SC says unitholders’ consent must before winding up mutual funds

Trustees cannot give themselves air of ‘domain experts’ and treat unitholders as mere “laypersons” whose consent is not necessary before winding up, it says

The Supreme Court on Wednesday held that trustees in a mutual fund scheme have to take the consent of the unitholders, who have invested their money, before deciding to wind up the scheme or prematurely redeem the units. Trustees cannot give themselves the air of “domain experts” and treat the unitholders of a mutual fund scheme as mere “laypersons” whose consent was not necessary before winding up, it said. “The argument that the unitholders are lay persons and not well-versed with the market conditions is to be rejected. Investments by the unitholders constitute the corpus of the scheme. To deny the unitholders a say, debilitates their role and right to participate,” a Bench of Justices S. Abdul Nazeer and Sanjiv Khanna observed in a judgment.