Sunday, 16 September 2012

Multilevel Marketing squarely falls within the definition of ‘Money Circulation Scheme’: Madras High Court

The Madras High Court way back in its judgement of 2004, notwithstanding the claims of multilevel marketing companies, held that multilevel marketing, network marketing, referral marketing are nothing but illegal money circulation schemes.In its judgement while hearing a writ petition filed by the Apple FMCG in 2004, the Madras High Court even commented:
It is true that several companies including Multinational Companies carry on the business of the “Multilevel Marketing” and it is also true that the Executive and the law enforcing authorities keep a blind eye on such activities. This also does not make an illegal act legal. It is always a fact that the law enforcing authority would try to close the stable only after the horse had escaped.” (Para 22).
Justice A Rajan speaking on behalf of the Bench, stated that in this part of India, people are gullible and fall an easy prey to the tall promises made through the media. That was the reason why the lottery tickets were sold in large numbers in the State. Many companies want to exploit this attitude of people and float many schemes and lure the people to join the schemes.
The petitioner is not entitled for direction for prohibiting the authorities from keeping surveillance over any meeting. Sec. 7 of the Act confers the right on the police officer to enter any premises, where he has got a reason to suspect that the premises are being used for purposes connected with the promotion or conduct of any prize chit or money circulation scheme in contravention of the provisions of the Act. (Para 33).
The Madras High Court held that mere fact no complaints were received does not make an act legal, if it be otherwise illegal. It is true that no service fee is collected by the petitioner for registration. It is also true that the commission that is received by the distributor depends upon the volume of business generated by him. From the scheme of Multilevel Marketing, as reflected in the brochure issued by the petitioner, the commission is received only if the distributor sells the product, which he purchases, to two others and those two persons sell it to two other persons each and those four persons sell similarly to two persons each.
In this manner, if more number of persons in the next stages come into this scheme, the person through whom those persons got enrolled gets commission. "Receipt of any money or valuable thing as the consideration or a promise to pay money, on any event or contingency relative or applicable to the enrollment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions.” The above definition makes it clear that any scheme by whatever name it is called whereby on a promise that one would receive or would make quick or easy money by enrollment as members into the scheme is ‘money circulation scheme’.
In this case, Justice A Rajan said that the contention of the petitioner is that there is no chain of customers. This contention appears not acceptable. The scheme, as stated above, creates chain of customers and only when the chain progresses without any break in any of the links, the ‘principal distributor’ gets more commission. If, for any reason, the chain is broken, at any stage, then the principal distributor’s commission would get reduced proportionally to that extent. Therefore, it is not correct to say that there is no chain of customers in the process. Section 2(c) of the Prize Chits and Money Circulation Schemes(Banning) Act, defines ‘Money Circulation Scheme’, as follows: “Money circulation scheme” means any scheme, by whatever name called, for the making of quick or easy money, or for there, there is enrollment of members into the scheme; there is also a promise made that on such enrollment of large number of persons into the scheme, one would make quick money or easy money. There cannot be any doubt that by enrolling new members and by the process of selling the goods to new distributors this chain progresses; the person who became such members earlier get commission without doing any work; getting such a commission is nothing but getting quick or easy money. Therefore, such schemes the so called ‘Multilevel Marketing’, definitely falls within the definition of ‘money circulation scheme’. The event is enrollment of new members; the commission received is relative to such enrollment of new members into scheme. Therefore, the argument of the learned counsel for the petitioners that there is no promise of quick or easy money is not correct for the reasons stated above. Thus, the so-called Multi-level Marketing, though called by a very attractive name squarely falls within the definition of ‘Money Circulation Scheme’ under the Act. Hence, it is prohibited by the Act. It is for the law enforcing authorities to take appropriate action.

13 comments:

nmart said...

according to u hll, Colgate and all mnc and Indian companies r money growing company because he have 26 distributor in all states and all state distributor made distributor in all dist. and they made distributor in all tahsil and they develop network to retailer and customer jis din tumhara sapna sach ho gya na us din pura hindustan bhukha marega

Shyam Sundar said...

It shows how small your brain is. These companies are not promoting network marketing. Hindustan Unilever Network started illegal money circulation scheme. I am looking for a victim to come forward to file a criminal case against it.
Hindustan won't starve if they stop cheating their own friends and relatives, but they sure starve of friends and relatives if they lose relations with them. That would happen due to the multilevel marketing.
You could wake up a sleeping person, but it would be impossible to wake up an already woke up person.
You are all pretending sleep.

