Thread by @barandbench

Supreme Court bench of Justices Abdul Nazeer and Sanjiv Khanna to resume hearing issues related to objection to the e-voting process for winding up Franklin Templeton's six mutual fund schemes and distribution of money to the unitholders. 
#SupremeCourt
#FranklinTempleton

Justice Sanjiv Khanna: Section 41(1) states that while winding up either AMC will look into it or third party. Other issues of explanatory memorandum etc it has already been made

Advocate Nithyaesh Natraj: The threshold of Section 39 will apply

Justice Khanna: We are only on the voting process

Adv Natraj: You had asked whether we want our money back. Ofcourse we want it back. But the question is how. The open ended scheme ensures me demanding the money on my whims and fancy.

Adv Natraj: They converted an open ended to close ended scheme. They took away my power to redeem.

Justice Khanna: Its a post redemption case. Let's not harp too much into this.

Justice Khanna: Until and unless the corpus is more than 20,000 crores the mutual fund has to wind up on its own.

Adv Natraj: If its an open ended scheme and I can get my entire money back then the unitholders will not have a problem..

Adv Natraj: If I have invested 100 , I want to go into getting 100 and not into a process of winding up where my recovery will be less. Franklin had assured me the money back.

SC: how do you want the money ?

Adv: By exercising the power of redemption.

Adv Natraj: 14,391 crores in available in 6 schemes. However they are willing to disburse about 9 crores. That's as per their affidavit.

SC: you want this debate to never end? We will again have a group of unitholders here then

Senior Advocate Meenakshi Arora shows the Franklin Templeton affidavit

Justice Khanna: I had asked youba question and you were supposed to take instruction

Arora: rights of investors have to be secured. I agree with Advocate Natraj. We are not taking differing positions

Senior Advocate Arora: we need to have a system to have filings in a common petition. Now you have so many petitions and filings.

Senior Adv Arora: Do they really need to be wound up?

Justice Khanna: We are receiving so many letters saying that please help with our money. So we are on that
These people are voiceless. You can invest your money in other mutual funds or in the market.

Adv Madhurima Bhattacharjee for an impleadment application: Please look at the scheme information document. Its a contract between me and Franklin. I only want my money back
#SupremeCourt

Adv Bhattacharjee: This is part of sebi circular. What stopped Franklin from paying my 2 lakhs. Why did they go into redemption and not pay my share. That was a violation of the contract

Justice Khanna: We are only on e voting and getting the money back. We will hear you later

Bhattacharjee: They have threatened the voters that there is a consequence for a yes vote and some repercussion for a no vote. Is this even allowed ?

Bhattacharjee: what has prevented SEBI from following the regulations. There should be an order to follow the regulations from this Court.

Adv Paritosh Gupta representing the Khambata family argues: I am on enabling distribution of funds. The money available with Franklin is not by sale of assets but the pre payment of maturity. It may be distributed proportionately

SC: nothing can be forced on unitholders without official orders of wounding up

Dr Abhishek Manu Singhvi begins: please don't lose sight of the main focus of the case. Your lordships have done the best for public interest. HC poses a consent condition and SEBI strongly says no consent is required but we took a stand that we are not fearful of consent at all

Dr Singhvi: Your lordships have surpassed the public interest extent. This is more about Justice of the process and not the substantive issue here.

@DrAMSinghvi appears for Franklin Templeton Asset Management

Senior Adv Singhvi: Please don't ignore that 98 percent of investors is not majority. I agree one percent is also important for Minority rights. Majority had voted for wounding up

Singhvi: Administrative law states you are here not to guess the destination but the journey to the same. We have to keep things in perspective. Everything cannot be an ambush.

Senior Adv Singhvi: FTAM had sent email and sms to unitholders. That was about 98 percent of it. You had earlier observed that there cannot be a rush of redemption. SEBI had said distress sale of assets will negatively impact unitholders.Most fickle of loyalty are market rumors.

Justice Khanna: issue is when you say that when one votes a no then the investment is lost then that creates a scenario where one may say unitholders are pressurized.

Singhvi: Rush on redemptions negatively impacts all

Singhvi: Its wrong to say one or two location of IP was used. K fintech is the same one who works for the Ministry of corporate affairs.

Justice Khanna: read para 5

Singhvi: Suppose downloading shows 10 IP addresses and you can easily find out where the IP is from
Is there a criminal investigation or a broad overview here ?

Justice Khanna: After a voter votes was an email sent stating that vote is cast?

Singhvi: Yes my lord. Very important

Voting has three stages. One is entry based on OTP, second stage is voting and third stage is a confirmation through an acknowledgment

Singhvi: Votes did not emanate from a single source and there was clear log of emails showing who all voted. So no single IP was used to cast multiple votes. Thousands did not collusively carey out fake voting.

Supreme Court discharges the board. Only Franklin Templeton arguments to continue post lunch.

Senior Advocate Singhvi to continue..

#SupremeCourt

Hearing resumes

@DrAMSinghvi : K Fintech has been providing e voting service which is certified by the MCA. They have conducted over 4,000 such votings and in case there was anything amiss there would have been a great outcry

#FranklinTempleton

Sudden interruption occurs in the hearing as Advocate Prashant Bhushan's Mic was switched on

@pbhushan1 : Modi government....

Singhvi: I cannot compete with that Mr Bhushan is arguing...

Moderator mutes the mic of Advocate Bhushan

Dr Singhvi: Only 16 people had raised objections but they are only five to six families like Khambatas. This raises questions on motive. CFMA does not hold any thing in any of my companies. It may be a knight in shining armor but not a party here.

