Sunday, 11 January 2015

Big Bazaar into big racket

The Future Group, which owns Big Bazaar, the biggest retail market chain in the country, has launched ‘Profit Club Card’ with an eye on making easy and quick money throwing the legalities to the wind. The new scheme intends to mobilise deposits from the customers for the goods to be supplied in future, which is nothing but violation of various laws.
It may be recalled that the Newlook Retails Private Ltd also known as NMart launched similar scheme in the past and collected nearly Rs 1,500 crore from public. However, it ran into rough weather after the police filed criminal cases against the company. Its chief Gopal Singh Shekhawat was put behind bars and the company was closed.
A glance at the Profit Club Card brochure reveals its true nature of violating the law of the land. An adult could become a member of the Profit Club to acquire its card by paying Rs 10,000 plus Rs 100 as admission fee. In the second type of Card, a member needs to deposit Rs 5,000 plus Rs 100 as admission fee.
The Cards could be used to purchase every month ‘selected’ products worth Rs 1,000 on Rs 10,000 Card for 12 months and Rs 400 on Rs 5000 Card for 15 months. The Card is valid only to purchase products in Big Bazaar, fbb and Food Bazaar of the Group and not other sister-concerns.
Mastan Vali, an advocate of the Hyderabad High Court, opined that deposit was defined in Sec 2 (b) of Andhra Pradesh Protection of Depositors Act, 1999. As per the Act 'deposit' means the deposit of a sum of money either in lump sum or instalments made with a financial establishment for a fixed period, for interest or return in any kind. The definition for deposit under the RBI Act and SEBI Act are different to definition of deposit under the AP protection of Depositors Act. As per the RBI Act and the SEBI Act, advance for sale is not deposit whereas in Depositors Act, there is not such exemption in the definition. As such, any person collects deposits with a promise to return in any kind falls within the definition of the Depositors Act. Hence, he opined that the government should suo motu enquire into this matter under the provisions of the AP Protection of Depositors Act, 1999 before any cause of action or grievances at large has taken place, he added.
The Profit Club Card also attracts the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 as it intends to mobilise deposits through its direct selling agents. A senior police officer also opined that it was an outright violation of the law of the land.
As per the General Terms and Conditions of the Profit Club brochure, one could be enrolled as member through direct sales agents/agencies duly appointed by Future Group. It also absolves its own liability to fulfil its obligations if there is change in law. More, The Future Group sets a condition that in case of disputes, the Mumbai Courts have exclusive jurisdiction. In essence, if anybody wants to file a suit against the Future Group if it fails to fulfil its obligations, one has to go to Mumbai to file the suit. Practically, it is not economically feasible to an ordinary customer.

It is high time that the law enforcing agencies took initiative to curb such illegal activities. 

Thursday, 1 January 2015

The Full text of the RBI warning alerting people against joining MLM schemes

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DEPARTMENT OF COMMUNICATION, Central Office, S.B.S.Marg, Mumbai‐400001
फोन/Phone: 91 22 2266 0502 फै��स/Fax: 91 22 22660358
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January 1, 2015
RBI cautions Public against Multi Level Marketing Activities
The Reserve Bank of India has cautioned the public against Multi-level Marketing (MLM) activities so that investors do not fall prey to unscrupulous entities. 

Explaining the functioning of these entities, the Reserve Bank stated that MLM/Chain Marketing/Pyramid Structure schemes promise easy or quick money upon enrolment of members. Income under such schemes majorly comes from enrolling more and more members from whom hefty subscription fees are taken rather than from the sale of products they offer. It is incumbent upon all members to enroll more members, as a portion of the subscription amounts so collected is distributed among the members at the top of the pyramid. Any break in the chain leads to the collapse of the pyramid, and the members lower down in the pyramid are the ones that are affected the most.
The Reserve Bank has advised that members of public should not to be tempted by promises of high returns offered by entities running Multi-level Marketing/Chain Marketing/Pyramid Structure Schemes. The Reserve Bank has reiterated that falling prey to such offers can result in direct financial losses and they, in their own interest, should refrain from responding to such offers in any manner.
The Reserve Bank has also said that acceptance of money under Money Circulation/Multi-level Marketing/Pyramid structures is a cognizable offence under the Prize Chit and Money Circulation (Banning) Act 1978. Members of public coming across such offers should immediately lodge a complaint with the State Police.
Alpana Killawala
Press Release : 2014-2015/1383 Principal Chief General Manager

