Sophistry trumps substance in this case where all parties missed the woods for the trees. SEBI’s inaction wasn’t traceable till April 14, when the first letter went from an asset management company (AMC) for higher borrowing. From October 2019, the writing was on the wall, when inflows had all but dried up and redemption pressure was building.

Schemes like ultra-short and low-duration with no exit load should have attracted SEBI’s attention. That is, whether the schemes can continue given that the investments were quite illiquid, being low-rated bonds. Month after month the details submitted by the AMC would have provided tell-tale signs of the problem.

The courts have not looked into this nor have the petitioners made out proper submissions. The regulations could never have envisaged a run on fund and incapacity of managers to run it. Generally, winding up may be necessitated where rule changes are made midway. This, SEBI has been doing regularly, making it difficult for AMCs to run schemes.

The recent multi-cap muddle is an example. It is like expecting a doctor to take permission from a patient’s relatives to remove the ventilator after the patient has died. Some of the best lawyers have only obfuscated the real issue and litigation may continue to rage.

SEBI’s counsel submits that just six schemes of an AMC, among 2,000 AMCs, has come for winding up. What does this mean? Can SEBI sleep till most AMCs come up for closure? And, where did the counsel get the number 2,000?

SEBI must be accountable for every wrong that happens, considering all the data it collects and the technology it has to detect errant trends.

It also collects a significant amount as fees from AMCs. It is time SEBI is divested of its role to oversee mutual funds and a specialised regulator appointed with a mandate to protect investors’ interest.