Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE V.G.ARUN TUESDAY, THE 26TH DAY OF JULY 2022 / 4TH SRAVANA, 1944 WP(C) NO. 2091 OF 2022 PETITIONER:
FRANCHAISE OWNERS ASSOCIATION REG NO. RKM/TC/217/2021, G571, 11TH CROSS ROAD, PANAMPILLY NAGAR, KOCHI - 682036REPRESENTED BY ITS SECRETARY, SRI. VIJU M. VARGHESE, S/O M.L. VARGHESE, AGED 48 YEARS, RESIDING AT MUNDANCHERRY, PANAIKULAM P.O., ALANGADU VILLAGE, KARUMALLOOR, PANAIKULAM, ERNAKULAM - 683511., PIN - 683511 BY ADVS.
NIRMAL V NAIR M.ANEESH RAHUL S.NATH RESPONDENTS:
1 STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, DEPARTMENT OF CONSUMER AFFAIRS, SECRETARIAT, THIRUVANANTHAPURAM - 695001. , PIN - 695001 2 NODAL OFFICER AND CONVENER STATE MONITORING AUTHORITY FOR DIRECT SELLING & MLM C/O. THE DIRECTOR OF FOOD SUPPLIES AND CONSUMER AFFAIRS, PUBLIC OFFICE, VIKAS BHAVAN, THIRUVANANTHAPURAM - 33., PIN - 695033 3 THE SECRETARY TO GOVERNMENT DEPARTMENT OF FINANCE, SECRETARIAT, THIRUVANANTHAPURAM - 695001., PIN - 695001 4 THE SECRETARY TO GOVERNMENT DEPARTMENT OF LAW, SECRETARIAT,
W.P.(C)No.2091/2022 2 THIRUVANANTHAPURAM - 695001., PIN - 695001 5 THE SECRETARY TO GOVERNMENT TAXES DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM - 695001., PIN - 695001 6 STATE POLICE CHIEF STATE POLICE HEADQUARTERS, SASTHAMANGALAM P.O., GX46+FXV, VAZHUTHACAUD, THIRUVANANTHAPURAM - 695010., PIN - 695010 7 COMMISSIONER COMMISSIONERATE OF STATE GST , 9TH FLOOR, TAX TOWER, KILLPPALAM, KARAMANA P.O, THIRUVANANTHAPURAM - 695002, PIN - 695002 8 SANDHYA DEVELOPMENT SOCIETY REG. NO. 486/01, KODUMPIDY P.O., PALA, KOTTAYAM - 686651, REPRESENTED BY ITS SECRETARY., PIN - 686651 9 PRESIDENT SANDHYA DEVELOPMENT SOCIETY, REG. NO. 486/01, KODUMPIDY P.O., PALA, KOTTAYAM - 686651., PIN - 686651 10 THE CHIEF EXECUTIVE OFFICER VICIB HOMELY PRIVATE LIMITED (REGISTERED NON-GOVT.
COMPANY - ROC, ERNAKULAM- REGN. NO. 066789), HAVING ITS REGISTERED OFFICE AT BUILDING NO. 8/439, 1ST FLOOR, SANDHYA DEVELOPMENT SOCIETY, KODUMPIDY P.O., PALA, KOTTAYAM - 686651, PIN - 686651 11 K.C. THANKACHAN SECRETARY, SANDHYA DEVELOPMENT SOCIETY, REG. NO.
486/01, KODUMPIDY P.O., PALA, KOTTAYAM - 686651., PIN - 686651 12 OMANA MOHAN PRESIDENT, SANDHYA DEVELOPMENT SOCIETY, REG. NO.
486/01, KODUMPIDY P.O., PALA, KOTTAYAM - 686651., PIN - 686651 13 BEJOY SEBASTIAN
W.P.(C)No.2091/2022 3 THE CHIEF EXECUTIVE OFFICER, VICIB HOMELY PRIVATE LIMITED, HAVING ITS REGISTERED OFFICE AT BUILDING NO. 8/439, 1ST FLOOR, SANDHYA DEVELOPMENT SOCIETY, KODUMPIDY P.O., PALA, KOTTAYAM - 686651., PIN - 686651 14 CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM - 695001, PIN - 695001 BY ADVS.
