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1718

MOOT COURT

Before

THE HONOURABLE SUPREME COURT OF VISCARA

Criminal Appeal No.1234/2017

EVERT GULLBERG VERSUS APPELLANT

ENFORCEMENT DIRECTORATE AND ORS. RESPONDENT

Memorial Filed on behalf of Petitioner

Counsel appearing on Behalf of Petitioner

TABLE OF CONTENTS

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TABLE OF CONTENTS.............................................................................................................. 2
LIST OFABBREVIATIONS........................................................................................................ 3
INDEX OFAUTHORITIES ......................................................................................................... 4
STATEMENT OF JURISDICTION............................................................................................. 5
SUMMARY OF FACTS.............................................................................................................. 6
ISSUES PRESENTED ............................................................................................................... 10
SUMMARY OFARGUMENTS................................................................................................. 10
ARGUMENTS ADVANCED ................................................................................................... 12
PRAYER.................................................................................................................................... 30

LIST OF ABBREVIATIONS

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A.I.R. All India Reporter

Art. Article
Hon’ble Honorable
Ltd. Limited
SC Supreme Court
W.P Writ Petition
ED Enforcement Directorate
SLP Special Leave Petition
SCC Supreme Court Cases
Sr. Senior
& And
U.O.I Union of India
v./vs. Versus
ECIR Enforcement Case Information Report
CMM Chief Metropolitan Magistrate

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INDEX OF AUTHORITIES

 STATUTES:-

 The Indian Penal Code, 1860

 Customs Act,1962
 Prevention of Money Laundering Act,2002
 Code of Criminal Procedure Act, 1973
 Indian Constitution,1950

 CASES:-

 A.Kamarunnisa Ghori vs Writ Petitions Filed Under on 11 July, 2012

 A.Kamarunnisa Ghori vs Writ Petitions Filed Under on 11 July, 2012
 Enforcement Directorate.Dr. Subramanium Swamy vs. Director CBI, JT 2014 (7)SC 474
 H.N. Rishbud V. State of Delhi, 1955 AIR 196
 Ketan Parekh vs. Securities And Exchange Board Of India on 14 July, 2006
 M.Shobana vs. The Assistant Director on 25 September, 2013 
 M.Shobana vs. The Assistant Director on 25 September, 2013
 Raj Kumar Khanna vs The State (Nct Of Delhi) And Ors.
 Ramalinga raju v. union of India

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 Ramalinga raju v. union of India 4th March 2011

 Shri  Dehati Stapana Nyas v.  The Directorate of Enforcement
 Smt.K.Sowbaghya vs Union Of India on 28 January, 2016
 State Of Haryana And Ors vs. Ch. Bhajan LalAnd Ors, A.I.R 1993 S.C 1348
 State of T.N. & Anr.vs. P. Krishnamurthy & ors. (2006) 4 SCC 517
 State of U.P. -vs.- BrahmDatt Sharma (1987) 2 SCC 179

STATEMENT OF JURISDICTION

The Petitioner humbly submits this memorandum for the petition filed before this Honourable
Court. The petition invokes its writ jurisdiction under Article 32 of the Constitution of India and
invokes Article 136. It sets forth the facts and the laws on which the claims are based.

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SUMMARY OF FACTS

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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. The 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”.
3. Evert Gullberg is a citizen of Viscara, residing in the State of Ollsen. Mr. Gullberg is a
successful businessman, owning a tea estate in Ollsen as well as a Jewellery Business called
“GullbergJewellers” spread across the country. 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. In 2009 they obtained a divorce by
mutual consent. 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.
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.
6. On 1st February 2016, 3 armed men entered the residence of Ms. Olive Bennett and at gunpoint
stole the painting Periscope. She immediately filed an FIR under Sections 378, 379, 382-386,
390 and 392 of the Viscara Penal Code, 18602 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.
i. The police did not find the painting in the car
ii. police found 2 bags containing 100 Kgs of gold in the car, They immediately arrested Mr.
Gullberg.
iii. in custody, Mr. Gullberg gave a statement:-" 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

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police but the police had failed to pursue him.

iv. 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 13 th February 2016, Mr. Gullberg was presented before the Chief Metropolitan Magistrate,
Boutel (“CMM”) in Ollsen who remanded him to judicial custody till 16 th 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,and succefully got the
bail.
10. Based on the information provided by the police, the Enforcement Directorate, 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 30 th
February 2016. The proceedings were 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.
I. Asking for the cancellation of FIR dated 12th February 2016 on the ground that the search and
seizure was not proper.
II. and the FIR should have been filed against Mr. Larrson and not himself since the seized goods
did not belong to him.
III. The High Court of Ollsen dismissed the petition finding no ground to quash the FIR.
IV. Mr. Gullberg preferred a Special Leave Petition, being SLP (Crl) No. 2431 of 2016 dated 15 th
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.
I. he had opened and closed 11 bank accounts between the period of 1 st January 2014 and 30th
March 2016 depositing and withdrawing a total amount of VNR 100 Crore in cash.
II. Only 3 of these accounts were in his own name while the rest were in the names of his wife,
children and companies.
III. it was Mr. Gullberg’s personal mobile number which was listed in all accounts.

