The Supreme Court on Friday passed an order dismissing the objections raised by some unitholders of the six Franklin Templeton mutual fund schemes that are being wound up. The fund-house had announced the winding up decision for the 6 debt funds in Apr. 2020.
The court judgement is important because from Monday i.e. February 15, accumulated distributable cash proceeds of Rs 9,122 crore will be returned to unitholders of 5 out of the 6 schemes. Disbursal to unitholders would be possible only when the court accepted that the six schemes should be wound up. The schemes have been shut for redemptions for about 10 months.
The Court also upheld the results of the e-voting, done in the last week of Dec-2020, to seek approval of the unitholders, for or against the winding up.
“…in view of the aforesaid discussion, we hold that for the purpose of clause (c) to Regulation 18 (15), consent of the unitholders would mean consent by majority of the unitholders who have participated in the poll, and not consent of majority of all the unitholders of the scheme. In view of the findings and reasons stated above, we reject the objections to poll results and hold that the unitholders of the six schemes have given their consent by majority to windup the six schemes,” reads the judgement passed by the Bench of Justices S Abdul Nazeer and Sanjiv Khanna.
The objecting unitholders’ primary grievances were related to allegations of gross mismanagement, failure and dereliction of duty by the asset management company (AMC) and Franklin Templeton Trustee Services Private Limited (trustees); violation of the SEBI Act; Mutual Fund Regulations; SEBI harmonization norms; investment horizon profiles; manipulation of Net Asset Value (NAV); disgorgement of wrongful payments etc. In particular, it is alleged that more than Rs 15,000 crore were withdrawn from the six schemes two weeks prior to the decision for winding up. Objecting unitholders submitted that a finding of fraud, on the part of the trustees and AMC, would entitle them to restitution.
The 15 objecting unitholders are Amruta Garg, Areez Khambatta, Persis Khambatta, Khambatta Family Trust, Sanyam Jain, KAJ Associates, Sarika Mittal, Ultra Walls & Floors, Aakansha Maheshwari, Priya Menghnani, Varnika Menghnani, Sriram Gantasala, Ratnajit Bhattacharjee, Aarti Jain and Kiran Rama, who had filed writ petitions. The six schemes put together as on 3rd December, 2020 had 3,15,600 unitholders.
The six schemes of Franklin Templeton MF mentioned above 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.
Franklin MF to pay back Rs 9,122 cr to debt fund investors in the week of Feb 15
Franklin debt funds wind up: NAV in 5 out of 6 schemes higher since April