Here is the Full text of the judgement delivered by the Division Bench of Andhra Pradesh High Court which slammed the business model of Amway India once again in its judgement.
IN THE HIGH COURT OF JUDICATURE
ANDHRA PRADESH AT
THE HON'BLE SRI JUSTICE GODA RAGHURAM
THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN
WRIT PETITION No. 22914, 22916, 23737 AND 25749 OF 2006
COMMON ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan)
This Writ Petition is filed by M/s. Gemini Techno Marketing Private Limited seeking a declaration from this Court that the provisions of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978 (hereinafter referred to as the “Act”) has no application to the business carried on by the petitioner and its distributors. The petitioner seeks a consequential direction to the respondents not to apply or enforce the provisions of the Act to the petitioners’ business, and to restrain them from interfering with their lawful business.
M/s. Dewsoft Overseas Private Limited, and their franchisees, have filed this Writ Petition seeking a declaration from this Court that the action of the respondent, in applying the provisions of the Act to the petitioners’ business and interfering with their business activities, is illegal and arbitrary. They seek a consequential direction to restrain the respondents from interfering with their lawful business and that of their associates/franchisees.
W.P. No.25749 of 2006:
This petition is filed by (Mr R Uma Maheswara Rao) a retired scientist of the National Geo-physics Research Institute in public interest to declare the action of respondents 1 to 12, in permitting M/s Amway India Enterprises to run its business in
The petitioner would assert that, without recognizing the factual and legal position, the respondents were interfering with their lawful business by taking action against them under the Act; respondents 5 and 6 had conducted simultaneous raids on their branches; had caused wide publicity regarding the arrest of some of their distributors; had registered cases against the petitioner and its distributors; had sealed various office premises of the petitioner; and had thereby created panic in the minds of the petitioner’s distributors and consumers with malicious intent.
The 2nd respondent would submit that implementation of the Act falls within the purview of the State Government; in case there are fraudulent schemes being carried on in the name of Direct/Network/Multilevel Marketing companies, with the object of making quick and easy money, such schemes should be investigated by the State Government; the Reserve Bank of India issued a clarification in its letter dated 5.2.2003; and it is for the State Government to decide whether or not any given scheme attracts the provisions of the Act.
The 7th respondent (Corporate Frauds Watch) would submit that the petitioner’s scheme is a binary scheme which means one person has to sponsor or enroll two persons each, and again these two persons are required to enroll or sponsor two persons each to join into the scheme; the new member must be sponsored or enrolled by the already enrolled members in the scheme; the new member ie., those sponsored are called the downline workers and the sponsor is called the upline member; the entrance fee is Rs.2699/-; when a new member joins the scheme, all upline members in the same network or chain get commission irrespective of their efforts; as soon as new members are sponsored either directly, or by the efforts of his downliners, all the upliners in the group get points and, on the basis of points, commission is paid and distributed; as money circulation is based on the contingency relative or applicable to enrolment of members, and on the efforts of the down line members, it is nothing but easy money; the petitioner is promoting an illegal money circulation scheme under the guise of sale of products; the amount of commission paid by the company is directly dependant on the sponsoring of new members into the scheme, not only on his personal efforts but also on the event of contingency relative or applicable to the enrolment of new members by their downline members without effecting any sales; and the scheme squarely falls within the definition of Section 2(c) of the Act. Reference is made to the judgment of the Supreme Court in Kuriachan Chacko v. State of Kerala in this regard.
 (2008) 8 SCC 708
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