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13. on 1st 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,
I. 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.
II. 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.
III. Mr. Gullberg filed a Special Leave Petition before the High Court of Viscara, being SLP (Crl)
9999 of 2016 on 1st August 2016.
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,
16. 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.
17. 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 1 st September
2016,andno reply was given on the merits

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19. The provisional attachment order dated 1 st June 2016 was due to expire on 29 th November.
Considering the fact that the hearing in the proceedings under Section 8 had not concluded, on
29th 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

I. Mr. Gullberg filed a Writ Petition before the High Court of Ollsen, being W.P. (Crl) 5421 of
2016.
II. on 10th December 2016 challenging the Constitutional validity of the PMLA Act, 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, 19503 and provided powers to the ED with no safeguards.
III. he also filed an application for stay of the provisional attachment order dated 19 th November
2016.
IV. On 15th December 2016, the High Court passed an order admitting the Writ Petition but refused
to stay the provisional attachment.
21. Against the temporary order refusing stay dated 15 th December 2016 of the High Court of Ollsen,
Mr. Gullberg filed a Special Leave Petition on 20th December 2016 before the Supreme Court of
Viscara, being S.L.P. (Crl) No. 29232 of 2016.
22. 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. The Court directed that the lead petition would be SLP (Crl) No.
29232 of 2016, which has henceforth been renumbered as Criminal Appeal 1234 of 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.

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ISSUES ADVANCED

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?

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SUMMARY OF ARGUMENTS

1. The FIR dated 12th February 2016 ought to be quashed.

The FIR ought to be quashed because of two reasons. First that the police does not have the power
to file an FIR on its own and start investigation without the order of the magistrate in a non-
cognizable offence according to section 155 of the Crpc. The offence filed in the FIR was that
under section 135 of the Customs Act and its investigation would only be permissible with the
order of the magistrate. Second that the search and seizure was improper and was hastily executed.
Due to this some significant evidence was disregarded and the wrong person i.e. Mr Gullberg was
arrested.
2. The Provisional Attachment and freezing order dated 1st March 2015 is invalid?
The provisional attachment and freezing order is invalid for three reasons. First that the petitioner
was not given an opportunity to be heard thus violating the principles of natural justice. Second
that there was no nexus between the alleged crime i.e. tax evasion and the attachment under money
laundering. This is only because the alleged crime was not committed by the petitioner so the basis
of attachment was absent. Third that the Enforcement Directorate exceeded its jurisdiction while
attaching the accounts held by Mr Gullberg in Marzipan. As Marzipan promises complete privacy
to persons having bank accounts in their country, the ED did not know whether the money held in
the accounts in Marzipan was laundered money or not. Thus it exceeded its jurisdiction by
attaching accounts in Marzipan.
3. The second issue is not answered in the affirmative, then is the second Provisional Attachment

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order dated 1st September 2015 invalid and not permissible under law.
As the first provisional attachment is not valid it is understood that the second attachment is also
invalid as it has been issued on the same lines.
4. 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 are liable to be struck down.
The above mentioned sections are vague and widely worded thus giving excessive power at the
disposal of the Enforcement Directorate and the Adjudicating Authority. Any law that delegates
excess power to the executive is arbitrary and bad in law.

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ARGUMENTS ADVANCED

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

1.1 Police has no power to investigate offence under section 135 Customs Act without order of
magistrate.
Police does not have power to investigate a non-cognizable offence without an order from the
magistrate under section 155 of the code of criminal procedure. In the present case the FIR was
registered against mister Gullberg under section 135 of the Customs Act 1962. Under section
104 of Customs Act 1962 all offences in the said Act are non-cognizable. Thus the FIR should be
quashed. The council places heavy reliance on the case of State Of Haryana And Ors vs. Ch.
Bhajan LalAnd Ors5 where the Supreme court gave the guidelines for quashing of an FIR in para
107 of its judgement, the relevant extract of the said judgment is as follows:-
“Paragraph 107 of the said judgment itemizes guidelines as follows:-

1. Where the allegations made in the First Information Report or the complaint, even if they are
taken at their face value and accepted in their entirety do not prima-facie constitute any offence
or make out a case against the accused.

2. Where the allegations in the First Information Report and other materials, if any, accompanying
the FIR do not disclose a cognizable offence, justifying an investigation by police officers under

5
1992 AIR 604

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Section 156(1) of the Code except under an order of a Magistrate within the purview of Section
155(2) of the Code.

3. Where the uncontroverted allegations made in the FIR or complaint and the evidence collected
in support of the same do not disclose the commission of any offence and make out a case
against the accused.

4. Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a
non-cognizable offence, no investigation is permitted by a police officer without an order of a
Magistrate as contemplated under Section 155(2) of the Code.

5. Where the allegations made in the FIR or complaint are so absurd and inherently improbable on
the basis of which no prudent person can ever reach a just conclusion that there is sufficient
ground for proceeding against the accused.”

