In the Franklin Templeton case hearing, the Karnataka High court’s division bench led by Hon’ble Chief Justice Abhay S Oka and Hon’ble Justice Ashok S Kinagi brought to attention of SEBI its failure, with regards to certain duties that SEBI ought to perform but did not. Remarking on the same, the HC reminded SEBI of its very primary objective that is protecting the investors’ interests.
As per the facts, SEBI was not in possession of copy of resolution, it failed to reply to the letters seeking its permission for winding up the schemes. The Karnataka High Court restricted Franklin Templeton and ruled that the latter cannot, without obtaining investors’ consent wind up the debt fund schemes and while all this, SEBI could have been more vigilant and proactive.
The bench observed that:
As stated in the statement of objects and reason, the confidence of investors in capital market can be sustained by ensuring that the interest of the investors is protected. The very Scheme of the SEBI Act suggests that SEBI has to act as a watchdog to protect the interests of the investors.
Further that SEBI should have been prompt when it was the first case of winding up under regulation 39(2) a. The Karnataka High Court issued directions to the SEBI again, to take action in accordance with Regulation 65.