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MUMBAI : The Supreme Court today expressed satisfaction with the payment of money in the Franklin Templeton India case adding that it had earlier apprehended that there would be some shortfall of money.
The court led by Justice Sanjiv Khanna will now hear the matter in the second week of April.
In the matter, the counsel for Franklin Templeton informed the apex court on record that until now nearly ₹26,098 crores was distribute across the 6 debt schemes of the company and there is still ₹27,354 crores available with the company.
Franklin Templeton India came under the scanner after the fund house shut its six mutual fund debt schemes in April 2020, citing redemption pressure and lack of liquidity in the bond market. This led to multiple legal cases against the fund house.
The six debt schemes include—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.
Independently, SEBI then launched its own inquiry into the events leading up to the scheme's wind-up and whether Franklin Templeton MF administered the schemes in line with the existing regulations after unitholders lodged complaints.
Sebi alleged that the fund house had “committed serious lapses/violations with regard to scheme categorization .
As per the regulator, serious lapses and violations appear to be a fallout of the Franklin Templeton AMC’s obsession to run high yield strategies without due regard from the concomitant risk dimensions.
In Sebi’s June, 2021 order required the fund house to credit the six wound-up debt schemes with investment management and advisory fees earned between June 4, 2018 and April 23, 2020. A total amount came upto ₹512 crore .
For the next two years, the market regulator barred the fund house from launching any new debt schemes.
The Securities Appellate Tribunal, on the other hand, had set aside this order. The tribunal asked the fund house to deposit 250 crores instead of the 512 crores as asked by the markets regulator.
In its order SAT noted that 21 debt schemes are still being managed by Franklin Templeton Mutual Fund and no complaint of these schemes have come to the fore.
This prompted SEBI to move the Supreme Court against the SAT order.
The Supreme Court ruled in its earlier verdict stated that trustees must obtain majority unitholder consent before closing mutual fund schemes after posting a notice detailing the reasons for their decision to wind up debt schemes.
The Supreme Court, in interpreting several clauses of the Securities and Exchange Board of India (Sebi) Regulations on mutual fund winding up, decided that the markets regulator has the ability to intervene if the trustees of such schemes break the rules.
Pratyush Miglani, Managing Partner, Miglani Varma & Co - Advocates, Solicitors and Consultants said
"The disbursement of payments by Franklin Templeton to unitholders of its six shuttered schemes has been consistent and satisfactory, so far. Crucially, the Supreme Court has held that the consent of majority unitholders is a must, should the trustees of a debt scheme decide to wind it up. The decision came in an appeal filed by Franklin Templeton itself, against a Karnataka High Court judgment which had held the same, when FT decided to wind up six of its schemes. The amendment in the regulations incorporates this mandate of the Supreme Court, further safeguarding the interest of mutual fund investors in India."
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