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SAT order asking Franklin Templeton to deposit Rs 250 cr is 'fair', rules SC

SAT order asking Franklin Templeton to deposit Rs 250 cr is 'fair', rules SC

SC says it won't interfere with the SAT order against SEBI's demand of Rs 512 cr; Franklin Templeton agrees not to launch a new debt scheme till SAT case is closed

SG says Rs 512 crore fine was calculated based on statutory rules, and that setting it aside by SAT is "erroneous" SG says Rs 512 crore fine was calculated based on statutory rules, and that setting it aside by SAT is "erroneous"

The Supreme Court of India on Monday ruled the Securities Appellate Tribunal's (SAT) order, asking Franklin Templeton Asset Management (India) to deposit Rs 250 crore was "fair".

The apex court said it won't interfere with the SAT order against the Securities and Exchange Board of India's (SEBI) demand of Rs 512 crore.

The top court also recorded an undertaking by Franklin Templeton, which agreed not to launch a new debt scheme till the SAT case is closed.

While disposing the petition, the SC said FT will also have to deposit Rs 250 crore in escrow account, as per the SAT order.

During the court hearing, solicitor general Tushar Mehta while appearing for SEBI, said: "The very foundation of fundamental error is wrong. We want them to deposit the amount in an escrow account. The interim order is wrong since only profits can be directed to be returned."

Also read: SAT stays Sebi order; Franklin Templeton gets interim relief

The solicitor general said SAT failed to calculate the actual expenses, taking the amount as gross amount without calculating the asset management firm's expenses.

The solicitor general said based on the statutory rules, Rs 512 crore was calculated, and that setting aside this amount by SAT is "erroneous".

Senior advocate Harish Salve, appearing for Franklin Templeton, said this is the first appeal on facts and law. "We are not saying they have wrongly identified the branch of fees. The whole thing can't be the income. At worse, you can ask for profit."  

Justice Nazeer asked how Rs 250 crore was calculated? Salve said: "Only 50 per cent. Please read para 12." He added: "This is the first appeal on facts and law. The appreciation of facts on which SAT order has been given is wrong." Salve said SEBI misled the court by saying "similar matters are pending".

Notably, the Securities Appellate Tribunal (SAT) had earlier stayed the SEBI's order, whereby the regulator barred the asset management firm from launching any new debt scheme for two years.

In addition, the regulator asked Franklin Templeton to refund investment management and advisory fees to the tune of Rs 512 crore, including interest, collected with respect to its six now shut debt schemes.

Sebi, in its order, found that Franklin Templeton "committed serious lapses/violations with regard to a scheme categorisation (by replicating high-risk strategy across several schemes) and calculation of Macaulay duration."
Serious lapses and violations appeared to be a fallout of the Franklin Templeton AMC's obsession to run "high yield strategies without due regard from the concomitant risk dimensions", the Sebi order said.

Also read: Franklin Templeton MF unitholders to receive Rs 3,303 cr in fifth tranche

Also Read: Franklin Templeton returns Rs 17,777 cr to investors of 6 shuttered schemes

Also Read: Sebi imposes Rs 15 cr fine on Franklin Templeton, 8 others