SEBI Mutual Fund Laws Want Extra Readability: Supreme Courtroom
In the most recent case of Franklin Templeton Trustee Services Pvt Ltd and Anr v Amruta Garg and othersThe Supreme Court interpreted the term “Shareholder Consent” under Rule 18 (15) (c) of the SEBI Regulation.
The issue raised by the Apex Court was whether “consent” would mean the majority of shareholders exercising their right to vote or the majority of all shareholders in the system.
In answering this question, the court found that “consent” would make not only an absurdity but also an impossibility as the mutual funds have thousands / lakhs of shareholders.
“Shareholder approval” would thus mean the approval of the majority of Shareholders who participated in the survey, rather than the approval of the majority of all Shareholders in the system.
In addition, the court found that mutual fund rules require more clarity and certainty.
They stated that they would not hesitate to explain the obvious that modern legislation has a huge impact on trade issues and therefore needs to be precisely and clearly regulated in order to avoid inconvenience, friction and confusion that can also have negative economic consequences.
The legislator must therefore reflect the remedial measures in the rules for investment funds in the present case and take remedial measures to achieve clarity and certainty.