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Wednesday, December 02, 2020

Karnataka HC order on Templeton schemes: Fund house may move SC

“While we are still in the process of studying the order, basis our initial review, we believe it may be necessary to appeal aspects of the order in the Supreme Court,” Franklin Templeton AMC said in a letter to investors.

By: ENS Economic Bureau | Mumbai | Updated: October 27, 2020 8:30:40 am
Karnataka HC order, Franklin Templeton AMC, Templeton schemes, Fund house, economy news, Indian express newsThe Karnataka HC on Saturday ruled that the trustees of Franklin Templeton must take the consent of unitholders by a simple majority for winding up of the six debt funds.

Franklin Templeton AMC has indicated that it will move the Supreme Court against certain aspects of the Karnataka High Court’s order on the issue of the closure of six credit risk schemes.

“While we are still in the process of studying the order, basis our initial review, we believe it may be necessary to appeal aspects of the order in the Supreme Court,” the fund house said in a letter to investors.

“It will also be our endeavor to seek appropriate directions from the court regarding return of cash of over Rs 5,200 crore currently accumulated in the four cash positive schemes, and with regard to any additional cash we may receive while the matter remains under the consideration of the Court,” it added.

The Karnataka HC on Saturday ruled that the trustees of Franklin Templeton must take the consent of unitholders by a simple majority for winding up of the six debt funds.

However, the high court has stayed the operation of this order for six weeks and clarified that no redemptions, borrowings or creating liability in the said six schemes can be initiated by the fund house.

In its order, the HC also said as a watchdog, the Securities and Exchange Board of India (Sebi) was expected to play a very proactive role by questioning the AMC, trustees and sponsor about the compliances with the provisions of the mutual fund regulations.

The unitholders of the (six) schemes will be justified in their criticism that Sebi was a silent spectator, the high court added.

It said Sebi did not respond to the email dated April 14, 2020 sent by the AMC and the regulator was not even possessing a copy of the resolution dated April 23, 2020 passed by the Board of Directors of the Trustees providing for winding up.

A week ago, Franklin Templeton had said its six shut schemes received Rs 8,302 crore from maturities, pre-payments and coupon payments since closing down in April.

Part of this amount has been utilised to repay borrowings and post repayment, Rs 5,116 crore is available for distribution to unitholders in four cash positive schemes — Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund, Franklin India Low Duration Fund, Franklin India Credit Risk Fund — subject to fund running expenses.

The fund house had closed six debt mutual fund schemes — in which close to Rs 28,000 crore of investor money is stuck — on April 23, citing redemption pressures and lack of liquidity in the bond market.

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