6th HPNLU INTRA MOOT COURT COMPETITION, 2023

TC-611

6th HPNLU INTRA MOOT COURT COMPETITION, 2023

BEFORE THE HON’BLE FEDERAL COURT OF REPUBLIC OF DAKSHIN

PRADESH

U/A 32 OF THE CONSTITUTION OF THE REPUBLIC OF DAKSHIN PRADESH

IN THE MATTER OF

WRIT JURISICTION
W. P. No. … OF 2023

Investor Group (IG) 1…………………………………….…….PETITIONERS

V.

Union of Republic of Dakshin Pradesh…………………...…RESPONDENTS

CLUBBED WITH
WRIT JURISDICTION
W.P. No. …OF 2023

Investor Group (IG) 2……………………………………….…PETITIONERS

V.

Union of Republic of Dakshin Pradesh………………..….…RESPONDENTS

UPON SUBMISSION TO THE HON’BLE

JUSTICES OF THE HON’BLE FEDERAL COURT

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Contents
LIST OF ABBREVIATIONS ......................................................................................................................................... 3
INDEX OF AUTHORITIES .......................................................................................................................................... 4
STATEMENT OF JURISDICTION ............................................................................................................................... 6
STATEMENT OF FACTS ............................................................................................................................................ 7
ISSUES FOR CONSIDERATION.................................................................................................................................. 8
SUMMARY OF ARGUMENTS ................................................................................................................................... 8
ISSUE [01] Whether the Turquoise Research Report amounts to a violation of the fundamental right of
freedom to carry on business, trade, or profession of the Armani Group? ......................................................... 10
I.I The ambit of the §19(1) of the COI in the concerned case with its restriction ....................................... 10
I.II No Fundamental Right is infringed of the Armani Group ........................................................................ 12
I.III No business is affected by the Turquoise............................................................................................ 13
ISSUE [2] Whether the Turquoise Research Report amounts to a violation of the national interests of the
country of Dakshin Pradesh? ................................................................................................................................ 14
II.I The Turquoise Research Report is mere opinion, thereby not violating National Interest. .................... 14
II.II The turquoise research report is in the interest of the investors. ...................................................... 15
ISSUE [3] Whether the State of Dakshin Pradesh has failed in its duty and obligation to protect and safeguard
the interests of investors of Dakshin Pradesh? .................................................................................................... 17
III.I The SEBI has appropriately acted as a watchdog to protect Investors’ Interests. .............................. 18
III.II The short-selling practices are legal; therefore, State does not fail in its duty and obligation to
protect and safeguard the interests of investors. ............................................................................................ 19
PRAYER ................................................................................................................................................................. 22

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LIST OF ABBREVIATIONS

Acc. According

AIR All India Report

& And

Anr. Another

Art. Article

Const. Constitution

Govt. Government

Hon’ble Honorable

Ltd. Limited

LoU Letter of Understanding

No. Number

Ors. Others

Pvt. Private

S. Section

SEBI Securities Exchange Board of India

SC Supreme Court

SCC Supreme Court Cases

u/a Under Article

u/s Under Section

UOI Union Of India

v./vs Versus

COI Constitution of India

FR Fundamental Right

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INDEX OF AUTHORITIES

STATUES
1. The Constitution of India, 1950.
2. The Securities and Exchange Board of India Act, 1992.
3. The Securities Contracts (Regulation) Act, 1956.

