SC restrains Franklin Templeton from launching debt schemes till SAT decides on Sebi decision

By: |
July 27, 2021 12:45 AM

While Solicitor General Tushar Mehta, appearing for the market regulator, said appellate tribunal order was "based upon wrong facts and had ignored all laws," senior counsel Harish Salve and Abhishek Manu Singhvi, appearing for Franklin, pledged that the company will not launch any new schemes till the tribunal decided the case.

It also claimed that the lapses were a fallout of Franklin Templeton's obsession to run high yield strategies, which allegedly disregarded the concomitant risk dimensions.It also claimed that the lapses were a fallout of Franklin Templeton's obsession to run high yield strategies, which allegedly disregarded the concomitant risk dimensions.

The Supreme Court on Monday restrained Franklin Templeton Asset Management from launching any new debt fund schemes till the issue is decided by the Securities Appellate Tribunal. A bench led by Justice SA Nazeer passed the order after lawyers appearing for Franklin Templeton Assets Management India assured that the fund house will not launch any fresh debt scheme till the Securities Appellate Tribunal decided the validity of the Sebi’s decision to bar it from launching any new debt scheme for two years. The apex court refused to interfere with a part of the SAT’s order dealing with depositing of 50% of the Rs 562-crore by Franklin Templeton in the escrow account. It asked the tribunal to decide the case expeditiously.

While Solicitor General Tushar Mehta, appearing for the market regulator, said appellate tribunal order was “based upon wrong facts and had ignored all laws,” senior counsel Harish Salve and Abhishek Manu Singhvi, appearing for Franklin, pledged that the company will not launch any new schemes till the tribunal decided the case.

In another appeal by Sebi against Franklin Asset Management Director Vivek Kudva and his wife Roopa, the bench also recorded an undertaking of their lawyer, senior counsel Darius Khambata that they will not deal in securities market till the disposal of the case before the tribunal.

The order came on two appeals by Sebi against the June 28 order of SAT which stayed its decision to bar Franklin Templeton Asset Management (India) from launching new debt schemes for two years and had asked the fund house to refund a little over Rs 512 crore and pay a penalty of Rs 5 crore.

On June 7, Sebi had directed the fund house to “disgorge investment management and advisory fees” of Rs 512 crore and refund the amount to the six debt schemes that were wound up on April 23 last year in the wake of the coronavirus-induced lockdown, besides barring the company from launching new schemes.

Sebi had held that Franklin Templeton committed serious lapses with regard to scheme categorisation, alleging replication of high-risk strategy across several schemes. It also claimed that the lapses were a fallout of Franklin Templeton’s obsession to run high yield strategies, which allegedly disregarded the concomitant risk dimensions.

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