Franklin Templeton Debt MF Wind Up Needs Unit Holder Consent: HC

The Karnataka High Court has ruled that Franklin Templeton India's decision to wind down its suite of six debt schemes cannot be taken till without obtaining the consent of investors of the said schemes. Franklin Templeton Mutual Fund shut down six of its debt mutual funds on 23 April, citing difficulty in bond market conditions due to COVID-19.

"We hold that no interference is called for in the decision of trustees to winding up of the said schemes. We hold and declare that the decision of the trustee to winding up the six schemes cannot be implemented until consent from the unit holders is obtained in accordance with Sub Clause C of Regulation 15. Hence we restrain the trustee to take any further steps based on the notice 23 april 2020,and 28th may 2020 issued till the consent of the unit holders is obtained. It will open for trustees to obtain consent of unit holders and to take further steps," the division bench of Chief Justice AS Oka and Justice Ashok S Kinagi stated in their 330 page judgement.

In April, Franklin Templeton Mutual Fund voluntarily decided to wind up six of its fixed-income debt schemes: Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.

These schemes cumulatively managed assets worth Rs 26,000 crore.

"We are studying the order issued by the Hon'ble Karnataka High Court and will take appropriate steps in consultation with legal experts in the best interest of unit holders," said Franklin Templeton in a statement.

At least four petitions were filed by the investors of the scheme that Franklin's decision to wind down the six schemes was illegal and required investor consent. They also alleged that these schemes were mismanaged.