Dr Singhvi: CFMA has a web page for me. I am a blue eyed boy for a public interest orgsnisation. They have 14 press releases against him. They are asking to settle a score against us, courts are not here for this. Would the court allow my competitor to take this route..

Dr Singhvi: Unless I sell the security and unless I as an asset manager don't know how to get the highest value and if this sale happens through liquidator then is it not a misrepresentation and putting cart before the horse?

Justice Khanna: pragmatic approach was being adopted. I don't know how much time you take to sell 17,000 crore securities. May be 6 months or 12 years. What is the principal amount of units

Dr Singhvi: We are happy with the timeline given.

Justice Khanna: I thought we have to wait for winding up process

Singhvi: SEBI too wanted consent first. But we are not saying that and this is the impression created by the other side

Singhvi: With great humility its the most virtuous path.

SC: we got an impression that we have to wait for a final decision

Justice Khanna: Any counsel appearing for SEBI?

Adv Venugopal: Mr Arvind Datar is arguing

SC: Address us on the timelime and whether you can point out the modality in which the payment needs to be made. All this please tell us

Singhvi: certain issues raised with voting process falls in the area of excessive caution without a needle of suspicion.

Justice Khanna: what is the minimum time frame you have in mind for liquidating the securities.

Singhvi: I have got a quick whatsapp message that 80 to 85 percent of the job will be wrapped up in 6 months.

Justice Khanna: 9, 122 crores is distributable cash proceeds. That is securities are liquidated

Singhvi: about to 14 to 15,000 crores are not liquidated

Justice Khanna: What objection you have to pro rata basis of distributing to the available cash proceeds.

Singhvi: this will be a run on my portfolio. We are against piecemeal distribution.

Senior Adv Salve: This has to be distributed equitably among all unitholders

Senior Adv Harish Salve: 17,000 crore securities are lying. SBI Caps will take some time to be sold off.

@DrAMSinghvi : This will be a run on my portfolio.

Justice Khanna: there is a disconnect between your arguments

Singhvi: Timeline is not the issue once the liquidator has taken a call.

Senior Adv Harish Salve: 3 points were argued yersterday and I am sad to know that such arguments were made in this Court

Justice Khanna: was there any rule for nature of votes required for consent etc?

Salve: Those were recommendations made

Salve: These are a handful of people who have invested in a high risk high return portfolio. Some of these were not even credit rated debts and it was stated. Some of they held 98 percent of unitholders to ransom

#FranklinTempleton

Senior Adv Salve: Home buyer cannot pay EMI suppose. So non banking financial company does not get the money and then there was a PIL asking banks to infuse money. Similar stress was created here too...

Salve: statement that trustees never said why they are winding up was wrong. Decision of windingup was informed to all. Mr Srivastava said there was a damming CSFL report. Please take a look at that report

Salve: Associating K fintech with another company is pure slandering. Just because someone is in Supreme Court anything and everything cannot be argued. Did they give any proof, nothing.

Advocate Pratap Venugopal for @SEBI_India : IF SBI mutual funds is involved then the disbursed would be completed equitably within 12 to 18 months

Justice Khanna: Dr Singhvi said 6 months. This is dependent on market situations also. This will depress a lot of people

Justice Khanna: It will be best to leave it to SBI mutual funds.

Venugopal: shorter period may lead to distress sale, however if not then SBI can decide..

Justice Khanna: are you saying trust deed should lay down the consent procedure?

Supreme Court: Any of you have any objection to the distribution of the Rs 9,000 crores.

Lawyers: No

Justice Khanna: Then we are going to committ that today by order through SBI mutual funds.

Senior Adv Meenakshi Arora wishes to argue and rebut allegations levelled on CFMA

SC: we are on the e voting process and how the funds can be distributed.

Adv Natraj: Franklin has made disproportionate investment in illiquid security. There are 44 others but only Franklin was affected. SEBI in counter affidavit says show cause notice was issued.

SC: We are only on the e voting process.

Justice Khanna: are you saying distribution has to wait till wounding up is over?

Natraj: Not at all, but the question is the way how

Justice Khanna: But if wrongdoings is proven later then you have other remedies.

Advocate Puneet Jain: you asked me i need the money now or not. I should have been told this before yes or no during the e voting process. This is not a winding up of a company which is governed by statutory companies.

Justice Khanna: please argue something we don't know. All of this we know

#SupremeCourt dictates order:
1/n We have heard and concluded arguments on validity of e voting. The counsels are at ad idem that ₹ 9,122 crores (the figure as on January 15 ,2021)(subject to provisions on expenses in ordinary cost) should be distributed amongst the unitholders

2/n under the six mutual fund schemes in proportion to the respective interest in the assets of the scheme. The excercise will be carried on by SBI mutual funds. Counsels for Franklin Templeton Trust Services Pvt Ltd and counsels of SEBI agree.

3/n Counsels appearing for others do not have any objection to distribution of funds by SBI mutual funds. Franklin Templeton Trusts Services Ltd and asset management company would fully cooperate with SBI mutual funds in this regard and would furnish to him entire details

4/n parties are to move the court through an application in case of any difficulty. Such distribution would be carried out expeditiously and preferably within a period of 20 days from the period of the copy of the order.

[Franklin Templeton debt schemes] ₹9,122 crore to be distributed among unitholders through SBI Mutual Funds: Supreme Court

report by @DebayonRoy

#franklintempleton #SupremeCourt

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