Franklin Templeton Asset Management told the Supreme Court on Monday that it would not launch any new debt scheme until the Securities Appellate Tribunal (SAT) makes a decision on its appeal against market regulator SEBI’s order which barred it from launching such schemes for the next two years and also asked it issue refunds worth ₹512 crore.
The Supreme Court refused to interfere with the SAT’s decision with regard to Franklin Templeton being told to deposit ₹250 crore in an escrow account in connection to its decision to close six debt schemes. It disposed of Sebi’s appeal against the SAT’s stay on its order.
The SAT in an interim order stayed SEBI’s June 7 decision on issuance of fresh mutual fund schemes and asked Franklin Templeton to deposit ₹250 crore in an escrow account instead of ₹512 crore as directed earlier by the market regulator.
The bench comprising Justices SA Nazeer and Krishna Murari took up SEBI’s appeal against the order of the SAT and clarified that it will not interfere with the tribunal’s direction asking the asset management company to deposit ₹250 crore instead of ₹512 crore in the escrow account. The Supreme Court said that it would rather address the issue of permitting Franklin Templeton to launch new debt schemes.
Solicitor general Tushar Mehta who appeared for SEBI said that the appellate tribunal’s order was ‘based on wrong facts and had ignored all laws’. Senior lawyers Harish Salve and Abhishek Manu Singhvi pledged that Franklin Templeton will not launch any new schemes till SAT decides on the case.
The bench took the statement on record and disposed of SEBI’s appeal against SAT.
Franklin Templeton was instructed by SEBI to refund investment management and advisory fees along with interest at the rate of 12% per annum amounting to ₹512.5 crore. Further, Franklin Templeton was also prohibited from launching new debt schemes for two years and a penalty of ₹5 crore was levied on it.
The SAT in its order noted that 21 debt schemes are still being managed by Franklin Templeton and no complaints regarding these schemes have come to the fore. The SAT said that since Franklin Templeton chose to wind up six schemes it does not mean that they should be debarred from launching any new debt schemes. Franklin Templeton in April last year announced that it is shutting its six debt mutual fund schemes citing redemption pressures and lack of liquidity in the bond market.
The schemes — 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 — together had an estimated ₹25,000 crore as assets under management.