The Gujarat High Court on Wednesday stayed the e-voting process, which was to be held from 9-12 June 2020, on the winding up of the six Franklin Templeton debt schemes. These schemes were frozen by the fund house on 23 April.
Effectively, the court has halted the winding-up process and the next hearing has been scheduled for 12 June. What does the stay mean for investors in terms of recovery of money? We explain.
Why did the High Court stay the e-voting?
The petitioners before the Gujarat High Court, namely the promoter-family of Rasna, contended that investor consent for the winding up was not taken. As winding-up was not according to norms, any subsequent action such as e-voting should not be allowed. The e-vote essentially allowed unitholders to authorize either the trustees of the mutual fund assisted by Kotak Mahindra Bank or Deloitte with the trustees playing a minimal role while monetizing the underlying paper.
A failure to approve either option would simply lead to another vote.
Thus an effective choice to approve the winding up was not given to unitholders (investors). Petitioners had alleged that as per the Sebi rules, consent of a majority of unitholders is required for the winding up of a scheme. The court’s stay order applies to all investors and not just the petitioners.
The petition asked for a few more reliefs. First, that unitholders should be returned their money at the net asset value (NAV) as on 23 April. Second, an appropriate body should manage the funds in question untill redemptions are honored. Third, proceedings should be initiated against the asset management company (AMC). In the case of the last relief, Sebi has already appointed chartered accountants firm Chokshi & Chokshi to audit investments made by these schemes and their management.
Readers should note that there is another case in the Madras High Court on this issue in which notices have been issued to Sebi and Franklin. Thus appeals may soon reach the Supreme Court to resolve any possible inconsistencies in multiple cases.
Does this mean my money will not be recovered until the stay order is lifted?
No. The interest and principal repayment on the various debt papers will continue to pour into the six Franklin schemes as and when the papers mature and their NAVs will reflect these accruals. However, Franklin may not be able to sell debt papers in order to recover money faster. Also, you will not be repaid the money held in your units until the stay order is lifted and the winding-up process is approved by a majority of unitholders.
What should you do?
At present, there is nothing you can do. If you feel that your legal rights are being violated, you can always implead yourself into the case before the Gujarat High Court. Impleading means joining a case as an affected party. However, the costs of doing this may not be proportionate to the reward if your investment amount in the schemes is small.
Jayshree P Upadhyay contributed to the story.
This HC stays Franklin Templeton's e-voting process: what this means for you was originally published on https://www.livemint.com/money/personal-finance/hc-stays-franklin-templeton-s-e-voting-process-what-this-means-for-you-11591250216248.html