Franklin Barred From Shutting India Funds Until Audit Shared

(Bloomberg) -- An Indian court barred Franklin Templeton from liquidating the debt funds it abruptly shut in April, until it disclosed the findings of its forensic audit amid allegations of fraud, prolonging the unitholders’ wait to recoup 200 billion rupees ($2.6 billion) invested in the plans.

The High Court of Gujarat on Monday restricted Franklin from conducting e-voting seeking approval from investors to wind up the six shuttered funds, according to the court documents. After the order, the asset manager suspended the voting that was scheduled to begin Tuesday.

“It has been rightly submitted” to the court that “amid the allegation of mismanagement of funds and fraud, unitholders would not be having the opportunity of informed decision making while casting the e-votes for the option given by the applicants,” the order said.

The hurdles facing the country’s biggest-ever forced fund closure means about 300,000 unitholders may have to wait longer to recoup the money invested in the six frozen funds. The Securities and Exchange Board of India asked Franklin Templeton last month to focus on returning investors their money as soon as possible.

The market regulator had also asked Franklin for the forensic audit report, according to the court order.

“We are in the process of seeking appropriate relief from the appellate judiciary at the earliest with an aim to enable monetization of assets and distribution of proceeds to unitholders,” a spokesman for the asset manager said in an email.

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