The Supreme Court in deciding the Criminal Appeal No. 1044 of 2008 KURIACHAN CHACKO AND OTHERS Versus STATE OF KERALA, stated that prima facie, the courts were satisfied that but for the representation and the benefits sought to be given under the Scheme, the victims would not have acted on such representation. It was, therefore, a case of application of Section 415 IPC. The trial court as well as the High Court considered the facts of the case and held that there is an element of cheating inasmuch as a representation was made by the accused that every unit-holder will get double the amount invested by him; the representation was false, the maker of the representation was aware that the representation was not true and by such representation, he deceived the victim to believe the representation to be true and actuated him to act on such representation. The promoters induced the common public to part with money on the lure of doubling the amount. The advertisement clearly declared that a member would get double the amount when after his enrollment, two members were enrolled under him and thereafter. (Paras 47 and 39)
Prima facie case had been made out in absence of better explanation by the accused. The Kerala High Court also upheld the argument of prosecution that the Scheme was a "mathematical impossibility". The promoters of the scheme very well knew that it is certain that the Scheme was impracticable and unworkable making tall promises which the makers of the promises knew fully well that it could not work successfully. It could work for some time in that "Paul can be robbed to pay Peter" but ultimately when there is a large mass of Peters, they will be left in the lurch without any remedy as they would by then have been deceived and deprived of their money. If it is so. It could be said to be a case for application of Section 420 read with Section 34 IPC. of course, at this stage. (Paras 47 and 41)
Amway is exactly doing what is described as cheating in the above case. It is inducing the public that they would earn Rs. 62, 500 every month on enrollment of 102 persons under their downline under the 6-4-3 scheme. Here they not only merely offered to double the investment but also claimed that the members would get an infinite income of Rs. 62, 500 every month. That is why here also Section 420 under Indian Penal Code is applicable along with Section 34 (joint liability).
The Amway apologists may argue that there is compulsion to enroll members but the inducement is so attractive that the IBOs keep on chasing for new members to achieve 102 members downline. Apart from Section 2 (c) and 3 r/w 4,5,6 of Prize Chits and Money Circulation Schemes (Bannng) Act, 1978, Section 420 and Section 34 of IPC are also applicable.