While winding up mutual fund scheme, consent of unit-holders would mean consent by majority of unit-holders who participated in poll

Supreme Court observed that consent of unit-holders for winding up of mutual fund scheme would mean consent by a majority of unit-holders who have participated in the poll and not the consent of the majority of all unit-holders of the scheme.

When the interpretation of any statute is beset with practical Court should accept 'construction' based on the view that draftsmen would legislate only for purpose of bringing about an effective result. The Court must strive as far as possible to give meaningful life to enactment or rule and avoid cadaveric consequences.

The word 'consent', in the context of the clause, clearly refers to 'consent of the majority of the unit-holders', and not consent given by individual unit-holders who alone would be bound by their consent, that is, it excludes unit-holders who are not agreeable. The word/expression 'consent' in sub-regulation (15) to Regulation 18 of SEBI (Mutual Funds) Regulations, 1996 refers to affirmative consent to winding up by the majority of the unit-holders'. Conversely, consent is denied when the 'majority of the unit-holders' do not approve the proposal to wind up the scheme.

The Bench observed that the unit-holders who did not exercise their choice/option cannot be counted as either negative or positive votes as either denying or giving consent to the proposal for winding up. The words 'all' or 'entire' are not incorporated and found in the said Regulation.

Clause (c) of Regulation 18(15), did not prescribe a minimum quorum and read the requirement of consent by the majority of the unit-holders' as consent by the majority of all the unit-holders. On the other hand, it would mean the majority of unit-holders who exercise their right and vote in support or to reject the proposal to wind up the mutual fund scheme.

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