LIST OF CASES
1. Sastri C.J. in Madras v. V.G. Row, (1952) S.C.R. 597, 607, (’52) A.SC. 196.
2. Lochner v. New York, (1904) 198 U.S. 45, 49 L.ed.937.
3. Romesh Thapar v. State of Madras, 1950 AIR 124; 1950 SCR 594
4. S. Rangarajan v. P. Jagjivan Ram, 1989 SCR (2) 204; 1989 SCC (2) 574
5. Sastri C.J. in Madras v. V.G. Row, (1952) S.C.R. 597, 607, (’52) A.SC. 196.
6. Lochner v. New York, (1904) 198 U.S. 45, 49 L.ed.937.
7. Romesh Thapar v. State of Madras, 1950 AIR 124; 1950 SCR 594
8. S. Rangarajan v. P. Jagjivan Ram, 1989 SCR (2) 204; 1989 SCC (2) 574
9. Indian Express Newspaper (Bombay) Pvt. Ltd. v. Union of India, AIR 1986 SC 515.
10. Shreya Singhal v. Union of India, AIR 2015 SC 1523.
11. Romesh Thapar v. State of Madras, AIR 1950 SC 124.
12. S. Rangarajan v. P. Jagjivan Ram, (1989) 2 SCC 574
13. SEC v. Texas Gulf Sulphur Co., 401 F.2d 833.
14. Re China Cast Education Corp. Securities Litigation, 809 F.3d 479.
15. United States v. Skilling, 561 U.S. 358 (2010)
16. Virginia Bankshares, Inc. v. Sandberg, 1991 SCC OnLine US SC 125.
17. SEC v. Pirate Investor LLC, 580 F.3d 233 (2009).
18. Venture Global Engineering v. Satyam Computer Services Ltd. & Anr., 2010 SCC OnLine
SC 864.
19. Sahara India Real Estate Corp. Ltd. & Ors. v. SEBI, (2013) 1 SCC 1.
20. SEBI v. L&T Finance Holdings Ltd., 2016 SCC OnLine SEBI 323.
21. Vijay Kumar Bansal v. SEBI, 2010 SCC OnLine SEBI 154.
22. SEBI v. Kanaiyalal Baldevbhai Patel, (2017) 15 SCC 1.
23. SEBI v. Shri Shailendra Kumar Agarwal, 2012 SCCOnLine CIC 15165.
24. Vijay Kothari v. SEBI, 2016 SCC OnLine SAT 274.
25. Shreya Singhal v. Union of India, AIR 2015 SC 1523.

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26. Romesh Thapar v. State of Madras, AIR 1950 SC 124.

27. S. Rangarajan v. P. Jagjivan Ram, (1989) 2 SCC 574
28. SEC v. Texas Gulf Sulphur Co., 401 F.2d 833.
29. Re China Cast Education Corp. Securities Litigation, 809 F.3d 479.
30. United States v. Skilling, 561 U.S. 358 (2010)
31. Virginia Bankshares, Inc. v. Sandberg, 1991 SCC OnLine US SC 125.
32. SEC v. Pirate Investor LLC, 580 F.3d 233 (2009).
33. Venture Global Engineering v. Satyam Computer Services Ltd. & Anr., 2010 SCC OnLine
SC 864.
34. Sahara India Real Estate Corp. Ltd. & Ors. v. SEBI, (2013) 1 SCC 1.
35. SEBI v. L&T Finance Holdings Ltd., 2016 SCC OnLine SEBI 323.
36. Vijay Kumar Bansal v. SEBI, 2010 SCC OnLine SEBI 154.
37. SEBI v. Kanaiyalal Baldevbhai Patel, (2017) 15 SCC 1.
38. SEBI v. Shri Shailendra Kumar Agarwal, 2012 SCCOnLine CIC 15165.
39. Vijay Kothari v. SEBI, 2016 SCC OnLine SAT 274.

WEBSITES
1. www.lexisnexis.co.in
2. www.manupatra.com

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STATEMENT OF JURISDICTION

The Petitioner approached the Hon’ble Court under Article 32 of the Constitution. The
petitioner (IG1) has approached this hon’ble court for issuance of directions in the case of
allegations alleged by the Turquoise Research Report. The petitioner (IG2) has asked to
register FIR against the European Founder of Turquoise Research.

The Respondent maintains that the charges filed by the Petitioner are not justified and no
violation of rights has taken place. The present memorandum sets forth the facts, contentions,
and arguments in the present case.

The Respondents have appeared before this Hon'ble Court in pursuance of the notice issued
by the court in reference to the appeal made by the petitioners via the Writ Petition as per
Article 32 of the Constitution of the Republic of Dakshin Pradesh, it is requested before this
Hon’ble Court to hear the side of the respondents, also, as per the principles of Natural Justice.

