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SC orders Franklin Templeton to pay Rs 9,122 crore to 6 debt schemes' unitholders

SC orders Franklin Templeton to pay Rs 9,122 crore to 6 debt schemes' unitholders

The Supreme Court has entrusted State Bank of India Mutual Fund (SBI MF) to oversee distribution of funds to unitholders of six shut debt schemes

Franklin Templeton to distribute funds within in 20 days Franklin Templeton to distribute funds within in 20 days

In a major relief to unitholders of six debt schemes of Franklin Templeton Mutual Fund, the Supreme Court on Tuesday asked the company to return Rs 9,122 crore to investors within 20 days from cash-positive schemes. As per the court order, the disbursal of fund would be done in proportion to unitholders' interest in the assets.

A bench of Justices S A Nazeer and Sanjiv Khanna has entrusted State Bank of India Mutual Fund (SBI MF) to oversee the distribution of these funds. However, there is no clarity whether SBI MF will be given the authorisation for selling the debt schemes during the winding-up process.

Franklin Templeton MF closed six debt mutual fund schemes on April 23, 2020 citing redemption pressures and lack of liquidity in the bond market in wake of COVID-19 pandemic. 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).  

Also Read: Franklin Templeton gets unitholders' nod to wind up six debt schemes

Till January 29, 2021 these six shut schemes received total cash flows of Rs 14,391 crore from maturities, pre-payments and coupon payments since their closing down on April 24 last year. The cash available stands at Rs 9,770 crore as of January 29 for these cash positive schemes, barring Franklin India Income Opportunities Fund, subject to fund running expenses. The balance Rs 4,621 crore has been used to repay borrowings and interest thereon of the six schemes.

In the last hearing on January 2021, the SC had said it would first deal with the issues related to objection to the e-voting process for winding up of the six mutual fund schemes and distribution of money to the unitholders.

Also Read: Franklin Templeton shut schemes receive Rs 13,120 crore till Dec 31

Last month, Franklin Templeton MF has received consent of unitholders for winding up of its six debt schemes, with more than 90 per cent of them voted for liquidation process.  The e-voting took place after Supreme Court asked Franklin Templeton MF to call a meeting of unit holders to seek their consent for closure of six mutual fund scheme. Market regulator SEBI had appointed Taruvai Subayya Krishnamurthy, former chief election commissioner of India, as the observer for e-voting.

With PTI inputs