The Karnataka High Court on Saturday said the Franklin Templeton trustees should have taken the consent of unit holders before giving the approval for winding down of six debt schemes. The 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.

The Court said the duties of trustees are in the nature of public duties. "If Trustees violate SEBI Act or the Mutual Fund Regulations, a High Court can issue Writ of Mandamus under Article 226 to the Trustees" the court observed, adding that trustees had an obligation to provide the minutes of meeting dated April 20 and April 23 to the unit holders.

Citing difficulty in bond market conditions due to COVID-19, Franklin Templeton Mutual Fund shut down six of its debt mutual funds on 23 April. 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 keeping 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.  The High Court has stayed the operative part of the judgment for six weeks for appeal, during which time no redemptions will be allowed.

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