No new debt scheme till SAT disposes appeal, Franklin Templeton to SC

The Supreme Court on Monday recorded that Franklin Templeton Asset Management India Pvt Ltd will not launch any new debt scheme till the disposal of its pending appeal before Securities Appellate Tribunal (SAT).

In June this year, the SEBI had directed Franklin Templeton to refund investment management and advisory fees to the tune of Rs 512 crore, including interest, collected with respect to its six debt schemes which were shut down last year. The SAT had, however, found the SEBI’s penalty on Franklin Templeton as “excessive”, for not accounting the expenses borne by the fund house on managing the six wound-up schemes and directed it to deposit Rs 250 crore in an escrow account till the case is heard and disposed.

On Monday, a bench comprising Justices Abdul Nazeer and Krishna Murari took on record a submission made by the fund house that it would not launch any new debt scheme till the pendency of the appeal before SAT.

The bench, however, refused to interfere in the other part of the order, which directed the Franklin Templeton to pay Rs 250 crore against demand of Rs 512 crore, and granted four weeks to the petitioner to file their reply before the tribunal.

“We request the tribunal to dispose of the main matter as expeditiously as possible,” it said.

As Solicitor General Tushar Mehta, representing the SEBI, submitted that Rs 512 crore was calculated based upon the statutory dues, the bench asked Franklin Templeton’s counsel as to how Rs 512 crore was reduced to Rs 250 crore, by the interim order of SAT. The counsel replied it is going to be heard and the company is not going anywhere.

The bench told Mehta, who had objected to the SAT reducing the amount to half, that it is a first appeal and normally in a money decree, the normal thing is to pay 50 per cent.

It told Franklin Templeton’s counsel that he knows what had happened to their 6 schemes. “We are still struggling with those schemes,” it noted.

As the counsel replied: “Between today and 31st, no scheme will be launched”, the bench responded: “Can we record that? Because we are not worried about Rs 250 or 500 crore. Public can’t be cheated and public should not be cheated.”

Senior counsel A.M. Singhvi and Harish Salve agreed that their statement can be recorded that no new scheme will be launched until disposal of appeal. Recently, the top court held that consent of majority unitholders was necessary for winding up of debt schemes after the publication of notices.

The market regulator had also barred Franklin Templeton from launching any new debt schemes for a period of two years. However, the SAT had set aside this order. SEBI moved the top court challenging SAT’s directions.