QNet, the controversial Hong Kong-based multi-level marketing (MLM) company, has been trying hard to get support from its peers, but with no success. While a few powerful members are not allowing QNet’s entry into the Indian Direct Selling Association (IDSA), its franchisee Vihaan Direct Selling (India) Pvt Ltd’s application too has been rejected by the other association, Federation of Direct Selling Association (FDSA)
According to documents seen by Moneylife, the FDSA has rejected membership application of Vihaan Direct Selling (India) Pvt Ltd. Michael Ferreira, former world billiards champion, owns 80% stake in Vihaan, while the rest is owned by Malcolm Desai. Both Ferreira and Desai, along with Vihaan's directors, Magaral Balaji and Srinivas Vanka, were arrested by police in October in the multi-crore QNet scam.
While rejecting Vihaan's membership application, FDSA said, "The Federation is repeatedly being approached by Economic Offences Wing (EOW) of Mumbai Police seeking various information regarding the company (Vihaan). The (Scrutiny) Committee feels it has collected the information about the pending court cases and is serious on the sub-judice status of the company. The Committee feels that the sub-judice status of the company (Vihaan) will jeopardise the faith of the government/ industry bodies in the Federation, hence recommends that the company need to come out clean before being considered by the Federation."
Srinivas Vanka (V Srinivas Rao), the operations head of Vihaan, has been trying hard to get membership of FDSA. He met and tried to convince FDSA officials several times. In the letter, the FDSA says, "...during the personal meeting at Hyderabad, we have received your logics (sic) and justification on your defence over what is happening in the field. You may be right at your end, but what image you carry is more important, which is created by the activities seen at ground level."
The FDSA, in the letter dated 17 April 2016 also says Vihaan is in the recruitment business rather than retailing, allowing an independent representative (IR) to open as many as 21 business centres under one ID. The letter says, "...the company revenue proportion of ID activation sales and retailing sales, clearly indicates that new recruitments is the only business in focus, not retailing."
FDSA says that according to its code of conduct, products from members should be reasonably priced, have optimum utility and be re-saleable. "Your (Vihaan's) core product, the holiday voucher is one such product, which is not falling in line with our FDSA norms. The magnetic pendent is another product falling in grey area, which has notional value...the Committee is not satisfied and considering your product line unreasonable for the masses where from the company (Vihaan) is currently collecting its major revenues," it added.
The rejection letter from FDSA also raises questions on refund and indiscipline in Vihaan, citing complaints it received from people who claim they have been dragged into QNet. FDSA says, "At ground level, it is a common practice that the IRs put soft pressure on a prospect for depositing couple of lakh rupees in the company. If the prospect is not having the funds, a personal loan is processed in no time under some arrangement with the branch manager of the bank. This is a case of lawlessness amongst the IRs and poor control of the company on them. You cannot do away this fact by classifying this as an act of unsatisfied people. The Committee considers this as no less than disguised money circulation and gross indiscipline in the industry."
Vihaan’s application for membership of FDSA also reveals how its director V Srinivas Rao also misled the courts of law across the country. He had repeatedly stated in his submissions before the courts that he had resigned as director from Vihaan in August-September 2014 and thus had no links to the QNet franchisee thereafter. However, the application submitted to FDSA is dated 16 December 2015 and mentions V Srinivas Rao as head of operations of Vihaan.
Earlier in October 2016, Ferreira and two others surrendered before a Special Court following orders from the Bombay High Court. In September, the HC had asked five prime accused, including Ferreira, Desai, Srinivas Rao, Magaral Balaji and Suresh Thimiri, director of Transview Enterprises India Pvt Ltd, to surrender as per the directions passed by the Supreme Court in the QNet scam case.
Ferreira and the other three were later arrested by the Hyderabad police. They are now lodged in Taloja Jail, near Mumbai, in Maharashtra.