The Supreme Court on Thursday permitted Franklin Templeton Trustee Services to maintain meeting with unit holders of six debt schemes that the company proposed to wind up on April 23 citing difficulties within the bond market due to the pandemic. The apex courtroom additionally stayed redemption from the schemes until additional orders.
A bench comprising justices Abdul S Nazeer and Sanjiv Khanna, whereas in search of 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 transient order.
The courtroom additionally mentioned that it’ll have to rely on “wisdom of Sebi” to determine the case although “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 listening to additionally noticed 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 additionally frowned upon the Sebi rules, saying they don’t seem to be simple 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 advised Sebi counsel Pratap Venugopal.
Venugopal knowledgeable the judges that the regulator had no powers within the winding-up course of. He additionally submitted that whereas the foundations and rules might actually be written higher than what they’re now, these guidelines take care of specialised and complicated conditions.
The SC then posted the case for additional listening to subsequent week. It asked the registry to place on file different cross-appeals additionally filed by Sebi and others.
While in search of keep on the redemptions, the MF’s senior counsel Harish Salve advised the apex courtroom that greater than 95% of the unit holders had been with the company on the difficulty of closing down the scheme. He additionally mentioned that Franklin Templeton can’t maintain meeting because the Sebi had restrained them from doing so. “We cannot go contrary to Sebi,” he added.
However, senior legal professionals Mukul Rohatgi and Ravindra Srivastava opposed Salve’s argument saying Sebi had nothing to do with the difficulty.
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 additionally restricted the asset administration company and trustees from taking up any recent borrowings within the six debt schemes.
While upholding Franklin’s resolution to shut down six of its debt schemes on April 23 on grounds of tough circumstances within the bond market 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 affected by Franklin Templeton’s resolution to wind up its debt mutual fund schemes.