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STATEMENT OF FACTS

Republic of Dakshin Pradesh: A Quick Glance

The country is situated in South Asia being 5th largest country with heavy reliance (more than
60%) on agricultural sector. The country got independent from Maritania around 70 years ago.
The country draws inspiration from various countries and declares itself as sovereign, socialist,
secular, democratic republic assuring citizens justice, equality, and liberty.
Armani Group
Post 1970s (LPG era) several MNCs mushroomed and Armani Group was one such
conglomerate with Armani Enterprise as flagship company. The group is engaged in wide
variety of services ranging from Port Management to Food Processing Units.
Market Capitalization of Armani Enterprise
In 2020, it crossed $100 bn mark and in 2022, it crossed $200 bn. In December 2022, it crossed
$280 bn. The corporate debt amounted to $30 bn in 2022. The 2023 witnessed steep decline in
the share.
Turquoise Research Report
The decline was precipitated by the report and further alleged that companies manipulated its
share prices, failed to disclose transactions with related parties, and violated securities laws. It
is alleged that Turquoise has taken short position in Armani Group. The Armani Group
subsequently lost $100 bn after the allegations of fraud and manipulations. The report further
alleges that Armani group is in violation of Rule 19A of Securities (Regulation) Rules by
controlling more than 75% of the shares of public list. Therefore, a SIT is demanded by the
Turquoise Research to investigate the fraud.
Investor Groups
The IG 1 filed petitions inter alia seeking the issuance of directions to the Union of Dakshin
Pradesh and the Union Ministry of Home Affairs to constitute a committee headed by a retired
judge of the Federal Court to investigate the allegations. While IG 2 have asked to register an
FIR against Mr. Clive Loyd (the European founder of Turquoise Research) and his associates.
FEBDP
The FEBDP has also placed on record a brief note on the regulatory mechanisms and
frameworks in place for the protection of investors and the regulatory framework
governing short selling.

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ISSUES FOR CONSIDERATION

ISSUE 01. Whether the Turquoise Research Report amounts to a violation of the fundamental
right of freedom to carry on business, trade, or profession of the Armani Group?

ISSUE 02. Whether the Turquoise Research Report amounts to a violation of the national
interests of the country of Dakshin Pradesh?

ISSUE 03. Whether the State of Dakshin Pradesh has failed in its duty and obligation to protect
and safeguard the interests of investors of Dakshin Pradesh?

SUMMARY OF ARGUMENTS

[1] Whether the Turquoise Research Report amounts to a violation of the fundamental
right of freedom to carry on business, trade, or profession of the Armani Group?

It is humbly submitted before the Hon'ble Federal Court of Union of Dakshin Pradesh that the
Turquoise has not violated any of the Fundamental right of the Armani Group and the
arguments have been presented in the three-fold manner as explained the ambit of the
fundamental right at concerned, secondly that there is no right of the Armani Group have been
abridged as the fundamental of speech and expression have been utilized by the Turquoise and
is protected under it and thirdly that the no business restriction have been imposed over or been
confined in by the Turquoise to the Armani Group.

[2] Whether the Turquoise Research Report amounts to a violation of the national
interests of the country of Dakshin Pradesh?
It is humbly submitted before the hon’ble court that Turquoise Research Report does not
amounts to violation of National Interest. It is contended by the counsels appearing on behalf
of the respondents that Turquoise Research Report is mere an opinion piece. The report no
where attacks upon the national sovereignty and integrity of India. Moreover, it is also
submitted that the report does not violate the national peace of India and neither harms the
International harmony of India with other nations. The report is no where defamatory in nature.
It is suggestive in nature and inclined towards the common good to caveat investors regarding

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their trading practices. Therefore, it is humbly submitted that Turquoise Research does not
violate National Interest of the Country.

[3] Whether the State of Dakshin Pradesh has failed in its duty and obligation to protect
and safeguard the interests of investors of Dakshin Pradesh?
The counsel appearing on behalf of the Respondents humbly and wholeheartedly submits that
the State has no where lagged in its duty and obligation to protect the interest of Investors. It is
submitted that SBI has released numerous rules, regulations, and guidelines in the context of
Investor Protection. Moreover, it is pertinent to mention here that the Preamble of SEBI Act,
1992 mentions the objective of Investor Protection hence, justifying the fact that state has no
where lagged in providing the wind sheet protection. Additionally, various case laws are
mentioned where short selling practices where upheld and were not considered as illegal.
Therefore, substantiating the argument in a twofold manner supported by statutory and judicial
pronouncement.

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ARGUMENTS ADVANCED

ISSUE [01] Whether the Turquoise Research Report amounts to a violation of the
fundamental right of freedom to carry on business, trade, or profession of the Armani
Group?

[¶1.] It is humbly submitted before the Hon'ble Federal Court of Union of Dakshin Pradesh
that the Turquoise had not violated any law and the TRR is immune under the Section
19(1)(g) of the COI. The allegation made against the Armani Group are near to the truth
and can be established with the further investigation by the related parties in
contravention of the regulations framed by FEBDP (Financial Exchange Board of
Dakshin Pradesh). [A] Firstly, the ambit of the §19(1) of the COI in the concerned case
with its restrictions, [B] Secondly, No FR is infringed of the Armani Group and [C]
Thirdly, No business is affected by the Turquoise.

I.I The ambit of the §19(1) of the COI in the concerned case with its restriction

19. Protection of certain rights regarding freedom of speech, etc.—

(1) All citizens shall have the
right—
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions 2
[or co-operative societies];
(d) to move freely throughout the territory of India;
(e) to reside and settle in any part of the territory of India; 3 [and]
(g) to practise any profession, or to carry on any occupation, trade,
or business.

