QNet: “It is a chain where a person is fooled and then he is trained to fool others to earn money” says Bombay HC order

The Bombay High Court while rejecting anticipatory bail applications of five accused in the multi-crore QNet scam, has observed that "the deceit and fraud is camouflaged under the name of e-marketing and business". This scheme is undoubtedly a multi-level marketing (MLM) activity and a pyramid structure of such scheme is prepared so that the members are promised to get money on purchase and sale of products, the Court said.

 

 

 

In a hard-hitting order on 6 May 2016, Justice Mridula Bhatkar said, "The motto of the company 'sell more, earn more' appears very attractive and innocuous. However, this motto is fully camouflaged. The company stands on a basic statement that people can be fooled. Thus, the true motto is 'sell more earn more' by fooling people. In fact it is a chain where a person is fooled and then he is trained to fool others to earn money. For that purpose, workshops are conducted where study and business material is provided with a jugglery of words, promises and dreams. Thus, the deceit and fraud is camouflaged under the name of e-­marketing and business."

 

"It has very grave and serious impact on the economic status and mental health of the people on a large scale. On considering parameters of section 438 of the Code of Criminal Procedure, I am not inclined to protect the accused. It won't be out of place to mention that such circulation is required to be stopped. It is necessary for the prosecution to take injunctive steps against this business activity, which is prima facie, illegal. Though by stopping this business, a large group of people may get financially affected, however, it will save larger groups of people from becoming prey of this activity," the Bombay HC said. 

 

The HC rejected bail applications of five including, Srinivas Rao Vanka and Magaral Veervalli Balaji, both directors of Vihaan Direct selling (India) Pvt Ltd, Suresh Thimiri, director of Transview Enterprises India Pvt Ltd, Malcolm Nozer Desai, who is a 20% stakeholder in Vihaan and Michael Joseph Ferreira, former world champion of billiards and an 80% stakeholder in Vihaan.

 

"I have gone through the plan which is given by QNet to every individual representative (IR)," Justice Bhatkar said. "I have gone through the statements of many witnesses, who claimed that they have been cheated under the scheme launched by QNet. I have also considered the conclusive report of Serious Fraud Investigation Agency (SFIO) under the Company Act) SFIO Prima facie, there is material to hold that the business conducted by Qnet is covered under PCMC Act and also under Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954."

 

"However," the Bench added, "the things are not as straight as they are perceived on the surface. Assuming that the scheme was launched with a noble object to give benefit to maximum people to make money quickly and easily by selling products of the company, however, after going through the material placed before me including the statements of the witnesses, I am of the view that in the mid­way, the intention of the applicants/ accused, who are the directors and shareholders of the company, became dubious. They had knowledge that more members are suffering financial losses and they are not satisfied with the products. The claim that the wellness products i.e., Biodisk and Chi Pendent are medicinal and spiritual products, are after all, a matter of faith. However, the applicants/ accused have launched these wellness products with ulterior motive and with correct judgment of vulnerability of the people. The holiday packages, which were sold or offered, without any choice left to the buyers. The entire business was Internet based and, therefore, the persons who are responsible i.e., the top brass i.e., the applicants/ accused, were not approachable to the persons who were aggrieved. The nature of the business was knitted in the interest of the Directors and shareholders in such a manner that the persons who are at the lower level of the pyramid cannot get any access to put up their grievances. The manner in which the persons were contacted, incentives offered, the workshops were conducted, are best examples of inducement."

 

Earlier, Pradeep Gharat, special Public Prosecutor submitted before the Bench that Vanmala Hotels, Travels and Tourism Services Private Ltd and Pallava Resorts Private Limited have created a Website and travel packages. "The commission was not paid on the products though the new members were introduced. The registered office of Vanmala Hotels, Travels and Tourism Services Pvt Ltd company is a call center," he said. 

 

He further submitted that in December 2014 the Ministry of Corporate Affairs sealed their office at Chennai and declared Gold Quest International Pvt Ltd and QuestNet Enterprise (P) Ltd as the fraud companies. "Thus, money is collected on­line and though the Independent Representative number is given, actual money was not available for withdrawal. Said money was laundered outside India. The police in the investigation have come across 73 bank accounts of Q Net Ltd and total laundering of is around Rs135 crore," Adv Gharat had said.

