The Supreme Court on Tuesday ordered Franklin Templeton to disburse Rs 9,122 crore to the unitholders of the six schemes it shut in April last year. It cited redemption pressures and lack of liquidity in the bond market as reasons for closure.
The money will be disbursed in proportion to the respective units they hold, and will have to be done in the next 20 days. The Supreme Court directed SBI Mutual Fund to carry out the disbursement of funds. The bench granted liberty to the litigating parties to approach the court in case of any difficulty in the disbursal of money to the unitholders. The court was hearing an appeal filed by Franklin Templeton against the High Court's order which stopped the fund house from winding up its debt fund schemes without prior consent of the investors.
The court also gave the parties liberty to move applications in case of any difficulty arising out of the process. The lawyer representing Franklin Templeton Trusts Services Limited told the bench that the company would render cooperation with SBI Mutual Fund.
The bench on January 25 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.
The voting with regard to winding up Franklin Templeton's six mutual fund schemes had taken place in the last week of December and it has been approved by the majority of unitholders. The apex court had said that its December 3 last year order by which it had stayed the redemption of payment to unit holders would continue till further order.
The top court was hearing an appeal filed by Franklin Templeton against the High Court's order which stopped the fund house from winding up its debt fund schemes without prior consent of the investors. The Karnataka High Court had earlier said that decision of Franklin Templeton Trustee Services Private Limited to wind up six schemes cannot be implemented unless the consent of the unit holders is obtained.
On Monday, Franklin Templeton Mutual Fund said its six shut schemes have received Rs 14,391 crore from maturities, pre-payments and coupon payments since they were closed down. Franklin Templeton MF said cash available stands at Rs 9,770 crore as of January 29 for these five cash positive schemes, subject to fund running expenses.
According to ET Now, the top court asked the Securities and Exchange Board of India to reply on the modalities of how the funds should be distributed, and if they are to be distributed in one go or staggered.
Last month, Franklin Templeton Mutual Fund said it received the approval of its unit holders to wind up the debt schemes. More than 90% of the unit holders in these six schemes reportedly voted the schemes to be wound up.
The six schemes are Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund. Individually, Franklin India Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund and Franklin India Short Term Income Plan have 65%, 53%, 41%, 27% and 11% of their AUM in cash, respectively.
In a statement, Franklin Templeton said it is pleased the Supreme Court has directed for the funds to be distributed.
"As previously stated, we went ahead with the difficult decision of winding up these schemes because of our firm belief that this was the right decision to preserve value for investors, as evidenced by the generation of cash in these schemes over the last 9 months. We believe the distribution of monies will provide unitholders with much needed liquidity and look forward to working with the Regulator and SBI Mutual Fund to distribute the cash within the period stipulated by the Court," it said.
WIth inputs from agencies