While dismissing a petition to quash first information report (FIR), the Delhi High Court has categorically stated that Michael Ferreira and Malcolm Desai, the two main stakeholders of Vihaan Direct Selling (India) Pvt Ltd are the primary beneficiaries of QNet, the multi-crore scam. Srinivas Rao Vanka and Magaral Veervalli Balaji, both directors of Vihaan at the relevant time, at the pinnacle of the company, were maintaining positions due to which they were in charge of and responsible for the functioning of the Company, the Court said.
"Their role and involvement in the alleged offence has to be ascertained. The investigation is still ongoing, and it cannot be said at this stage that nothing has been, or can be unearthed against the petitioners. In my view, quashing the subject FIR at this nascent stage would thwart the unravelling a huge multi victim scam which has affected hundreds of innocent investors and robbed them of their hard earned savings. It would also send a very wrong signal – not only to the petitioners, but to the society at large," Justice Vipin Sanghi said in an order issued last month.
The HC said, "The case involves a multi-victim scam. It appears that cognizable offence of cheating is made out by the complainants and victims against the accused Company and its independent representatives (IRs). The modus operandi of the accused – as explained; the purchase confirmation receipts brought on record; the earlier proceedings instituted against the earlier Avatar of the accused Company promoted by the same beneficiaries and promoters prima facie indicate that offences of cheating, dishonest inducement and criminal breach of entrusted property have been made out."
The Delhi HC Bench, using fact brought on record by counsel from both the sides, revealed how Vihaan, QNet, GoldQuest and QuestNet are all interlinked. The Court stated, "... it is not disputed that the accused company comes from the same stable as QNet Ltd. In fact, a perusal of the QNET Policies and Procedure which have been produced on record by the petitioners (Ferreira, Desai and other two) states that 'the Company (Vihaan Direct Selling (India) Pvt Ltd) is a franchisee of QNet Ltd (Hong Kong) for the distribution of QNET products within the territory of India'. Further, the status reports reveal that Vihaan and QNET are associated with companies called QuestNet Enterprises and GoldQuest International. These companies have further been stated to have a common business module like that of the accused Company (Vihaan)."
"The petitioners herein, admittedly, have been the IRs in QuestNet and are now involved in the accused Company as either promoters/ shareholders or directors of the accused Company. They have been involved in floating the said multi-level marketing (MLM) scheme. These facts indicate the probability of the petitioners having knowledge of the alleged fraudulent transactions being undertaken through the IRs of the accused Company and of being direct or indirect beneficiaries of the same," it added.
According to the HC, the IRs are enrolled and then tutored or trained into trapping others into the money circulation scheme. It said, "The IRs have no option, but to – unwittingly, fall in line and carry out the fraudulent scheme of the company. It also prima facie appears that the scheme floated and operated by the accused is only a money circulation scheme and not a MLM scheme, since no actual products or services appear to have been sold or delivered to the customers. This is evident from the modus operandi adopted by the accused in providing incorrect or fictitious addresses and phone numbers. Pertinently, the accused have not even claimed that goods or services have been delivered at such fictitious addresses."
"The petitioners were IRs of the company QuestNet Enterprises, which was also prosecuted and has currently terminated its operations. The same petitioners have founded Vihaan Direct Selling (India) Pvt Ltd which is accused of cheating and dishonestly inducing victims to invest monies in a fraudulent business by camouflaging it as an e-commerce business. Such facts further strengthen the possibility that the petitioners having a nexus with such fraudulent transactions," the HC said.
The FIR was registered by one Anuj Jain and 15 others from New Delhi against Vihaan, Himanshu Aggarwal, Anita Jaggi and Kanika. Jain in his FIR stated that his friend Himanshu and two others met him on 29 November 2015 and asked him to invest Rs6.5 lakh in a business opportunity. When Jain told them that he could not arrange this amount, they told him he can join with whatever amount he could manage. Jain then handed over a cheque of Rs4.5 lakh on 4 December 2015 and another cheque of Rs2 lakh in the name of one of the accused on 8 December 2015.
