IN THE HIGH COURT OF JUDICATURE OF ANDHRA RADESH AT HYDERABAD (Special Original Jurisdiction) WRIT PETITION NO: 20616 OF 2006

Between: 1. Sistla Ravitega S/o S. Radhakrishna Murthy, Aged 38 years, R/o Vijayawada. 2. Tirumala Raja Naren Kumar S/o T. Janarthana Naidu, Aged 27 years, R/o Tirupathi. 3. Tirumala Anjali Naren W/o.Raja Naren Kumar, Aged 22 years, R/o Tirupathi. 4. Gummakonda Sreeti Reddy W/o. G. Ashok Reddy, Aged 36 years, R/o Hyderabad. 5. Gummakonda Ashok Reddy S/o.Lakshma Reddy, Aged 39 years, R/o Hyderabad. 6. Turaga Radhika Ramani D/o. T. Kamaraju, Aged 41 years, R/o Tirupathi. …PETITIONERS AND 1. Union of India, rep. by Secretary Govt, Ministry of Home, New Delhi. 2. Union of India, rep. by Secretary, Ministry of Consumer Affairs, Food & Public Distribution, New Delhi. 3. Govt. of Andhra Pradesh, rep. by Chief Secretary,Secretariat, Hyderabad. 4. Govt. of Andhra Pradesh, rep. by Secretary, Home Department,. Secretariat, Hyderabad. 5. The Director General of Police, Govt. of Andhra Pradesh, Hyderabad.

6. The Addl. Director General of Police, C.I.D., Govt. of Andhra Pradesh, Hyderabad. 7. The Superintendent of Police CID (Economic Offences Wing) Hyderabad. 8. The Dy Superintendent of Police (EOW) CID., Hyderabad. 9. The commissioner of Police, Cyberabad. 10. The commissioner of Police, Vijayawada City, Krishna district. 11. Amway India Enterprises (a Private Company with unlimited liability) Having its registered office at C-3, Qutub Institutional Area, New Delhi -16 12. Britt World Wide India Pvt. Ltd., Having its Head Office at Vardhaman Chambers, Plot No.84, Sector 17, Navi Mumbai. 13. A.V.S.Satyanarayana, director, Altus Systems Pvt. Ltd, Hyderabad. 14. The Indian Performing Right Society Ltd., Rep. by its Director, Regd. Office, Mumbai. …RESPONDENTS * * * COUNTER AFFIDAVIT FILED ON BEHALF OF THE RESPONDENT NO. 3 to 8 I, S.Ashok Kumar S/o. Late Satyanarayana, aged about 55 years, Deputy Superintendent of Police, Economic Offences wing, C.I.D., Hyderabad r/o. Hyderabad, do hereby sincerely and solemnly affirm and state on oath as follows: 1. I am the 8th respondent herein authorized to file the affidavit on I have read the

behalf of respondents 3 to 8 also as such, I am well acquainted with the facts of the business of the respondent. averments in the affidavit filed by the petitioner and deny the various

allegations made therein except those that are specially admitted in this counter affidavit. 2. It is humbly submitted that Sri K. Rajasekhar Reddy S/o. K.

Lakshmikanth Reddy r/o. Hyderabad and others though styled themselves as Distributors of the 11th respondent company have not produced the authorization of the petitioner’s company about such authorization or his legal distributionship of such 11th respondent company or trade licences issued by the Government for carrying on the business of respondent and hence unless and until they furnish the authorization proof they have no locus standi to file this writ and the same is liable to be rejected. 3. Preliminary Submission: It is humbly submitted that before submitting the parawise remarks to the affidavit filed by the petitioner, I submit few words about the business operations and other aspects of the petitioner’s business. 4. Direct selling Business : It is humbly submitted that India is citadel to Direct selling in the world. Direct selling means no intermediary and no retail profit in the selling. There will be no resell in between the manufacturer and end consumer. In Direct Selling both the manufacturer and end consumer are beneficiaries. Manufacturer sells with not intermediatories thus avoiding the costs involved in this regard and the consumer gets the goods at a lesser price as they are getting directly from the manufacturer. By this way the Consumer gets the goods/services at a lesser price. It is humbly submitted that the Milk man is the best example of direct selling. Milk man has a buffalo, he draws milk from buffalo and sells milk directly at our doorstep without any intermediary or further resell. If there is any reselling then it is a retail business and not direct selling. Like Milk man, our Ryot Bazaars and recently

factory outlets, exhibitions, malls, centrals are the best examples of direct selling as there is no intermediary and resell business except direct selling by the company. It is humbly submitted that it is clear that direct selling means selling of goods directly by the manufacturer to end consumer without any resell or retail profit. 5. Scheme of Petitioner company: It is humbly submitted that petitioner’s company Amway India Enterprises (shortly called as Amway) is a subsidiary of foreign company, and it was permitted by the Foreign Investment Promotion Board (shortly called as FIPB) of Government of India in the year 1994 only to develop direct selling business. After starting of commercial operations in India, the petitioner’s company has floated a scheme instead of developing direct selling with the end consumer. The petitioner company is running a scheme wherein members are enrolled into the scheme by sponsoring of new members by already enrolled members. The new member is called as ‘Independent Business Owner’ or ‘Amway Business Owner’ and he has to pay an entrance fee of Rs.4,400/- (Startup Kit) for which the company is claiming that it will sell products and business kit, distribution ship as well as literature. Subsequently the new enrolled member has to sponsor more members, for which the company will provide various attractive incentives for sponsoring members not only on his personal sponsoring but also on the sponsoring of his downliners (enrolled members). Besides this the company is promising depending on the sponsoring / enrolling of members, a enrolled member of the petitioner scheme can easily become millionaire’s within a short span of time. (a) Sponsoring in this business / scheme of Petitioner: It is humbly submitted that the sponsoring scheme of petitioners is called as ‘Sales and Marketing Plan of 6-4-3 principle’ wherein initially person has to sponsor 6 members and in turn

these 6 members have to enroll / sponsor 4 persons each totaling 24 members and in turn these 24 members have to enroll / sponsor 3 members each totaling 72 members thus the total of 103 members are called as one leg. Like wise an enrolled member can sponsor / enroll infinite members into the scheme but follow the system of sponsoring of members in 6-4-3 levels by him and his downliners or 102 members alone. It is humbly submitted that depending on the sponsoring of members into the scheme, the petitioner’s company is awarding the following 22 titles to its members. Sponsoring the members into the scheme equals selling products. The petitioners company on one hand is claiming that it is doing direct selling but on the other hand awards titles with fancy names to its members depending on enrllment of members into the scheme. Sl. Name of the How he is elevated No. title 1 Silver producer A silver producer has attained a qualifying month at 21% as defined in the Amway Business Manual. 2 Gold producer A gold producer has attained three qualifying months at the silver producer level within a rolling 12 months period. A platinum has attained six qualifying months at the Silver producer level, at least three of which are consecutive, in a rolling 12 months period. A Ruby is a qualified platinum who has attained at least 20,000 ruby PV in any month in the fiscal year during or after Platinum qualification. A founders platinum has attained 12 months at the silver producer level during a fiscal year or has attained at least 10 months at the SP level with a volume Equivalency of 1,44,000 PV during the fiscal year.

