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Supreme Court today, while disposing off pending appeals in Franklin Templeton directed that, no new schemes shall be launched by the Franklin Templeton Asset Management Company until the disposal of Appeal before the SEBI. Court dismissed the contention as to deposit of Rs 250 Crore and granted 4 week time to file reply before the SEBI.  

A Division Bench of Justice S. Abdul Nazeer and Justice Krishna Murari, while hearing the matter today, said,

“Senior Counsel Harish Salve and Dr Singhvi submit that Respondent Franklin Templeton Asset Management India limited will not launch any new debt scheme, till the disposal of the appeal before SEBI, Mumbai.

The submission of the learned senior counsel is placed on record.

However we are not inclined to interfere in the other part of the order, to deposit of 250 crore.  

Appeals are accordingly disposed of. Four weeks additional time granted to file reply before SEBI.

Main matter to be disposed as expeditiously as possible.”

Securities Appellate Tribunal had asked Franklin Templeton Asset Management to deposit Rs 250 crore.

It was the submission of the learned SGI that SAT had failed to calculate the actual expenses and also follow circulars issued by the SEBI.

SEBI had recorded that FTAM (India) “committed serious lapses with regard to a scheme categorization (by replicating high-risk strategy across several schemes) and calculation of Macaulay duration."

On February 12, 2021, A Division Bench of Justice S. Abdul Nazeer and Justice Sanjiv Khanna dismissed all objections to the winding up of six mutual fund schemes floated by Franklin Templeton and upheld the results of e-voting.  The bench, precisely said, 

“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 all the unitholders of the scheme… 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 said schemes.”

On July 14, 2021, Court categorically said, Trustees are bound to notices disclosing reasons for winding up of any scheme and that comparison of Unit Holders with Creditors, is far-fetched.

“It cannot be accepted that the trustees under clause (a) to Regulation 39(2) have been given absolute and unbridled power to wind up a scheme.

Language of clause (a) to Regulation 39(2) states that the trustees must form an opinion on the happening of any event which requires the scheme to be wound up,” the Order read.

Case Title: SEBI v. Franklin Templeton Asset Management (India) Ltd.