Mac said...

shyam, If you want any branded distributorship you need lakhs of rupees, here nmart is best solution to poor people, and house wives, students, elder people, no work lawyer no work engineers etc to grow immensely

Mac said...

You are a victim of monopoly business model, where whole market controlled by a few rich MNC'S, open your eyes shyam.

Mac said...

Shyam ji , why are you confusing yourself, If reasonable product and LTD company and paying Taxes, nothing is money circulation.Even Banking system is also based on money circulation tactics only.

MALLAPPA RAJU said...

DEAR, CAN YOU GIVE ME LATEST UPDATES REGARDING YOUR PETITION ON NMART? BECAUSE YOU ONLY PERSON WILL GIVE ALL DETAILS WHETHER TRUE OR FALSE. BECAUSE YOU ARE ONLY PERSON OPPOSING NMART IN THIS MUCH STRONG. BY RECEIVING UPDATES FROM YOU, WE WILL TAKE DECISION AS YOU ARE CORRECT OR WRONG. NO ANGRY ON ME NA. THIS IS THE SUBJECT OF NATION. THERE IS NO ANY PERSONAL QUARREL BETWEEN US. AM I CORRECT. SO PLEASE GIVE UPDATES ON THIS ISSUE.

Nmart said...

Dear Shyam,
Pls Check MLM Means is Multi Level Marketing Not Money Circulation Schqeme...
Must Read Andhra Pradesh Court order

http://164.100.12.10/hcorders/orders/2012/wp/wp_25236_2012.html

THE HON’BLE SRI JUSTICE K.C.BHANU

WRIT PETITION NO.25236 OF 2012
ORDER:
This Writ Petition is filed seeking to issue writ of Mandamus declaring the action of the police officials in interfering with the civil disputes of the petitioner, as arbitrary and illegal.

2. Heard.

3. On instructions, the learned Assistant Government Pleader for Home, appearing for the respondents stated that on a complaint given by Smt G.Pratibha, police registered a case in Crime No.292 of 2010 for the offence punishable under Section 420 IPC. After completion of investigation in the above crime, police filed report under Section 173 Cr.P.C. before XI Metropolitan Magistrate, Cyberabad, L.B.Nagar referring the case ‘as lack of evidence’. Excepting conducting investigation in the above Crime, police are not interfering with the civil disputes of the petitioner.

4. Recording the said submission, no further orders are required to be passed in this Writ Petition and accordingly, the Writ Petition is closed. There shall be no order as to costs. Miscellaneous petitions, if any, pending in this Writ Petition shall stand closed.

Shyam Sundar said...

Excepting investigation into the crime, the police are not interfering in the civil disputes of the petitioner, Justice Bhanu said.
When he said lack of evidence, he is referring to the civil disputes.
Police were ordered to do the investigation into the crime mentioned in the petition. Unfortunately, the police did not investigate into the crime. As a result, the NMart has grown unmanageably in two years and Gopal coolly pocketing Rs. 1400 crore.

Shyam Sundar said...

Mac, try to put forward these arguments in the AP High Court and see whether the judiciary accepts it.
Gemini Techno used the same words and same technique, it was thrown out by a division bench of High Court.

mahenmart said...

mr.shyam,,,,
can u tell me what u want.
pls give clear details,r u really doing for public.
can put case against corruption.
if u did for that u r really a good person for all.
but here so many people said mlm is good for wealth.but still u standing in one leg.
i will give u a one good idea,pls put case for mlm regulatory (like IRDA,RBI,SEBI),pls do for that its very useful for all.
if any company want to do mlm business they should come under this regulatory so that ,ur problem is solved.
Why u not doing like that....
if u want get a pool option also.
govt will decide on result basis.
pls give me a answer for every indian question ...........

Mac said...

Gemini techno have no shopping malls, understand?

GRANDMASTER said...

shyam tell me answer my question.....
can u take it challenge.
if u put case against for make regulatory for doing legally.
if any company to prove they can give a benefit to the customers or members ,then they should approve for that company.
what do u mr.shyam.

Shyam Sundar said...

What a splendid English.
What do you want to say. To tell you or answer you.
Shall I 'put' 'case' against or for.
Express yourself clearly. For that you need to improve your communication skills.