SC Stays All Proceedings Against QNET In India

QNET India

In a major development, the Supreme Court has ordered a stay on all further proceedings against direct selling company QNet and its franchisee Vihaan Direct Selling Pvt Ltd (Vihaan). It fundamentally also granted bail to its Indian shareholders Michael Ferreira and Malckolm Desai. QNet, which has been under investigation since 2013, views this with positivity thereby.

The order comes at a timely moment given the backdrop of the model Direct Selling Guidelines issued by the Ministry of Consumer Affairs for the proper functioning of Direct Selling companies in India.

In an interim order, a two-judge bench comprising Mr Justice Pinaki Chandra Ghose and Mr Justice Rohinton Fali Nariman categorically stayed all FIRs against the business of QNET in India. The Supreme Court has also stayed further proceedings in all 19 FIRs against the company across India.

As per the order of the Hon’ble Supreme Court, the FIRs are being stayed on the grounds mentioned in the Writ Petition. The petition explains that the business model followed by Vihaan Direct Selling (India) Pvt. Ltd is not a money circulation scheme as alleged and does not fall under the purview of the Prize Chits and Money Circulation (Banning) Act 1978. The petition further states that the business of Vihaan is compliant with all legal requirements of conducting business in India.

After six long months especially for the individuals needing bail, the Supreme Court unequivocally granted bail to the shareholders of Vihaan – Michael Ferreira and Malckolm Desai, who had surrendered before authorities in September 2016 for custodial enquiry.

The investigation into QNET and Vihaan arises from a misconceived complaint filed by one  Gurupreet Singh Anand in August 2013. Anand had alleged that his wife had purchased a product and had been cheated by representatives of the company. Records from the company prove that Anand’s wife Parmeet Kaur had placed an order for an online education product valued at Rs.30,000 but had cancelled the payment before the order was processed and hence no commercial transaction ever took place between her and QNET.

Thereafter multiple baseless allegations were made against QNET’s products and its business model.

Commenting on the development Raj Vasudevan, Chief Legal Officer of QNet said, “This order is a vindication we have been seeking for more than 3 long years. It has come at a very apt time when the government is trying to instil confidence in this industry with the introduction of the Model Direct Selling Guidelines.”

The order from the Supreme Court comes soon after the Hon’ble High Court of Karnataka had allowed quashing of the charge sheet filed by the CID in Bangalore. It may be noted that the Hon’ble Justice Anandbyra Reddy has categorically stated that “QNet is not a Ponzi scheme and the company does legitimate business” in his detailed order. Also to be noted that the Hon’ble High Court of Telangana and AP had stayed all proceedings against the company in late 2016.

Karnataka High Court quashed a similar FIR and charge sheet against QNET last month stating that multilevel marketing does not constitute offences under the Prize Chits and Money Circulation Schemes (Banning) Act, or the charge of cheating under the IPC.

In October last year the Hyderabad High Court had granted a similar relief to the directors and shareholders of Vihaan Direct Selling Pvt Ltd, and stayed all proceedings against the company in the state.

QNet has fully cooperated with the investigation and has submitted more than 50,000 pages of documents in the course of the last three years to the relevant authorities to prove its legitimacy. The company reiterates that it runs a legitimate direct selling business and promotes a wide range of high quality, innovative health, wellness and lifestyle products through its proprietary e-commerce platform. QNet is also a staunch advocate of ethical marketing practices in network marketing and is committed to the sustainable development of the industry in India.

The Order comes at a crucial juncture and endorses these elements for the present.

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S. Kapeed