Investors may need to wait a bit longer for return of money from the six Franklin Templeton debt funds which were proposed to be shut down. On June 19, the Supreme Court of India decided to transfer various petitions related to the debt funds shutdown plan by the fund-house, to one single court: the High Court of Karnataka. The matters will now be heard there by a Division Bench. All eyes are on the legal system to deliver speedy justice and bring an amicable end to the Franklin issue that has left a bitter taste in the mouth of the debt fund investors of Franklin.

The Supreme Court has not lifted the Gujarat High Court stay on the e-voting process for winding up the schemes. The e-voting process, if it went ahead, would have paved the way for liquidation process of the six debt funds that have assets worth nearly Rs 26,000 crore. The e-voting was to begin on June 9, and now looks to be delayed by quite sometime. It was April 23 when Franklin in an unprecedented move had announced its plan to wind down the six open-ended debt schemes, and also restricted further transactions by investors in those schemes.

“…several writ petitions are pending in the High Court of Gujarat, The High Court of Delhi as well as the High Court of Judicature at Madras. It is agreed that let the matters be transferred to the High Court of Karnataka, to be heard by a Division Bench. Thus, we request the Hon’ble Chief Justice of the
High Court of Karnataka to take up matters himself in a Division Bench. Let the pending matters be transmitted to the High Court of Karnataka, including the appeal filed by SEBI before the High Court of Gujarat against the interim order,” the written order of The Supreme Court said.

Do note that investors, who have contested the six debt funds’ shutdown plan by Franklin, have alleged that the fund-house has not followed proper rules and regulations in the winding up event. They have also questioned the nature of investments done by the fund-house which led to schemes being rendered illiquid after the Covid-19 lockdown situation. To manage redemptions, the funds had to even borrow money to repay exiting investors. What has also added to the confusion is that Franklin hasn’t given a proper timeline in terms of when it will return investors’ money and how much of the money will be returned. It has maintained that it will make best efforts to return the dues in shortest possible time.

It may take more than five years to return funds if one goes by some schemes’ maturity profile. The role of trustees and debt investment management team, led by Santosh Kamath, has also been brought into question.

The matters are now being transmitted to the High Court of Karnataka within 15 days by the concerned High Courts. The High Court of Karnataka will hear and finally decide the matter, including the SEBI appeal, within three months.

The High Court of Karnataka will now hear the matters afresh and take its view.

The matters being moved are:

* Chennai Financial Markets and Accountability v. SEBI and Others, W.P. 7744/2020 filed before the Madras High Court.

* Areez Phirozsha Khambatta and Ors. v. SEBI and Ors., Civil Application No. 7201 of 2020 filed before the Gujarat High Court.

* Amruta Garg (Formerly Amruta Narendra Nikam)v.. UOI and Ors., W.P. (Civil) 3366/2020 filed before the Delhi High Court.

* Chennai Financial Markets and Accountability v. Additional Director General of Police, CRL OP No. 8660/2020 filed before the Madras High Court.

* SEBI v. Franklin Templeton Trustee Services Pvt. Ltd. bearing LPA No. 311/2020 in SCA No. 7201/2020 filed before the Gujarat High Court.

* LPA No. 311/2020 – Securities and Exchanges Board of India Versus Franklin Templeton Trustee Services Pvt. Ltd. & Others.

Related:

Franklin Templeton: 4 cases filed by investors hold up voting process for winding up debt funds

Franklin Templeton moves to indemnify trustees amid legal cases; have trustees done their job?

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

View all posts