The Supreme Court on Thursday permitted Franklin Templeton Trustee Services to hold meeting with unit holders of six debt schemes that the firm proposed to wind up on April 23 citing troubles in the bond marketplace due to the pandemic. The apex court also stayed redemption from the schemes till additional orders.
A bench comprising justices Abdul S Nazeer and Sanjiv Khanna, even though looking for response from the investors, mentioned, “…without prejudice to rights and contentions of all parties, trustees are permitted to call meeting of unit holders to seek their consent/approval. Steps in this regard will be taken within a period of one week. There will be stay on redemptions till then,” the judges mentioned in its short order.
The court also mentioned that it will have to rely on “wisdom of Sebi” to choose the case even even though “Sebi (itself) has a lot to answer. We appreciate unit holders’ concern. But we will have to rely on Sebi. We cannot take the responsibility, Sebi will have to do so”, justice Khanna mentioned.
Justice Khanna in the course of the hearing also observed that the “the issue is big. People wanted refund…let Sebi answer… If they knew people will withdraw money like anything during Covid, why didn’t Sebi do something like RBI”?
The bench also frowned upon the Sebi regulations, saying they are not quick to comprehend for the laymen. “Your regulations are so sketchy. All the confusion is because of your regulations. We also interpret these liberally. A layman cannot understand the language of your regulations,” justice Khanna told Sebi counsel Pratap Venugopal.
Venugopal informed the judges that the regulator had no powers in the winding-up procedure. He also submitted that even though the guidelines and regulations could surely be written far better than what they are now, these guidelines deal with specialised and complicated circumstances.
The SC then posted the case for additional hearing subsequent week. It asked the registry to spot on record other cross-appeals also filed by Sebi and other folks.
While looking for remain on the redemptions, the MF’s senior counsel Harish Salve told the apex court that extra than 95% of the unit holders had been with the firm on the situation of closing down the scheme. He also mentioned that Franklin Templeton can’t hold meeting as the Sebi had restrained them from carrying out so. “We cannot go contrary to Sebi,” he added.
However, senior lawyers Mukul Rohatgi and Ravindra Srivastava opposed Salve’s argument saying Sebi had absolutely nothing to do with the situation.
Franklin Templeton Mutual Fund has challenged the Karnataka High Court’s October 24 order that asked the fund home to acquire the consent of the unit holders of the six debt mutual fund schemes that it proposed to wind up. The HC had also restricted the asset management firm and trustees from taking on any fresh borrowings in the six debt schemes.
While upholding Franklin’s selection to shut down six of its debt schemes on April 23 on grounds of hard situations in the bond marketplace due to the pandemic, the HC mentioned 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 unit holders”.
Around 3 lakh investors had been impacted by Franklin Templeton’s selection to wind up its debt mutual fund schemes.