Gujarat HC stays Franklin Templeton MF's e-vote process for closure of six debt schemes

In a fresh blow to crisis-hit Franklin Templeton Mutual Fund, the Gujarat High Court on Wednesday stayed the e-voting process for winding up its six debt schemes. Rasna India's founder Areez Khambatta, his wife Persis Khambatta and a trust promoted by them, had filed a plea in the court, seeking a stay on the liquidation process. The matter will be next heard on June 12.

The petitioners alleged that the liquidation of the debt schemes was illegal as it needs to first obtain consent of unit holders before winding up or prematurely redeeming units of a scheme. 83 year-old Khambatta, his wife Persis Khambatta and Khambatta family trust had collectively invested around Rs 6.5 crore in mutual fund schemes floated by the asset manager.

A bench comprising Justice Gita Gopi stayed the notice and ordered that notices be issued to respondents, including Franklin Templeton. "By way of ad-interim relief, the operation and implementation of the notice dated May 28, 2020 regarding E-voting and Unit-holder's meeting send through Email by respondent no.3 herein shall remain stayed," the court order said.

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"We are examining the matter and will take appropriate steps as may be required. We continue to follow due process, both in making investment decisions and in the winding up of these schemes. We have acted in the best interest of our investors and in accordance with all regulations," a Franklin Templeton spokesperson said.

Franklin Templeton's e-vote was scheduled to be held from June 9 to June 11, while the unit holders' meet was slated to happen on June 12, 2020. Franklin had issued e-voting notices to 3 lakh investors who invested in the six debt schemes.

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In a surprising move, Franklin Templeton Mutual Fund on April 23 said it would wind up six schemes - Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund - in wake of liquidity crisis and redemption pressures caused by the COVID-19 pandemic. The move resulted in locking in investor wealth worth Rs 30,800 crore.

The American fund house has appointed Kotak Mahindra Bank to monitor the winding up process of the 6 schemes it closed on April 23.