SC asks SEBI to oversee Franklin Templeton's e-voting process

SC asks SEBI to oversee Franklin Templeton's e-voting process

SEBI was directed by the Supreme Court of India to appoint an observer for supervising the e-voting process while putting stay on the redemption payment to the unitholders.

A Special Leave Petition (SLP) was filed by Franklin Templeton Trustee Service Pvt. Ltd. & Ors. (the Petitioner) versus Amruta Garg & Ors. (the Respondents) in the Supreme Court (SC) against the order of the Karnataka High Court (HC). The HC had passed an order that winding up of six schemes of the plaintiff cannot be implemented unless the consent of the unitholders was obtained.

The six schemes of the plaintiff 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.

The plaintiff had closed all of these debt mutual fund schemes, wherein it clearly cited that there was a redemption pressure and lack of liquidity in the bond market. Since 24 April 2020, these six schemes receive from its pre-payments, coupons and maturities, a total cash amount of Rs.11,576 crores. On 27 November 2020, cash flow out of four schemes stood at Rs.7,226 crores.

The SC directed the SEBI to appoint an observer regarding the e-voting for winding up of Plaintiff's six mutual fund schemes, which is scheduled between26 and 29 December 2020.

The SC further directed that the result of the e-voting would not be announced and SEBI would also file a copy of the final Forensic Audit Report before the SC in a sealed cover. It further said in its order dated 3 December 2020 that "Staying redemption payment to the unit holders would continue till the next date of hearing".

Considering the interests and rights of the investors the SC further ordered that "In the meanwhile, without prejudice to the rights and contentions of all parties, the trustees are permitted to call a meeting of unit holders to seek their consent/approval. Steps in this regard should be taken within a period of one week from today".

A bench comprising Justices S Abdul Nazeer and Sanjiv Khanna listed these petitions for hearing in the 3rd week of January 2021.