The regulatory body also directed the mutual fund to mention clearly in its letter to the unitholders that the decision of the Bombay High Court in the matter of pricing in the case of conversion of the close ended scheme into open ended would be final. As per the SEBI directive, if majority of unitholders prefer redemption, then CMF will have to redeem the units at the promised price.

In light of the recent controversy over the SEBI permission to Canbank Mutual Fund to covert its Cantriple scheme into open ended fund, the SEBI advised the investors to wait for the decision of the court and apply their mind while replying to the letter of the mutual fund. The SEBIhad received some complaints from investors who suggested that the SEBI should not have permitted CMF to convert its Cantriple scheme from close ended to an open-ended scheme. ``The SEBI should have directed Canbank Mutual Fund to honour the commitment of paying three times of the face value. While launching the scheme, CMF had promised to triple the return. But now CMF is ready to redeem the units only at the net asset value (NAV),'' investors had complained.

CMF had last week offered redemption of Cantriple scheme at the NAV-based price. The scheme's NAV as on June 24 stood at Rs 17.43. The scheme had a capital base of Rs 285.65. If it pays the promised amount of triple return, CMF will have to pay a whopping sum of Rs 857 crore. On the other hand, CMF needs to pay only Rs 497 crore. This means CMF can save at least Rs 357 crore by not paying the promised return.

On the other hand, Canbank Mutual Fund approached the SEBI and argued that under the law, they did not require formal permission from the SEBIto convert the scheme into an open-ended scheme. Canbank Mutual Fund also contended before the SEBI that there was no commitment of paying three times the face value of the units. ``There was only an indication in this regard in the offer document,'' it said.

Before the SEBI could look into the matter and take a decision, an investor had moved the Mumbai High Court. Since the court has been seized of the very issue and the same is pending before the high court, the SEBI has not taken any decision on the redemption price at this stage.