Vijayawada-based civil society organisation Corporate Frauds Watch served a legal notice to the Union Minister for Corporate Affairs, Sachin Pilot for openly supporting multilevel marketing companies in general and Amway India Enterprises in particular which is against the spirit of the Constitution and the judgments of various high courts in the country.
The Vijayawada-based civil society organistion Corporate Frauds Watch has been striving to bring awareness among people regarding the dubious activities of several companies which have been indulging in money circulations schemes in the name of selling products and services.
Shaik Mastan Vali, counsel for the Corporate Frauds Watch issued the notice to the young Central Cabinet Minister.
Corporate Frauds Watch pointed out that after the arrest of the C.E.O. of Amway India Enterprises by Kerala Police, the Union Minister has made a statement that the Ministry is trying to safeguard the interests of such companies by an enactment. This statement created havoc in the minds of victims and confusion in the minds of general public. Hence, Corporate Frauds Watch wants to put the following information to the knowledge of the Minister.
Amway got F.I.P.B. permission by misrepresentation and misleading statement of promotion of direct selling. But in reality what is happening at the ground level is Amway has not engaged in direct selling to the end-consumers. Amway has been selling products to its members for Rs.96/- and in turn these members are selling the same product to the end-consumers for Rs.100/- with some retail profit apart from commissions on enrollment of new members. Thus there is no direct sale by Amway. Moreover Amway will not sell products directly to the end-consumer. If the Minister has any doubts in this regard, he may try to purchase products from the Amway office and learnt the same.
Amway has been running 6-4-3 scheme in the guise of sale of products. The 6-4-3 scheme means the first person has to sponsor/enroll 6 persons and these six persons have to enroll /sponsor 4 persons each totaling 24 persons and again these 24 persons have to enroll/sponsor 3 persons each totaling 72 persons. Thus there are 103 persons (1+6+24+72) in 6-4-3 scheme. These 103 persons are called one leg for commission distribution.
In the year 2002 itself, RBI, after examining the scheme of Amway, filed a criminal case against Amway in Sector 26 P.S. in the Union Territory of Chandigarh.
In 2002, Minister for Finance and Company Affairs Adusul V. Anand informed the Lok Sabha that the scheme of Amway is creating chain of distributors and falls under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978.
The Division Bench of the High Court of A.P. after hearing at length and verifying the scheme and ground-level report has held vide WP 20470/2006 that the scheme of Amway is nothing but illegal Money Circulation Scheme banned under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The Supreme Court of India also upheld the judgment of the AP High Court order when Amway filed an SLP bearing No.13414/207 against the order of the Hon’ble High Court of AP.
In Kerala also, Amway, by lobbying, made the Kerala Government to make guidelines to save itself from the provisions of Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and further violated even the State government guidelines.
It is respectfully put to the knowledge of the Minister that Multi-Level Marketing is nothing but product camouflaged illegal money circulation scheme because in the front end these so-called MLM companies show case sale of products and in the back end they promote illegal money circulation scheme. They promise huge commissions not only on the event of personal efforts of joining new members but also on the contingency relative or applicable to enrollment of new members by their downline members. We request the Minister to kindly just remove the product from the schemes of these persons, and then the naked money circulation scheme will be exposed.
It is further respectfully put to the knowledge of the Minister that the recent statements of the Hon’ble Minister supporting the MLM companies have created confusion among the public and havoc in the minds of victims. As per Section.3 of The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 it is not permissible and punishable.
Hence, the Minister is requested on behalf of the Corporate Frauds Watch not to make such statements encouraging the MLM companies in the interest of general public and society.