Section 135 of the Customs Act states:-

“Evasion of duty or prohibitions.—1[
(1)  Without prejudice to any action that may be taken under this Act, if any person—
(a)  is in relation to any goods in any way knowingly concerned in miss declaration of value or in
any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any
prohibition for the time being imposed under this Act or any other law for the time being in force
with respect to such goods; or
(b)  acquires possession of or is in any way concerned in carrying, removing, depositing,
harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any
goods which he knows or has reason to believe are liable to confiscation under section 111 or
section 113, as the case may be; or
(c) attempts to export any goods which he knows or has reason to believe are liable to confiscation
under section 113; or
(d)  fraudulently avails of or attempts to avail of drawback or any exemption from duty provided
under this Act in connection with export of goods, he shall be punishable,—

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(i) in the case of an offence relating to,—

(A) any goods the market price of which exceeds one crore of rupees; or
(B) the evasion or attempted evasion of duty exceeding thirty lakh of rupees; or
(C)  such categories of prohibited goods as the Central Government may, by notification in the
Official Gazette, specify; or
(D) fraudulently availing of or attempting to avail of drawback or any exemption from duty referred
to in clause (d), if the amount of drawback or exemption from duty exceeds thirty lakh of rupees,
with imprisonment for a term which may extend to seven years and with fine: Provided that in
the absence of special and adequate reasons to the contrary to be recorded in the judgment of
the court, such imprisonment shall not be for less than one year;
(ii) in any other case, with imprisonment for a term which may extend to three years, or with fine, or
with both.] 2[(2) If any person convicted of an offence under this section or under sub-section
(1) of section 136 is again convicted of an offence under this section, then, he shall be
punishable for the second and for every subsequent offence with imprisonment for a term which
may extend to seven years and with fine: Provided that in the absence of special and adequate
reasons to the contrary to be recorded in the judgment of the court such imprisonment shall not
be for less than 3[one year].”

The FIR registered by the police on 12th February against Mr. Gullberg, charging him under Sections
135 of the Customs Act, 1962 6should be quashed as offences under the Customs Act are non-
cognizable offences according to section 104(4) of the Customs Act:-
“ Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898)2, an
offence under this Act shall not be cognizable.”7
And under section 155 (2) of the code of criminal 8 procedure a police officer cannot investigate a
non-cognizable case without the order of the magistrate.

Section 155(2) of the Code of criminal procedure 9states:-

6
Sections 135 of the Customs Act, 1962
7
Section 104 in the Customs Act, 1962
8

9
Section 155(2) of the Code of criminal procedure

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“Information as to non- cognizable cases and investigation of such cases.

(2)No police officer shall investigate a non- cognizable case without the order of a Magistrate
having power to try such case or commit the case for trial.”

1.1The manner in which the police filed the report is a fraud on Section 155 (2), the police has no
power to file a first information report in cases of non-cognizable offences. As FIR can only be
filed by police under section 154 of CrPC 10in relation to cognizable offences and offences under
Customs Act are non-cognizable. Thus the police had no power to register FIR under section 154
CrPC.
Section 155 (2) prohibits the police from investigating a non-cognizable offence without the
order of the Magistrate. 
Thus, as sec 135 of customs act is a non-cognizable offence, the police did not have the power
the investigate or register an FIR in the case of mister Gullberg.

1.2 Search and seizure made by police was improper

More over the search and seizure made by the police on 12th Feb was also improper. In the case
of non-cognizable offences police cannot search or seize without a warrant.
The search and seizure was hasty and improper. The petitioner’s car was intercepted and
searched without a search warrant. When the car was intercepted a person got off the car and fled
leaving behind two bags from which gold was recovered. The police failed to pursue the person
and arrested MrGullberg instead who was not at all involved with the gold that was recovered.
Even after he gave a statement saying that the gold belonged to the person that fled the scene, the
police ignored the evidence and continued investigation against MrGullberg instead. Thus the
search and seizure was improper and too hasty as no order from the magistrate was taken before
registering the FIR nor was a search warrant or arrest warrant issued against Mr. Gullberg. The
council places reliance on the case of Raj Kumar Khanna vs The State (Nct Of Delhi) And
Ors.11where the Hon’ble High Court of Delhi held that:-

10
section 154 of CrPC
11
95 (2002) DLT 147

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“Mr. Lekhi countering these arguments urged that expediting the action by itself is no ground to
quash the FIR. We agree with Mr. Lekhi that on this ground itself FIR cannot be quashed but at
the same time we cannot ignore the haste with which police acted violating its own guidelines.”
As haste on the part of the police opens avenues and increases the probability of negligence
which is what occurred in the present case.
As held by the Hon'ble Supreme Court in H.N. Rishbud V. State of Delhi12, the investigation
generally consists of the following steps:–
“(i) Proceeding to the spot;
(ii) Ascertainment of the facts and circumstances of the case;
(iii) Discovery and arrest of the suspected offender;
(iv) Collection of evidence relating to the commission of the offence which may consist of
(a) the examination of various persons (including the accused) and the, reduction of their statements
into writing, if the Officer thinks fit,
(b) the search of places or seizure of things considered necessary for the investigation and to be
produced at the trial; and
(v) Formation of the opinion as to whether on the material collected there is a case to place the accused
before a Magistrate for trial, and if so, taking necessary steps for the same by filing of a charge-
sheet under Section 173 Cr.P.C. before the competent Court.”

In the present case the police showed negligence while ascertainment of the facts and
circumstances of the case thus arresting the wrong person.
On the basis of the above mentioned reasons the FIR dated 12th Feb should be quashed.

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

2.1The provisional attachment order was not valid as the contention of MrGullberg wasn’t heard
by the court before passing it.

