Thread by @barandbench

Franklin Templeton hearing to resume today before Supreme Court.

#FranklinTempleton

Hearing commences. Senior Advocate Meenakshi Arora resumes her submissions.

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My submission is that Covid was not necessarily an issue and I am proceeding on that basis: Arora.

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Even SEBI did not have copy of the resoltuion passed for winding the 6 Schemes: Arora.

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Arora listing out the reasons given by Franklin Templeton for winding up the schemes: Covid 19 crisis, continuous heightened redemption in mutual funds.

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The resolution about it was placed on record only after High Court called for the same. The SEBI also has acknowledged the same: Arora.

Covid was not the reason. It was only a purported ground. The reason was the SEBI's circular of October 2019: Arora

(The circular mandated mutual funds to cap their exposure to unlisted NCDs at 10 percent of scheme's corpus)

#FranklinTempleton

My position is that Franklin Templeton in reckless manner in violation of SEBI guidelines invested in illicit securities. SEBI did not catch it: Arora.

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Under SEBI regulations are you required to send the resolution of BOD or only reasons: Bench to Arora.

Arora says she will check it up.

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Arora pointing out various instances of omission by SEBI when it failed to respond to various communications regarding the schemes: Arora.

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"Unitholders will be justified in their criticism that SEBI was a silent spectator:" Arora quoting from Karnataka High Court judgment.

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The investors are entitled to know what has gone wrong with their money. SEBI has to act in the interest of investors. But who will regulate the regulator? This issue needs to be addressed at some point of time. This is an opportunity: Arora.

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SEBI has completely failed in protecting interest of investors in this case. SEBI cannot have a say on behalf of investors: Arora concludes her arguments.

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Advocate Nithyaesh Natraj representing an intervenor begins arguments.

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Consent of unitholders is needed and interpretation by Karnataka High Court of Regulation 18(15)(c) of Mutual Fund Regulation needs to be upheld: Natraj.

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Paritosh Gupta: If the authorised person takes a call then unitholders have to wait for interest for three years and there is no time limit specified for widing up.

Justice Khanna: question is whether orders by SEBI is made available or made available in parts or not available at all. These have to be answered. No one has argued this point yet

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Adv Madhumita Bhattacharya: There has been gross mismanagement. I would like to lay down investors point of view.
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Bhattacharya: SEBI has to protect investors. They don't care. SEBI could have taken proactive action and cannot act as a postman. @SEBI_India

Bhattacharya: It was a very important investment decision. Why didn't they disclose it was not a price sensitive investment.

Justice Khanna: which disclosure is not there. It must be in site

Bhattacharya: SEBI was a mute spectator

Bhattacharya: SEBI in 2013 had laid down a investment protocol. It was a moderate risk investment. I maintain that
#FraklinTempleton

Senior Adv Arvind Datar for @SEBI_India:
we are a regulator and we face cases all the time. If some associating is coming against us then they have to be Franklin Investors etc and not individual associations

Datar: Mutual fund is different from a share or a debenture. Unitholders cannot take a call on winding up etc. When we invest we expect a reasonable interest. First time a major crisis came for mutual funds.

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SEBI: There cannot be participatory democracy in a unitholders kind of a system.

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Datar: Riskometre had showed that these investments were a high risk investments already. Out of these 6 schemes, they were open ended schemes. There was no indication for any problem when we went over it. Impossible to monitor individual schemes at for SEBI
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SEBI: Mutual funds must be left to trustees and they should take a call when to wind up.

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Dr Singhvi: I believe SEBI will carry a fair adjudication. But I have questions on third party raising questions. These investors are upset and they are bringing these allegations. What is the point of SAT if all these arguments are being made here?
@DrAMSinghvi

Justice Sanjiv Khanna: In redemption there is obligation to pay. In winding up payment is different and based on realizable value of assets

#SupremeCourt

Datar: If I get 100 crores from market, I will have to plan my investment in such a way that it is more than a provident fund etc

Senior Advocate Datar reads rights and obligations of trustees.

Matter to continue tomorrow.

#FranklinTempleton
#SupremeCourt