G
circumstances leading to the winding up, the steps taken for disposal of assets of
the fund before winding up, expenses of the fund for winding up, net assets available
for distribution to the unit holders and a certificate from the auditors of the fund.
(4) Notwithstanding anything contained in this regulation, the provisions of
these regulations in respect of disclosures of half-yearly reports and annual reports
shall continue to be applicable until winding up is completed or the scheme ceases
to exist. H
610 SUPREME COURT REPORTS [2021] 14 S.C.R.

A have stated in unison that the liquidation/realisation has to be proceeded
with caution, as an attempt to offload the securities in haste can result in
losses which would be detrimental and cause reduction in realisable value.
We would not like to enter into this debate or give any specific directions
but would observe that M/s. SBI Funds Management Pvt. Ltd. shall
follow the best effort principle so as to ensure expeditious and timely
B
payment to the unitholders and assure the best possible liquidation value
of the assets/ securities to the unitholders. However, we have no
hesitation in directing that distribution/disbursement of funds to the
unitholders can be made in tranches without waiting for liquidation of all
the securities/assets.
C 42. In view of the aforesaid discussion, we hold that for the purpose
of clause (c) to Regulation 18(15), consent of the unitholders would
mean consent by majority of the unitholders who have participated in
the poll, and not consent of majority of all the unitholders of the scheme.
In view of the findings and reasons stated above, we reject the objections
D to poll results and hold that the unitholders of the six schemes have given
their consent by majority to windup the six schemes. Winding up and
disbursements would be in terms of our directions in earlier orders dated
2nd February, 2021 and 9th February, 2021 and paragraph 41 above. We,
however, clarify that this order does not examine and decide other aspects
and issues including the questions whether Regulation 18(15)(c) would
E apply when the trustee’s form an opinion that the scheme should be
wound up in accordance with Regulation 39(2)(a) and the contention of
the objecting unitholders regarding misfeasance, malfeasances, fraud
and the effect thereof.

F
Divya Pandey Directions issued.

G

H