12
A.I.R. 1955 S.C. 196

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Ketan Parekh vs. Securities And Exchange Board Of India on 14 July, 2006
“The Principles of Natural Justice have come out from the need of man to protect himself from
the excesses of organized power man has always appealed to someone beyond his own creation.
Such someone is the God and His laws, divine law or natural law, to which all temporal laws and
actions must confirm.

i. Natural Law is of the 'higher law of nature' or 'natural law'

ii. Natural Law does not mean the law of the nature or jungle where lion eats the lamb and tiger eats
the antelope but a law in which the lion and lamb lie down together and the tiger frisks the
antelope.
iii. Natural Law is another name for common-sense justice.
iv. Natural Laws are not codified and is based on natural ideals and values which are universal.
In the absence of any other law, the Principles of Natural Justice are followed.
Earliest form of natural law can be seen in Roman philosophical expressions (Jus Natural). It is
used interchangeably with Divine Law, jus gentium and the common law of nations.
 The Principles of Natural Justice are considered the basic Human Rights because they
attempt to bring justice to the parties naturally.
Giving reasoned decisions is a postulate and principle of Natural Justice.
audi alteram partem
English meaning: Hear the other side
Also called the Rule of Fair Hearing.
This principle is a Rule of Law and a part of the Principles of Natural Justice. It says that no one
shall be condemned unheard.
When a dispute is put before a Court or a Tribunal, the Bench should hear both the parties of the
case before a reasoned decision is made. The Bar comprising of Advocates assists the parties in
presenting the case.”Shri Dehati Stapana Nyas v.  The Directorate of Enforcement". The action
of adjudicating authority in denying reasonable opportunity of hearing before passing the
impugned order in teeth of the specific provisions of section 6 and 8 of the P.M.L.A. It is
submitted that provision of section 26 of the act relating to appeal before the Appellate tribunal is

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of no meaning for a person who has not been given any opportunity to defend himself before
adjudicating authority. petitioner would be denied opportunity to defend himself on merits before
appellate tribunal as no documents relating to the petitioner could be adduced before
adjudicatingauthority who has passed an order of confirmation of the provisional attachment
affecting the petitioner. Therefore, the petitioner has approached this court.

M.Shobana vs. The Assistant Director on 25 September, 2013 

“ It is settled by the decisions of this Court that a writ of prohibition will issue to prevent a
tribunal or authority from proceeding further when the authority proceeds to act without or in
excess of jurisdiction; proceeds to act in violation of the rules of natural justice; or proceeds to
act under a law which is itself ultra vires or unconstitutional. 
As indicated by this Court in State of U.P. -vs.- BrahmDatt Sharma (1987) 2 SCC 179 when a
show-cause notice is issued under statutory provision calling upon the person concerned to show
cause, ordinarily that person must place his case before the authority concerned by showing
cause and the courts should be reluctant to interfere with the notice at this stage unless the notice
is shown to have been issued palpably without any authority of law.

Also, an opportunity of being heard is also given to an individual claiming the property though
not issued with the notice. After all, 'opportunity of being heard' is a cardinal Principal of Natural
Justice and the authority is to take into account all relevant materials placed on record by the
parties concerned before him.

Adjudicating Authority is to adopt the procedure of following the Principles of Natural Justice.
Only to prevent miscarriage of Justice, the purpose of following Principles of Natural Justice is
emphasized, as opined by this Court.
.No wonder, the term 'Attachment and Confiscation' is a proceeding 'In Rem and not in
Persona'. Section 9 of Prevention of Money-Laundering Act, 2002 provides that once a crime
relating to property is proved in Competent Court of Law, the Adjudicating Authority shall pass
an order in ordering confiscation of such property after hearing the concerned persons. The onus

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of adducing evidence during trial in respect of the offences under the Prevention of Money-
Laundering Act is on the prosecution.

ii)No nexus between offence alleged and the attachment.

The offence alleged was a one under customs act and the attachment and freezing order were
made under the Prevention of money laundering act.”
Section 5 in The Prevention of Money-Laundering Act, 2002
“5 Attachment of property involved in money-laundering. —
(1)  Where the Director, or any other officer not below the rank of Deputy Director authorized by
him for the purposes of this section, has reason to believe (the reason for such belief to be
recorded in writing), on the basis of material in his possession, that—
(a)  any person is in possession of any proceeds of crime;
(b)  such person has been charged of having committed a scheduled offence; and
(c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner
which may result in frustrating any proceedings relating to confiscation of such proceeds of
crime under this Chapter, he may, by order in writing, provisionally attach such property for a
period not exceeding  9 [one hundred and fifty days] from the date of the order, in the manner
provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or
the other officer so authorized by him, as the case may be, shall be deemed to be an officer under
sub-rule (e) of rule 1 of that Schedule:
10
 [Provided that no such order of attachment shall be made unless, in relation to the scheduled
offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal
Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorized to
investigate the offence mentioned in the Schedule, before a Magistrate or court for taking
cognizance of the scheduled offence, as the case may be: Provided further that, notwithstanding
anything contained in clause (b), any property of any person may be attached under this section
if the Director or any other officer not below the rank of Deputy Director authorized by him for
the purposes of this section has reason to believe (the reasons for such belief to be recorded in
writing), on the basis of material in his possession, that if such property involved in money-

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laundering is not attached immediately under this Chapter, the non-attachment of the property is
likely to frustrate any proceeding under this Act.]
(2)  The Director, or any other officer not below the rank of Deputy Director, shall, immediately
after attachment under sub-section (1), forward a copy of the order, along with the material in
his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed
envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such
order and material for such period as may be prescribed.
(3)  Every order of attachment made under sub-section (1) shall cease to have effect after the expiry
of the period specified in that sub-section or on the date of an order made under sub-section (2)
of section 8, whichever is earlier.
(4)  Nothing in this section shall prevent the person interested in the enjoyment of the immovable
property attached under sub-section (1) from such enjoyment. Explanation.— For the purposes
of this sub-section “person interested”, in relation to any immovable property, includes all
persons claiming or entitled to claim any interest in the property.
(5)  The Director or any other officer who provisionally attaches any property under sub-section (1)
shall, within a period of thirty days from such attachment, file a complaint stating the facts of
such attachment before the Adjudicating Authority.
(i) Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate
under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974); or
(ii) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking
cognizance of an offence by the Special Court constituted under sub-section (1) of section 36 of
the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985).”.

