Summary
Deciding a limited issue concerning six Franklin Templeton mutual fund schemes, the Supreme Court held that consent under Regulation 18(15)(c) meant a majority of participating voters, rather than all unitholders. It rejected objections to the poll and directed winding up and phased disbursement through SBI Funds Management with the parties’ consent. Whether the consent provision applied to trustee-initiated winding up, and allegations of fraud and mismanagement, remained open.
Issues
- Whether consent under Regulation 18(15)(c) requires a majority of all unitholders or of those participating in the vote.
- Whether objections to the voting process invalidated the poll, and what directions should govern winding up and distribution.
Provisions considered
- Regulation 18(15)(c), Securities and Exchange Board of India (Mutual Funds) Regulations, 1996Consent means a simple majority of those present and voting. Abstentions do not count on either side, and no minimum quorum is implied. Applicability of this provision to winding up initiated by trustees under Regulation 39(2)(a) was assumed for this decision and expressly reserved. (¶¶ 4, 6, 16, 17, 18, 19, 42)
- Regulations 39, 40 and 41, Securities and Exchange Board of India (Mutual Funds) Regulations, 1996The Court considered the winding-up framework and, with the parties’ consent, entrusted realization and distribution to SBI Funds Management. Payments could be made in tranches before every asset was liquidated. (¶¶ 4, 40, 41, 42)
Held
- The required majority is of participating voters; nonparticipating unitholders cannot be treated as voting against winding up. The majority decision binds dissenting unitholders. (¶¶ 8, 9, 16, 17, 18, 19)
- A poll weighted by units held is preferable to a show of hands. Judicial scrutiny of voting irregularities ordinarily requires an effect material to the result, subject to substantially unlawful polling; the Court does not substitute its view of commercial wisdom. (¶ 28)
- The objections concerning the voting agency, electronic voting safeguards and the explanatory notice did not establish grounds to invalidate this poll. The notice had to be read as a whole in its circumstances. (¶¶ 33, 34, 35, 36, 37, 38, 39)
- SBI Funds Management was to undertake winding up with best endeavours to realize the best value expeditiously. No rigid liquidation deadline was fixed, and distributions could proceed in tranches under the operative directions. (¶¶ 40, 41, 42)
- The relationship between Regulations 18(15)(c) and 39(2)(a), and questions of misfeasance, malfeasance, fraud and resulting liability, remained undecided. (¶¶ 3, 4, 42)
Result
Poll objections rejected and majority consent confirmed for the limited question decided; winding-up and disbursement directions issued, with the remaining issues reserved.