NEW DELHI / MUMBAI: The Karnataka the superior court ruled Saturday that Franklin Templeton mutual fund it will need to seek shareholder approval before liquidating six schemes with combined assets of about 280 billion rupees ($ 3.8 billion).
One of the largest fixed income fund houses in India, it closed six loan funds in April due to lack of market liquidity and repayment pressures due to pandemic.
The funds had large exposures to higher-yielding, lower-rated credit securities.
But some investors challenged the decision in court, saying their permission should have been requested.
Karnataka’s high court, where his cases have been heard since June, ruled on Saturday that while it did not want to interfere with Franklin’s decision, it said it should seek shareholder consent.
Franklin Templeton in response said in a statement that the court had upheld the decision made by its trustees to liquidate the schemes, but had ordered that shareholder approval be required.
“We are considering the order and will take appropriate action in consultation with our legal experts in the best interest of shareholders,” he said.
The court gave Franklin six weeks to appeal the decision to the Supreme Court if he so wishes, local media reported.
“Franklin’s unilateral decision without shareholder confirmation has been rightly considered illegal,” said Paritosh Gupta, a lawyer representing some of the shareholders.
The court’s ruling sets a precedent as it will force fund houses to seek shareholder approval should they wish to liquidate the schemes, he said. Sumit Agrawal, founder of Regstreet Law Advisors and former official of the Indian capital markets regulator.
Franklin’s decision had shaken investors and triggered panic withdrawals from other Franklin funds, as well as loan funds from other asset managers.
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