M.Shobana vs. The Assistant Director on 25 September, 2013

The Adjudicating Authority or the Court will have to first come to the conclusion that at least
one of the inter-connected transactions is proved by the investigating agency to be involved in
money- laundering.
The authorities had even failed to establish that there was any nexus between the contraband
goods and MrGullberg. The police ,in spite of seeing a man run out of the car on the sight of the

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police , failed to pursue him and attempt to search the real owner of the gold .In this view of the
matter, there was a total lack of evidence which would incriminate MrGullberg in the offence
under Section 135 of the Customs Act.As there is no nexus between the gold found in the car and
Mr Gullberg thus the scheduled offence on the basis of which investigation started under PMLA
is absent.
M/S MAHANIVESH OILS & FOODS PVT. LTD. versus DIRECTORATE OF ENFORCEMENT
“ A commission of a scheduled offence is the fundamental pre-condition for any proceeding
under the Act as without a scheduled offence being committed, the question of proceeds of crime
coming into existence does not arise.”
As the scheduled crime was not committed by Mr Gullberg thus there is no question as to the
proceeds of crime which is essential to constitute the offence of money laundering. The pre-
requisite being absent there could not have been a connection between the alleged crime and the
attachment.

Thus the attachment made under section 5,PMLA is invalid.

iii)The ED was acting beyond its territorial jurisdiction because it also attached the accounts
of marzipan.

1. Short title, extent and commencement.-

1.     This Act may be called the Prevention of Money-laundering Act, 2002.
2.     It extends to the whole of India.
3.     It shall come into force on such date as the Central Government may, by notification in the
Official Gazette, appoint, and different dates may be appointed for different provisions of this
Act and any reference in any such provision to the commencement of this Act shall be construed
as a reference to the coming into force of that provision.

ED does not hold the power to attach property i.e., accounts placed anywhere outside the
territory of India especially if it has some policies regarding the disclosure of those bank
accounts.

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It is mentioned in the facts that Marzipan gives certain privileges to the people who hold accounts in
their kingdom.

Issue 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?

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?
The second Provisional Attachment is invalid for the same reason the first Provisional
Attachment is invalid.
Reasons:
a) Violation of principle of natural justice.
b) No nexus between the alleged offence and the attachment.
c) Enforcement Directorate exceeded jurisdiction by attaching accounts in Marzipan.

Issue 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?

In State of T.N. & Anr.vs. P. Krishnamurthy & ors. (2006) 4 SCC 517, whereupon reliance has
been placed by Mr. Tripathi, it has been held:

“15. There is a presumption in favor of constitutionality or validity of a subordinate legislation

and the burden is upon him who attacks it to show that it is invalid. It is also well recognized that
a subordinate legislation can be challenged under any of the following grounds:

(a) Lack of legislative competence to make the subordinate legislation.

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(b) Violation of fundamental rights guaranteed under the Constitution of India.

(c) Violation of any provision of the Constitution of India.

(d) Failure to conform to the statute under which it is made or exceeding the limits of authority
conferred by the enabling Act.

(e) Repugnancy to the laws of the land, that is, any enactment.

(f) Manifest arbitrariness/unreasonableness (to an extent where the court might well say that the
legislature never intended to give authority to make such rules)

Thus the provisions of the PMLA are challenged under (b) and (c) grounds amongst the ones
mentioned above as it violates Articles 14 and 300-A of the Constitution.

The Constitution Bench in Ram Krishna Dalmia41, further observed that statute which may
come up for consideration on the question of its validity under Article 14 of the Constitution may
be placed in one or other of the following five classes:

“(i) A statute may itself indicate the persons or things to whom its provisions are intended to apply
and the basis of the classification of such persons or things may appear on the face of the statute
or may be gathered from the surrounding circumstances known to or brought to the notice of the
court. In determining the validity or otherwise of such a statute the court has to examine whether
such classification is or can be reasonably regarded as based upon some differentia which
distinguishes such persons or things grouped together from those left out of the group and
whether such differentia has a reasonable relation to the object sought to be achieved by the
statute, no matter whether the provisions of the statute are intended to apply only to a particular
person or thing or only to a certain class of persons or things. Where the court finds that the
classification satisfies the tests, the court will uphold the validity of the law.

(ii) A statute may direct its provisions against one individual person or thing or to several individual
persons or things but no reasonable basis of classification may appear on the face of it or be
deducible from the surrounding circumstances, or matters of common knowledge. In such a case
the court will strike down the law as an instance of naked discrimination.

