Sunday 11 January 2015

Big Bazaar into big racket


The Future Group, which owns Big Bazaar, the biggest retail market chain in the country, has launched ‘Profit Club Card’ with an eye on making easy and quick money throwing the legalities to the wind. The new scheme intends to mobilise deposits from the customers for the goods to be supplied in future, which is nothing but violation of various laws.
It may be recalled that the Newlook Retails Private Ltd also known as NMart launched similar scheme in the past and collected nearly Rs 1,500 crore from public. However, it ran into rough weather after the police filed criminal cases against the company. Its chief Gopal Singh Shekhawat was put behind bars and the company was closed.
A glance at the Profit Club Card brochure reveals its true nature of violating the law of the land. An adult could become a member of the Profit Club to acquire its card by paying Rs 10,000 plus Rs 100 as admission fee. In the second type of Card, a member needs to deposit Rs 5,000 plus Rs 100 as admission fee.
The Cards could be used to purchase every month ‘selected’ products worth Rs 1,000 on Rs 10,000 Card for 12 months and Rs 400 on Rs 5000 Card for 15 months. The Card is valid only to purchase products in Big Bazaar, fbb and Food Bazaar of the Group and not other sister-concerns.
Mastan Vali, an advocate of the Hyderabad High Court, opined that deposit was defined in Sec 2 (b) of Andhra Pradesh Protection of Depositors Act, 1999. As per the Act 'deposit' means the deposit of a sum of money either in lump sum or instalments made with a financial establishment for a fixed period, for interest or return in any kind. The definition for deposit under the RBI Act and SEBI Act are different to definition of deposit under the AP protection of Depositors Act. As per the RBI Act and the SEBI Act, advance for sale is not deposit whereas in Depositors Act, there is not such exemption in the definition. As such, any person collects deposits with a promise to return in any kind falls within the definition of the Depositors Act. Hence, he opined that the government should suo motu enquire into this matter under the provisions of the AP Protection of Depositors Act, 1999 before any cause of action or grievances at large has taken place, he added.
The Profit Club Card also attracts the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 as it intends to mobilise deposits through its direct selling agents. A senior police officer also opined that it was an outright violation of the law of the land.
As per the General Terms and Conditions of the Profit Club brochure, one could be enrolled as member through direct sales agents/agencies duly appointed by Future Group. It also absolves its own liability to fulfil its obligations if there is change in law. More, The Future Group sets a condition that in case of disputes, the Mumbai Courts have exclusive jurisdiction. In essence, if anybody wants to file a suit against the Future Group if it fails to fulfil its obligations, one has to go to Mumbai to file the suit. Practically, it is not economically feasible to an ordinary customer.

It is high time that the law enforcing agencies took initiative to curb such illegal activities. 

Thursday 1 January 2015

The Full text of the RBI warning alerting people against joining MLM schemes

ूेस ूकाशनी PRESS RELEASE
संचार 􀇒वभाग, क􀉅ि􀈣य काया􀁛लय, एस.बी.एस.माग􀁛, मुंबई‐400001
_________________________________________________________________________________________
____________________________
DEPARTMENT OF COMMUNICATION, Central Office, S.B.S.Marg, Mumbai‐400001
फोन/Phone: 91 22 2266 0502 फै􀃈स/Fax: 91 22 22660358
भारतीय 􀇐रज़व􀁛 ब􀉇क
RESERVE BANK OF INDIA
वेबसाइट : www.rbi.org.in/hindi
Website : www.rbi.org.in
इ‐मेल email: helpdoc@rbi.org.in
January 1, 2015
RBI cautions Public against Multi Level Marketing Activities
The Reserve Bank of India has cautioned the public against Multi-level Marketing (MLM) activities so that investors do not fall prey to unscrupulous entities. 

Explaining the functioning of these entities, the Reserve Bank stated that MLM/Chain Marketing/Pyramid Structure schemes promise easy or quick money upon enrolment of members. Income under such schemes majorly comes from enrolling more and more members from whom hefty subscription fees are taken rather than from the sale of products they offer. It is incumbent upon all members to enroll more members, as a portion of the subscription amounts so collected is distributed among the members at the top of the pyramid. Any break in the chain leads to the collapse of the pyramid, and the members lower down in the pyramid are the ones that are affected the most.
The Reserve Bank has advised that members of public should not to be tempted by promises of high returns offered by entities running Multi-level Marketing/Chain Marketing/Pyramid Structure Schemes. The Reserve Bank has reiterated that falling prey to such offers can result in direct financial losses and they, in their own interest, should refrain from responding to such offers in any manner.
The Reserve Bank has also said that acceptance of money under Money Circulation/Multi-level Marketing/Pyramid structures is a cognizable offence under the Prize Chit and Money Circulation (Banning) Act 1978. Members of public coming across such offers should immediately lodge a complaint with the State Police.
Alpana Killawala
Press Release : 2014-2015/1383 Principal Chief General Manager

Don't fall prey to promises of multi-level marketing firms:RBI

Cautioning investors against multi-level marketing firms promising easy and quick money, 
RBI today asked public not to be tempted by such offers. 
"MLM/Chain Marketing/Pyramid Structure schemes promise easy or quick money upon enrolment of members. 
"The Reserve Bank has advised that members of public should not to be tempted by promises 
of high returns offered by entities running Multi-level Marketing/Chain Marketing/Pyramid 
Structure Schemes," it said in a statement. 
There have been a spurt of such schemes in the recent past while various regulators are 
taking actions such entities. 
Advising caution, RBI said investors should not fall prey to these kind of unscrupulous 
entities as the pyramid structure mandates all members to enroll more members. 
"Any break in the chain leads to the collapse of the pyramid, and the members lower down 
in the pyramid are the ones that are affected the most," it added. 
It said falling prey to such offers can result in direct financial losses and they, in 
their own interest, should refrain from responding to such offers in any manner. 
Further, RBI said that acceptance of money under Money Circulation/Multi-level 
Marketing/Pyramid structures is a cognizable offence under the Prize Chit and Money 
Circulation (Banning) Act 1978. 
"Members of public coming across such offers should immediately lodge a complaint with 
the state police," it added.

This statement by the RBI could be understood as warning against joining the schemes of Amway India and other IDSA members as the Hyderabad High Court conclusively stated that the business model of Amway is illegal.