Thread by @GSLChambers

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

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

Bench will today be hearing the arguments on behalf to SEBI. Arguments to be addressed by Mr. Arvind Dattar, Senior Advocate.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Bench: Can the order appointing the forensic auditor be placed on record?

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Bench: Can you place the forensic audit report on record?
Mr Datar: We can send it in a sealed cover.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

The audit report is of 130 pages plus around 1000 pages of annexures.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

We have sent the forensic report to FT on 03.08.2020
and FT has time of 30 days to file its reply.

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Mr. Datar: Writ Appeal 399/2020 filed against the order dated 03.06.2020 by single judge bench of the Gujarat High Court.

The order is pertaining to the forensic audit report.

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Bench: Where is the order of the Gujarat High Court directing SEBI to produce the forensic audit report?

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Bench: Gujarat High court order dictates that the interim order/ injunction to continue till the time foresic audit report is prepared.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Bench: Why has the forensic report not been produced before the Court?

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Bench: What is the reluctance of SEBI not to produce the forensic report?

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Mr Datar: We can produce the same before this court in a sealed cover.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

There is no question of furnishing copies to any of the parties. We can furnish the same to this court.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Mr. Datar: The said forensic audit report is outside the purview of section 8(1)(d) of RTI Act, 2005.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

In a normal case, after we conduct the forensic audit, the report is sent to the fund house.

After we get comments from the fund house, the SEBI constitutes a committee and the committee takes the decision on how to go ahead further.

#gslupdates #franklintempleton

Order: On Saturday 29.08.2020, whether SEBI is willing to produce the order appointing the forensic auditor before this court?

SEBI to produce copy of the order appointing the forensic auditor report.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Second, whether copy of Forensic Audit report be placed on record?

Bench directs the competent officer of SEBI to state on affidavit whether SEBI is wiilling to produce copy of Forensic audit report under cover before this court and record its reasons.

#gslupdates

If SEBI is willing to produce the copy of the report and not to furnish the same to petitions then give grounds for the same.

SEBI to file its affidavit by day after i.e., 02.09.2020.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

In response to what steps did SEBI take qua FT. It allowed FT to raise borrowings limit from 20 to 30% then to 40%.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Further SEBI sent emails to external affairs and RBI, in pursuance of which RBI ordered savings package of Rs 50,000 Crores.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Bench: Whether after 24th of April, can borrowings be discharged by FT?

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Mr. Datar: If borrowings are discharged after 24.04.2020, then the same is to be answered by FT.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Bench: Whether FT can distribute the money in teeth of regulation 41(2)(b) since the scheme has become cash positive?

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Bench: If the interim order of Gurajat High Court wasn't there, FT could have cleared the liabilities contrary regulation 41?

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Mr Datar: If FT has done, then they will have to order for that.

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Mr Datar: Without holding the meeting and meeting the requirements of 41(1), distribution could not have been done.

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Mr. Datar; there is no obligation on trustees to take prior permission from SEBI in case of winding up, they can straightaway go for publication.

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SEBI can punish trustees as envisaged under section 24 and other provisions under the act in case of any wrongdoing.

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Decision of trustees is final and the same is not subject to prior approval of the unit holders.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

There is no precedent in any interpretation of regulation 18, 39 & 41 till fate and this is the first of its kind.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Mr. Datar: Consent as under regulation 18 is with regards to regulation 41(1) and not in case of regulation 39(2)(a).

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

If prior consent of unit holders is to be taken in case of a winding up, then it will cause a major issue for SEBI.

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Mr. Datar to make arguments now on the maintainability of the present Writ Petitions starting with the Madras Petition.

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Mr Datar: SEBI did everything in its power. We got Rs. 50,000 crores disbursed to MF through RBI.

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Is Writ petition under article 226 a remedy in case of money markets?

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

If there is an statutory authority such as SEBI then what should be the role of a Writ court with regards to the same.

@LiveLawIndia @barandbench #gslupdates #franklintempleton #franklinupdate

Mechanism is to approach SEBI then the appeal will lie against the order of SEBI to SAT and then ultimately the appeal will lie with the Hon’ble Supreme Court.

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Hearing to continue on Wedenesday.

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