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Applied in the case:

(iii) A statute may not make any classification of the persons or things for the purpose of applying its
provisions but may leave it to the discretion of the Government to select and classify persons or
things to whom its provisions are to apply. In determining the question of the validity or
otherwise of such a statute the court will not strike down the law out of hand only because no
classification appears on its face or because a discretion is given to the Government to make the
selection or classification but will go on to examine and ascertain if the statute has laid down any
principle or policy for the guidance of the exercise of discretion by the Government in the matter
of the selection or classification. After such scrutiny the court will strike down the statute if it
does not lay down any principle or policy for guiding the exercise of discretion by the
Government in the matter of selection or classification, on the ground that the statute provides
for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to
discriminate between persons or things similarly situate and that, therefore, the discrimination is
inherent in the statute itself. In such a case the court will strike down both the law as well as the
executive action taken under such law.

(iv) A statute may not make a classification of the persons or things for the purpose of applying its
provisions and may leave it to the discretion of the Government to select and classify the persons
or things to whom its provisions are to apply but may at the same time lay down a policy or
principle for the guidance of the exercise of discretion by the Government in the matter of such
selection or classification.

(v) A statute may not make a classification of the persons or things to whom their provisions are
intended to apply and leave it to the discretion of the Government to select or classify the
persons or things for applying those provisions according to the policy or the principle laid down
by the statute itself for guidance of the exercise of discretion by the Government in the matter of
such selection or classification. If the Government in making the selection or classification does
not proceed on or follow such policy or principle, then in such a case the executive action but not
the statute should be condemned as unconstitutional.”

The provisions of the present act i.e., the PMLA are invalid according to the third point of the
above mentioned five classes.

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 In Nergesh Meerza16, the three-Judge Bench of this Court while dealing with constitutional
validity of Regulation 46(i)(c) of Air India Employees’ Service Regulations (referred to as ‘A.I.
Regulations’) held that certain conditions mentioned in the Regulations may not be violative
of Article 14 on the ground of discrimination but if it is proved that the conditions laid down are
entirely unreasonable and absolutely arbitrary, then the provisions will have to be struck down.

Therefore, though not discriminatory, the provisions of the PMLA are absolutely arbitrary due to
the arbitrary power given by it in the hands of the Enforcement Directorate and the absence of
specific procedure.

 In E.P. Royappa26, it has been held by this Court that the basic principle which informs both
Articles 14 and 16 are equality and inhibition against discrimination. This Court observed in para
85 (page 38 of the report) as under:

“….From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality and
arbitrariness are sworn enemies;

one belongs to the rule of law in a republic while the other, to the whim and caprice of an
absolute monarchy. Where an act is arbitrary, it is implicit in it that it is unequal both according
to political logic and constitutional law and is therefore violative of Article 14, and if it affects
any matter relating to public employment, it is also violative of Article 16. Articles 14 and 16
strike at arbitrariness in State action and ensure fairness and equality of treatment.”

The provisions of the PMLA enable arbitrary acts by the Enforcement Directorate.Dr.
Subramanium Swamy vs. Director CBI, JT 2014 (7)SC 474;

 The two dimensions of Article 14 in its application to legislation and rendering legislation
invalid are now well recognized and these are (i) discrimination, based on an impermissible or
invalid classification and (ii) excessive delegation of powers; conferment of uncanalised and
unguided powers on the executive, whether in the form of delegated legislation or by way of
conferment of authority to pass administrative orders – if such conferment is without any
guidance, control or checks, it is violative of Article 14 of the Constitution.

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The above mentioned provisions of the PMLA delegate too much power without guidelines or
limitations. It leaves too much to the discretion of the executive and this is often misused.

He also relies upon the decision in I.R. Coelho[2] in support of the proposition that Article 14 is
a part of the rule of law and it is the duty of the judiciary to enforce the rule of law.

sec 2 (u)  “proceeds of crime” means any property derived or obtained, directly or indirectly, by
any person as a result of criminal activity relating to a scheduled offence or the value of any such
property;

Sec 2 (v)  “property” means any property or assets of every description, whether corporeal or
incorporeal, movable or immovable, tangible or intangible and includes deeds and instruments
evidencing title to, or interest in, such property or assets, wherever located;

sec 3-Offence of money-launderingWhosoever directly or indirectly attempts to indulge or

knowingly assists is a party or is actually involved in any process or activity connected proceeds
of crime including its concealment, possession, acquisition or use and projecting or claiming it as
untainted property shall be guilty of offence of money-laundering."

sec 5- Attachment of property involved in money-laundering.-

(1)  Where the Director, or any other officer not below the rank of Deputy Director authorised by
him for the purposes of this section, has reason to believe (the reason for such belief to be
recorded in writing), on the basis of material in his possession, that—
(a)  any person is in possession of any proceeds of crime;
(b)  such person has been charged of having committed a scheduled offence; and
(c) such proceeds of crime are likely to be concealed, transferred or dealt with in any manner
which may result in frustrating any proceedings relating to confiscation of such proceeds of
crime under this Chapter, he may, by order in writing, provisionally attach such property for a
period not exceeding  9 [one hundred and fifty days] from the date of the order, in the manner
provided in the Second Schedule to the Income-tax Act, 1961 (43 of 1961) and the Director or