[¶2.] Articles 19(2) to (6) impose limitations on the freedoms guaranteed by Arts.19 (1)(a) to
(g). These restrictions pose a general question as to how are the restrictions related to the
right, which they restrict? It has been said that it is the rights, which are fundamental, and
not the limitations. But these observations overlook the fact that the rights granted are not
absolute but are subject to permissible restrictions. Thus, the freedom to speak does not
mean the freedom to say whatever one likes, but freedom subject to the laws of libel,

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sedition, blasphemy, and the like. Again, the freedom of assembly is subject to the
assembly being peaceful and not causing a breach of public peace.
[¶3.] The rights represent the claims of the individual and the limitations represent the claims
of other individuals and the claims of the State or society. Therefore, to say that the rights
are fundamental and the limitations are not destroying the balance which Art.19 was
designed to achieve.
[¶4.] Another question is what is the test for determining whether a restriction is reasonable
within the meaning of Art.19? The test of reasonableness as laid down by Sastri C.J. in
Madras v. V.G. Row1 has generally been accepted as correct. He said: “it is important…
to bear in mind that the test of reasonableness, wherever prescribed should be applied to
each individual statute impugned, and no abstract standard or general pattern of
reasonableness, can be laid down as applicable to all cases.”
[¶5.] For adjudging reasonableness of a restriction, the courts consider such factors as: the
nature of right alleged to have been infringed, the purpose of the restrictions imposed, the
extent and urgency of the evil sought to be remedied thereby, the disproportion of the
imposition, the prevailing conditions at the time, should all enter the judicial verdict.
[¶6.] The test of reasonability can be supplemented by the following observations of Holmes.
J. in his classic dissent in Lochner v. New York.2 “the test to be applied is not whether a
judge personally considers particular restrictions unreasonable, but whether a reasonable
man would necessarily consider them unreasonable.” The reasonableness of the
restriction must be judged not in reference to the ground on which it can be imposed, but
with reference to the fundamental right which is restricted.
[¶7.] Certain general considerations have been laid down in amplifying the tests of
reasonableness. Thus, in considering whether restrictions are reasonable it is relevant to
consider whether the law imposing them is temporary or permanent. Again, when the
State must take swift decisions in emergent situations of apprehended danger,
restrictions may be considered reasonable which would not be considered otherwise
reasonable.
[¶8.] And it is necessary to inquire whether the impugned law provides reasonable safeguards
as, for example, by conferring a right of appeal or review, or a right to have the matter
judicially determined. A legislature cannot restrict the freedoms beyond Art 19 (2) to (6).

1
Sastri C.J. in Madras v. V.G. Row, (1952) S.C.R. 597, 607, (’52) A.SC. 196.
2
Lochner v. New York, (1904) 198 U.S. 45, 49 L.ed.937.

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Before proceeding to the tests which determine the reasonability of the restrictions it is
important to know the nature of the restrictions and the clauses giving it.
[¶9.] The Constitution (1st Amendment), Act, 1951 also added this ground to the constitution,
to meet the circumstances emerging from the Supreme Court’s decision. In the case of
Romesh Thapar v. State of Madras,3 the Supreme Court held that the public order is
different from the security of the state and from the law and order. Also, seen in the case
of local breaches of public order there are no grounds for imposing restrictions on public
order. The Supreme Court said that public order is an expression of the public peace,
public safety, and tranquility.
[¶10.] In this case, there was a ban on a Journal by the law in the State of Madras in the interest
of public order. The court held that the restrictions imposed by the government were only
on the grounds mentioned in Article 19(2). So, in this case, the decision was taken by
the Supreme court and the expression “public order” was added to Article 19 (2) to
impose certain restrictions on the freedom of speech and expression.

