Although prima facie, the Speak Asia case appears to be fit for trial under the Prize Chits and Money Circulation Schemes (Banning) Act, the question is since it is not registered in the country, how and where would the proceedings be initiated against the MLM company

Speak Asia (SpeakAsiaonline.com) has been collecting large sums of money by rapidly enrolling people with the promise of incredible payments for simply filling out online surveys. We learn from our investigation and this has been confirmed by Speak Asia officials, that the company is not registered in India and so cannot present any legal documentation. Now, a debate has been set off on whether Speak Asia and its multi-level marketing (MLM) scheme can be banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCSB Act).

Only two days ago, the Manipur state government used provisions of the PCMCSB Act to ban MLM companies. The state government said in a notification, "The MLM, though called by very attractive names, squarely falls within the definition of 'Money Circulation Scheme' under the Act and hence is prohibited by the Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978."

"This is to inform all the general public, government officials and others concerned that the specific provisions under Prize Chits and Money Circulation Schemes (Banning) (Manipur) Rules, 1978, relevant sections under cheating Section 420 of IPC, Drugs and Cosmetics Act 1940 by the Ministry of Health and Family Welfare, Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954 are abundantly available to be invoked and effectively check and prevent progress of such dubious floated companies," the notification said.

"Section 3 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 bans prize chit and money circulation schemes, or enrolment as members to any such schemes, or participation in such schemes. Sections 4 and 5 are penal provisions and prescribe punishment. Section 6 deals with offences committed by companies. Section 7 authorises a police officer, not below the rank of officer in charge of a police station, to exercise power to enter and search premises and to seize things used for such scheme. Section 8 provides for forfeiture of newspaper and publication containing money circulation scheme. The Preamble of 1978 Act declares that it has been enacted to ban the promotion or conduct of prize chits and money circulation schemes and for matters connected therewith and incidental thereto," the notification said.

Not long ago, the Andhra Pradesh government also used the same Act to ban Japan Life,  Amway and GoldQuest. Shyam Sundar Matham of Corporate Frauds Watch (CFW) says, "The Andhra Pradesh High Court stated in its judgement that the business model of Amway India attracts the provisions of the PCMCS Act, 1978 and it asked the police to continue the investigation and file the charge-sheet in six months. Now the case is pending in the Chief Metropolitan Magistrate's Court, Nampally, Hyderabad under the same enactment."

The PCMCSB Act prohibits any entity from promoting, conducting any prize chit or money circulation scheme, enrolling any member of any such chit or scheme, or participating in it otherwise, or from receiving or remitting any money in pursuance of such chit or scheme (Section 3 of the Act). Under the provisions of the Act, the state governments were initially required to frame rules in consultation with the Reserve Bank of India (RBI) for winding up of the companies, which were running in contravention of the Act.

Earlier, the RBI, after receiving a complaint or information, would examine whether there was any prima facie case under the provision of the PCMCSB Act. The central bank would then inform the police, advising investigation and appropriate action. This was done by using the opinion given by the RBI and SR Hegde, the then legal advisor of the central bank, in September 2001.

However, in February 2003, the RBI issued another circular saying that it had no role to play and that its legal opinion (provided in September 2001) should be considered null and void. In the second circular, the RBI said that the PCMCSB Act was to be used by state governments, through consultation with their legal advisors and not depending on the central bank.

This is fine with MLM companies who operate or have offices in a particular state. But, since Speak Asia does not have its own office and is not registered in India, the question is which state government would take action against it? This is why authorities in Uttar Pradesh have taken action against some franchisees, but not against Speak Asia. It is being suggested that the union government, through the Enforcement Directorate (ED) and the Income Tax department (I-T) could initiate proceedings against Speak Asia. (The company says that it has remitted Rs325 crore to Singapore and distributed about Rs250 crore to its agents in India, for filling surveys, without deducting any tax.)

According to media reports, the Ministry of Corporate Affairs (MCA) has started an investigation on Speak Asia and is working together with the RBI and the Securities and Exchange Board of India (SEBI). Last month, Moneylife Foundation sent a letter to Murli Deora, minister of corporate affairs, RPN Singh, minister of state for corporate affairs, the Secretary MCA and other officials, informing them about Speak Asia. (Click to read the letter)

Nowadays, many media organisations are even using our reports on Speak Asia in their stories and correspondence, without acknowledging Moneylife. Its a different story that they all want to take credit for exposing Speak Asia now, purposely forgetting that the content they are using has its origin on the Moneylife website.

The Bharatiya Janata Party's national secretary, Kirit Somaiyaa, who has filed a case against Speak Asia with the Economics Offences Wing (EOW), in Mumbai, too has used Moneylife reports almost verbatim in his correspondence with the finance ministry, SEBI, RBI and EOW. 

Frankly, as long as it serves the purpose we do not mind anyone taking any credit for anything. Our humble request is at least acknowledge Moneylife, which would boost our efforts in the fight against frauds.
 

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