Franklin Templeton: Will first deal with e-voting objection, says SC

The Supreme Court Monday said it would first deal with issues related to objection to the e-voting process for winding up Franklin Templeton's six mutual fund schemes and distribution of money to unitholders.

A Bench comprising Justices S A Nazeer and Sanjiv Khanna posted the matter for hearing on February 1 after one of the lawyers, appearing in the case, referred to a recent media report and sought time to file an application placing on record certain new facts.

The Bench permitted the lawyer to file application within three days and said that response to the plea be filed within three days thereafter.

“It is clarified that on the said date, we will first examine the question of objection to e-voting and disbursal of funds,” the bench said while posting the matter for hearing on February 1.

On January 18, the SC had granted three days for filing of objections to the e-voting on winding up of six mutual fund schemes of the company.

The top court was last week told by the counsel for Franklin Templeton that an order be passed for allowing distribution of money to the unitholders.

Earlier, the apex court had asked the Securities and Exchange Board of India (Sebi) to appoint an observer for overseeing the e-voting process.

The voting with regard to winding up the six mutual fund schemes had taken place in the last week December and it has been approved by the majority of unitholders.

The apex court had said that its December 3 last year order by which it had stayed the redemption of payment to unit holders would continue till further order.

“Sebi shall appoint an observer regarding the e-voting of unit holders which is scheduled between December 26 to December 29, 2020. The result of the e-voting would not be announced and would be produced before us in a sealed cover along with the report of the observer appointed by the Sebi,” the Bench had said in its earlier order.

It had said that Sebi would also file a copy of the final Forensic Audit Report before the court in a sealed cover.

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

On December 7, FT MF had said it has sought consent of unitholders for orderly winding up of the schemes.

On December 3 last year, 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 schemes.

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

The Karnataka High Court had earlier said that decision of 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, 2020 the six schemes received total cash flows of Rs 11,576 crore from maturities, pre-payments and coupon payments since April 24 last year.

The cash available stands at Rs 7,226 crore as of November 27, 2020 for the four cash positive schemes, subject to fund running expenses.