3

Platinum

4

Ruby

5

Founders Platinum

6

Founder’s Ruby Sapphire

A founders Ruby is a qualified Platinum who has maintained 20,000 Group PV for 12 monhts in a fiscal year. A sapphire has sponsored any two in market 21% legs in the same six months in a fiscal year whilst maintaining 4000 Group PV (An additional 21% leg may be counted in the absence of 4000 GPV in any of these months) A founders Sapphire is a qualified platinum who has maintained Sapphire qualification for all 12 months in a fiscal year. An Emerald has sponsored at least 3 legs, each of which was at the 21% commission level for at least 6 months in a fiscal year A founders Emerald is a qualified platinum who has maintained Emerald qualification for all 12 months in a fiscal year. A founders Emerald has sponsored at least 3 legs, each of which was at the 21% commission for all 12 months in a fiscal year. Volume Equivalency is applicable to each of the qualifying legs. A Diamond has sponsored six legs, each of which qualified at the 21% performance incentive level for at least six months in a fiscal year. A founders diamond has sponsored six legs, each of which qualified at the 21% performance incentive level for all 12 months or is a diamond who has achieved 8.0 FAA points in a fiscal year. Volume equivalency is also applicable to the qualifying legs. An Executive Diamond has sponsored none legs, each of which qualified at the 21% performance incentive level for 6 months or is a diamond who has achieved 10.0 FAA points in a fiscal year. A founders Executive Diamond has sponsored nine legs, each of which qualified at the 21% performance Incentive level for all 12 months or is a Diamond who has achieved 12.0 FAA points in a fiscal year. Volume equivalency is also applicable to the qualifying legs.

7

8

Founders Sapphire Emerald

9

10

Founders Emerald

11

Diamond

12

Founders Diamond

13

Executive Diamond

14

Founders Executive Diamond

15

Double Diamond

A Double Diamond has sponsored 12 legs, each of which qualified at the 21% performance incentive level for 6 months or is a Diamond who has achieved 14.0 FAA points in a fiscal year. A founders Double Diamond has sponsored 12 legs, each of which qualified at the 21% performance incentive level for all 12 months or is a diamond who has achieved 16.0 FAA points in a fiscal year. Volume equivalency is also applicable to the qualifying legs. A Triple Diamond has sponsored 15 legs, each of which qualified at the 21% performance incentive level for 6 months of is a Diamond who has achieved 18.0 FAA points in a fiscal year. A founders Triple Diamond has sponsored 15 legs, each of which qualified at the 21% performance incentive level for all 12 months or is a Diamond who has achieved 20.0 FAA points in a fiscal year. Volume equivalency is also applicable to the qualifying legs. A Crown Diamond has sponsored 18 legs, each of which qualified at the 21% performance incentive level for 6 months or is a Diamond who has achieved 22.0 FAA points in a fiscal year. A founders Crown Diamond has sponsored 18 legs, each of which qualified at the 21% performance Incentive level for all 12 months or is a Diamond who has achieved 25.0 FAA points in a fiscal year. Volume equivalency is also applicable to the qualifying legs. A Crown Ambassador Diamond as sponsored 12 legs, each of which qualified at the 21% performance incentive level for six months or is a diamond who has achieved 27.0 FAA points in a fiscal year. A founders Crown Ambassador has sponsored 20 legs, each of which qualified at the 21% performance incentive level for all 12 months r is a diamond who has achieved 30.0 FAA points in a fiscal year. Volume Equivalency is also applicable to the qualifying legs.

16

Founders Double Diamond

17

Triple Diamond

18

Founders Triple Diamond

19

Crown Diamond

20

Founders Crown

21

Crown Ambassador

22

Founders Crown Ambassador

It is humbly submitted that when a member while filling up his enrollment application has to give information about the line of sponsorship which is also mandatory. The line of sponsorship will be as follows:Your immediate sponsor Your sponsor’s sponsor And his/her sponsor

So ultimately the chart will be as follows:A B C D A is sponsored by X. B is sponsored A. C is sponsored by B. New Member sponsored by C.

Thus this network / chain moves down.

(b) Easy Money relative or applicable to or depending on sponsoring of members promised by the company in the disguise of incentives: It is humbly submitted that the company is promising additional incentives in addition to their normal merchandise.

(i) Easy Money based on Sponsoring activity: It is humbly submitted that if anybody wishes to join the scheme, he must be sponsored by already enrolled member and the sponsored member will be treated as downliner to sponsorer and his upline members. There is no other way to directly enroll into the scheme of the company except sponsoring by already enrolled member. For instance: E was sponsored by D, D was sponsored by C, C was sponsored by B and B was sponsored by A so on. E was called as downliner to D, D was called as downliner to C and so on. All the A to E are named as one group by the company.

E----< D ----< C ----< B----< A----<PROMOTERS---<COMPANY

--------- Uplines ------

As soon as new members are sponsored by directly or by the efforts of his downliners, then all the uplines in the group will get points for monthly commissions, in the instant case on enrolment of new member 44.72 PVs (1 PV= Rs.45/-) will be given to all members from immediate member to company situated in USA who are in the same group / chain, means 44.72 x 45/- = Rs.2,012/- business credited their account and all the points earned by each member week will be calculated monthly once and commissions will be disbursed accordingly. It is humbly submitted that the petitioner’s company is promising through its Sales and Marketing Plan of 6-4-3 principle that member will not only get points on his personal sponsoring but also on the sponsoring of his downliners who are in his group by following the performance incentive level table. PERFORMANCE INCENTIVE LEVELS PV Onwards % of level 100 3% 500 6% 1000 9% 2000 12% 4000 15% 7000 18% 10000 21%

It is humbly submitted that as per the Sales and Marketing Plan of 6-4-3 principle of petitioner’s company which is also available in the internet in the following address also promises that a member will get Rs.56,925/- per month for enrolling / sponsoring 102 members under his down line in 6-4-3 levels and making mandatory monthly purchase of products worth Rs.4,500/-. In conventional market it is not possible(Impossible!) to get Rs.56,925/- for selling of products worth Rs.4,500/-.

