In 2003, a multilevel marketing company V-Can Network (Private) Limited which marketed three products - Ozone water purifier, Magnetic bed and Companion (multipurpose foldable table with four seats and designed to look like a suit case) filed a writ petition in Madras High Court to issue a writ of Mandamus directing the police not to prevent the company from carrying on their day-to-day business of selling their products and services under the multilevel marketing scheme by using their respective offices and network systems.
The company said that each of the products cost Rs. 5990 and sold under distribution system in addition to the direct sales which is being networked from individual to individual. This system already existed in India and many other companies are doing the same business of individual networking system. The consumer makes the purchase out of his won will and there is no compulsion in the business and the same person out of his own decision and will may become a distributor or may remain as consumer himself. (Amway puts forward the same argument) The distributor is getting commission for the sale he is undertaking and such independent distributor have the power not only to sell the products but also appoint two other distributors under him and all of them can sell the company products and earn points apart from incentive commission on the value of the products sold.
The purchaser who became distributor on accumulation of 600 value points, becomes an independent distributor and eligible to avail discount up to 30% of the sale price of the product. Three products are manufactured scientifically. Nearly 50,000 distributors in five States are depending on this business and nearly two lakh people are directly involved earning livelihood out of this system. Though there is no complaint from any quarter, recently police arrested four distributors and registered a case. The company stated that leading legal personalities have certified that their system of business would not fall within the ambit of PCMC Act.
After exhaustive hearing, the High Court held that though the company claim innocence and their business being lawful, the same has to be ascertained only after thorough investigation, final report, trial, evidence and judgement and in such circumstance, the grievance expressed by V-Can Network cannot be gone into a writ jurisdiction. It is needless to mention that it is open to them to put-forth their defence before the appropriate court if their business is lawful. Hence this writ petition is dismissed.