I.II No Fundamental Right is infringed of the Armani Group

[¶11.] In S. Rangarajan v. P. Jagjivan Ram,4 everyone has a fundamental right to form his
opinion on any issues of general concern. Open criticism of government policies and
operations is not a ground for restricting expression. Intolerance is as much dangerous
to democracy as to the person himself. In democracy, it is not necessary that everyone
should sing the same song.
[¶12.] Here in the concerned case, there is no fundamental right of the party is infringed as the
§19(1)(g) of the COI is not infringed that states that,
19. Protection of certain rights regarding freedom of speech, etc.— (1)
All citizens shall have the right—

(g) to practise any profession, or to carry on any occupation, trade or

business

(6) Nothing in sub-clause (g) of the said clause shall affect the operation
of any existing law in so far as it imposes, or prevent the State from

3
Romesh Thapar v. State of Madras, 1950 AIR 124; 1950 SCR 594
4
S. Rangarajan v. P. Jagjivan Ram, 1989 SCR (2) 204; 1989 SCC (2) 574

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making any law imposing, in the interests of the general public,

reasonable restrictions on the exercise of the right conferred by the said
sub-clause, and, in particular, [nothing in the said sub-clause shall affect
the operation of any existing law in so far as it relates to, or prevent the
State from making any law relating to,—

(i) the professional or technical qualifications necessary for practising

any profession or carrying on any occupation, trade, or business, or

(ii) the carrying on by the State, or by a corporation owned or controlled

by the State, of any trade, business, industry, or service, whether to the
exclusion, complete or partial, of citizens or otherwise].

[¶13.] This clearly mentions that Turquoise did not infringe any of the fundamental right of the
Armani Group which falls under the sub-section 2 of the section 19 of the COI.
I. Security Of The State,
II. Friendly Relations With Foreign States
III. Public Order,
IV. Decency And Morality,
V. Contempt Of Court,
VI. Defamation,
VII. Incitement To An Offence, And
VIII. Sovereignty And Integrity Of India.

I.III No business is affected by the Turquoise.

[¶14.] It is humbly contended before the Hon’ble court of the country that, even though the
publish of the report by the Turquoise cause loss to the Armani Group due to fall in the
share price of the company but still there is no restriction or hindrance aroused to the
Armani Group over the conduction any kind of business from the Turquoise Group and
herein the no prima facia case can be delt with the issue aroused with the concerned issue
raised over.

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ISSUE [2] Whether the Turquoise Research Report amounts to a violation of the
national interests of the country of Dakshin Pradesh?

[¶15.] The counsel appearing on behalf of the respondents humbly submits that Turquoise
Research Report does not amount to violation of National Interest. The argument is
substantiated in a twofold manner. The Turquoise Research Report is mere opinion,
thereby not violating National Interest [a]. The turquoise research report is in the
interest of the investors [b].

II.I The Turquoise Research Report is mere opinion, thereby not violating National
Interest.

[¶16.] In the context of national interest, the freedom of speech and expression is balanced
against the need to protect the country's security, sovereignty, and integrity. While the
government can restrict speech that poses a threat to national security, an opinion on a
company's practices is unlikely to fall into that category.
[¶17.] Moreover, it is worth noting that the Turquoise Research report did not make any claims
that could be construed as harming the country's security or national interests. It was an
analysis of Armani's business practices and financial performance, and while it may have
been critical, it did not contain any information that could be considered a danger to the
country's security or sovereignty.
[¶18.] The Turquoise Research report on Armani was largely based on publicly available
information, such as company filings, news reports, and other sources. As such, it did
not reveal any sensitive or confidential information that could harm national security or
interests which includes investors.
[¶19.] The report made several critical statements about Armani's business practices and
financial performance. However, it did not make any defamatory statements that
could harm Armani's reputation or the country's interests.
[¶20.] The report has sparked important discussions about corporate governance: The
Turquoise Research report has sparked important discussions about corporate
governance and transparency in India's corporate sector. These discussions are
important for promoting the country's economic development and ensuring that
companies operate in a responsible and sustainable manner.
[¶21.] The report has led to increased scrutiny of Armani's business practices: The report has
led to increased scrutiny of Armani's business practices, which is important for ensuring

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that the company complies with relevant laws and regulations. This increased scrutiny
is in the interest of national development and progress.
[¶22.] In the case of Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India5 (1985)
the Supreme Court of India held that the freedom of speech and expression includes the
right to criticize, even if the criticism is harsh. The court also held that the government
can impose reasonable restrictions on this right in the interest of national security or
public order. However, these restrictions must be narrowly tailored to achieve their
objective and must not unduly restrict the right to free speech.
[¶23.] In Shreya Singhal v. Union of India6 (2015), the Supreme Court of India struck down
Section 66A of the Information Technology Act, which criminalized the sending of
offensive messages through communication services. The court held that the provision
was too broad and vague and could lead to the restriction of legitimate speech. The court
also reaffirmed the importance of the right to free speech and expression in a democratic
society.
[¶24.] In the landmark judgment of Romesh Thapar v. State of Madras7 (1950), the Supreme
Court of India held that the freedom of speech and expression includes the right to
criticize the government and its policies. The court held that this right is essential for the
functioning of a democratic society and must be protected at all costs.
[¶25.] In S. Rangarajan v. P. Jagjivan Ram8 (1989), the Supreme Court of India held that the
freedom of speech and expression includes the right to express opinions that may be
unpopular or offensive to some. The court held that this right is essential for the
exchange of ideas and the formation of public opinion.
[¶26.] The Turquoise Research report on Armani is an expression of opinion that is protected
by this fundamental right of speech and expression and does not violate national interest.

