SC upholds validity of e-voting to wind up 6 Franklin MF schemes

The Supreme Court on Friday upheld the validity of the e-voting process for winding up six mutual fund schemes of Franklin Templeton, and said disbursal of funds to unitholders will continue.

The court termed objections raised by certain quarters about the e-voting process and the poll results as “mere nitpicks”.

Ninety-five per cent of the unitholders who voted have expressed consent to the winding up of the six schemes, the court noted in a 52-page judgment. The disbursal of ₹9,122 crore among the unitholders will continue unhindered.

“Unitholders are the best judge and are more conversant with their own interests. All that is to be seen is that broad parameters of fairness in the administration, bona fide poll/election, and that fundamental rules of reasonable management of public business have not been breached,” a Bench of Justices S Abdul Nazeer and Sanjiv Khanna observed.

Appointment of observer

One of the several objections raised against the e-voting was the appointment of former Chief Election Commissioner TS Krishnamurthy as an observer.

The court, however, dismissed the objection, saying Krishnamurthy was appointed by the court to ensure fairness and transparency.

“We reject the objections to poll results and hold that the unitholders of the six schemes have given their consent by majority to wind up the schemes,” Justice Khanna, who authored the verdict, held. The court further cleared the air on what would actually comprise ‘consent’ of a unitholder to the winding-up of a mutual fund scheme.

Justice Khanna said ‘consent’ has to be given by the majority of the unitholders present and voting per the mutual funds regulations framed by the Securities and Exchange Board of India (SEBI).

Certain sections of unitholders termed the decision to wind up the six schemes as a “smokescreen to conceal misfeasance and malfeasance”.

Other allegations

Allegations included gross mismanagement, failure and dereliction of duty by the Asset Management Company and Franklin Templeton Trustee Services Private Limited, SEBI law violations, manipulation of the Net Asset Value, and disgorgement of wrongful payments.

It was, in particular, alleged that more than ₹15,000 crore was withdrawn from the six schemes two weeks prior to the decision to wind up.