- Money circulation scheme means any scheme that promises easy and quick by way of commissions and enrolling members into the scheme. No matter whether it involves goods or sales of goods at any stage.
- Multi-Level Marketing (MLM) is a product camouflaged Money circulation scheme.
- The modus operandi of MLM is collecting entrance free from the new members, bagging half of the collected fee and distributing remaining among the chain or network.
- The commission depend on the making others to join in the scheme.
- Case Study – Live examples – Amway joining fee is Rs.4,500/-, Goldquest entrance fee is Rs.32,500/-, out of this joining fee half of the amount directly credited to company and the remaining amount is distributed among the public according to their own formulas.
- Amway is claiming nearly 13 lakh members into its scheme means it got Rs.2,000/-X13 lakh = Rs.26,000/- lakh on entrance fee of members apart from commissions.
- Goldquest is claiming nearly 5 lakh members into its scheme means it got Rs.16,000/- X 5 lakh= Rs.80,000 lakhs.
- Here two things, one is sale and another is enrolling activity. The crux herein is routine selling activity is not illegal but the Modus Operandi to sell the product is illegal. In the case of Amway, the for Rs.4,500/- worth Rs.2,000/- will be given and if you are able to resell those products we will get only 20% of retail profit i.e. Rs.900/- whereas you get Rs. 1,938/- if you enroll 6 people, Rs.9,540/- for enrolling 24 people and Rs.56,925/- for enrolling 102 members. Hence enrolling people is more attractive than selling.
- Illegalities in MLM:
- Violation of laws of land and Promotion of illegal Money Circulation Scheme.
- Siphoning of huge money to foreign countries without any check in the name of commissions to uplines who are in foreign countries.
- Cheating and looting the gullible and middle class by false promise of get quick rich.
- Spoil of social fabric and economic fabric since due to unworkable and mathematical impossibility of the scheme since it exploits social relationships.
- Law and Legal: The Hon’ble Madrass High court (M/s.Apple FMCG Vs. Union of India-7/1/2005), The Kerala High court and Hon’ble Supreme court (Kuria chan Chako Vs. State of kerala- 2008(8) SCC 708), Karnataka High Court (Commissioner Income Tax Vs. Manoj housing Pvt. Ltd) and the Division bench of High court of A.P. in Amway Vs. Union of India held that Multi-Level marketing is an illegal Money circulation scheme banned under the provisions of Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
- Parliament: On 20/12/2002 the Hon’ble Minister for State, Finance and Company affairs informed to parliament that the scheme of Amway which creates chain of distributors falls within the purview of illegal Money Circulation Scheme. Again in 2007 in Rajyasabha also Ministry of consumer informed action has been initiated against Amway.
- Some more such companies are Daehsan Trading (
- What needs to be done on urgent basis is 1) ensure that siphoning of funds to foreign countries should be stopped forthwith 2) the activities of all such companies should be stopped with a proper coordination and coalition among all the law enforcing agencies of both states and centre.
ILLEGAL MONEY CIRCULATION SCHEME
Subscribe to:
Posts (Atom)