Source : http://www.amwayindia.com/images/SalesMarketPlan.jpg

(ii) On Renewal activity : It is humbly submitted that on the promise of easy money to members, the company is collecting non-refundable mandatory renewal fee of Rs. 995/- and block renewal fee from the members and thus it is making quick money and this quick money will depend on the members sponsored / renewed and this money will increase every year as the members in the chain / group will increase. 6. The Prize Chits and Money Circulation Schemes (Banning)

Act, 1978:
It is humbly submitted that the Statements of Object and Reason of The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (for brevity called as Act) is as follows:

“An Act to ban the promotion or conduct of prize chits and money circulation schemes and for matters connected therewith or incidental thereto.”

Sec.2(c) of Act defines what Money Circulation Scheme is:
“money circulation scheme” means any scheme, by whatever name called, for making of quick or easy money, or for the receipt of any money, or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions;

Sec.11 exempts certain entities from the above definition:
Sec.11. Act not to apply to certain prize chits or money circulation schemes.-Nothing contained in this Act shall apply to any prize chit or money circulation scheme promoted by(a) a State Government or any officer or authority on its behalf; or (b) a company wholly owned by a State Government which does not carry on any business other than the conducting of a prize chit or money circulation scheme whether it is in the nature of a conventional chit otherwise; or (c) a banking company as defined in clause ( c ) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), or a banking institution notified by the Central Government under Section 51 of that Act or the State Bank of India constituted under Section 3 of the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank constituted under section 3 of the Banking Companies(Acquisition and Transfer of Undertakings)Act, 1970 (5 of 1970),or a Regional Rural Bank established or

under Section 3 of the Regional Rural Banks Act, 1976 (21 of 1976) or a co-operative bank as defined in clause (ii) of Section 2 of the Reserve Bank of India Act, 1934 ( 2 of 1934);or (d) any charitable or educational institution notified in this behalf by the state Government, in consultation with the Reserve Bank.

Sec.3 of the Act bans the Money Circulation Scheme:
Sec.3: Banning of prize chits and money circulation schemes or enrolment as members or participation therein:- No person shall promote or conduct any prize chit or money circulation scheme, or enroll as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme.

Sec.4 of the Act imposes penalty for Money Circulation Scheme:
Sec.4: Penalty for contravening the provisions of Section 3:- Who ever contravenes the provisions of Section 3 shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both; (3) Provided that in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees. (a) As per the principles laid down by the Supreme Court in STATE OF WEST BENGAL Vs. SWAPAN KUMAR GUHA (1982) 1 Supreme Court Cases 561: Para No.78: -

“To be a money circulation scheme, a scheme must be for the making of quick or easy money on any event or contingency relative or applicable to the enrolment of the members into the scheme. The scheme has necessarily to be judged as a whole, both from the viewpoint of the promoters and also of the members.” It is humbly submitted that the Hon’ble Supreme Court of India in the same case has laid down the following criteria to call the scheme as a Money Circulation Scheme. Condition No.1 : It must be proved that the person is promoting or
conducting a scheme for making of quick or easy money; and

It is humbly submitted that in the case of Amway, the company
has been inducing its members to sponsor / enroll to promote its business and according to their enrolling of members, the company has been giving commissions not only on the sales of his products but also on the sales of their down line (Network). The business of company is carried out only by the sponsoring of new members by the uplines. Thus the scheme creates a network of customers and only when the downline / network progresses the principal distributors gets more commission. The company and its distributors are promoting a scheme for making easy money by creating network / down the line. Condition No.2 : The chance or opportunity of making quick or easy money must be shown to depend upon on an event or contingency relative or applicable to the enrolment of members into that scheme

It is humbly submitted that in the case of Amway and the
petitioners scheme, the principal distributor gets more commission only when he enrolls new members / sponsors downline. (E.g. in a 6-4-3 principle of Amway there will be 103 persons, in which each person sells products worth Rs.4,500/-. Then the first person (principal distributor) gets commission of cash Rs.56,925/-. This is nothing but easy money. The person could get this amount only by enrolling persons downline.

Sl.

Condition

Present Amway Model

No. i. There ii.

must

be be

a Amway Sales and Marketing Plan of 6-43 principle. a A person enrolled into the scheme of the Amway is called as distributor / Amway Business Owner. After enrolling into the scheme, a member will be eligible to enroll / sponsor further members into

scheme There must members scheme. of

iii.

the scheme. The scheme must be Amway India Enterprises induces public i) for the making of through it’s Sales and Marketing Plan to quick or easy money a) on any event or relative or the enrolment into give easy money by way of huge commissions on the event of not only on sales and entry fee (PV obtained on the of kit) of their sponsored members. the

b) contingency their personal sales but also on the c) applicable to cost of products included in the startup members scheme or ii) there must be a scheme for the receipt of any money or valuable thing as the consideration for a promise to pay money a) on any event or b) contingency relative or c) applicable to the enrolment into of the members scheme

iv.

The

event

or In Amway Sales and Marketing plan,

contingency relative commissions are giving based on the or applicable to the group sales not on the individual sales, enrolment members into of thus the persons who fail to sell the the products on his own but they will be members. Thus the money

scheme will however getting commission on the sales of their not be in any way group affected by the fact obtained by way of commissions on the whether or not such efforts of other persons is nothing but money or thing is easy derived the such from entrance money of members scheme of or money as specified by this the condition.

periodical subscriptions. It is humbly submitted that even as per the guidelines laid down by the Hon’ble Supreme Court of India the petitioner’s scheme squarely falls in a Money Circulation scheme because the scheme of Amway consists of systematic arrangement of action of Sponsoring as well as Merchandise of products / services. There is a proposal on the side of promoter to give easy money on the direct or indirect enrollment / sponsoring of members into their scheme besides personal merchandise. The money which was awarded on the indirect sponsoring of members into the scheme is nothing but easy money as stated in the definition of the Sec.2(c) of Act. (b) As per the judgement in
W.P.No:22674 OF 2004 AND

W.P.M.P.No:27411 OF 2004 on the file of Hon’ble High Court of Madras, delivered by Hon’ble Justice A.K. Rajan, in M/s. Apple FMCG

Marketing (Pvt) Limited, Chennai Versus Union of India reported in 2005 Writ LLR 115.