GEORGE POONTHOTTAM (SR.)
NISHA GEORGE THOMAS J.ANAKKALLUNKAL OTHER PRESENT:
GP P.G.PRAMOD THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 26.07.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P.(C)No.2091/2022 4 V.G.ARUN J.
------------------------------------- W.P.(C) No.2091 of 2022 --------------------------------- Dated this the 26th day of July 2022 JUDGMENT The petitioner is a registered association of individuals who have executed a franchise agreement with the 8th respondent, a direct selling entity. According to the petitioner, its members were induced into executing the agreements by respondents 8 to 10 claiming that the 8th respondent is a Direct Selling Entity involved in the sale of more than 250 varieties of consumables. The members were assured handsome profits and were made to believe that the business was being run in accordance with the Direct Selling Guidelines, 2018, implemented in the State as per G.O.(P) No. 8/2018/CAD dated 04.06.2018. To become a franchisee, each person had to remit an amount of Rs. 25,000/- as membership fees and make an initial purchase of Rs.1,00,000/-. The quality of the products diminished gradually, while the prices went up. It also came to light that the 13th respondent, who was inducted as the CEO of the Company, was the accused in a criminal case being investigated by the CBCID for offences punishable under Sections 120B, 109, 420, 406 r/w 34 of IPC. Further enquiries revealed that respondents 8 to 10 were conducting the Multi Level Marketing(MLM)
W.P.(C)No.2091/2022 5 business without licence and were indulging in a pyramid scheme of business, which is expressly prohibited under the Direct Selling Guidelines. On finding that its members had been defrauded, the petitioner lodged Ext.P6 complaint before respondents 1 to 7. Since no positive action was forthcoming from the official respondents, this writ petition was filed seeking the following reliefs;
i). Issue a writ in the nature of mandamus or any other appropriate writ order or direction commanding the respondents 1 to 7 to take cognizance of Exhibit P6 complaint and to ensure that the respondents 8 to 13 cease and desist from engaging in the direct selling business ;
ii). Issue a writ in the nature of mandamus or any other appropriate writ order or direction commanding the respondents 1 to 7 to take cognizance of Exhibit P6 complaint and to ensure that the respondents 8 to 13 cease and desist from engaging in the Multi Level Marketing business under the pyramid structure ;
iii). Issue a writ in the nature of mandamus or any other appropriate writ order or direction commanding the 2nd respondent to take cognizance of Exhibit P6 complaint and to take coercive steps to blacklist the respondents 8 to 13 and to ensure that they do not engage in or promote the direct selling business/Multi Level Marketing business under the pyramid scheme in any other name and style.
W.P.(C)No.2091/2022 6 2. Learned counsel for the petitioner contended that the petitioners were induced into executing franchise agreements. Later it turned out that they were cheated and the entire functioning of the 8th respondent was illegal. Hence, the official respondents are bound to enquire into the allegations raised in the complaint and take penal action against respondents 8 to 13.
3. The 8th respondent has filed a counter affidavit challenging the maintainability of the writ petition and refuting the factual contentions.
4. During the course of arguments, it came to light that the Government has issued an order, constituting a mechanism for monitoring and supervising the activities of direct selling entities and direct sellers called the “Monitoring Mechanism to Monitor or Supervise the Activities of Direct Selling Entities and Direct Sellers, 2022”.
The objectives of the Monitoring Authority are as under;
i). To regulate the business of Direct Selling as per the Consumer Protection(Direct selling) Rules 2021 to prevent fraud and protect the legitimate rights and interests of consumers ;
ii). To prohibit all forms of Pyramid Scheme or enroll/participate any person to such scheme or participate in such arrangement in any manner whatsoever in the garb of doing direct selling business;
iii). To prohibit all forms of money circulation scheme or enroll/participate any person to such scheme in the garb of doing direct selling business.