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the other officer so authorised by him, as the case may be, shall be deemed to be an officer under
sub-rule (e) of rule 1 of that Schedule:
10
 [Provided that no such order of attachment shall be made unless, in relation to the scheduled
offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal
Procedure, 1973 (2 of 1974), or a complaint has been filed by a person, authorised to
investigate the offence mentioned in the Schedule, before a Magistrate or court for taking
cognizance of the scheduled offence, as the case may be: Provided further that, notwithstanding
anything contained in clause (b), any property of any person may be attached under this section
if the Director or any other officer not below the rank of Deputy Director authorised by him for
the purposes of this section has reason to believe (the reasons for such belief to be recorded in
writing), on the basis of material in his possession, that if such property involved in money-
laundering is not attached immediately under this Chapter, the non-attachment of the property is
likely to frustrate any proceeding under this Act.]
(2)  The Director, or any other officer not below the rank of Deputy Director, shall, immediately
after attachment under sub-section (1), forward a copy of the order, along with the material in
his possession, referred to in that sub-section, to the Adjudicating Authority, in a sealed
envelope, in the manner as may be prescribed and such Adjudicating Authority shall keep such
order and material for such period as may be prescribed.
(3)  Every order of attachment made under sub-section (1) shall cease to have effect after the expiry
of the period specified in that sub-section or on the date of an order made under sub-section (2)
of section 8, whichever is earlier.
(4)  Nothing in this section shall prevent the person interested in the enjoyment of the immovable
property attached under sub-section (1) from such enjoyment. Explanation.— For the purposes
of this sub-section “person interested”, in relation to any immovable property, includes all
persons claiming or entitled to claim any interest in the property.
(5)  The Director or any other officer who provisionally attaches any property under sub-section (1)
shall, within a period of thirty days from such attachment, file a complaint stating the facts of
such attachment before the Adjudicating Authority.
(i) Paragraph 1 of Part A and Part B of the Schedule, a report has been forwarded to a Magistrate
under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974); or

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(ii) Paragraph 2 of Part A of the Schedule, a police report or a complaint has been filed for taking
cognizance of an offence by the Special Court constituted under sub-section (1) of section 36 of
the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985).”.

1.Sections 2(u),2(v),3 and 5 of the PMLA are in violation of article 14 because

1.1 They give arbitrary power to the executive.

Section 3 of the Act is the charging section. The Section read as follows prior to the
2013 Amendment Act :

"3. Offence of money-laundering.--Whosoever directly or indirectly attempts to indulge or

knowingly assists is a party or is actually involved in any process or activity connected proceeds
of crime and projecting it as untainted property shall be guilty of offence of money-laundering."

Post amendment, it reads as follows :

"3. Offence of money-laundering. Whosoever directly or indirectly attempts to indulge or

knowingly assists is a party or is actually involved in any process or activity connected proceeds
of crime including its concealment, possession, acquisition or use and projecting or claiming it
as untainted property shall be guilty of offence of money-laundering."

The main requirement to proceed under Section 3 was the presence of mens rea. But by virtue of
the amendment substituting the phrase - 'with the proceeds of crime and projecting' - with the
phrase 'concealment, possession, acquisition or use and projecting or claiming'- the Section has
armed the competent officers under the Act with unfettered powers to proceed against persons
who may have innocently acquired, what is possibly proceeds of crime. There is now no need to
demonstrate the presence of mens rea to prosecute any person accused of money laundering.
This circumstance was never intended by the legislation nor is it in consonance with the Scheme
of the Act . I would therefore contend that the amended Section is violative of Article
14 and 21 of the Constitution of India.

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The supposed proceeds of crime on the basis of which the proceedings under the PMLA began
was innocently acquired. They were temporarily in the possession of Mr Gullberg as the
belonged to the person who took a lift in his car. The element of mens rea was absent.

Section -5 of P.M.L.A

The Director is required to apply its mind to the complaint and the material filed therewith and
form a reason to believe that a person has committed an offence u/Sec. 3 or is in possession of
proceeds of crime. On settled principle and authority, the reason to believe is neither academic
nor on subjective satisfaction but must follow upon an objective consideration, for good and
sufficient reasons. Thenotice issued by the Adjudicating Authority should be directed only
against such persons as it has reasons to believe have committed an offence u/Sec. 3 or are in
possession of the proceeds of crime.

The reason to believe varies from person to person. Hence it gives too much power at the
disposal of the executive body which in this caseis the Director of the Enforcement Directorate.

1.2 The provisions are ambiguous and vague.

section 2(u)-proceeds of crime(gold in this case)

Section 2(u) of the Act defines "proceeds of crime" expansively to include property or the value
thereof, derived or obtained, directly or indirectly, as a result of criminal activity relating to a
scheduled offence even if in the hands of a person who has no knowledge or nexus with such
criminal activity allegedly committed by others.

In the present case the gold was found in the hands of Mr Gulberg but the ownership wasn’t his.
He merely was stuck with it as the owner had left it in his car and had fled.

Section -3 of P.M.L.A

The offence of money laundering as defined in Sec.3 is in respect of acts of persons. There are
no guidelines as to what properties can be said to be 'involved in money laundering' and thus

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subject to attachment and/or confiscation under the Act. Thus it is vague and ambiguous and thus
arbitrary.

