MOOT COURT PROBLEM

MOOT PROPOSITION
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1. Viscara1 is a Democratic country located in South East Asia. Viscara is

flanked by the Kingdom of Marzipan on its eastern side. The Kingdom of
Marzipan is known as a tax haven due to its regulatory regime where offshore
companies are not taxed at all. Marzipan also promises complete privacy to
persons having bank accounts in their country.

2. In October 2016, an unprecedented leak occurred from the database of an

offshore law firm revealing the names of about 12 million people who had
their account in the Kingdom of Marzipan. The documents leaked were
popularly termed as the “Marzipan Diaries”. Several persons in the country of
Viscara too had their names in the Marzipan Diaries.

3. Evert Gullberg is a citizen of Viscara, residing in the State of Ollsen which

shares its borders with the Marzipan. Mr. Gullberg is a successful
businessman, owning a tea estate in Ollsen as well as a Jewellery Business
called “GullbergJewellers” spread across the country. Apart from these two
primary businesses, Mr. Gullberg also has investments in businesses across
the country, and some investments in Marzipan as well. Although he does not
have a past criminal record, his name was one of the several names listed in
the Marzipan Diaries.

4. In 2005, Mr. Gullberg had married Ms. Olive Bennett. Unfortunately, their
relations strained over the years, and in 2009 they obtained a divorce by
mutual consent. Although no formal complaint was ever filed, Ms. Bennett
had alleged in her divorce petition that she had been assaulted by Mr.
Gullberg several times and also alleged that Mr. Gullberg was involved in
several illegal activities in his businesses. Although the divorce was largely
peaceful, dispute arose with regard to a painting by the renowned artist
Jasper Johns titled ‘Periscope’, worth USD 1 Million, which both Mr. Gullberg
and Ms. Bennett were fond of. In the end, Mr. Gullberg was forced to give up
his claim for the painting when Ms. Bennett threatened to initiate criminal
proceedings against him. However, he swore to Ms. Bennett that he would get
back the painting which rightfully belonged to him.

5. In 2010, Mr. Gullberg married Ms. Jane Doe and had two sons in 2011 and
2012 respectively. They are currently living a happy married life.

1All laws of Viscara are in pari-materia to the laws of India, including precedents.

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6. On 1st February 2016, 3 armed men entered the residence of Ms. Olive
Bennett and at gunpoint stole the painting Periscope. They did not steal any
other valuable item from her residence. She immediately filed an FIR under
Sections 378, 379, 382-386, 390 and 392 of the Viscara Penal Code, 1860 2
and named Mr. Gullberg as her suspect in the FIR.

7. On 12th February 2016, the Ollsen police intercepted the vehicle on Mr.
Gullberg suspecting him of having stolen the painting Periscope. As soon as
Mr. Gullberg’s vehicle was stopped they noticed a man get out of the car and
run off. Since it was not Mr. Gullberg, they did not pursue the man but went
on to search the car of Mr. Gullberg. The police did not find the painting in
the car, however, incidentally, they found 2 bags containing 100 Kgs of gold in
the car. They immediately arrested Mr. Gullberg. While in custody, Mr.
Gullberg gave a statement to the police that the Gold did not belong to him
and the bag was in fact owned by one Mr. HenrickLarrson who he had given a
lift while on his way to work from his home. He further stated that Mr.
Larrson had fleed the car when it was intercepted by the police but the police
had failed to pursue him. The police registered an FIR against Mr. Gullberg
under Sections 135 of the Customs Act, 1962 and the matter was thereafter
transferred to the authorities under the customs act.

8. On 13th February 2016, Mr. Gullberg was presented before the Chief
Metropolitan Magistrate, Boutel (“CMM”) in Ollsen who remanded him to
judicial custody till 16th February 2016. In the meanwhile, the police
conducted raids in the residence and offices of Mr. Gullberg. During such
raid, they also recovered the painting Periscope from one of Mr. Gullberg’s
offices.

9. On 16th February 2016, Mr. Gullberg applied for bail before the CMM, Boutel
who was pleased to grant bail on the condition that he would fully cooperate
with the investigation authorities.