After realising that he was lured into a network marketing business, Jain sought refund of his investment. However he was told that he could only get it back by earning commission, which is given if new members are brought in. Jain also claimed that a new email id was registered by the accused persons on their portal through which the products were purchased by using his money in the name of one Anita Jaggi at her address.
Adv Richa Kapoor, Additional Standing Counsel (ASC) for the State, citing two status reports, submitted that Jain and other 15 lost monies between Rs1.5 lakh to Rs10 lakh each. During the investigation more victims came forward taking the number of complaints to over 65.
Explaining the modus operandi, Adv Kapoor told the Court that Jain was given a portfolio number, a login ID and password. "...the investigation shows that the email ID '[email protected]
' was created by the IRs without Jain's consent, and this email address was used for the purchases made by the IRs in his name. The email was later changed and was used in the portal so that he could not get any information regarding any purchases being made by the IRs, and further disabling him to apply for a refund."
The status reports revealed that the in some of the purchase confirmation receipts, the
shipping address of Jain was displayed as 'K-47 Jangpura Ext Delhi 110014 British Virgin Is.', for the purchase of some products, while some products are shown to be shipped at an address in Dubai showing his contact number as '971555532884' and address as 'c/o Srinivasan Raghavan Flat No.204 building no.R-444 near 7 days Super Market Karama Dubai, UAE'. A perusal of these receipts show that orders have been placed using the email ID '[email protected]
' which, as aforementioned, was not created by Jain. Further, two watches, one vacation package and two Cristal pendants have been shown as purchased by Jain, which was without his instructions. He, along with other complainants and victims have never received or been given anything as specified in the purchase orders so far, the report says.
Adv Kapoor submitted before the Court that Vihaan and QNET are acting in connivance with each other to cheat and defraud the public at large. She said the domain names 'www.qnetindia.in' and 'www.qnetindia.net', which were registered through the domain name providing company 'Net4India' in the name of Vihaan, and not QNET.
On investigation, Net4india provided the address details of the company which applied for the said domain names as:- “ QNETINDIA, Srinivas Venka, Unit No.S02, 22nd floor WTC Bengaluru Brigade Gateway Campus, 26/1 Dr Rajkumar road, Malleshavaram West Bengaluru, Karnataka, Ph-9901530200, e-mail id: [email protected]
and [email protected]
Ms Kapoor submitted that Srinivas Rao Venka is one of the accused in this case. She further submitted that Vihaan had applied for renewal of the aforesaid domain names.
"...investigation of the bank account details of Vihaan shows that it was opened very recently on 18 December 2015 and within a span of six months, about Rs56 crore was found to be
deposited in this account and there are several other bank accounts of Vihaan," Ms Kapoor submitted.
She stated that Vihaan has been incorporated by its promoters and shareholders, since the fraud and cheating committed by their companies had been unearthed, and they could not carry out their fraudulent activities in the name of the erstwhile company.
In his contention, Senior Adv Sudhir Nandrajog, Counsel for Desai and others stated that the status reports relied upon by the State contain no material evidence to establish the alleged direct inducement made by the petitioners to the victims. He submits that entrustment is a mandatory requirement before an offence of cheating can be established. He reiterates that the petitioners are not direct beneficiaries of the said schemes. He submits that the petitioners were IRs of Questnet, which has now closed its operations, and not Vihaan. He admitted that the petitioners were promoters of Vihaan - holding a 100% stake in the company, but submitted that the people involved in the execution of the MLM scheme were the IRs and not the promoters. "The promoters were not responsible for the working out of the scheme. Thus, the mismanagement of the said scheme has been done at the behest of the IRs, and the petitioners cannot be held liable for the same," he added.
While dismissing the petition, Justice Sanghi said, "Having heard the learned senior counsel for the Petitioners as well as the learned ASC and perused the FIR and the status reports on record, I am not inclined to quash the FIR in question and the criminal proceedings arising therefrom at this stage, in light of the facts of the present case and the materials unearthed so far during the investigation conducted till now."