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The High Court of Karnataka recognized the business legitimacy of QNET’s sub-franchisee Vihaan Direct Selling India (Pvt. Ltd) in January 2022. The court came to this decision after hearing submissions from Vihaan on the illegal invocation of the provisions of the Karnataka Protection of Interest of Depositors in Financial Establishments (KPIDFE) Acts of 2004 against Vihaan by the Government of Karnataka.
Chief Justice Ritu Raj Awasthi and Justice Suraj Govindaraj presided over the division bench. The court’s ruling protected QNET’s sub-franchisee Vihaan from any coercive action while instructing Vihaan to cooperate fully with the authorities conducting the investigation. Justices Awasthi and Govindaraj advanced the interim order following the presentation of the petition, which had been filed by Vihaan, that questioned the legality of citing the provisions of the KPIDFE Act.
Vihaan, a QNET sub-franchisee, elucidated that it’s actually a direct selling company and not a financial establishment, as per the government’s allegation. Legal representatives of Vihaan explained that the direct selling company is not in the business of accepting deposits, which is why the provisions of the KPIDFE Act could not be used against it.
Other Important Legal Wins for QNET in India
Since 2013, when QNET first faced allegations of being a scam and pyramid scheme in India, Vihaan Direct Selling has been cooperating with all authorities in pertinent investigations. The direct selling company has provided all relevant documents to authorities to support its position as a legitimate business. Parallelly, the Indian government has also moved towards recognizing and regulating the direct selling industry, including creating the Direct Selling Guidelines of 2016 by the Ministry of Consumer Affairs and incorporating the Direct Selling regulations into the amendments of the Consumer Protection Act.
Follow are some notable wins by QNET in India through its franchisee Vihaan Direct Selling.
Cybercrime Complaints Against QNET Dismissed by Karnataka High Court in 2017
The Karnataka High Court axed a cybercrime case, filed under the penal provisions of the Indian Penal Code and the Information Technology Act, against QNET in February 2017. “The instant case is a typical case where criminal legislation which is not even remotely applicable to the circumstances of the case has been invoked to substantiate the charges. Moreover, the dispute, if at all, is between a consumer and a direct seller and (is) out to be adjudicated under the provisions of the Consumer Protection Act. As a consequence, the First Information Report and the charge sheet are unsustainable and deserve to be quashed,” stated Justice Anand Byrareddy, who dismissed the case.
The court found that direct selling, specifically QNET, doesn’t fall into the category under the Prize Chits and Money Circulation Schemes (Banning) Act (PCMC Act), 1978. Further, it reinforces the fact that QNET is not a Ponzi scheme; it’s a legitimate e-commerce based direct selling company.
The court also stated, “Material of unimpeachable character pertaining to the activities of QNET have been produced before the court. A perusal of the material and the charge sheet averments prima facie indicate that the activities of QNET and Vihaan, i.e., the multilevel marketing companies, do not constitute offenses under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The company’s activities do not fall within the definition of ‘Money Circulation Scheme’ under Section 2(c) of the Act, nor does it fall within the definition of ‘Prize Chit’ under Section 2(e) of the Act. When the activities of these companies do not constitute either (the) Money Circulation Scheme or Prize Chits, the offenses under sections 4 and 5 of the Act do not even remotely apply to such activities and, consequently, charging the accused of such offenses is unsustainable.”
The Honorable Supreme Court Rules In Favor of QNET in 2019
QNET received another favorable ruling in 2019. The Supreme Court of India ordered that no coercive action could be taken against the direct selling company and or its directors in January 2019. That directive covered more than 60 FIRs, or first information reports, which included several cases filed in the states of Telangana and Karnataka. However, despite the Supreme Court of India’s orders, the Cyberabad police began investigating QNET’s independent representatives and filed charges of cheating against them.
As a result, the QNET Distributors Welfare Associate (QDWA) appealed with a petition and sought protective orders against the harassment in the High Court of Telangana. The court took no coercive action against the direct selling company. According to a statement, “The action taken by the police has no civil and criminal law conformance and is in direct contempt of the order granted by the Supreme Court of India that has directed all states, including the state of Telangana, not to take any coercive action against the company.”