II.II The turquoise research report is in the interest of the investors.

[¶27.] It is humbly submitted before the hon’ble court that the Turquoise Research report on
Armani is an ‘independent analyses of Armani Group's business practices and financial
performance. It provides insights that can be valuable for investors to make informed
investment decisions. The report raises serious concerns about Armani Group's

5
Indian Express Newspaper (Bombay) Pvt. Ltd. v. Union of India, AIR 1986 SC 515.
6
Shreya Singhal v. Union of India, AIR 2015 SC 1523.
7
Romesh Thapar v. State of Madras, AIR 1950 SC 124.
8
S. Rangarajan v. P. Jagjivan Ram, (1989) 2 SCC 574

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accounting practices, corporate governance, and environmental compliance, which can

have a significant impact on the company's financial performance and reputation.
[¶28.] In this context, it is argued that the Turquoise Research report is in the interest of the
investors, as it provides them with valuable information that can help them make
informed decisions about their investments in Armani Group. Investors have a right to
know the risks and opportunities associated with their investments, and the report
provides a detailed analysis of the potential risks associated with investing in Armani
Group.
[¶29.] Furthermore, the Turquoise Research report does not necessarily violate the national
interest, as it is an independent analysis which is not aimed at undermining the
economic or national security interests of any country. The report raises concerns about
specific business practices of Armani Group, and it does not make any sweeping claims
about the Indian economy or national security.
[¶30.] The Turquoise Research report is an independent analysis, not affiliated with any
government or regulatory agency. The report has been conducted by a private research
firm. Therefore, it is not a violation of national interest, as it is not an attempt to interfere
in the internal affairs of a country or its economy.
[¶31.] The report provides valuable insights for investors by highlighting potential red flags in
Armani Group's business practices. The report raises concerns about the company's
accounting practices, related party transactions, and environmental compliance. These
issues can have a significant impact on the company's financial performance and
reputation, which can directly affect investors' returns.
[¶32.] The case of SEC v. Texas Gulf Sulphur Co.9 (1968) is widely regarded as the landmark
case for insider trading. The court held that companies have a duty to disclose material
information to investors that could affect their investment decisions. The case
established the principle that investors have a right to receive accurate and complete
information about the companies they invest in.
[¶33.] The case of Re China Cast Education Corp. Securities Litigation10 (2014) involved
allegations of accounting fraud at China Cast Education Corp. A research firm called
Reinvesting published a report that raised concerns about the company's financial
statements, and the stock price dropped significantly after the report was published. The

9
SEC v. Texas Gulf Sulphur Co., 401 F.2d 833.
10
Re China Cast Education Corp. Securities Litigation, 809 F.3d 479.

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court held that the report was protected under the First Amendment as it provided
valuable information to investors.
[¶34.] It is humbly submitted that in United States v. Skilling11 (2010) the case involved
allegations of fraud at Enron Corporation. The court held that executives have a duty to
disclose material information to investors that could affect their investment decisions.
The court also held that independent research reports that provide valuable information
to investors are protected under the First Amendment.
[¶35.] The attention of court is drawn to the case of Virginia Bankshares, Inc. v. Sandberg12
(1991). This case involved allegations of insider trading by a bank officer who sold his
shares in the bank after receiving inside information about the bank's financial
performance. The court held that insiders have a duty to disclose material information
to investors, and investors have a right to rely on accurate and complete information
when making investment decisions.
[¶36.] In the case of SEC v. Pirate Investor LLC13 (2015), it involved allegations of fraud by a
group of investors who published false and misleading information about a company in
order to manipulate its stock price. The court held that independent research reports that
provide accurate and complete information to investors are protected, but false and
misleading information that is intended to manipulate the market is illegal.

ISSUE [3] Whether the State of Dakshin Pradesh has failed in its duty and obligation to
protect and safeguard the interests of investors of Dakshin Pradesh?