Para – 20 : “Definition in Sec. 2(c) makes it clear that any scheme by whatever name it is called whereby on a promise that one would receive or would make quick or easy money be enrolment as members into the scheme is ‘money circulation scheme’ – Such members earlier get commission without doing any work; getting such a

commission is nothing but getting quick or easy moneyTherefore, such schemes/ the so called ‘Multilevel Marketing’, definitely falls within the definition of ‘money circulation scheme’. (Para 20)” Para – 22 : “It is true that several companies including Multinational Companies carry on the business of the “Multilevel Marketing” and it is also true that the Executive and the law enforcing authorities keep a blind eye on such activities. This also does not make an illegal act legal. It is always a fact that the law enforcing authority would try to close the stable only after the horse had escaped.” Para 22” Para – 33: “In this part of India, people are gullible and fall an easy prey to the tall promises made through the media. That was the reason why the lottery tickets were sold in large numbers in the State. Many companies want to exploit this attitude of people and float many schemes and lure the people to join the schemes. The petitioner is not entitled for direction for prohibiting the authorities from keeping surveillance over any meeting. Sec. 7 of the Act confers the right on the police officer to enter any premises, where he has got a reason to suspect that the premises are being used for purposes connected with the promotion or conduct of any prize chit or money

circulation scheme in contravention of the provisions of the Act. Para 33.” Para – 36 : “The event is enrolment of new members: the commission received is relative to such enrolment of new members into the scheme. Therefore, the argument of the learned counsel for the petitioners that there is no promise of quick or easy money is not correct for the reasons stated above. Thus, the so-called Multi-level Marketing, though called by a very attractive name, squarely falls within the definition of ‘Money Circulation Scheme” under the Act. Hence, it is prohibited by the Act. It is for the law enforcing authorities to take appropriate action. In the result, the writ petition is dismissed (Para 36). (C) As per the judgement in
W.P.No:2908 OF 2003 AND

W.P.No:4144 OF 2003 on the file of Hon’ble High Court of Madras, delivered by Hon’ble Justice P. Sathasivam, in V-Can Network (P)

Ltd., Chennai Versus Union of India reported vide (February 13,

2003) 2003 (TLS)1206810.
Para No.10:. 10. It is useful to refer the statement of Objects and Reasons for the enactment of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. In June, 1974, the Reserve Bank of India had constituted a Study Group under the Chairmanship of Shri James S. Raj, the then Chairman, Unit Trust of India, for examining in depth the provisions of Chapter III-B of the Reserve Bank of India Act, 1934 , and the directions issued thereunder to non-banking companies in order to assess their adequacy in the context of ensuring the efficacy of the monetary and credit policies of the country and affording a degree of protection to the interests

of

the depositors who place their savings with such 1975, the Group observed that the prize

companies. In its report submitted to the Reserve Bank in July, chit/benefit/ savings schemes benefit primarily the promoters and do not serve any social purpose, and that they are prejudicial to the public interest and affect the efficacy of the fiscal and monetary policies of the country. Ultimately the Group recommended that prize chits or money circulation schemes, by whatever name called, should be totally banned in the larger interests of the public and suitable legislative measures the Parliament enacted should the be undertaken for the purpose. recommendation, 1978. Pursuant to the said Prize

Chits and Money Circulation Schemes (Banning) Act, Among the other provisions, the following sections are relevant: "Section 2 (c) "money circulation scheme" means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment or members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions; Section 3. Banning of prize chits and money circulation schemes or enrolment as members or participation therein.- No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme , or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme."

Sections 4 and 5 speak about punishments.

Learned

Government Advocate points out that the investigation prima facie discloses an offence under Prize Chits and Money Circulation Scheme (Banning) Act, 1978, whereby V-Can Network are running a Money Circulation Scheme and they sell inferior products to the public after enrolling them as members/distributors and thereafter promise them that they can make quick and easy money. It is further brought to my notice that they then in turn falsely induce more members into the scheme. According to them, this very scheme is a chain fraught with manipulation and deceit. It is to be noted that in order to curb offences in the name of said schemes/promotion/distribution/membership, the

Act was enacted. As per Section 3 of the Act, no one is permitted to promote or conduct either prize chit or money circulation scheme, or enrol any one as member for the same and receive any money in pursuance of such chit or scheme. Learned Government Advocate has produced Abudu pamphlets Kumar and details regarding Money by Mr. Circulation Scheme. As rightly pointed out

Rajaratnam,

learned Government

Advocate, all these issues have to be investigated in detail. Considering the plea of the learned Government Advocate that so far the police have received 30 complaints against V-Can Network, in the light of the statutory provisions referred to above, I am of the Article 226 of the view that interference by this Court exercising extraordinary jurisdiction under Constitution of India is not warranted at this juncture. Para No.11:

“11.

As

per

definition

2

(c),

money the

circulation hapless and

scheme

or multi-level marketing or whatever by name

called, is a fraud being played on

innocent public by way of manipulation and deceit. It is the case of the respondents that inferior quality products are sold with false claims at exorbitant rates while the products are worthless and thereby they cheat the public. Likewise, the members/distributors are falsely induced by selling inferior products at exorbitant rates which are worth nothing and in turn for them to make quick or easy money. before me that fee The members/distributors as which per is that scheme, by have every the to falsely induce more members. It is demonstrated

member/distributor has to be necessarily enrolled with a membership taken petitioner/promoter to buy their products and each

member/distributor has to falsely induce and enrol more members and if that is done, he gets a minor share of the ill-gotten wealth and thereby the chain continues. I have already referred to the Statement of Objects and Reasons in enacting the legislation, namely, Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The intention of the legislation was collar crimes the that being perpetrated to on prevent white hapless and facie discloses

innocent public. It is the case of the respondents that preliminary the investigation prima petitioner/promoter company is involved in

money circulation scheme, thereby whatever money is paid to a member/ distributor is money paid by the members themselves to a minor extent and the major part is illegally kept by the me petitioner/promoter that unless the company by false inducement and false representations. It is also demonstrated before member/distributor falsely induces others to become

members/distributors, they cannot make quick or easy money and the money paid or circulated as commission or incentive is only the ill-gotten money made from other members/distributors and the chain continues by In such manipulation and deceitful false claims.

circumstances, since the investigation is at the crucial stage, I am of the view that any interference in the investigation will seriously hamper and prejudice the investigation.”. It is humbly submitted that thus, on the plain reading of Act itself, it is clear that the company will claim exemption from the Money Circulation Scheme only if it is a Banking or co-operative Bank or State Government promoted company, but it do not fall in any of the categories, hence it will not fall within the exemption of the Act. Secondly the company is running or promoting a scheme (a systematic arrangement of acts) with a promise of easy money in the form the incentives on the event or contingency of enrolment of members by their direct efforts or by the efforts of their downliners who were sponsored by them, into it’s scheme. All the Easy Money earned is not prohibited by this act, but the easy money earned based on the event or contingency relative or applicable to enrolment of members was prohibited. Thus in the instant case the person will get nominal benefit on the personal merchandise but on the sponsoring activity he is promised huge easy money which squarely falls within the definition of this Act”. 7. Camouflaging activities under Corporate Veil: It is humbly submitted that as the Act prohibits promotion of Money Circulation Scheme’s under any circumstances, but cleverly the promoters, under the corporate veil by registering themselves with Registrar of Companies, are promoting Money circulation scheme camouflaging it with product selling, so that they can easily

