SC upholds e-voting process for assent of three lakh unit holders on winding up of Franklin Templeton (FT)’s six mutual fund debt schemes

On the winding up of Franklin Templeton (FT)’s six mutual fund debt schemes, the Supreme Court has upheld the e-voting process for the assent of three lakh unitholders.

Majority of unit holders had voted in favour of the winding up of the schemes which were wound up by FT on April 23 citing difficulties in the bond market conditions following the pandemic.

While rejecting the objections raised by some investors to the e-voting results, a bench comprising justices SA Nazeer and Sanjiv Khanna held that the majority of unit holders had favoured the move to wind up these schemes. It said that the consent of the unit holders would mean consent by majority of the unit holders who have participated in the poll and not consent of majority of all the unit holders of the scheme. Winding up and disbursements would be in terms of our directions in earlier orders of February 2 and February 9”.

The apex court had on February 2 and February 9 entrusted SBI Funds Management to carry out the exercise for disbursing Rs 9,122 crore to the investors of the six schemes in “proportion to their respective interest in the assets of the scheme” within 20 days. The SC had also approved the distribution plan submitted by the SBI Funds which sought protection from any liability arising from such distribution exercise and wanted to rely solely on the data/amounts provided by FT for effecting the distribution.

However, the judges recently observed that SBI Funds “shall follow the best effort” principle so as to ensure expeditious and timely payment to the unitholders and assure the best possible liquidation value of the assets/ securities to the unit holders.

While noting that securities of substantial amount equivalent to more than Rs 17,000 crore were yet to be realised, the SC said that the trustees and SEBI had given different time frames within which securities can be liquidated. However, both the trustees and SEBI had stated that the liquidation/realisation had to be proceeded with caution as an attempt to offload the securities in haste could result in losses which would be detrimental and cause reduction in realisable value.