10. During the pendency of such proceedings, based on the information provided
by the police, the Enforcement Directorate, Prevention of Money Laundering
(“ED”) initiated investigation under the Prevention of Money Laundering Act,
2002 by registering an Enforcement Case Information Report (“ECIR”) being
ECIR No. KLZO/80/2016 on 30th February 2016. The proceedings were
2 In pari material to the Indian Penal Code, 1860.

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initiated based on the fact that Section 135 of the Customs Act, 1962 and
Section 384-386 and 392 of the Viscara Penal Code were scheduled offences.

11. On 1st March 2016, Mr. Gullberg filed a petition under Section 482 of the Code
of Criminal Procedure, 1973 before the High Court of Ollsen, being Crl. M.C.
3298/2016 seeking quashing of FIR dated 12th February 2016 on the ground
that the search and seizure was not proper and that the FIR should have been
filed against Mr. Larrson and not himself since the seized goods did not
belong to him. The High Court of Ollsen dismissed the petition finding no
ground to quash the FIR. Against such dismissal, Mr. Gullberg preferred a
Special Leave Petition, being SLP (Crl) No. 2431 of 2016 dated 15th April 2016.

12. During the investigation by the ED, it was discovered that Mr. Gullberg had
opened and operated several bank accounts in his name and in the names of
his wife and children. More particularly, he had opened and closed 11 bank
accounts between the period of 1st January 2014 and 30th March 2016
depositing and withdrawing a total amount of VNR 100 Crore in cash. Only 3
of these accounts were in his own name while the rest were in the names of
his wife, children and companies. However, against all accounts, it was Mr.
Gullberg’s personal mobile number which was listed.

13. Based on the investigation, on 1 st June 2016, a provisional attachment order

under Section 5 of the PMLA was issued against Mr. Gullberg attaching all his
assets, bank accounts and properties, including those of his companies,
amounting to VNR 400 Crore. The order further attached the painting
Periscope as well. On the very same day, the ED also issued an order under
Section 17 (1-A) of the PMLA freezing all bank accounts of Mr. Gullberg,
including the ones in Marzipan. This was despite the fact that the ED did not
know any details of the accounts held by Mr. Gullberg in Marzipan.

14. Aggrieved by the said attachment order and the freezing order, Mr. Gullberg,
on 15th June 2016, filed a Writ Petition, being W.P. (Crl) No. 2222 of 2016
challenging the validity of the provisional attachment order and the freezing
order on the ground that he had not been heard before passing of the ordersin
violation of the principles of natural justice and that there was no nexus
between the offence alleged and the attachment. He also argued that the ED
was acting beyond its jurisdiction by attaching his bank accounts held in

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Marzipan and he could not be forced to disclose the same. He further argued
that since there was a petition for quashing of the FIR dated 12 th February
2016 pending in the Supreme Court, the proceedings under PMLA should also
be stayed. The Hon’ble High Court refused to interfere in the proceedings on
the ground that for a provisional attachment order and a freezing order, no
hearing is necessary and since these were only temporary measures, they
need not be interfered with. Aggrieved by this, Mr. Gullberg filed a Special
Leave Petition before the High Court of Viscara, being SLP (Crl) 9999 of 2016
on 1st August 2016. The said SLP andcame up for hearing on subsequent
dates but no substantive order was passed.

15. On 1st September 2015, the Adjudicating Authority issued a show cause
notice under Section 8 of the PMLA against Mr. Gullberg calling upon him to
disclose the source of income, earning or assets out of which he has acquired
the properties attached under the Provisional Attachment order and Freezing
order dated 1st June 2016, and why the said properties should not be
declared to be involved in money-laundering and consequently why the
attachment order should not be confirmed.

16. During the pendency of these matters, Ms. Bennett approached the ED to
return the painting stolen from her possession. However, the ED refused to
return the painting on the ground that the painting is a “proceeds of crime” as
defined under Section 2(u) of the PMLA and had therefore been confiscated.
She was told that it would only be returned to her once the proceedings are
concluded.

17. Appalled by such a legal procedure, Ms. Bennett challenged the vires of
Section 2(u) of the PMLA by filing W.P. (Crl) No. 3393 of 2016 before the High
Court of Ollsen on the ground that it was arbitrary and in fact punished the
victim of the crime along with the accused. The Petition was filed on 31 st
September 2016 and was admitted on the very same day.

