Franklin Templeton mutual fund has had to postpone the e-voting exercise that was due to have started at 9 am on June 9.
The Gujarat High Court has dismissed the application filed by the fund house to set aside the stay order that the Court had imposed on the plea by Ahmedabad-based petitioners, Areez Khambatta. After hearing both sides of the arguments on June 9 evening, the court said that pending the Securities and Exchange Board of India (SEBI) investigation that is underway, investors would not be able to make an informed decision as to whether they should vote for or against the winding up process.
“Pursuant to the order dated June 8 issued by the Honourable High Court of Gujarat, the E-voting scheduled for June 9–11 and Unitholder's Meeting on June 12, related to the schemes under winding up, stands suspended till further communication,” Franklin Templeton spokesperson said.
Unit-holders were meant to either vote for or against the winding up process that the fund had decided upon.
And if they voted for it, then whether they should choose the fund house’s trustees or Deloitte to oversee the winding up process. Franklin Templeton is expected to shortly write to its unit-holders informing them about their next plan of action.
On June 3, the Gujarat High Court issued a stay order on the upcoming voting process that Franklin Templeton Asset Management had initiated for choosing either its own trustees or Deloitte for the winding up process of the six debt schemes.
In response to that, on June 5, Franklin Templeton Asset Management filed a petition in the Gujarat High Court to vacate the stay. The case was heard on June 8.
The court order dated June 8 stated, "It has been rightly submitted by learned Senior Advocate Mr. Thakore that amidst the allegation of mismanagement of funds and fraud, the unit-holders would not be having the opportunity of informed decision making while casting the E-votes for the option given by the applicants. No winding-up process could be concluded without the consent of the unit-holders, as has been laid down in sub-regulation 15(c) of Regulation 18 of the Regulation. The Trustee shall have to obtain the prior consent of the unit-holders when a majority decide to windup or prematurely redeem the units. Thus, in view of the above provision of law, the interim injunction granted is confirmed till the forensic audit report comes in public domain. "In the result, the present civil application is dismissed."
Franklin Templeton Asset Management has appointed Kotak Mahindra Bank to monetise assets of six schemes of Franklin Templeton Mutual Fund.
On April 23, Franklin Templeton Mutual Fund had said it would wind up six schemes worth AUM of Rs 25,856 crore - Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund - citing severe illiquidity and redemption pressures caused by the COVID-19 pandemic.
The High Court order dated 8 June said that till this SEBI report came, Franklin Templeton could not proceed further with any voting exercise. In doing so, the court also upheld the SEBI Regulation 18 (15) c under which it reiterated that trustees must take prior consent of unit-holders when a majority of the trustees decided to wind up or prematurely redeem the units.