Multi level marketing, a camouflaged illegal money circulation scheme : Finance department of Manipur

The Manipur State Government has issued a Press statement warning its people not to fall prey to the evil designs of multilevel marketing companies.
Corporate Frauds Watch highly appreciates the efforts of one of the prominent states of North Eastern part of India to curb the menace of multilevel marketing.

Posted by manipurmail The First English daily newspaper of Manipur on May 18th, 2011 and filed under Features

Mail News Service

Imphal, May 17 : Finance Commissioner, VK Dewangan said it has been brought to the notice of State Government that a number of money circulation schemes – involving cash gains, infringed into marketing goods, services, drugs and health care products are thriving in the State. The Promoters of these schemes have been making high profile campaign by declaring that enrollment into such scheme; one would be getting back the initial paid investment and keep gaining financially by enrolling new members.

While promoting the schemes they induce the influential people from all cross section of the society and honour them by organizing indoor and outdoor parties/functions with big fanfare to make the general public believe genuineness of schemes, while enrolling other members in the chain with attractive and stylish titles to the enrolled members as “Silver member, Gold member, Diamond member, Platinum member, so on and so forth”.

Many of these companies are taking promotional trips to Bangkok, Pattaya, Singapore and other countries in the name of conferences, meetings etc. Locally also they conduct meetings, conference in big hotels. These dubious companies do whatever possible to attract gullible public, so that, the second set of enrollers keep multiplying and gain financially, fascinating every onlooker to get engrossed into such dubious money circulation schemes. Such a system of chain which work endlessly to provide profit to everyone concerned would ultimately breakdown at some stage, that is when a person fails to get his required clients or enrollers, the promoter would not tell of its attaining saturation of member enrollments in that particular area but blame it as one’s personal failures.

Ultimately, the easy prey, the middle class, building castles in the air loses all their

savings even at the cost of their blood relations, the kith and kin who are also victimized.

The worst suffers in such schemes are often educated unemployed youths who lose their time, health, Wealth in the chase of wild goose and dreams. Such schemes have ultimately destroyed a number of families and friendships.

2. This is to inform to all the general public, Government officials and other concerned that the specific provisions under Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978, relevant sections under cheating Section 420 of IPC, Drugs and Cosmetics Act 1940 by the Ministry of Health and Family Welfare, Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 are abundantly available to be invoked and effectively check and prevent progress of such dubious floated companies.

Section 3 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 bans prize chit and money circulation schemes or enrolment as members to any such schemes or participation in such schemes. Section 4 and 5 are penal provisions and prescribe punishment. Section 6 deals with offences committed by Companies. Section 7 authorizes Police Officer not below the rank of Officer in charge of a police station to exercise power to enter and search premises and to seize things used for such scheme. Section 8 provides for forfeiture of newspaper and publication containing money circulation scheme. The Preamble of 1978 Act declares that it has been enacted “to ban the promotion or conduct of prize chits and money circulation schemes and for matters connected therewith and incidental thereto”.

3. The Hon’ble Supreme Court and various Hon’ble High Courts have issued judgments against Multi- Level Marketing (MLM)- a camouflaged illegal money circulation scheme. The Andhra Pradesh High Court (Amway Vs, State of A.P & others), Madras High Court (Apple FMCG Vs. State of T,N & others), Karnataka High Court (Commissioner of Income Tax Vs. Amarjeet Kaur) and Supreme Court of India (Kuriachan Chako Vs, State of Kerala) in their judgments on the above cases have clearly stated that these types of schemes are prejudicial to the public interest and are also adversely affect the efficacy of fiscal and monetary policy as siphoning of crores and crores of money takes place without accountability. Department of Financial Services, Ministry of Finance, Government of India have directed Direcorate of Enforcement and Central Economic Intelligence Bureau for “taking up appropriate action against these major Financial Scam – Siphoning of money without accountability and check in the guise of Multi-Level marketing, Chain Business, Network Business etc. The Central Economic Intelligence Bureau, in turn, has directed State Governments for taking up appropriate action!

4. Therefore, Government of Manipur hereby informs that Prize chits or benefit schemes benefit primarily the promoters and do not serve any social purpose. Thus, the so-called Multi-level marketing (MLM), though called by a very attractive name squarely falls within the definition of “Money Circulation Scheme” under the Act and hence prohibited by the Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978.

The general public should avoid and not enroll themselves into these schemes as they not only destroy the economic fabric of our State/country, but also the fiscal system of the country. It is also to inform that MLM schemes destroy the well knitted social fabric of our society and therefore, general public should not associate with such con companies.