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No winding up of 6 schemes sans consent of majority unitholders, Karnataka High Court tells Franklin Templeton

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New Delhi (ILNS): The Karnataka High Court today ruled that Franklin Templeton trustees should not take any action on the winding up of its six schemes till a simple majority consent of unit holders is obtained. 

The division bench of Chief Justice AS Oka and Justice Ashok S Kinagi passed this order while hearing a batch of pleas related to the winding up of six Franklin Templeton mutual fund debt schemes.

The High Court ordered: “We hold and declare that the decision of the Trustees to wind up 6 schemes mentioned in paragraph 1 of the judgment, by taking recourse to sub-clause (a) of clause 2 of Regulation 39 of the Mutual Fund Regulations cannot be implemented unless the consent of the Unit Holders is obtained in accordance with sub-clause (c) of clause 15 of Regulation 18. Hence, we restrain the trustees from taking any further steps on the basis of the impugned notices dated 23rd April 2020 and 28th May 2020, with the consent of the unitholders by a simple majority till the decision of winding up is obtained by the Trustees in accordance with sub-clause (c) of clause 15 of Regulation 18 of the Mutual Fund Regulations.”

The High Court also put a restraint on the operation of the judgment for six weeks and said during this period there should not be any redemptions, adding that ‘status quo should be maintained as of today’.

The Court further clarified: “If Trustees violate SEBI Act or the MF Regulations, a High Court can issue Writ of Mandamus under Article 226 to the Trustees”.

Earlier, the Supreme Court had transferred petitions against Franklin Templeton from different High Courts to the Karnataka High Court and directed it to dispose of the matter within three months. 

On April 23 Franklin Templeton decided to wind up six of its debt schemes citing redemption pressures and lack of liquidity in the bond market.

-India Legal Bureau

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