The Supreme Court on Friday upheld the e-voting method, for the assent of 3 lakh unitholders, on the winding up of Franklin Templeton’s six mutual fund debt schemes.
An “overwhelming majority” of unitholders had voted in favour of the winding up of the schemes which have been wound up by FT on April 23, citing troubles in the bond industry circumstances following the pandemic.
A bench comprising justices SA Nazeer and Sanjiv Khanna, even though rejecting the objections raised by some investors to the e-voting final results, held that the majority of unitholders had favoured the move to wind up these schemes. It stated the “consent of the unitholders would mean consent by majority of the unitholders who have participated in the poll, and not consent of majority of all the unitholders of the scheme… Winding up and disbursements would be in terms of our directions in earlier orders of February 2 and February 9”.
The apex court had on February 2 and February 9 entrusted SBI Funds Management, to carry out the physical exercise for disbursing Rs 9,122 crore to the investors of the six schemes in “proportion to their respective interest in the assets of the scheme” inside 20 days. The SC had also authorized the distribution strategy submitted by the SBI Funds, which sought protection from any liability arising from such distribution physical exercise and wanted to rely solely on the information/amounts supplied by FT for effecting the distribution.
However, the judges on Friday observed that SBI Funds “shall follow the best effort principle so as to ensure expeditious and timely payment to the unitholders and assure the best possible liquidation value of the assets/ securities to the unitholders.
While noting that securities of “substantial amount” equivalent to more than Rs 17,000 crore have been but to be realised, the best court stated that the trustees and Sebi had provided distinct time frames inside which securities can be liquidated. However, each the trustees and Sebi, had stated that the liquidation/realisation had to be proceeded with caution, as an try to offload the securities in haste could outcome in losses which would be detrimental and lead to reduction in realisable worth, it stated.
The problem with regard to interpretation of the Sebi regulations governing winding up is but to be examined. The Karnataka High Court in its judgment on October 24 had expressed disappointment more than ambiguities in the industry regulator’s guidelines.
Franklin Templeton had appealed against the Karnataka HC’s order that asked the fund property to acquire the consent of the unitholders of the six debt mutual fund schemes that it proposed to wind up.
While upholding Franklin’s selection to shut down six of its debt schemes, the HC stated that “the decision of the trustees to wind up the six schemes is not interfered by the court subject to it obtaining consent from the unitholders.”
The HC had also restricted the asset management business and trustees from taking on any fresh borrowings in the six debt schemes.