Karnataka HC quashes criminal proceedings against QNet

In a landmark judgment, Karnataka High Court quashed criminal proceedings against direct selling and multi-level marketing company QNet's executive Naresh Balasubramaniam in a cybercrime case over alleged defrauding of two customers by selling products online.
 
Balasubramaniam, a resident of Kuala Lumpur, had approached the Karnataka High Court for a case against him by the cyber crime police (Economic Offences Division) on a complaint filed by one of its Bengaluru-based customers named as Pragya.
 
The respondent (Pragya) had alleged the cyber crime police in June 2016 that QNet, through its local representative, has defrauded by persuading her to purchase some lifestyle items at a sum of Rs 2,55,000 by way of online transfer of which she paid Rs 55,000 in cash.
 
QNet is a Hong Kong-headquartered direct selling and multi-level marketing company currently doing business in India through Vihaan Direct Selling (India). After several meetings with company executives and attending seminars at various locations, Pragya found the business model doubtful and filed criminal proceeding in the cyber crime division in Bengaluru.
 
"The instant case is a typical case where criminal legislation which are not even remotely applicable to the circumstances of the case have been invoked to substantiate the charges. The dispute, if at all, is between a consumer and a direct seller and out to be adjudicated under the provisions of he Consumer Protection Act. As a consequence, the first information report (FIR) and the charge sheet are unsustainable and deserve to be quashed," the court observed.
 
"This is a step in the right direction. We are happy to see that justice has been served and elated that the honourable court has recognised the importance of the direct selling industry to the economy," said Raj Vasudevan, Chief Legal Officer of Q-Net.
 
The observation of the Karnataka High Court is set to change the way direct selling and multi-level marketing companies are perceived. Apart from QNet, a number of other companies are involved in direct selling and multi-level marketing business in India including, Amway, Oriflame, Hindustan Unilever etc. whose business is basically marketing of products directly from manufacturer to consumer, thus reducing the price of the product drastically through elimination of distributors, wholesale agents, sub-agents, retailing outlets etc.
 
The court further stated that there was no case where any over act in inducing the complainant from parting with any money or influencing her in doing so was observed. Only because Subramaniam was the managing consultant of QNet India did not in any way provide grounds for his name to be included in the charge sheet said the order. The cyber crime police had filed a charge sheet against Subramaniam in October 2016 levying various charges under criminal proceedings.
 
"It is not shown that the petitioner is associated with the latter. This circumstance alone would render the proceedings initiated against the petitioner in law. When the activities of these companies do not constitute either money circulation scheme or prize chit, the criminal offences do not even remotely apply to such activities and consequently charging the accused for such offences is unsustainable," the court held.
 
Meanwhile, a recent report by the Federation of Indian Chambers of Commerce and Industry (FICCI) estimates direct selling and multi-level marketing industry in India at several hundred crores. According to an industry estimate, this business has crossed over $1 billion in 2016.
 
The Union Ministry of Consumer Affairs, however, has issued a draft guideline seeking responses from companies involved in direct selling and multi-level marketing in India to frame a final code of business conduct, which is currently lacking here.