Market regulator Securities and Exchange Board of India (SEBI) has advised victims of multi-level marketing (MLM) QNet and its franchisee Vihaan Direct Selling India Pvt Ltd to the Economic Offences Wing (EOW) of Police having jurisdiction.
SEBI said its Bengaluru local office is regularly receiving complaints against activities carried on by QNET and Vihaan Direct Selling. "SEBI has noted that activities of QNet and VDSIL against which complaints are being received are akin to MLM activities and therefore, the same are being forwarded to state government and the EOW of Karnataka, having jurisdiction to implement provisions of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 governing MLM activities in the nature of money circulation schemes, for further action as they deem fit," it said.
The Prize Chits and Money Circulation Schemes (Banning) Act empowers respective state governments and local police authorities to take action against MLM activities in the nature of money circulation schemes carried out in their territorial jurisdiction.
QNet, in response to the SEBI directive, has alleged that vested interests have been writing to market regulator to create an impression of wrong doing. "QNet has been under investigation based on a false complaint. The investigations have been on for the past three years and till date no charge sheet has been filed. This follows the mis-information campaign launched against QNet and its associates by vested interest groups who are arm-twisting and destroying a legitimate business operation. QNet and its associates are facing several criminal complaints filed by individuals motivated by these interest groups and our business is under investigation by police department. However till date no reports have found or even remotely indicated any involvement of either QNet or its associates being involved in any activities not permitted under law in the last 16 years of its operations in India," the statement says.
Earlier in September 2016, the Bombay High Court had asked five prime accused, including former world champion of billiards Michael Ferreira, to surrender as per the directions passed by the Supreme Court in the multi-crore QNet scam case. The HC was hearing a bunch of writ petitions filed by these five accused.
The Bombay HC in May 2016 had also rejected bail plea of these five associates of QNet. While rejecting anticipatory bail applications of five accused the HC had observed that "the deceit and fraud is camouflaged under the name of e-marketing and business". This scheme is undoubtedly a MLM activity and a pyramid structure of such scheme is prepared so that the members are promised to get money on purchase and sale of products, the Court had said.
In a hard-hitting order on 6 May 2016, Justice Mridula Bhatkar said, "The motto of the company 'sell more, earn more' appears very attractive and innocuous. However, this motto is fully camouflaged. The company stands on a basic statement that people can be fooled. Thus, the true motto is 'sell more earn more' by fooling people. In fact, it is a chain where a person is fooled and then he is trained to fool others to earn money. For that purpose, workshops are conducted where study and business material is provided with a jugglery of words, promises and dreams. Thus, the deceit and fraud is camouflaged under the name of e-marketing and business."
"It has very grave and serious impact on the economic status and mental health of the people on a large scale. On considering parameters of section 438 of the Code of Criminal Procedure, I am not inclined to protect the accused. It won't be out of place to mention that such circulation is required to be stopped. It is necessary for the prosecution to take injunctive steps against this business activity, which is prima facie, illegal. Though by stopping this business, a large group of people may get financially affected, however, it will save larger groups of people from becoming prey of this activity," the Bombay HC said.
The HC then rejected bail applications of five including, Srinivas Rao Vanka and Magaral Veervalli Balaji, both directors of Vihaan Direct Selling, Suresh Thimiri, director of Transview Enterprises India Pvt Ltd, Malcolm Nozer Desai, who is a 20% stakeholder in Vihaan and Michael Joseph Ferreira, former world champion of billiards and an 80% stakeholder in Vihaan.
Gurupreet Singh Anand, a computer consultant from Lokhandawala, Andheri in his first information report (FIR) stated that his wife was duped for Rs30,000 by some people who had introduced themselves as the independent representatives (IRs) of QNet.