Franklin’s voting process irks investor association

A leading investor association has questioned the legality of the voting process, pertaining to the winding up of six schemes managed by Franklin Templeton Asset Management (India).

There was no postal intimation to unit holders who didn’t have a registered email address, according to a letter that Midas Touch Investors Association sent to the Securities and Exchange Board of India (Sebi).

Further, it argued that the unit holders should have a vote in proportion to their holding.

“The principle of ‘one vote per shareholder’ violates the right of the unit holder, and hence is illegal,” said the letter, from the association’s founder Virendra Jain, to the regulator.

Legal opinion pointed to the need for equal treatment in terms of intimation.

“We note basis the notice for e-voting as published on its website, that the unit holders eligible to vote were to receive their login credentials for the e-voting process by email. Typically, in a scenario where the voting is conducted through electronic means and login credentials provided by email, the trustee should ensure that every unit holder receives the intimation of such meeting and login credentials for the e-voting process, irrespective of whether their email IDS were registered with the scheme or not,” according to Divaspati Singh, partner at Khaitan & Co.

A spokesperson for Franklin said it had conducted the process with due permissions.

“We wish to clarify that we have conducted the e-voting and unit holder meets after obtaining permission from the Supreme Court and under the scrutiny of an independent observer appointed by Sebi. As per directions of the Supreme Court, the results of the e-voting and report of the observer are expected to be submitted in a sealed envelope to the court. We request our investors and partners to wait for further directions from the Supreme Court.”

Franklin wound up six schemes in April 2020 amid liquidity issues because of the pandemic. Investors had ~28,000 crore stuck in the schemes at the time. The six schemes were Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund, and Franklin India Income Opportunities Fund.

Investors then moved court on the matter, following which voting happened in December.

The results are yet to be declared. Meanwhile, the fund has said that the schemes have got cash inflows of over ~13,000 crore from the investments that were made earlier.