2021 Supreme(SC) 74

SUPREME COURT OF INDIA
S. Abdul Nazeer, Sanjiv Khanna, JJ.
Franklin Templeton Trustee Services Private Limited And Another – Appellants
Versus
Amruta Garg And Others Etc. – Respondent
Civil Appeal Nos. 498-501 of 2021 (Arising Out of SLP (C) Nos. 14288-14291 of 2020) with Civil Appeal No. 502 of 2021 (Arising Out of Slp (C) No. 14734 of 2020),
Civil Appeal No. 503 of 2021 (Arising Out of Slp (C) No. 14929 of 2020), Civil Appeal No. 508 of 2021 (Arising Out of Slp (C) No. 15205 of 2020), Civil Appeal Nos. 504-507 of 2021 (Arising Out of Slp (C) Nos. 15008-15011 of 2020)And Civil Appeal No. 509 of 2021(Arising Out of Slp (C) No. 15206 of 2020)
Decided On : 12-02-2021

IMPORTANT POINTS
(1) Concept of ‘absurdity’ in context of interpretation of statutes is construed to include any result which is unworkable, impracticable, illogical, futile or pointless, artificial, or productive of a disproportionate counter mischief.
(2) Winding up of mutual fund schemes – Consent of unit holders would mean consent by majority of unit holders who have participated in poll and not consent of majority of all unit holders of scheme.

Headnote:

(A) Interpretation of Statute – Rules of Construction – Concept of ‘absurdity’ in context of interpretation of statutes is construed to include any result which is unworkable, impracticable, illogical, futile or pointless, artificial, or productive of a disproportionate counter mischief – Enacted law would not set a standard which is palpably unjust, unfair, unreasonable or does not make any sense – When an interpretation is beset with practical difficulties, courts have not shied from turning sides to accept an interpretation that offers a pragmatic solution that will serve needs of society – When there is choice between two interpretations, Court would avoid a ‘construction’ which would reduce legislation to futility and should rather accept ‘construction’ based on the view that draftsmen would legislate only for the purpose of bringing about an effective result – Court must strive as far as possible to give meaningful life to enactment or rule and avoid cadaveric consequences – Modern regulatory enactments bear heavily on commercial matters and must be precisely and clearly legislated as to avoid inconvenience, friction and confusion, which may, in addition, have adverse economic consequences – Legislator in present case must reflect and take remedial steps to bring about clarity and certainty in Mutual Fund Regulations. (Paras 14 and 15)

(B) Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 – Regulations 18(15)(c) and 39(2)(a) – Winding up of mutual fund schemes – Consent of Unitholders – For the purpose of clause (c) to Regulation 18(15), consent of unit holders would mean consent by majority of unit holders who have participated in poll and not consent of majority of all unit holders of scheme – Unit holders of six schemes have given their consent by majority to windup six schemes – Winding up and disbursements would be in terms of directions in earlier orders – However, this order does not examine and decide other aspects and issues including questions whether Regulation 18(15)(c) would apply when trustee’s form an opinion that scheme should be wound up in accordance with Regulation 39(2)(a) and contention of objecting unit holders regarding misfeasance, malfeasances, fraud and effect thereof. (Para 42)

Facts of the case:

Judgment under challenge inter alia interprets the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 (‘Mutual Fund Regulations/ Regulations’) framed by Securities and Exchange Board of India (‘SEBI’) to hold that clause (c) to sub-regulation (15) of Regulation 181 mandates consent of the unit holders for winding up of mutual fund schemes even when trustees form an opinion that the scheme is required to be wound up in terms of clause (a) to sub-regulation (2) of Regulation 392 of the Mutual Fund Regulations. To this extent, the judgment under challenge substantially agrees with the unit holders. SEBI in its appeal before this Court contests this interpretation as erroneous. SEBI propounds that clause (a) of sub-regulation (2) to Regulation 39 is a standalone provision and the unit holders’ consent is not required when the trustees upon happening of an event form an opinion that the mutual fund scheme is to be wound up.

Findings of Court:

All Systematic Investment Plans, Systematic Transfer Plans and Systematic Withdrawal Plans portfolio holdings at the earliest opportunity, to enable an equitable exit for all investors in the ‘unprecedented circumstances’. We do not think, in the facts of the present case, the notice for e-voting and the contents would justify annulling the consent given by the unit holders for the winding up of the six schemes into and from the abovementioned funds stood cancelled post the cut off time from 23rd April, 2020. The notice had also furnished information and clarification regarding distribution of monies from the Fund Assets, inter alia stating that following the decision to wind up the six schemes, trustees would proceed for orderly realization and liquidation of underlying assets with the objective of preserving value for unit holders.

Result : Reference answered.