Section -5 of P.M.L.A

Ramalinga raju v. union of India 4th March 2011,

The two provisos to Sec. 5(1) were incorporated by the 2nd Amendment Act. Under the first
proviso no order of attachment shall be made unless the report is forwarded u/Sec. 173 Cr.P.C. in
relation to a scheduled offence, or a complaint is filed before a Magistrate or a Court for taking
cognizance of the scheduled offence. The 2nd proviso enacts that notwithstanding anything in
Clause (b), any property of a person may be attached under the Section if an authorized officer
has reason to believe that such property involved in money-laundering, if not immediately
attached is likely to frustrate any proceedings under the Act. Section 5(1) is vague and confusing.
While under the main provision [Sec.5 (1)], 'such property' is the property of a person charged of
a scheduled offence; the 2nd proviso enables property of any person, and of involved in money-
laundering, to be proceeded against. The term 'involved in money laundering' is vague and
ambiguous. There is no indication as to the nature or degree of involvement required. It is not
clear whether the liability runs with the property or is only in respect of property belonging to a
person charged with committing a scheduled offence. The provision is also bereft of guidelines
consistent and commensurate with the serious consequences that follow. The provision is
therefore arbitrary and unconstitutional. 

Also the term “in possession” does not specify whether temporary possession is included in it or
not and is only the possession sufficient to cause provisional attachment or is the ownership of
the proceeds of crime also required.

The expansive definition thus inflicts grossly unreasonable consequences on innocent persons
and is, therefore, unconstitutional offending Articles 14,and Article 300 - A of the Constitution. 

1.3 no categorization-not specific enough

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The 2013 amendment was obviously an amendment which was clarificatory in nature - vis-a-vis,
Clause (b) above. Now as per the 2013 Amendment, clause (b) of sub-section (1) of Section
5 has been omitted and the erstwhile clause (c) is transposed as clause (b). In the result, the
second proviso is left in a vacuum and is incongruous. It is contended that the 2013
Amendment is contrary to the legislative Scheme and has denuded the basic protection granted to
persons as provided under the second proviso to Section 5 (1) which empowers officers to attach
property of any person even without there being a charge sheet under Section 173 of the Cr.P.C.
It places him in a worse position than a person who is accused of having committed a Scheduled
offence - where the attachment could take place only if there was a final report under Section
173 Cr.P.C. It is also pointed out that the expression employed in the Second proviso is
'attachment ' and not 'provisional attachment', as in the case of an accused in a Scheduled
offence. And the limit of 180 days is also absent, while it is available under the first proviso.
This, it is contended, is again violative of Article 14 and 21 of the Constitution of India.

Wherever there is a loophole or a blank space where there is an absence of legislation,

probability of arbitrariness arises.

In so far as Section 3 is concerned, it is too widely worded so as to include innocent persons and
therefore it is arbitrary, offending Article 14of the Constitution of India and hence the same is
liable to be struck down.

1.4 silent about procedure before confiscation

The impugned order of the Adjudicating Authority illustrates absence of focus and clarity as to
what is adjudicated and decided upon; on what criteria; and under what procedure and
application of standards of appreciation of evidence

The Act does not enable the Adjudicating Authority to go into the legality, validity, propriety or
correctness of the provisional attachment order made u/Sec. 5(1), even though the Adjudicating
Authority is required to consider confirmation of such attachment. The criteria for provisional
attachment are different from the course of enquiry and the consideration that the Adjudicating

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Authority must apply to confirm the order of attachment. The standard of evidence and the
sequence of leading evidence is also uncertain.

1.5 no fair hearing-violation of principles of natural justice

A.Kamarunnisa Ghori vs Writ Petitions Filed Under on 11 July, 2012

(i) that the order of the Director under section 5(1) and the order of the Adjudicating Authority
under section 8(3) were passed in violation of the principles of natural justice and without
providing adequate opportunity of being heard; and

Thus, persons against whom proceedings are pursued are disabled from presenting their defence
in the proceedings and are thus denied fair trial, violative of Art.14.

 Smt.K.Sowbaghya vs Union Of India on 28 January, 2016

 Violation of 300-A

A.Kamarunnisa Ghori vs Writ Petitions Filed Under on 11 July, 2012

 The right to property, though not a fundamental right, is nevertheless a Constitutional right in
terms of Article 300-A. The Supreme Court has held the right to property as a human right also.
Even if I assume for a minute, that the object of the Prevention of Money Laundering Act, 2002
is to keep the accused out of the possession and enjoyment of the proceeds of crime, the human
rights of other members of his family or even persons who are in occupation of the property
under lawful agreements of tenancy, cannot be thrown to the mercy of the respondents. We must
be conscious of the fact that the right to dispossess the accused, is conferred upon the
respondents by the Statute, even before his conviction.

A.Kamarunnisa Ghori vs Writ Petitions Filed Under on 11 July, 2012

(ii) that without deciding the question of independent ownership of the properties, the
respondents have attached the properties owned by the family members of the accused.

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Ramalinga raju v. union of India

There are no guidelines as to what properties can be said to be 'involved in money laundering'
and thus subject to attachment and/or confiscation under the Act.

PRAYER

In light of the issues raised, arguments advanced and authorities cited, the counsel for the
Petitioner humbly prays that the Hon’ble Court be pleased to adjudge, hold and declare:

1. That the writ filed is maintainable in the court of law.

2. That the FIR dated 12th Feb 2016 is quashed
3. That the provisional attachment orders and the freezing order is invalid
4. That sections 2u, 2(v), 3 and 5 of the PMLA are arbitrary and violative of Articles 14 and 300-A
of the Constitution and are struck down.

And pass any order that this Hon’ble court may deem fit in the interest of equity, justice and
good conscience. And for this act of kindness, the counsel for the petitioner shall duty bound
forever pray.

Sd/-
(Counsel for Petitioner)

PETITIONERS