Franklin Templeton Mutual Fund’s (FT MF) move to wind-up six of its debt schemes has led to a clutch of investors approaching courts, leading to uncertainty over the process that was expected to start from Tuesday (i.e. June 9) through e-voting by the unitholders.
On Monday, Delhi High Court (HC) issued notice to FT MF, the Securities and Exchange Board of India (Sebi), following writ petition filed by an investor challenging the wind-up notice and the consequent e-voting notice issued by the fund house.
The petition challenged FT MF’s contentions that cited Covid-19 pandemic for the wind-up move and that this was the only viable option to preserve value for unitholders. It also claimed that the trustees have failed to make prudent investments and faulted in proper administration of the fund.
In other allegations, it was claimed that the fund house fell short of following Sebi’s circulars and invested in securities which were of low “credit transparency of investment rating”.
The Delhi HC has said that all decision on winding up would be subject to the outcome of the writ petition. However, court’s stance on voting process could not be ascertained at the time of going to press.
Petition was filed by Abhinav Shrivastava, partner at GSL Chambers and advocate Manish Yadav on client’s behalf.
Some investors have also filed a writ petition at Supreme Court seeking intervention.
Meanwhile, more investors have joined the plea against FT MF in Gujarat HC, which has given an ad-interim relief through a stay on the e-voting process. FT MF has also filed plea at Gujarat HC to vacate the stay so that the voting can go-ahead as scheduled.
With the legal process initiated by some investors, others are worried over the payout timelines.
“We were hoping that some payments could get released sooner as some of the schemes had turned cash positive,” said an investor in one of the six wound-up schemes.
In their voting notices to investors, Trustees had advised investors to vote ‘Yes’ to the authorisation as a rejection may result in delay of the asset monetisation process.
In the FT MF’s four-day voting process, the investors were to be given three options. The unitholders could give authorisation to the trustees to monetise the scheme assets. The trustees will be assisted by debt capital markets (DCM) team of Kotak Mahindra Bank and supported by the fund house.
The other option was to authorise the audit and consulting firm Deloitte to monetise the scheme assets, assisted by the fund house, which was being advised by DCM of Kotak Bank.
The third option was to opt for ‘No’ to reject both the authorisation processes. However, FT MF in past communications has clarified to investors that ‘No’ would not change the winding-up status of the scheme.