[¶37.] It is humbly submitted by the counsels appearing on behalf of the respondents that State
of Dakshin Pradesh has no where lagged in its duty and obligation to protect and
safeguard the interests of the investors. The several steps have been taken by the
Securities Exchange Board of India, 1992. The argument is substantiated in a twofold
manner. First and foremost, issue is that, the SEBI has appropriately acted as a watchdog
to protect Investors’ Interests [a]. Another limb of the argument is that the short-selling
practices are legal, therefore State does not fail in its duty and obligation to protect and
safeguard the interests of investors [b].

11
United States v. Skilling, 561 U.S. 358 (2010)
12
Virginia Bankshares, Inc. v. Sandberg, 1991 SCC OnLine US SC 125.
13
SEC v. Pirate Investor LLC, 580 F.3d 233 (2009).

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III.I The SEBI has appropriately acted as a watchdog to protect Investors’ Interests.

[¶38.] It is humbly submitted that; SEBI is responsible for regulating the securities market in
India and protecting the interests of investors. In response to the allegations made in
the Turquoise report, SEBI initiated an investigation into Armani Group's companies.
SEBI asked the companies to provide clarifications on the allegations made in the report
and sought detailed responses from the companies on the issues raised.
[¶39.] SEBI also issued notices to some Armani Group companies to ensure compliance with
regulatory requirements, including the filing of financial statements and disclosures. In
addition, SEBI directed stock exchanges to seek clarifications from Armani Group
companies on news reports regarding the freezing of accounts of certain foreign funds
that had invested in these companies.
[¶40.] It is also humbly submitted that SEBI has also taken other measures to strengthen
investor protection in recent years. For example, SEBI has introduced regulations to
improve the quality of disclosures made by listed companies, and to increase
transparency and accountability in the market. SEBI has also established a new system
for redressal of investor grievances, which provides investors with a fast and efficient
mechanism to resolve complaints.
[¶41.] Overall, it appears that SEBI has appropriately acted as a watchdog to protect investors'
interests in the context of the Turquoise report on Armani Group. SEBI has taken a
proactive approach to investigate the allegations made in the report, and has taken
measures to ensure that Armani Group companies comply with regulatory requirements.
This is in line with SEBI's mandate to protect the interests of investors and maintain the
integrity of the securities market in India.
[¶42.] SEBI has taken strict actions against individuals and companies involved in insider
trading. For example, in 2017, SEBI imposed a penalty of Rs 2,423 crore on 331 entities
for insider trading in shares of listed companies. SEBI's actions have helped create a
level playing field for investors and promote transparency and accountability in the
market.
[¶43.] SEBI has introduced several measures to promote good corporate governance practices
among listed companies. SEBI has mandated the appointment of independent directors
on company boards, increased the frequency of board meetings, and introduced
regulations for related-party transactions. These measures have helped increase
transparency and accountability in the operations of listed companies.

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[¶44.] The attention of the court is drawn to the 2009 Satyam scandal14, where the company's
founder Ramalinga Raju confessed to committing financial fraud. SEBI initiated an
investigation into the matter and imposed a penalty of Rs 1,850 crore on the company
and its directors for insider trading, false disclosures, and other irregularities. This case
was a landmark in SEBI's efforts to protect investors' interests.
[¶45.] In 2011, SEBI ordered the Sahara Group15 to refund over Rs 24,000 crore to investors
for raising funds through illegal means. The Sahara Group appealed the order, but the
Supreme Court upheld SEBI's decision, stating that the company had violated securities
laws and defrauded investors.
[¶46.] The counsel further submits that IPO scam came to light in 2006, where several
companies had manipulated the allotment of shares during initial public offerings. SEBI
initiated an investigation into the matter and imposed penalties on several companies
and their officials for their role in the scam.
[¶47.] Furthermore, SEBI in 2018 proactively in the PNB fraud case involving jeweler Nirav
Modi took a stand. SEBI initiated an investigation into the matter and issued notices to
several companies associated with the fraud for violation of securities laws. SEBI also
directed stock exchanges to suspend trading in the shares of several companies
associated with the fraud.

III.II The short-selling practices are legal; therefore, State does not fail in its duty and
obligation to protect and safeguard the interests of investors.

[¶48.] It is most humbly submitted before the hon’ble court that short-selling practices refer to
the sale of securities that the seller does not own but has borrowed from someone else
with the intention of buying them back at a lower price in the future. These practices are
legal in most countries, including India.
[¶49.] The legality of short-selling practices does not imply that the Indian government or
regulatory bodies have failed in their duty to protect and safeguard the interest of
investors. Short selling can provide liquidity to the market and help prevent prices from
becoming artificially inflated. It can also be used as a risk management tool by investors
to hedge their portfolios against potential losses.

