MUMBAI: Franklin Templeton Mutual Fund, which was asked by the Karnataka high court to take investors’ permission to shut six of its debt schemes, indicated that it may move the Supreme Court on some of the points in the order. Chennai Financial Markets & Accountability (CFMA), an investors’ association, also plans to move the SC against the order.
On Saturday, the Karnataka HC upheld the decision taken by the trustee of the fund to wind up the schemes. It also upheld the constitutional validity of some of the Sebi regulations relating to the winding-up of funds. However, the HC said that consent of the unitholders would be required to wind up the schemes, a letter from the fund house’s president to its investors said.
On April 23, Franklin MF had decided to close down six of its debt schemes in the interest of investors since it faced, among other problems, liquidity issues to meet redemption pressure. As of that day, these schemes were managing assets worth nearly Rs 26,000 crore. Subsequently, some of its investors moved several courts around the country, challenging the decision to close down the schemes. Eventually, the SC transferred all the cases to the Karnataka HC, a neutral court. On October 24, it passed the order in the case.
“While we are still in the process of studying the order, basis our initial review, we believe it may be necessary to appeal aspects of the order (in the SC). It will also be our endeavour to seek appropriate directions from the court regarding return of cash of over Rs 5,200 crore currently accumulated in the four cash-positive schemes, and with regard to any additional cash we may receive while the matter remains under the consideration of the court,” Franklin Templeton MF president Sanjay Sapre wrote in the letter.
Reacting to the court order, CFMA said it would move the SC to protect the interest of investors as it feels that the HC didn’t address some important points that were raised in its petition. If left unanswered, this could set a bad precedent for the MF industry.