Delhi HC issues notice to Franklin Templeton, SEBI on petition challenging scheme wind-up

Delhi High Court

The Delhi High Court has issued a notice to Franklin Templeton Mutual Fund and Securities and Exchange Board of India (SEBI) in response to a writ petition filed by an investor.

The petition has been filed challenging the winding-up notice issued by the fund house to close its six debt funds. It challenges a consequent notice issued for e-voting and also SEBI’s mutual fund regulations.

The petitioner has prayed for a refund of her money from Franklin Templeton.

She has called the reasons cited by the fund house for the wind-up of the schemes as a 'hogwash'.

"The trustees have failed to make prudent investments and faulted in proper administration of the fund," the writ petition claimed.

The fund house had said liquidity constraints due to COVID-19 was the reason for the wind-up and that this is the only viable option to preserve value for unitholders.

"Franklin Templeton has been falling short in following the circulars of SEBI, which were for increasing transparency of investment, time and again. Also, the Fund invested in the securities which were of low credit rating," the petitioner noted.

The court has also directed SEBI to ensure compliance of the regulations and take action if it finds any substance in the audit (ordered by SEBI) which is already underway.

All decisions to be taken on winding up of the scheme would be subject to the outcome of the writ petition.

The petition was filed by Abhinav Shrivastava, Partner GSL Chambers and Manish Yadav Advocate. Ravindra Shrivastava, senior advocate, argued the case on behalf of the petitioner. Tushar Mehta, Solicitor General, appeared for SEBI. Franklin
Templeton was represented by CA Sundaram, senior advocate.