Franklin may appeal against Karnataka HC order

Franklin’s India head Sanjay Sapre said the fund will seek directions from the SC regarding return of cash of over Rs 5,200 crore that four out of the six schemes have received from issuers.

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Franklin Templeton Mutual Fund may appeal in the Supreme Court against ‘aspects’ of the Karnataka High Court’s order that directed the fund house to obtain the consent of the unitholders of the six debt mutual fund schemes before winding them up. In an email communication to investors after the judgement on Saturday, Franklin’s India head Sanjay Sapre said the fund will seek directions from the SC regarding return of cash of over Rs 5,200 crore that four out of the six schemes have received from issuers.

“While we are still in the process of studying the order, basis our initial review, we believe it may be necessary to appeal aspects of the order in the Hon’ble Supreme Court,” said Sapre in the letter to unitholders. The letter did not detail what aspects of the order would they appeal against.

The Karnataka High Court, in a special sitting on Saturday, stayed the operation of this order for six weeks, which means during that time Franklin can challenge the ruling in the Supreme Court.


A division bench of Chief Justice AS Oka and Justice Ashok Kinagi in its 330-page order on Saturday said, “The decision of the trustees to wind up the six schemes is not interfered by the court subject to it obtaining consent from the unitholders.”

The Franklin letter to unitholders said the Karnataka High Court has upheld the earlier decision taken by the fund’s Trustees to wind up the schemes. “Regulation 39 to 42 of the SEBI (Mutual Funds) Regulations 1996 (which specifically deal with winding up of schemes) have been held to be constitutionally valid,” it said.

A few unitholders in the six debt schemes of Franklin Templeton had dragged the fund house to various courts after it abruptly closed down the products handling Rs 26,000 crore of investor money on April 23, halting redemptions indefinitely.
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