Franklin case: Supreme Court allows to seek consent of unit holders on winding up 6 schemes

Kumar Shankar Roy   /   December 3, 2020
Franklin debt funds

The Supreme Court on Thursday permitted Franklin Templeton trustees to call a meeting of its unit holders to seek their consent for the closure of 6 debt funds, even as requests of redemption from investors remain suspended. 

Steps to call the meeting will have to be taken within a period of one week.

“The Hon’ble Supreme Court on December 3, 2020 issued an interim order allowing the Trustee of Franklin Templeton to seek consent of the unitholders for the winding up of the six schemes u/r 18(15)(c) of SEBI (Mutual Fund) Regulation 1996. Redemptions will continue to be suspended till further notification,” said a Franklin Templeton spokesperson.

Interestingly, according to Bar & Bench, which tweeted the SC proceedings live, the apex court asked SEBI that if they knew people will withdraw money like anything during COVID, why didn’t SEBI do something like RBI? In response, Advocate Pratap Venugopal for SEBI said that the regulator doesn’t have any powers in the winding up process.

Franklin Templeton MF said it believes that the Supreme Court order will be helpful in ensuring orderly monetization and distribution of scheme assets.

The fund-house is expected to issue the notice for seeking consent of unitholders shortly. It hoped to commence distribution of investment proceeds at the earliest. The cash available (for distribution) as of November 27, 2020 stands at Rs 7,226 crore for the four cash positive schemes, subject to fund running expenses.

Franklin Templeton MF had approached the apex court against the Karnataka High Court’s decision according to which prior consent of unit holders was required to close the six debt fund schemes during the pandemic. The closure was challenged due to the fact that no consent was taken from investors. But according to Franklin Templeton, it was under the impression that no prior consent or approval was required from investors.

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.

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