Don't fall prey to promises of multi-level marketing firms:RBI

Cautioning investors against multi-level marketing firms promising easy and quick money, 
RBI today asked public not to be tempted by such offers. 
"MLM/Chain Marketing/Pyramid Structure schemes promise easy or quick money upon enrolment of members. 
"The Reserve Bank has advised that members of public should not to be tempted by promises 
of high returns offered by entities running Multi-level Marketing/Chain Marketing/Pyramid 
Structure Schemes," it said in a statement. 
There have been a spurt of such schemes in the recent past while various regulators are 
taking actions such entities. 
Advising caution, RBI said investors should not fall prey to these kind of unscrupulous 
entities as the pyramid structure mandates all members to enroll more members. 
"Any break in the chain leads to the collapse of the pyramid, and the members lower down 
in the pyramid are the ones that are affected the most," it added. 
It said falling prey to such offers can result in direct financial losses and they, in 
their own interest, should refrain from responding to such offers in any manner. 
Further, RBI said that acceptance of money under Money Circulation/Multi-level 
Marketing/Pyramid structures is a cognizable offence under the Prize Chit and Money 
Circulation (Banning) Act 1978. 
"Members of public coming across such offers should immediately lodge a complaint with 
the state police," it added.

This statement by the RBI could be understood as warning against joining the schemes of Amway India and other IDSA members as the Hyderabad High Court conclusively stated that the business model of Amway is illegal.

Sunday, 28 December 2014

Biz Bazaar launches illegal scheme a la NMart

GREED always overwhelms people. There is no other explanation for the Future Retail Ltd, the largest conglomerate which runs chain of Big Bazaar supermarkets and other businesses, launching an illegal business proposal to make easy and quick money.
The Big Bazaar group has launched Profit Club card to enroll members into its illegal money circulation scheme with the promise of huge returns of about 22 per cent interest in the coming 12 months.
The Big Bazaar launched the scheme recently. It is offering Profit Club membership card by collecting Rs. 10,000 from the prospective members. After payment, the members are given a card in which Rs. 12,000 is loaded. The members can purchase 'certain' goods specified by the Future Retail Ltd management in the next 12 months at the rate of Rs. 1000 every month.
Sounds familiar. YES! This is the modus operandi of NMart which launched its membership drive and ended up facing criminal cases throughout the country.
It may be recalled that another group New Look Retail Ltd indulged in similar racket and finally its chief Gopal Singh Shekhawat ended behind bars for considerable time. The AP CID recently attached its properties and bank deposits situated at various places and banks. Its modus operandi is simple. Pay Rs. 5,500 and become a member to avail of 48 coupons each worth Rs. 200 to be exchanged with the goods in the NMart retail stores in the next 48 months. If the members enrolled more members into the scheme, they are paid Rs. 200 per membership. The NMart was not given any relief by any high court in the country and it was finally closed shop.
Exactly, it is going to happen to Big Bazaar too.
It is high time, authorities concerned take note of the illegal activities of the one of the biggest conglomerates in the country and nip it in the bud.

Thursday, 25 December 2014

AP CID attaches properties of NMart

Andhra Pradesh Crime Investigation Department has attached the movable and immovable properties of Surat-based New Look Traders also known as NMart. The fixed deposits Rs. 2.61 crore parked in various banks throughout the country and immovable properties situated in Surat, Gujarat worth about Rs. 9.27 crore have been attached by the CID.
It may be recalled that following a complaint lodged by Vijayawada-based Corporate Frauds Watch, the then superintendent of police of Prakasam District Dr Kolli Raghuram Reddy registered a criminal case against the NMart for indulging in illegal money circulation scheme offering huge returns in a short span of time.
The police have also frozen the accounts of NMart at that time. The chairman of NMart, Gopal Singh Shekhawat, was arrested and thrown behind bars. The Prakasam police have also identified the immovable properties belonging to Gopal Shekhawat in Surat and other places after freezing the bank accounts in various banks throughout the country.
The NMart has mobilised deposits from people of various districts in the then undivided State of Andhra Pradesh and all over the country too. After enrolling members into the scheme by collecting Rs. 5,500 per member, the NMart also induced them to enrol more members into the scheme with an incentive of Rs. 200 per member.
Subsequently, the case was transferred to the CID for further investigation. 

