New Delhi, December 03, 2020: The Supreme Court on Thursday has ordered a stay on redemptions by investors, while allowing Franklin Templeton Trustees to call for meeting of unit holders to seek their consent/approval and agreed to hear a challenge to the Karnataka High Court verdict by which it was ordered that no interference can be made in the decision to wind up the six debt schemes of Franklin Templeton.

The Supreme Court Bench of Justices Abdul S Nazeer and Sanjiv Khanna ordered today, "Place on record cross SLPs by SEBI (Securities and Exchange Board of India) and others. In the meanwhile, without prejudice to rights of all parties, trustees are permitted to call meeting of unitholders to seek their consent for approval. Steps in this regard will be taken within a period of one week."

Further, the Court also held:

• Regulations 39 to 41 of the Mutual Funds Regulations to be legal and valid.

• Securities and Exchange Board (SEBI) to take a decision on taking action against the company after receiving the Forensic Audit report, within six weeks.

• Copy of the said report is to be given to the unit holders in a sealed cover if they apply.

• Duties of trustees are in the nature of public duties. If rrustees violate SEBI Act or the Mutual Fund Regulations, a High Court can issue Writ of Mandamus under Article 226 to the trustees.

• The Forensic Audit Report given by SEBIin sealed cover is not a final report and at best can be termed a tentative report. It is not relevant for adjudication of the present issues, and hence the issue of privilege is not gone into by the Court.

• Trustees have an obligation to provide the minutes of meetings dated April 20 and April 23 to the unit holders as there is no confidentiality attached to the said documents.

• SEBI has no jurisdiction under Section 11B of the SEBI Act to interfere with the winding up decision taken by the trustee.

Pertinently, the Court opined that "SEBI ought to have played a more proactive role" in the matter and that SEBI had failed to perform its duties.

The Court also asked,"If they knew people will withdraw money like anything during COVID, why didn't SEBI do something like RBI?"

Advocate Pratap Venugopal, appearing for SEBI, contended that the regulator has no powers in the winding up process.

On October 24, the Karnataka High Court refused to interfere in the decision of the trustees to wind up the six debt schemes of Franklin Templeton.

The Court, however, clarified that the consent of unit holders as per the regulations is to be obtained before going through the winding-up process.

News Courtesy:PIB | Hindu| DC | LE | LI | LO | IE | LL | PTI |ht | ET | UNI | DNA | FP | Jurist |IndToday|

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