14
Venture Global Engineering v. Satyam Computer Services Ltd. & Anr., 2010 SCC OnLine SC 864.
15
Sahara India Real Estate Corp. Ltd. & Ors. v. SEBI, (2013) 1 SCC 1.

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[¶50.] However, the Indian government and regulatory bodies do have a responsibility to ensure
that short selling is conducted in a fair and transparent manner, and that it does not lead
to market manipulation or abuse. They need to put in place appropriate regulations and
oversight mechanisms to prevent any illegal or unethical activities.
[¶51.] It is humbly submitted before the hon’ble court that short selling can help to increase
market liquidity by allowing traders to take positions on both the long and short sides
of the market. This can help to facilitate price discovery and ensure that markets operate
more efficiently.
[¶52.] Short selling can help to prevent market bubbles by enabling traders to bet against
overvalued assets. This can help to bring prices back down to more realistic levels,
which can benefit all investors in the long run.
[¶53.] It is submitted before the court that the Indian government and regulators are committed
to protecting the interests of investors. This includes ensuring that markets operate fairly
and transparently, and that investors are not subjected to any undue risks or harm.
[¶54.] In the case of Securities and Exchange Board of India (SEBI) v. L&T Finance Holdings
Ltd.16, SEBI had alleged that L&T Finance Holdings had engaged in fraudulent and
unfair trade practices by using certain derivative products to short-sell securities.
However, the Securities Appellate Tribunal (SAT) ruled that L&T Finance Holdings had
not violated any regulations, and that its trading activities were legitimate.
[¶55.] In the case of Vijay Kumar Bansal v. SEBI17 the appellant had alleged that certain
brokers had engaged in manipulative short selling of shares, which had caused a
significant decline in the stock price of certain companies. However, the SAT ruled that
there was insufficient evidence to support these allegations, and that the brokers had
not violated any regulations.
[¶56.] It is submitted by the counsel that in the case of Securities and Exchange Board of India
(SEBI) vs. Kanaiyalal Baldevbhai Patel18 the appellant had alleged that certain
individuals had engaged in illegal short selling of shares, which had caused a decline in
the stock price of a particular company. However, the SAT ruled that short selling is a
legitimate trading practice, and that the individuals had not violated any regulations or
engaged in any illegal activities.

16
SEBI v. L&T Finance Holdings Ltd., 2016 SCC OnLine SEBI 323.
17
Vijay Kumar Bansal v. SEBI, 2010 SCC OnLine SEBI 154.
18
SEBI v. Kanaiyalal Baldevbhai Patel, (2017) 15 SCC 1.

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[¶57.] Securities and Exchange Board of India (SEBI) vs. Shri Shailendra Kumar Agarwal19 In
this case, SEBI had alleged that the respondent had engaged in fraudulent and
manipulative trading activities, including short selling, in order to manipulate the stock
price of a particular company. However, the SAT ruled that short selling is a legitimate
trading practice, and that the respondent had not violated any regulations or engaged in
any manipulative activities.
[¶58.] In the case of Vijay Kothari vs. Securities and Exchange Board of India (SEBI)20, the
appellant had alleged that certain individuals had engaged in illegal short selling of
shares, which had caused a decline in the stock price of a particular company. However,
the SAT ruled that short selling is a legitimate trading practice, and that the individuals
had not violated any regulations or engaged in any illegal activities.

19
SEBI v. Shri Shailendra Kumar Agarwal, 2012 SCCOnLine CIC 15165.
20
Vijay Kothari v. SEBI, 2016 SCC OnLine SAT 274.

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PRAYER

WHEREFORE IN LIGHT OF THE ISSUES RAISED, ARGUMENTS ADVANCED,

AUTHORITIES CITED, SUBMISSIONS MADE HERE TO ABOVE AND THOSE TO BE

URGED AT THE TIME OF HEARING,

IT IS HUMBLY PRAYED THAT THIS HON’BLE SUPREME COURT MAY BE

PLEASED,

1. That, the Turquoise Research Report does not amount to a violation of the fundamental
right of freedom to carry on business, trade, or profession of the Armani Group.
2. That, the Turquoise Research Report does not amount to a violation of the national
interests of the country of Dakshin Pradesh.
3. That, the State of Dakshin Pradesh has not failed in its duty and obligation to protect and
safeguard the interests of investors of Dakshin Pradesh.

AND PASS ANY OTHER ORDER, DIRECTION, OR RELIEF THAT THIS HON’BLE
COURT MAY DEEM FIT AND APPROPRIATE IN THE INTERESTS OF justice, equity,
and good conscience.

All of which is humbly prayed,

Counsels for the RESPONDENT

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