The CID officials attached the properties which would be subsequently auctioned and deposited with the government. 

Sunday, 2 November 2014

Ponzi schemer jailed for cheating US residents of $22 mn

Washington (IANS): If you have been one of those approached by some 'known' person for investing in something with an assurance of 'easy money', you may benefit reading about this Ponzi schemer, jailed in the US for robbing his own people.
Vincent Singh, a Ponzi schemer, has been sentenced to 15 years and eight months in federal jail for preying on the members of his own ethnic Indian Fijian community in the Sacramento region.
In sentencing Singh, US District Judge Morrison C. England Jr. said his crimes were "the worst of their kind that I've seen in 12 years as a federal judge", reported Friday.
According to court papers, over a period of three years, Singh cheated 190 people of Indian Fijian descent who are members of a small, tight-knit community in and around Sacramento, out of $22 million. Then he filed for bankruptcy protection.
Singh, the 46-year-old native of Fiji and former Elk Grove city resident, pleaded guilty in March to wire and bankruptcy fraud.
Assistant US Attorney Matthew Segal, a top white-collar prosecutor in the US Attorney's office, found it hard to describe to Judge England the devastation left in the wake of Singh's merciless quest to get every dime his victims possessed.
"He knew the situation of his victims," Segal said. "He had been in their homes. They served him meals. He knew what the effect was going to be. He didn't just take their money, he took their lives."
The crimes were considered affinity fraud, which refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly or professional groups.

Friday, 17 October 2014

Need to rein in Ponzi schemes

In what could be described as a welcome move, the Department of Financial Services of the Union Ministry of Finance has decided to clamp down on Ponzi schemes which are thriving throughout the country in the name of selling products and services. With several people fleeced by them filing criminal cases against these companies, the Union Ministry of Finance has woken up and taken stock of the situation. It augurs well for the Modi administration to get tough with the illegal money circulation schemes or Ponzi schemes by bringing in the toughest of norms to rein in the money circulation schemes and pyramid marketing businesses. The new norms, it appears, would include a detailed definition of ‘money circulation schemes’ to cover all money-pooling activities with a corpus of less than Rs 100 crore as well as those not covered under the collective investment schemes regulated by the SEBI. As the SEBI can only deal with illicit money-pooling activities with a turnover of Rs 100 crore or more, the ponzi operators are running at times multiple small schemes rather than a single big one. This has to be taken under consideration before framing of new rules to rein in all the ponzi schemes.
However, one has to wait and see the outcome of these proposals. In relation to the amendments to the PCMCSB Act, the draft proposals would be first discussed by various ministries concerned before they are placed before the Union Cabinet for approval. It would be better if the draft legislation is forwarded to the consumer organisations for their views as larger issues are involved. Since the Consumer Affairs Ministry has to decide whether to seek a separate legislation to cover the direct selling companies, these companies may lobby hard for legislation in their favour. The Enforcement Directorate decided recently that Amway alone has siphoned out Rs 8,000 crore illegally out of India. Against this backdrop, the Consumer Affairs Ministry should thoroughly look into all angles of the issue before preparing guidelines for direct selling. The Kerala State government has already prepared some guidelines in this respect, and the Consumer Affairs Ministry could well study them. As SEBI chief U K Sinha rightly pointed out, some action is required in the area of multilevel marketing (MLM) and PCMCSB Act. It is high time all the loopholes are plugged. In a welcome move, the Central government is said to be contemplating heavy penalties and even imprisonment for the managements of companies or individuals running such type of illicit schemes. It has been estimated that people all over India have lost about Rs 3 lakh crore in the schemes illegally run by these fraudulent companies. It is desired that the Union Ministry Finance should take a right decision to completely banish such schemes in the larger interests of people.

The Editorial published in The Hans India newspaper on 18-10-2014