The Delhi High Court has cleared the decks for Franklin Templeton Mutual Fund (MF) to sell shares of Zee Entertainment Enterprises (ZEE) and Dish TV to recover Rs 616 crore worth of dues from the Essel Group.
The shares were pledged with Franklin Templeton as a security cover for debentures of Essel Infraprojects worth Rs 425 crore, which the fund house had subscribed to.
The transaction happened in May 2015. The fund house did not receive the money from the Essel Group when the debentures had come up for maturity on May 22, 2020. This prompted it to invoke the pledge on the shares.
Essel Group had moved the Delhi High Court seeking a stay in the matter citing the poor market conditions due to Covid-19. However, IDBI Trusteeship Services — which is the debenture trustee — argued that the trouble in the case started before Covid-19 and as the trustee, it has powers to invoke the pledge if the contractual obligations aren’t met.
“When absolute discretion lies in law and under the subject contracts with the pawnee (IDBI Trustee) to sell the shares when it likes and as it likes, surely, this Court cannot substitute that discretion with its own discretion,” said Delhi High Court in its judgement.
An email sent to Franklin Templeton remained unanswered. ZEE declined to comment on the matter.
“The company (Essel Group) is definitely exploring legal options and could move the Supreme Court in the matter,” said a legal expert privy to the development.
IDBI Trusteeship Services submitted to the court that any injunction in the matter would be detrimental to the interests of unit holders of Franklin MF. According to a copy of the petition accessed by
ET, IDBI Trusteeship Company held 6.25 crore shares of Dish TV and 43 lakh shares of ZEE. “Debentures constitute a component of the net asset value of a mutual fund… The reduction of the NAV will directly impact the subscribers of these mutual funds, which includes public funds,” said IDBI Trusteeship Services in its petition.
Essel Group entities were represented by senior counsel Harish Salve. IDBI Trusteeship was represented by Vikram Trivedi, managing partner of law firm Manilal Kher Ambalal & Co and senior counsel Neeraj Kishan Kaul.