divert the attention of common man and also the law enforcement authorities from the perceptive of Money circulation Scheme. It is humbly submitted that under the corporate veil, the promoters are propagating that their sponsoring business, is not new, but same like as L.I.C. and Banks promoted by Govt. But as per Sec.11 of the Act, both of these are exempted from the Money Circulation Scheme and further in the above institutions there is no benefits received for further enrollment of members. It is humbly submitted that by conducting lavish parties in the expensive star hotels with public figures and influential persons the promoters of such scheme are drawing the attention of common man and making false impression that their schemes are not money circulation schemes but a good business opportunity to become millionaires. It is humbly submitted that in the name of great business opportunity, false lucky draws, involving in Social Activities and public claim of Registrar of Companies Registration Certificate the promoters are encashing the gullibility of public by camouflaging their illegal scheme with product selling. It is humbly submitted that thus in the backend the promoters Amway and its members are promoting money circulation schemes and in the front end the promoters are camouflaging their illegal scheme with product selling and thus defrauding the public and sucking the hard earned money of the middle class families besides destroying the economic fabric of this country. It is all the more necessary in public interest and for public good to prohibit such companies from running / conducting these money circulation schemes under the garb of “direct sale of products to consumers”. 8. Unjust Enrichment and opposed to public policy : It is humbly submitted that the provisions of the Contract Act prohibit unlawful enrichment of one at the cost of many. Being the promoters, the initial members are uplines to all the members into the scheme and they will get easy money without any efforts. Thus

they are unlawfully enriching themselves at the cost of innocent distributors down the line. Undue influence in the name of Sponsoring opposed to public policy: It is humbly submitted that the promoters of the scheme to promote their scheme promises huge easy money for sponsoring members as well as encouraging and instigating the members to listout their family members, relatives, subordinates, colleagues and other known persons and make them to enroll or sponsor members into their scheme by exploiting their personal relations. They are making the family and neighbourhood as their markethood. In the chase of wild dream for huge easy money, the members are making undue influence by exploiting the personal relationships and thereby social fabric of our well knitted society is getting affected. For instance a woman by name Sailaja r/o. Vijayawada who is the alleged distributor of Amway, was brutally murdered in the bid of sponsoring more members through her downlines, is the subject matter in Cr.No.688/2006 U/s. 302, 380 IPC of Patamata L&O P.S. of Vijayawada city. It is humbly submitted that the promoters are naming these scheme as a Good Business Opportunity and it is Multi-Level Marketing (MLM) Scheme and in these schemes the promoters will Make Huge Money through Other People’s Efforts and Other Peoples Money (i.e. MLM = O.P.E. + O.P.M.) by way of exploitation of personal relationships and also due to gullibility of public. This leads to unjust enrichment. Such unlawful enrichment at the cost of gullible and innocent consumers is opposite to public policy and in violation of the provisions of the Contract Act and is therefore prohibited under statute. 9. Malafide claiming of valid registrations and paying taxes: It is humbly submitted that every Law and Act has its own spear of action and getting registration in one law cannot claim impunity from the other laws in force. Payment of taxes to

Government does not immune themselves from the laws of the land. Every one should follow the law of land. For instance if one person gets the driving license and paying taxes under M.V. Act cannot exempt him from causing hurt/death by rash and negligent driving. 10. Claiming the Statement of Minister and letters of Secretary of Ministry of Consumer Affairs, Food and Public distribution: It is humbly submitted that on 20.12.2002 on the question about the enactment of new law on the efforts of Indian Direct Selling Association in the Ministry, Hon’ble Minister of Consumer Affairs, Food and Public Distribution has intimated to House of Parliament that there is adequate provisions in the law to safe guard the provisions of consumers and no need of new law and also reiterated about the direct selling of goods which are actually doing direct selling do not fall within the mischief of the aforesaid Act. But Hon’ble Minister did not exempt the selling of goods through sponsoring activities from this act. It is humbly submitted that the Hon’ble Minister for Finance and Company Affairs on the very same day i.e. on 20.12.2002 when Hon’ble Minister for Consumer Affairs, Food and Public Distribution has intimated to House of Parliament, replied to the unstarred question No.4889 to the following : a) Whether any observations has been passed by RBI against AMWAY India and its promoter’s company. b) if so, the details of observation passed by the RBI against this company; c) whether the said company is involved in violation of various rules; d) if so, the details thereof; e) whether some members of parliament and investors Association brought to the notice of RBI and Government regarding the violations committed by the said company; and f) if so, the details of action taken by the Government against this company? ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE & COMPANY AFFAIRS

(SHRI ANANDRAO V. ADSUL) (a),(b),(c)&(d): Reserve Bank of India (RBI) has reported that it had examined the scheme of M/s. Amway India Enterprises (AMWAY) in March 2001 and again in May 2002 aiming at creating a chain of distributors and taken a vies that the said scheme appears to be a prize chit or money circulation scheme as defined in and prohibited under Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The offences under the said Act are cognizable and the police authorities of the concerned State Governments have to investigate and take a view whether the scheme of Amway India attract the prohibition under the said Act. (e)&(f): Amway had made representation to the Minister (Economic), Embassy of India in Washington DC that its schemes are not covered under the Act. RBI had once again examined the matter and it had advised to the Embassy that the Amway’s activities appear to attract the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. RBI has forwarded a report in this regard to the Police authorities who are empowered under the Act for taking necessary action. It is humbly submitted that the petitioner company is wisely hiding this bare fact and claiming the Statement of Hon’ble Minister of Consumer Affairs, food and Public distribution and thus misleading the law enforcement authories, Hon’ble Court and ultimately cheating the Indian public at large. It is pertinent to state that the letter of Shri Wajahat Habibullah, the then Secretary of Ministry of Consumer Affair, Food and Public distribution Dt.31.3.2003 was annulled by way of clarification letter Dt. 23.9.2003 by the said department, even though claiming the annulled letters is nothing but misleading the court and ultimately cheating the public at large.

It is humbly submitted that Hon’ble Madras High Court has emphasized in M/s. Apple FMCG, Chennai Vs. Union of India reported in 2005 Writ L.R. 115 delivered on 7.1.2005 in para No.21: Para No.21: “21. The learned counsel for the petitioner submitted that Union of India has made a clarification in an answer to a question in Parliament that Multi-level Marketing does not violate or offend the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act. It is suffice to say that it is not for Union of India or any Member of Parliament to interpret the provisions of any Member of Parliament.

