Franklin Templeton matter: Supreme Court asks Sebi to appoint observer for e-voting process

The Supreme Court on Wednesday asked the Securities and Exchange Board of India (Sebi) to appoint an observer for overseeing the e-voting process, scheduled in the last week of December, for winding up of Franklin Templeton’s six mutual fund schemes.

The apex court said that its December 3 order, in which it had said that “for the time being, there will be stay of redemption payment to the unit holders”, would continue in the meantime.

A bench comprising Justices S Abdul Nazeer and Sanjiv Khanna posted the matter for hearing in the third week of January.

Also read — e-voting to be held for wind up of mutual funds schemes: Franklin Templeton

The apex court is hearing an appeal filed by Franklin Templeton against the Karnataka High Court order which stopped the fund house from winding up its debt fund schemes without prior consent of the investors.

At the outset, Solicitor General Tushar Mehta, appearing for Sebi, told the bench that appeal filed in the apex court by the market regulator in the matter has not been listed for hearing today.

When Mehta urged the court that Sebi’s appeal be listed for hearing in a day or two, the bench said, “We can list the matter for hearing in January”.

On December 7, Franklin Templeton Mutual Fund had said it has sought consent of the unit-holders for the orderly winding up of the six fixed income schemes.

The electronic voting will take place from December 26-28 and the meeting of unit-holders of relevant schemes on December 29, Franklin Templeton MF had said in a statement.

On December 3, the apex court had asked Franklin Templeton Mutual Fund to initiate steps within one week for calling a meeting of unit-holders to seek their consent for closure of six mutual fund scheme.

The bench had observed that the issue is big and people wanted a refund.

“In the meanwhile, without prejudice to the rights and contentions of all parties, the trustees are permitted to call meeting of unit holders to seek their consent/approval. Steps in this regard be taken within a period of one week from today”, the bench had said in its last week order.

Sebi had told the bench that the market regulator has no role in the winding up process but had written to the Reserve Bank of India in this regard.

On October 24, the Karnataka High Court had said that decision of the Franklin Templeton Trustee Services Private Limited to wind up six schemes cannot be implemented unless the consent of the unit holders is obtained.

The six schemes are Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund.

Franklin Templeton MF closed these six debt mutual fund schemes on April 23, citing redemption pressure and lack of liquidity in the bond market.

Till November 27, the six schemes received total cash flows of Rs 11,576 crore from maturities, pre-payments and coupon payments since April 24, 2020.

The cash available stands at Rs 7,226 crore as of November 27 for the four cash positive schemes, subject to fund running expenses.