RPN Singh, minister of state, MCA in written reply in Lok Sabha said that, “There is no separate activity code to identify multi level marketing (MLM) companies.” Surprisingly, such a reply from MCA comes at a time when ministry of consumer affairs is drafting guidelines for MLMs
While many multi-level marketing (MLM) companies continue to mushroom, targeting gullible people and amassing several thousand crores, the government seems to have no solution to stop them. Recently the ministry of company affairs (MCA) said that that there is no separate activity to identify MLMs and it has no information on any action taken on such companies.
RPN Singh, minister of state, MCA in written reply in Lok Sabha said that, "There is no separate activity code to identify multi level marketing (MLM) companies. Therefore, these companies cannot be separately identified from the list of companies registered under the Companies Act, 1956. Also, there are no separate guidelines for MLM companies. Hence information on action and tax collection is not available."
Mr Singh was replying to written questions on whether the government is aware that the MLM companies are prevalent in India; details and total number of such companies, if the government has proposed any guidelines for these MLM companies along with details of any action against any MLM company and the tax collected from such companies in last three years.
Surprisingly, such a reply from MCA comes at a time when ministry of consumer affairs is drafting guidelines for MLMs. Sources confirmed to Moneylife that acting on the order from the Prime Minister's office (PMO), the ministry is consulting stakeholders to formulate detailed guidelines on MLMs and for direct selling companies.
Recently, Veerappa Moily, minister of consumer affairs, had said that it has written to the ministry of home affairs stating that it has no reservation if such regulatory body, as suggested by Serious Fraud Investigation Office (SFIO), is set up within the ministry of home affairs to check the cases of frauds by MLMs as is being done of chit funds.
SFIO is a fraud investing body. Famous scams by MLMs such as SpeakAsia Online and Gold Quest International (a chit fund company) are being investigated by the SFIO. Currently, India bans MLMs and Ponzi schemes under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, which is grossly inadequate. However, considering menace of these schemes, the state of Meghalaya implemented its own Act which completely banned Ponzi and MLM schemes from the state. Rajasthan is also planning to draft its own legislation, apart from the central Act.
The Kerala government, which in the past admitted noticing frauds amounting to over Rs1,000 crore by MLMs, framed guidelines to distinguish a genuine direct selling company from a fake one. However, experts pointed out that these guidelines were grossly inadequate and misleading.
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