The

act

has

been

passed

by

the

Parliament, but the power to interpret the Act is only vested in judiciary and that power is not given to the Executive. The statement given by the Union of India or its Officers that Multi-level Marketing does not attract the provisions of the Act cannot legalise an illegal act.”
11. Misrepresentations in the affidavit of petitioner: (i) It is humbly submitted that the petitioner’s company were permitted in India only to develop direct selling business. But contrary to the concept of Direct selling, Amway has floated a scheme consisting of enrolling of members by sponsoring and by introduction of intermediary in the name of distributor encouraging its members for reselling with retail profit of 20% and above and naming it as direct selling. In reality Amway is not directly selling the products to end consumer and end consumer cannot purchase products directly from the Amway. Thus the petitioner and their company are misrepresenting the Hon’ble Court that their retail business is a direct selling. (ii) It is humbly submitted that the petitioner are misrepresenting the Hon’ble Court that they are the distributor of

the Amway, but they are not registered with any Government agency to carryon their business and besides this they don’t have even a trade licence from Municipalities, PFA License and VAT registrations and by claiming that they are the distributors of Amway is not but cheating the Government also because they are conducting their business without any valid licences, this is nothing but willful misrepresentation. (iii) It is humbly submitted as per the information furnished by the Reserve Bank of India from 1994 to 2006, Amway has brought only 18 crores of Foreign Money to India, but claiming in the affidavit that it has invested in excess of US $35 Million (Rs.151 Crorers) in India is nothing but misrepresenting. (iv) It is humbly submitted that Amway as founder member of Indian Direct Selling Association and allowed some other foreign companies to join in the association and now claiming that other companies are also doing the same and hence their business is legal. Moreover now claiming that it is only a member instead of founder member, this nothing but willful misrepresentation. (v) It is humbly submitted that the letter of Shri Wajhat Habibullah, the then Secretary, Ministry of Consumer Affairs, Food and Public Distribution was annulled vide letter Dt.23.9.2006 by the Ministry of Consumer Affairs, Food and Public distribution. this is nothing but misrepresenting the court.
(vi) misleading. It is submitted that the petitioner’s claim that and his company minimizes overheads and advertising budgets is nothing but The costly brochures, Phamplets, hoardings in important places (In Hyderabad at Khairathabad, Tank bund etc), advertisements in leading news papers and above all conferences and seminars in luxurious places with costly peripherals, speak volumes of their overheads and advertising budgets. The company claims that it is spreading purely entrepreneurial venture is nothing but a Money Circulation Scheme camouflaged with self proclaimed quality products. (vii) It is humbly submitted that products of Amway are not as per standards and out of 18 health products, 14 were proved misbranded,

Even

though the petitioner is presenting the outdated and annulled letter,

adulterated and

4 are not food items by the State Food Laboratory,

Nacharam, Hyderabad. Hence the claim of quality products are nothing but a deception and a blatent cheating of innocent conusmers in the name of quality products.

12. Ill-effects of sponsoring based easy money business: (a) Sponsoring needs introduction and it may exploit the personal relation ships and thereby ruin the well knitted social fabric of our society. (b) It leads to undue influence. If the boss of the organization enrolls himself in such companies illegal scheme then the subordinates are forced to become in the scheme unwillingly. (c) To oblige the reference of the Family elder, Superior Officer or Role model, we have to purchase the goods of these companies which will ultimatelty lead to unnecessary consumerism. (d) In this business every consumer is a distributor and it will lead to infinite distribution ship, and it will become hardship to Governments to monitor the activities of these unchecked distributionships. (e) Gullible public may fall prey to these companies and to get out of the cheating by these companies there is likelywood that they will trap the other innocents by their influence into these schemes. It is humbly submitted that Money Circulation Schemes are known as Pyramid schemes World wide.

Hypothetical calculation of result of continuous sponsoring of members into a scheme:
It is humbly submitted that in a hypothetical pyramid scheme, with respect to how it is claimed to work. Suppose the list included in this scheme contains six names. You are to send a dollar to each person listed, remove the top name, move all the other names up one position, and send it on to more people. Let us assume, that you get ten people to join, and each of them gets ten people, and so on. As the pyramid grows below you, here's what supposedly happens:

1. The first level below you has ten people. They each send you a dollar, so you collect $10. 2. The next level has a hundred people. (Each of your first ten gets ten more.) You collect $100. 3. The next level has a thousand people. You collect $1,000. 4. The next level has 10,000 people, so you collect $10,000. 5. The next level has 100,000 people, so you collect $100,000. 6. The next level has 1,000,000 people, so you collect $1,000,000. 7. At this point, your name drops off the list, and you collect no more. So, for your initial investment of $6, (one dollar to each of the six people above you), you collect a total of $1,111,110. There are, of course, many variations on this concept. It's very easy to understand how this kind of scheme should work. It all seems so simple and so obvious. It is, unfortunately, somewhat more difficult to understand why this kind of scheme does not work, and why it is unethical and dishonest, and, in most cases, very much illegal. The truth is, this scheme does not work, except for those who get in at the first few levels. The vast majority of participants in such a scheme will only lose their original investment, and make no profit at all. In a moment, I'll get into why this is so; but because it is so, every instance where a person is induced to join such a scheme, based on the promise that he will make a profit by participating, a fraud has been committed. It is humbly submitted that nearly every nation, and every government, has laws against fraud. Most have specific laws against pyramid schemes, Ponzi schemes, and similar operations. It is humbly submitted that even if the particular variation in which you might participate happens to avoid running afoul of the laws which are relevant in your situation, I ask you to consider that

by participating in such a scheme, you would be engaging in something that is dishonest and unethical, and which is very unlikely to make you any profit. It is humbly submitted that in order to understand why pyramid schemes do not work, there are two points which you must understand. It is humbly submitted that The pyramid must fail because there is a finite and limited number of potential participants. It is humbly submitted that Pyramid schemes depend on bringing in an exponentially-growing number of new participants. I've used the term “exponentially” several times already, perhaps I should explain it. Where n represents some number, if you start with one person, who gets n people to join, and each of those people gets n more people to join, and so on, you have the total number of people growing by powers of n. Even where n is a fairly small number, the total number of people involved grows to amazingly huge numbers without very many steps being required to reach these huge numbers. Indeed, it is these huge numbers, which you are led to believe represent the number of people who will each be sending you $5 or whatever, that makes pyramid schemes attractive. It is humbly submitted that but these huge numbers create a problem. There are somewhere between five and six billion people in the world. Let's suppose that every one of these people could be induced to join a particular pyramid scheme. For how many levels could this scheme run before it failed, for lack of new participants? You'll be amazed when you see how quickly the number of required new participants grows to exceed the population. It is humbly submitted that in the example above, I assumed that each person who joined would bring in ten new people. How many levels can be supported by a population of five to six billion? Let's count them...

