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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.

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

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate
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