FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE LIMITED AND ANOTHER versus AMRUTA GARG AND OTHERS ETC.

Citation: [2022] 6 S.C.R. 880 · Decided: 12-08-2022 · Supreme Court of India · Bench: S. ABDUL NAZEER · Disposal: Dismissed

Judgment (excerpt)

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880
SUPREME COURT REPORTS
[2022] 6 S.C.R.
FRANKLIN TEMPLETON TRUSTEE SERVICES PRIVATE
LIMITED AND ANOTHER
v.
AMRUTA GARG AND OTHERS ETC.
I. A. NO. 53453 of 2022
in
(Civil Appeal Nos. 498-501 of 2021)
AUGUST 12, 2022
[S. ABDUL NAZEER AND SANJIV KHANNA, JJ.]
Security and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 52 – Applicability – Regulation 52,
which relates to and permits deduction of expenses including
commission payable to the distributor, is applicable when the scheme
is in operation, and not post the decision of the trustees in terms of
Regulation 39(2)(a) read with Regulation 39(3), when, upon
publication of notices, the ceasure mandate of Regulation 40 is
triggered.
Security and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulations 40 and 52 – Held: Regulations 40
and 52 need to be read harmoniously – When read together,
Regulation 52, authorising and specifying the limit of the fees and
expenses payable to the asset management company, would apply
only when the scheme is in operation, and not after publication of
the notice under Clause (b) to sub-regulation 3 to Regulation 39
resulting in ceasure of any business activities in respect of the scheme
to be wound up.
Security and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 41 – Applicability – Regulation 41,
which deals with the procedure and manner of winding up, applies
once the notice under Regulation 39(3)(b) is published and the
unitholders’ approval under Regulation 18(15)(c) of the Regulations
is received.
Security and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 41 – Claim for entitlement to
[2022] 6 S.C.R. 880
880
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payment of commission under clause (b) to sub-regulation 2 to
Regulation 41 – Held: In a given case, some of the recurring expenses
mentioned in clause (b) to Regulation 52(4) like audit fee, insurance
premium, cost of statutory advertisements, etc., would be covered
and would satisfy the requirement of clause (b) to Regulation 41(2)
– However, if and only when they fall under and meet the
requirement of the expenses connected with the winding up can
they be allowed under Regulation 41(2)(b) – Commission payable
to the mutual fund distributers is certainly not an expense connected
with the winding up of the scheme.
Security and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 39(2)(b) and  52(4) (b) – Claim for
commission payment by mutual fund distributors as an amount ‘due
and payable under the scheme’ , on ground that it was an amount
or payment that had accrued before the publication of notices under
Regulation 39(2)(b), but was not paid as it was payable in future –
Held: Not tenable – The expression ‘due and payable’ has to be
interpreted with reference to the context in which the words appear
– In the context of the Regulations in question, the expression refers
to the present liabilities which may be payable in praesenti or in
future – There must be an existing obligation to pay though the
appointed date of payment may not have arrived – Clause (b) to
Regulation 52(4) refers to recurring expenses, that is, expenses which
will recur from time to time – It does not refer to one-time payment
which is deferred – The recurring liability is not a present liability,
but an obligation which, on satisfaction of certain conditions, may
accrue in future – The right to claim commission may not accrue
and become due and payable – On and after publication of the
winding up notice in terms of Regulation 39(3)(b), the trustees and
the asset management company cannot claim any payment on account
of recurring expenses under clause (b) to sub- regulation (4) to
Regulation 52 – Words and Phrases – Expression ‘due and payable’.
Security and Exchange Board of India (Mutual Funds)
Regulations, 1996 – Regulation 39(3)(b) and 41 – On publication
of notices in terms of Regulation 39(3)(b), the business of the mutual
fund comes to a stop and therefore, on and from that date the trail
commission is not payable, as the scheme is to be wound up and the
money is to be collected and paid to the unitholders, in terms of and
FRANKLIN TEMPLETON TRUSTEE SERVICES PVT. LTD. v.
AMRUTA GARG AND OTHERS ETC.
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SUPREME COURT REPORTS
[2022] 6 S.C.R.
as per the mandate of Regulation 41 – Even if a distributor renders
some services to the unitholders after publication of the notice under
Regulation 39(3)(b), it 

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