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SC asks Franklin Templeton Mutual Fund to disburse Rs 9,122 crore to investors
New Delhi, February 2, 2021
The Supreme Court on Tuesday directed Franklin Templeton Mutual Fund (FTMF) to distribute Rs 9,122 crore among unit-holders of the six schemes that were shut by the mutual fund house in April last year and said the distribution of funds need to be undertaken by the SBI Mutual Fund and completed within 20 days.
The apex court said the unit-holders should be repaid in proportion to their respective share in assets of the scheme and the distribution of funds would be undertaken by the SBI Mutual funds as agreed by both Franklin Templeton Trust and the Securities and Exchange Board of India (SEBI).
Hearing a plea by Franklin Templeton challenging a Karnataka High Court order which restrained winding up of six of its debt schemes without obtaining the consent of its investors by a simple majority, a division Bench of Justice Abdul Nazeer and Justice Sanjeev Khanna said, "We have heard and concluded arguments on the validity of e-voting. The counsels are at ad idem that Rs 9,122 crore, the figure as on January 15, 2021, and subject to provisions on expenses in ordinary cost should be distributed amongst the unit-holders under the six mutual fund schemes in proportion to the respective interest in the assets of the scheme. The exercise will be carried on by SBI Mutual Fund."
The top court asked the Franklin Templeton Trust services and the Asset Management Company to cooperate with SBI Mutual Funds and furnish the entire data and details of the shut debt schemes. It also gave the concerned parties liberty to move applications in case of any difficulty arising out of the process.
Commenting on the development, counsel for CFMA, an investor body, Nithyaesh Natraj said, "The unit-holders finally have something to cheer after about nine months when six open-ended debt schemes were unilaterally and arbitrarily wound up by the Trustees of FTMF citing the strange reason of Covid-19, which purportedly impacted only these six debt schemes of FTMF. I am happy for the unit-holders, but this is only half the battle won."
CFMA has been striving continuously to ensure that the unit-holders do not lose a single rupee of their principal amount invested in these six debt schemes of FTMF. However, for various reasons, the Trustees of FTMF have been avoiding confirming the period of repayment and quantum of loss to the Unit Holders.
On April 23 last year, FTMF shut six debt mutual fund schemes citing redemption pressures and lack of liquidity in the bond market. The schemes - Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund, and Franklin India Income Opportunities Fund - together had an estimated Rs 25,000 crore as assets under management (AUM).
"The six schemes have received total cash flows of Rs 14,391 crore till January 29, 2021, from maturities, coupons, and prepayments since winding up," the fund house has stated.
In a statement, CFMA said the hard-earned and tax paid money of the unit-holders has been invested in regulated debt schemes and not in some chit funds like Rose Valley or PACL.
"It is, therefore, the responsibility of the SEBI to make the Trustees of FTMF legally and morally duty-bound to ensure that the money of the unit-holders is not wiped off, because of bad investment decisions of the FTMF Fund Managers and the entire money is returned to the Unit Holders. If SEBI doesn't act, there would be no difference among the regulated markets and chit funds," it added.