In Brief
This landmark judgment addresses the winding up of six Franklin Templeton mutual fund schemes. The Supreme Court interpreted Regulation 18(15)(c) and Regulations 39-42 of the SEBI Mutual Funds Regulations to hold that while trustees may form an opinion to wind up a scheme under Regulation 39(2)(a), they must obtain consent of the majority of unitholders present and voting. Consent must be sought after publication of winding-up notices (not before), ensuring the cease-and-freeze effect of Regulation 40 is not delayed. The Court rejected constitutional challenges to the Regulations, finding no vagueness or manifest arbitrariness. SEBI retains investigatory and directional powers over trustee decisions if they violate regulations or are taken for extraneous reasons. The judgment upholds the fiduciary role of trustees while protecting unitholder rights to participate in decisions affecting their investments.
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