The Supreme Court today ordered the payment of Rs 9,122 crore within 20 days to investors of six Franklin Templeton Mutual Fund Schemes shut down last year during the coronavirus lockdown.
“This money is cash-ready with Franklin Templeton,” said the Supreme Court, directing SBI Mutual Funds, as the intermediaries, to distribute the amount among unit holders of the US-based company.
If there was “any difficulty” in the process, all parties could approach the Supreme Court, the judges said.
The directions came on an appeal by Franklin Templeton challenging a Karnataka High Court order that had restrained it from winding up six of its debt schemes without the consent of its investors by a simple majority.
The money will be distributed to the unit holders in proportion to their interest in the assets of the scheme.
On December 3, the Supreme Court had asked Franklin Templeton Mutual Funds to initiate steps within one week to call a meeting of its unitholders to seek their consent to close the schemes. The judges had observed that the “issue is big and people want a refund”.
The vote on closing down the schemes had taken place in the last week of December and it was approved by a majority of unitholders. On January 18, the top court granted three days for filing of objections to the e-voting.
Franklin Templeton MF, one of India’s most prominent fixed income fund houses, abruptly shut down these schemes in April, at the peak of a nationwide Covid lockdown, citing redemption pressure, severe market dislocation and liquidity crisis.
These 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. The funds had large exposures to higher-yielding, lower-rated credit securities.
The decision had sparked panic withdrawals from other Franklin funds as well as credit funds of other asset managers.
Some investors challenged the decision in court saying their permission should have been sought.
Till November 27, the schemes had received total cash flows of Rs 11,576 crore from maturities, pre-payments and coupon payments since April 24, when they were shut down.