Level People in Level 1 1 2 10 3 100 4 1,000 5 10,000 6 100,000 7 1,000,000 8 10,000,000 9 100,000,000 10 1,000,000,000 (The above calculations also available in the internet in the following address : http://members.impulse.net/~thebob/Pyramid.html ) It is humbly submitted that that's ten levels, counting the one person at the top who started it. By the time these ten levels are filled, there will be a total of 1,111,111,111 participants. The eleventh level would require 10,000,000,000, or ten billion new participants to fill in. But there aren't that many people in the world. There's only between five and six billion, minus the somewhat over a billion who've already joined. Most of the billion people in the tenth level will not be able to get any new participants below them, and will therefore make no money at all. And of course, none of those who join in the eleventh level will get any new participants below them. There aren't enough people to fill in the eleventh level, much less to start a twelfth level below that. It is humbly submitted that at this point, the pyramid collapses. And when it does, a solid majority of those who had joined will not have made any return at all. They will have paid their money to get in, but the promise that they will profit as people join below them will never be fulfilled. It is humbly submitted that of course, the number of levels that can be filled depends on how many new participants, on average, are brought in by each previous participant. But even if each participant brings in only two new participants, the pyramid

will collapse in about 32 or 33 levels (still assuming, of course, that you can get all five or six billion people in the world to join) with most participants having lost money. 13. World wide banning on the easy money business based on sponsoring of members: It is humbly submitted that Money Circulation Schemes are known world wide as Pyramid Schemes, Ponzi Schmes, Chain schemes, Multi-level Marketing, Network Marketing, Sponsoring Marketing, Referral Marketing and Introduction Marketing. (a) It is humbly submitted that during the year 1996-97 after the civil riots and death of 2000 people happened in the Albenia due to pyramid schemes (sponsoring based business), International Monitory Fund has conducted a study and requested all the countries in the world to take stringent action on such schemes. (IMF study report dt. March 2000 under caption- The rise and fall of Albania’s Pyramid schemes available in the internet http://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm). “The pyramid scheme phenomenon in Albania is important because its scale relative to the size of the economy was unprecedented, and because the political and social consequences of the collapse of the pyramid schemes were profound. At their peak, the nominal value of the pyramid schemes' liabilities amounted to almost half of the country's GDP. Many Albanians—about two-thirds of the population —invested in them. When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed. Albania's experience has significant implications for other countries in which conditions are similar to those that led to the schemes' rise in Albania, and others can learn from the way the Albanian authorities handled—and mishandled—the crisis. ------------

Finally, the IMF and the World Bank should be aware of the possibilities of pyramid schemes emerging when the conditions for their growth are present and should be vigilant in warning governments about them. When they can, the IMF and the World Bank should insist on action”. (b) In the year 2005, due to huge losses suffered by the ¼ of the citizens in the Country, SriLanka has enacted a legislation banning pyramid schemes. (c) In the year 1998, China has also banned the Pyramid structure (sponsoring based) business. (d) Like China and Srilanka several countries in the world have

banned the pyramid structure (sponsoring based) business. (e) Federal Trade Commission which is the legal agency for the protection of Consumers in U.S.A. has issued alert messages vide their internet messages published in the website address- Source: http://www.ftc.gov/bcp/conline/pubs/alerts/pyrdalrt.shtm as “……. Joining a pyramid is risky because the vast majority of participants lose money to pay for the rewards of a lucky few. Most people end up with nothing to show for their money except the expensive products or marketing materials they're pressured to buy. ….. Be skeptical if a distributor tells you that for the price of a "start-up kit" of inventory and sales literature - and sometimes a commitment to sell a specific amount of the product or service each month - you'll be on the road to riches. Often consumers spend a lot of money to "build their business" by participating in training programs, buying sales leads or purchasing the products themselves. Too often, these purchases are all they ever see for their investments. ….”
In USA also launched prosecution against Amway, a self styled big Multi-level Marketing company who happened to be a member of WFDSA and founder member of many DSAs in more than 88

countries engaged in the self named direct selling company in the world (filed in US District court in the northern district of California on January 10,
2007, case number 3:07-cv-00201-EMC.)

Full text is available in the internet in the following source : http://www.pyramidschemealert.org/PSAMain/news/AmwayPyrami dSuit.pdf So many experts and victims allover the world have published huge material in the internet. Some of them are (i) The Myth of Income Opportunity in Multilevel Marketing : http://www.pyramidschemealert.org/PSAMain/news/MythofMLMIn come.doc.pdf

President,

Pyramid

Scheme

Alert

(PSA),

USA

Mr.Robert

L.Fitzpatrick speaking at a lecture on “Combating Pyramid Schemes” at the Centre for Banking Studies, Rajagriya called Pyramid Schemes as “Financial Tsunamis!” (Available at www.southasianmedianet.com). Mr.Fitzpatrick in his article “Ethics in Economics-The Pyramid Scheme: A “Devastating Con” has clearly state “the pyramid scheme phenomenon---fashion. The fraud of pyramid-----payback occurs. But what is the actual harm----- dashed hopes. In a recent petition to FTC----- their fault. Participants ------continues. The products or services------cosmetics (available at www.businessethics.org). Mr. Robert Fitzpatrick has published in 2004 in Marketing Master Mind a monthly publication of the Institution of Chartered Financial Analysts, a division of ICFAI, University Bangalore India an article called “The Non-Retail ‘Direct Selling’ Company”. companies (available at In this article he has clearly explained about the con ways of such www.pyramidschemealert.org.) Mr.Fitzpatrick after analyzing and researching the MLM Schemes for more than 10 years has written a article called “The Ten Big Lies of MLM”. The research has shown that MLM business model as it is practiced by most companies is a “Marketplace Hoax”(available at www.pyramidschemealert.org).

(ii) The Merchants of Deception: http://www.merchantsofdeception.com/DOWNLOADBOOK2.html (iii) The 10 Big lies of Multilevel Marketing : http://www.falseprofits.com/MLM%20Lies.html (iv) To know about the Multilevel Marketing and Pyramid scheme scams : http://www.pyramidschemealert.org/PSAMain/home.html (v) The Mirages of Multilevel Marketing : http://www.quackwatch.org/01QuackeryRelatedTopics/mlm.html