18. On 1st October 2016, Mr. Gullberg filed his reply to the show cause notice
dated 1st September 2016. However, he only raised preliminary objections to
the issuance of the show cause notice and no reply was given on the merits.
Mr. Gullberg also pleaded that the matter show be stayed till the outcome of
the petitions pending before the courts against the FIR and the provisional

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attachment order.

19. The provisional attachment order dated 1 st June 2016 was due to expire on
29th November. Considering the fact that the hearing in the proceedings under
Section 8 had not concluded, on 29 th November 2016, the ED passed a second
attachment order under Section 5 of the PMLA on the same lines as the order
dated 1st June 2016.

20. Considering the circumstances, and the fact that he had been harassed by the
authorities for nearly a year, Mr. Gullberg filed a Writ Petition before the High
Court of Ollsen, being W.P. (Crl) 5421 of 2016 on 10 th December 2016
challenging the Constitutional validity of the PMLA Act, more specifically
Sections 2(u), 2(v), 3 and 5 on the ground that they were arbitrary and
violated Articles 14 and 300-A of the Constitution of Viscara, 1950 3 and
provided powers to the ED with no safeguards. In the same Petition, he also
filed an application for stay of the provisional attachment order dated 19 th
November 2016. On 15th December 2016, the High Court passed an order
admitting the Writ Petition but refused to stay the provisional attachment.

21. Against the interim order refusing stay dated 15 th December 2016 of the High
Court of Ollsen, Mr. Gullbergfiled a Special Leave Petition on 20 th December
2016 before the Supreme Court of Viscara, being S.L.P. (Crl) No. 29232 of
2016.

22. Considering the importance of the legal issues involved, the Hon’ble Supreme
Court transferred W.P. (Crl) 5421 of 2016, W.P. (Crl) No. 3393 of 2016 to be
heard with SLP (Crl) No. 29232 of 2016. At the instance of Mr. Gullberg, the
Supreme Court agreed to tag the matters with SLP (Crl) 9999 of 2016 and SLP
(Crl) No. 2431 of 2016 to be heard and disposed off together. This was not
opposed by any of the parties to the proceedings. It was mutually agreed
between Mr. Gullberg and Ms. Bennett that since Ms. Bennett was only
concerned with the constitutional validity of one provision of the PMLA, the
issue would be addressed by a mutually agreed Counsel whereas the other
issues would be dealt with by the Counsel of Mr. Gullberg.

23. The Court directed that the lead petition would be SLP (Crl) No. 29232 of
2016, whichhas henceforth been renumbered as Criminal Appeal 1234 of

3 In parimateria with the Constitution of India, 1950.

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2017. Vide order dated 21st February 20174, the Supreme Court framed the
issues in the matter and has listed the matter for final hearing and disposal
on March 2017.

4 See Annexure A

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Annexure A

SUPREME COURT OF VISCARA RECORD OF PROCEEDINGS

Criminal Appeal No.1234/2017

EVERT GULLBERG VERSUS APPELLANT

ENFORCEMENT DIRECTORATE AND ORS. RESPONDENT(S)

With

SLP (Crl) 9999 of 2015 SLP (Crl) 2431 of 2014 TC (Crl) 313 of 2016 TC (Crl) 314 of
2016

Date : 21/02/2017 This Appeal was called on for hearing today.

CORAM :
HON'BLE MR. JUSTICE PATRICK STEWART
HON'BLE MR. JUSTICE JIM PARSONS

UPON hearing the counsel the Court made the following

ORDER

All these petitions arise out of the same cause of action and raise common issues. It
is therefore necessary to hear and dispose of these matters at the earliest. After
hearing the parties, the common issues raised in the petitions are:

1. Whether the FIR dated 12th February 2016 ought to be quashed?

2. Whether the Provisional Attachment and freezing order dated 1st March 2015 is
valid?

3. If the second issue is answered in the affirmative, then is the second Provisional
Attachment order dated 1st September 2015 valid and permissible under law?

4. Whether Sections 2(u), 2(v), 3 and 5 of the PMLA are arbitrary and violative of
Articles 14 and 300-A of the Constitution and liable to be struck down?

Let the matter be for final disposal on___March 2017. The Parties are free to file
theirWritten Submissions, if any by_____January 2017.