Thread by @GSLChambers

The Karnataka High Court will shortly resume hearing on plea challenging the validity of Regulation 39 to 41 of #SEBI (Mutual Fund) Scheme, 1996 relating to winding up of MF schemes.

@amrutanikam26 @sh_abhinav @LiveLawIndia @barandbench #gslupdates #franklintempleton

Yesterday, Sr. Adv. Mr. @sradvravindra submitted that an expert can ascertain whether a decision of winding up is in the interest of investors or the interest of the trustees.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Mr. @sradvravindra: Recommendations of AMC and decision taken by trustees have not been placed on record. The notice which was published is on record.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

The notice given to #SEBI under Regulation 39(3)(a) is also not placed on record. These are very important documents for the adjudication of the matter.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

The trustee is not a judicial body to which a presumption regarding perfomance of official acts could be attached.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Winding up could not be a last resort as only a week before the winding up notice was issued the trustees claimed that suspension of redemption is the last resort.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

#SEBI has to issue a direction whether the winding up of the schemes is in the interest of the investors. Trustees cannot take that decision as they have a vested interest.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

An opinion cannot come under the scope of judicial review normally but under the special circumstances of the case which led to the formation of the opinion can be examined by the court.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

A scheme may be wound up only after paying the amount due to the investors and trustees shall disclose the circumstances leading up to the decision of winding up.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Whether those circumstances are relevant and extraneous is open to judicial review.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

In a judicial precedent it was held that it is not sufficient to assert that the circumstances exist and give no clue to what they are because the circumstances must be such as to lead to conclusions of certain definiteness.

#gslupdates #franklintempleton #franklinupdate

The impugned notice do not disclose the circumstances but merely a reference to such circumstances that have led to the decision of winding up is made.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

It was held in a judicial precedent that the court is entitled to examine the question whether reasons for formation of opinion have rational connection or relevant bearing to the formation of such opinion and are not extraneous to the purpose of the statute.

#gslupdates

In another judgement of the Supreme Court it was held that the existence of circumstances in question are open to judicial review though the opinion itself is not amenable to review by the courts.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

The existence of satisfaction cannot be challenged except on the ground that the authority acted mala fide.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Assuming that there was a liquidity crisis by an increase demand of redemption, would it be a relevant consideration for forming an opinion on winding up.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

As per the scheme, it is only relevant for the suspension of the redemption and not winding up of the scheme.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

The redemption of the units may be suspended temporarily when there are circumstances leading to a systemic crisis or event that severely constricts market liquidity.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

In an email written by the President of the AMC to #SEBI it was stated that as a last resort funds may be required to resort to suspension as permitted under SEBI Regulations. SEBI was also asked to consider removing the restriction of suspending redemption for 10 days.

An event under Regulation 39 should be of such a nature that it creates a situation of impossibility to continue with the scheme and not merely on the basis that it has become economically stressful for the company to continue the scheme.

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The bench has risen. The hearing will continue tomorrow at 10:30.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate