Majority consent enough to wind up Franklin schemes: SC
NEW DELHI: The Supreme Court on Friday rejected the objections to poll results and held that the unitholders of the six mutual funds schemes of Franklin Templeton have given their consent by majority to wind up the schemes which the mutual fund house had closed in April last year.
In a 54-page judgment, a bench comprising Justices S. Abdul Nazeer and Sanjiv Khanna said the underlying thrust behind 18(15)(c) of the SEBI (mutual funds) Regulation is to inform the unitholders of the reason and cause for the winding up of the scheme and to give them an opportunity to accept and give their consent or reject the proposal.
"It is not to frustrate and make winding up an impossibility," the top court said, noting that the unitholders of the six schemes had given their consent by majority to wind up the schemes through e-voting in December last year.
The objecting unitholders had submitted that the trustees' decision to wind up the six schemes is a smokescreen to conceal misfeasance and malfeasance, and the question of liability of the trustees/AMC (Asset Management Company) should be decided first or together.
However, the court noted that no unitholder has expressed or stated that they could not vote or their queries were not answered.
"We do not think, in the facts of the present case, that the notice for e-voting and the contents would justify annulling the consent given by the unitholders for the winding up of the six schemes," said the top court.
The Karnataka High Court had on October 24 said that the decision of the Franklin Templeton Trustee Services Private Limited to wind up the six schemes cannot be implemented in the absence of consent of the unitholders.
On April 23, 2020, Franklin Templeton had closed the six debt mutual fund schemes citing redemption pressure and lack of liquidity in the bond market. The six schemes are 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.
Citing the objections to e-voting, the top court said these contentions are mere nitpicks and would hardly justify rejection of the consent to wind up the schemes, which has been expressed by more than 95% of the unitholders who had voted.
On the aspect of objections raised in the appointment of KFin Technologies for providing e-voting platform services, the top court said: "Further on examination and analysis of the event logs of the two web servers, no abnormal events were witnessed.”