COURTESY HT FEB 3
SC tells Franklin Templeton to pay investors ₹9,122cr
Utkarsh Anand
letters@hindustantimes.com
New Delhi : Unitholders of the six wound-up mutual fund schemes of Franklin Templeton will soon get a part of their money back.
The Supreme Court on Tuesday directed Franklin Templeton to disburse ₹9,122 crore to the unitholders of the six schemes shut in April within 20 days. Five out of the six wound-up schemes collectively held ₹9,770 crore as of January 29. The sixth was not cash-positive.
An SC bench of justices SA Nazeer and Sanjiv Khanna entrusted to SBI Mutual Fund, the responsibility of the distribution in proportion to the units held by the unitholders in these schemes. The bench directed the mutual fund house to release the funds within 20 days.
Senior advocate Harish Salve and Abhishek Manu Singhvi, who represented Franklin Templeton, and SEBI’s counsel P Venugopal agreed with appointment of SBI Mutual Fund for regulating the disbursement. All other counsel, appearing for the investors and others also agreed.
Fixing the matter for a hearing after three weeks, the bench gave liberty to all the parties to seek a clarification from the court if any issue crops up regarding the distribution of money.
Franklin Templeton MF shut six debt mutual fund schemes in April, citing redemption pressures and lack of liquidity in the bond market.
Around 300,000 investors were affected by the winding-up these debt mutual fund schemes. Their total investment was around ₹26,000 crore.
Ruling on a clutch of petitions against this decision, the Karnataka High Court in October declined to interfere with the winding up decision but ordered that the consent of unit holders was a must in terms of the relevant regulations.
Franklin Templeton challenged this order before the Supreme Court in an appeal. Last month, the SC permitted Franklin Templeton Trustee Services to hold a meeting with unitholders of the six debt schemes and conduct an e-vote to obtain approval for the winding up, something it should have done in April. SEBI was asked to appoint an observer to oversee the e-voting process.
The observer later submitted in his report before the bench, that an “overwhelming majority” of unitholders voted in favour of the move.
Last week, the court said it would examine SEBI regulations governing winding up after determining the procedure to distribute the money to the unitholders of the six wound-up schemes. This is being watched closely because it could set a precedent on how funds can wind up, and whether they can do so without investor approval.
At the time, Franklin Templeton informed the bench that five of these six schemes were now cash positive, with the cash available for disbursement at over ₹9,000 crore as of January 15.
Franklin India Low Duration Fund (65% cash), Franklin India Ultra Short Bond Fund (53% ), Franklin India Dynamic Accrual Fund (41% cash), Franklin India Credit Risk Fund (25% cash) and Franklin India Short Term Income Plan (11% cash) are the cash-positive schemes. Unitholders of Franklin India Income Opportunities Fund (FIIOF), which is not yet cash-positive, will have to, however, wait for their dues till the borrowings are fully repaid.
On Monday, the fund house issued a statement that its six shut schemes have received ₹14,391 crore from maturities, pre-payments and coupon payments till January 29 since their closing down in April.
It added cash available stands at ₹9,770 crore as of January 29 for the five cash positive schemes, subject to fund running expenses. The balance ₹4,621 crore has been used to repay borrowings and interest of the six schemes.