 

Below is the order passed by the Bombay HC…

 

 

Earlier in February 2016, the special Maharashtra Protection of Interest of Depositors (MPID) Court had also rejected anticipatory bail applications of these five. The Economic Offences Wing (EOW) of Mumbai Police, which is probing the case, had invoked the stringent MPID Act against controversial multi-level marketing (MLM) company QNet, which has denied any wrongdoing on its part.

 

Gurupreet Singh Anand, a computer consultant from Lokhandawala, Andheri in his first information report (FIR) stated that his wife was duped for Rs30,000 by some people who had introduced themselves as the independent representatives (IRs) of QNet. 

 

While arguing before the HC in person, he contended that the illegal money circulation scheme is being conducted in India by changing names from GoldQuest to QuestNet to the current QNet.

 

Earlier, the SFIO in its detailed ‘secret’ report on GoldQuest International Pvt Ltd and Quest Enterprises India Pvt Ltd has called multi-level marketing (MLM) schemes run by overseas operators as “a potential threat to national security”.

QNet: EOW arrests V-Elite leaders Sandeep Kalra and Hitesh Miglani

Kalra from Delhi and Miglani from Bangalore have had pocketed lakhs of rupees through the MLM scheme and organised several training camps to lure investors. Both were intercepted by immigration authorities as their names were on a look out circular issued by EOW

The Economic Offences Wing (EOW) of Mumbai Police arrested Sandeep Kalra and Hitesh Miglani, senior independent representative (IR or agents) of controversial multi-level marketing (MLM) company QNet. Both were picked up from Delhi International Airport. Meanwhile, the MLM and its leaders are also booked under the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 as well for selling plastic and glass products terming them miraculous objects for treating severe diseases like Cancer.

 

Kalra and Miglani were intercepted by immigration authorities at the Indira Gandhi International Airport at Delhi last night, say media reports. Both belong to the ‘Infiniti’ team at QNet and part of V-Elite leader’s team. 

 

The duo, who arrived from Dubai in separate flights, was stopped at the airport as Look Out Circulars (LOC) were issued against them by the EOW probing the case. 

 

The two suspects, who were suspected to have had pocketed lakhs of rupees through the scheme and organised several training camps to lure investors, have been subsequently brought to the metropolis and placed under arrest this evening, police said.

 

The LOCs have been issued against those whose statements have been necessitated in the probe but did not appear before the investigators despite summons.

 

Kalra hails from Delhi while Miglani is from Bangalore, police said adding that this is the first arrest of those against whom LOCs had been issued.

 

The EOW had earlier arrested 15 persons for allegedly duping investors by selling QNet products, including magnetic disks, herbal products and holiday schemes, through allegedly fraudulent means.

 

The EOW has invoked the stringent Maharashtra Protection of Interest of Depositors (MPID) against the company which has denied any wrongdoing on its part.

 

QNet has also been accused of using the banned binary pyramid business model. An FIR in the case was registered in August in 2013. The accused had been charged with cheating and forgery under relevant sections of the Prize, Chits and Money Circulation Schemes (Banning) Act, 1978.

 

EOW booked 19 accused including Michael Ferreira, the former world champion of billiards and five companies related with QNet, under the MPID Act. This means all the cases against QNet, Vihaan and all those involved in the MLM scam would be heard before the special MPID Court. Until now, the accused were being investigated for cheating and forgery under the Prize, Chits and Money Circulation Schemes (Banning) Act 1978, and for money laundering by the Enforcement Directorate (ED).

 

Gurupreet Singh Anand, a computer consultant from Lokhandawala, Andheri in his first information report (FIR) stated that his wife was duped for Rs30,000 by some people who had introduced themselves as the independent representatives (IRs) of QNet. Anand told the police, “They (IRs) had said that one of the bio-products my wife bought could be used to treat my 12-year-old son's brain-related diseases.”