Consumer Activist Mr.Stephan Barrett M.D. in his article “The Mirage of Multi-Level Marketing” has analysed how such companies are cheating the common man with dubious claims. He recommends “Govt. Agencies should Police the Multilevel Market place aggressively, using undercover investigators and filing criminal charges when wrong doing is detected (available at www.quackwatch.org) (vi) What is wrong with Multilevel Marketing : http://www.vandruff.com/mlm.html (vii) Article published by the Investigative Jounalist by name Ramji Ramachandran of Banglore, India in monthly magazine : With soaps in their Hands and Hopes in their Hearts : http://www.pyramidschemealert.org/PSAMain/news/BangaloreMon thly.html (viii) Why pyramid schemes are illegal : http://72.14.235.104/search?q=cache:7ML_jSK2V_UJ:www.mlmthetruth.com/PyramidSchemes-InternetEcCrimesSummit04.ppt+MLM+survivors.com&hl=en&ct=clnk&cd=1 &gl=in (ix) History and nature of Ponzi schemes : http://www.sjsu.edu/faculty/watkins/ponzi.htm (x) Is MLM Legal : - http://www.falseprofits.com/FSLegalityPg.html It is humbly submitted that Mr.Ravi Dykema Publisher/Editor in Chief NEXUS, Clorado’s Holistic Journal in his article “The Dark Side of MLM’s” states that “Here’s what I see happening in many MLM’s: A few are getting very rich. A few more are getting spending money. A lot are getting disappointed. However it appears to me that the pyramid selling system employed by MLM’s breeds deception. Hundreds of thousands of people are investing substantial time and money and losing it. These folks thought they had a decent chance to “build a dream”. They didn’t. That dreamn of time freedom and prosperity was always a long shot. The MLM

system of product distribution is designed to sell consmetics or computers at a profit for the company, NOT to make Mr. or Ms. Distributor rich (available at www.falseprofits.com/NexusEditorial.html. (xi) It is humbly submitted that Dr.Jon Taylor another consumer

activist has rightly said in the article “MLM-NetWork Marketing, Direct Selling and the DSA” has “Most MLM’s are no more direct selling programs than a pig is a horse”. Another activist Douglas M.Brooks, Gulman and Pastor, LLP in the same article has said “Dr.Taylor has coined the term “Product –based Pyramid Schemes” to describe (MLM) plans and I believe his term to be dead-on accurate”(available at www.mlm-thetruth.com/dsa.htm). (xii) It is humbly submitted that Shri M.P.George Addl.Drugs

Controller, Kerala in his article called “Multilevel marketing of medicines” has stated “Usually multilevel marketers select products, taking…….. and MLM is a dignified form of looting. Keep away from the modified and dignified forms of crimes for the benefit of oneself and the society”. (available in the internet in the following address : http://www.kerala.gov.in/keralacallfeb04/p15-16.pdf ) It is humbly submitted that Shri S.Prakash in his article “Cashing the ignorance?” has correctly stated “The Multi-line marketing--------in star hotels for consumers. In many cases, the consumers----------lies the importance of multi-level marketing companies.” (Available in the internet in the following address : http://www.kerala.gov.in/keralacallfeb04/p14.pdf ). Para wise Remarks : 14) It is humbly submitted that Para Nos.1 to 5 are descriptive in nature.

14)

It is humbly submitted that in reply to para No.6, It is

pertinent to state FIPB has permitted only to develop direct selling not resell to end consumer by the so called distributors. 15) It is humbly submitted that in reply to para No.7, It is

pertinent to state that every law has its own spear of action and taking permission under one law will not exempt from punishment from violation of other laws. Law enforce authories will take action only when there is violation of law. per law, if he violates law of land. 16) It is humbly submitted that in reply to para No.8 and 9, It is If the person may possesses some good qualities but they will not be exempted from actions as

pertinent to state that Amway is the founder member of IDSA and moreover IDSA is a private body and does not have any status in the Indian laws. 17) It is humbly submitted that in reply to para No.10 and 11, It is

pertinent to state that paying taxes does not exempt the illegal acts from taking action under various laws for violations. It is further submitted that the petitioner’s claim of paying various taxes is nothing but “Robbing Peter to Pay Paul”. 18) It is humbly submitted that in reply to para No.12 and 13, It is

pertinent to state that the reply to this para was already explained in the previous paras. It is humbly submitted that law is enforced only when there is violation of law. If the person may possesses some good qualities, but they will not be exempted from actions as per law, if he violates law of land. 19) It is humbly submitted that in reply to para No.14 to 16, It is

pertinent to state that right to free trade guaranteed under Article 19(1)(g) of the Constitution of India was subjected to reasonable

restrictions. If the modus operandi of the business violates the law of land, there will be no such right and if such act falls under cognizable offence, Police have right to initiate criminal action against such violaters and U/s.149 Cr.P.C. Police have preventive powers in cognisable offences. 20) It is humbly submitted that in reply to para No.17 and 18, It is

pertinent to state that Hon’ble Minister did not state that the direct business through sponsoring of members will not fall within the definition of Money Circulation Scheme. But in the instant case easy money based on the sponsoring of new members attracts the provisions of Money circulation Scheme as per the Sec.2(c) of Act. It is humbly submitted that on the complaint of Reserve Bank of India, a criminal case vide Cr.No.280/2001 U/s.3 & 4 Prize Chits and Money Circulation Schemes (Banning) Act, 1978 of Se206 P.S. of Chandigarh. 21) It is humbly submitted that in reply to para No.19, It is

pertinent to state that the letter of Shri Wajahat Habibullah Dt.31.3.2003 was annulled by issuing a clarification letter Dt. 23.9.2003 by the said department. Producing the outdated letter to the Hon’ble Court is nothing but misleading. 22) It is humbly submitted that in reply to para No.20, it is

pertinent to state that the opinion Para No.23 and 25 of the Hon’ble retired Chief Justice of India, Sri Justice Y.V. Chandra Chud also says that the scheme of Amway falls under Money Circulation Scheme. 23) It is humbly submitted that para Nos.21 to 29, it is pertinent to

state that police has a right to investigate a cognizable offence and the provisions of the Prize Chit and Money Circulation Scheme (Banning) Act, 1978 are cognizable offence. It is humbly submitted that just information is enough to launch prosecution in Cognisable offences. Even if any one has right to trade as per Article 19(1)(g) of

Constitution of India, it is subjected to reasonable restrictions and if the modus operandi of the business falls within the violation of laws, generally there will be no right to free trade. 24) It is humbly submitted that the Writ Petition is unrighteous. It

is not bonafide and is devoid of merits and filed to legalise their illegal acts with misleading and misrepresentation. 25) It is humbly submitted that for all the aforesaid reasons, I

beseech the Highest court of the state to dismiss the Petition.

Solemnly affirmed and signed before me on this the day 26th April, 2007 at Hyderabad.

Deponent

Before me

Page No. 40 Corrections.

Attestor

VERIFICATION STATEMENT I, S. Ashok Kumar, S/o. Late Sri S. Satyanarayana, aged about 55 years, Deputy Superintendent of Police, Economic Offences Wing, C.I.D., Hyderabad r/o. Hyderabad do hereby verify that the contents in paras 1 to 25 of the Counter Affidavit are based on information and records and believed to be true and correct. Verified on this the 26th day of April, 2007 at Hyderabad.

Counsel for respondents

Deponent

Page No. 41 Corrections.

Attestor

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