New Delhi, Dec 9 The Supreme Court on Wednesday directed the Securities and Exchange Board of India (SEBI) to appoint an observer for overseeing the entire e-voting process to be held on December 26-28 for the winding up of six debt schemes of Franklin Templeton Mutual Fund (FTMF) and submit its results in a sealed envelope before the court.
The apex court also asked the SEBI to submit the final copy of the forensic audit in a sealed envelope before the court.
Based on the submissions made by the Chennai Financial Markets Accountability (CFMA), an investor body, and other parties, the Supreme Court also directed the parties concerned to complete pleadings and final arguments of the matter by the third week of January 2021.
Further, the stay on redemptions by the unit-holders earlier ordered by the Supreme Court will continue.
It was clarified that the order passed by the Supreme Court is peculiar to the facts and circumstances of Franklin Templeton case alone and should not be taken as a precedent in other mutual fund cases.
The interim order passed is without prejudice to the rights and contentions of all parties and the aspects of the case will be finally argued in the third week of January 2021.
On behalf of the unit-holders, the CFMA asked why Franklin Templeton was shying away from making a statement before the Supreme Court that the monies of the unit-holders will be protected. "Further, it was also pointed out to the Supreme Court that the final copy of the forensic report should be provided to the unit-holders so that they would be in a position to make an informed decision before any voting is done," it stated.
The CFMA said it was also submitted that the right to redeem in an open-ended scheme is a fundamental attribute and a statutory right of the unit holders and the same cannot be delayed for more than nine months.
Notably, the CFMA has also moved an interim application, wherein directions have been sought to furnish details regarding redemptions that took place from January 1, 2020 to April 23, 2020. The unit-holders have also highlighted their concern before the court that since there seems to be loss of faith in trustees, it would be just and fair, if somebody is appointed to oversee the entire election process.
Meanwhile, the SEBI has also filed its own Special Leave Petition. In this regard, SEBI informed the court to record that the present issue is restricted only to FTMF as it has an industry-wide impact on the Rs 28 lakh crore domestic mutual fund market.
After seven months, the market regulator has realized the impact of winding up across the mutual fund industry which the CFMA has been emphasizing from day one.
Upbeat about the apex court directions, the CFMA said it believed that steadily and firmly the truth is getting established and its stance is getting vindicated.
On December 3, the Supreme Court had directed Franklin Templeton to seek the unit-holders' consent within a week to close the six debt schemes. On December 7, FTMF said it has sought the consent of the unit-holders for the orderly winding up of the six fixed income schemes.
Franklin Templeton is seeking a simple-majority consent of its unit holders to wind up six debt funds it had shut in April this year, which locked over Rs 28,000 crore in the biggest forced fund closure ever in India.
( With inputs from IANS )
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