W.P.(C)No.2091/2022 7 iv). To prohibit all forms of unfair trade practices across all models of direct selling;
v). To monitor/supervise the activities of Direct Sellers, Direct Selling Entities regarding compliance of The Consumer Protection Act 2019 and the rules famed thereunder, viz. The Consumer Protection(Direct selling) Rules 2021;"
The newly constituted Monitoring Authority consists of following officials;
i. The Special Secretary/Principal Secretary-Department of Consumer affairs as the Chairman, ii. Commissioner Civil Supplies and Consumer affairs as the Nodal Officer iii. & Convener and the following members ;
iv. The Secretary to Govt. Finance Dept.or any other Officer nominated by him not below the rank of Deputy Secretary.
v. The Secretary to Govt.Law Dept, or any other Officer nominated by him not below the rank of Deputy Secretary.
vi. The Secretary to Govt.Taxes Dept or any other Officer nominated by him not below the rank of Deputy Secretary.
vii. The Controller of Legal Metrology or any other Officer nominated by him not below the rank of Deputy Secretary.
viii. The Food Safety Commissioner or any other Officer nominated by him not below the rank of Deputy Secretary.
W.P.(C)No.2091/2022 8 ix. Commissioner, CGST Department , Kerala.
x. Commissioner, SGST Department , Kerala.
xi. ADGP rank officer from the Police Department dealing with Economic offences;
xii. One Subject Expert, duly nominated by the Government.
5. Learned counsel for the petitioner submitted that Ext.P6 complaint is pending consideration and, if need be, the complaint can be transmitted to the newly constituted authority. Learned senior counsel appearing for the party respondents submitted that the new Monitoring Authority being separate entity, the petitioner will have to file a fresh complaint.
6. I am in agreement with the said submission and deem it appropriate to relegate the petitioner to the newly constituted Monitoring Authority rather than deciding the question of maintainability or venturing into the factual disputes involved.
The writ petition is therefore disposed of without expressing anything on merits and permitting the petitioner to file its complaint before the Monitoring Authority. If such a complaint is filed, that shall be considered as expeditiously as possible and, at any rate, within two months of receipt of a copy of this judgment.
Sd/-
V.G.ARUN Judge dpk
W.P.(C)No.2091/2022 9 APPENDIX OF WP(C) 2091/2022 PETITIONER EXHIBITS Exhibit P1 A TRUE COPY OF THE GENERAL BODY RESOLUTION DATED 11-10-2021 OF THE PETITIONER ASSOCIATION Exhibit P2 A TRUE COPY OF G.O.(P). NO. 8/2018/CAD DATED 4-6-2018 ISSUED BY THE 1ST RESPONDENT Exhibit P3 AA TRUE COPY OF THE RELEVANT PORTION OF THE GUIDELINES FOR MONITORING MECHANISM AT STATE LEVEL FOR REGULATING THE ACTIVITIES OF MULTI LEVEL MARKETING/DIRECT SELLING COMPANIES BASED ON CENTRAL GUIDELINES Exhibit P4 A TRUE COPY OF THE CASE STATUS IN C.C. NO.
261/2017 ON THE FILES OF THE CHIEF JUDICIAL MAGISTRATE, PALAKKAD Exhibit P5 A TRUE COPY OF THE CASE STATUS IN C.C. NO.
6/2018 ON THE FILES OF THE CHIEF JUDICIAL MAGISTRATE, PALAKKAD Exhibit P6 A TRUE COPY OF THE COMPLAINT DATED NIL SUBMITTED BEFORE THE 2ND RESPONDENT BY THE PETITIONER Exhibit P7 TRUE COPIES OF THE POSTAL RECEIPTS DATED 10-12-2021 Exhibit P8 A TRUE COPY OF THE LETTER NO.
CA1/121/2021/CONSUMER AFFAIRS DATED 21- 12-2021 ISSUED BY THE 1ST RESPONDENT Exhibit P9 A TRUE COPY OF THE LETTER NO.
GEXCONAE/COMP/GST/78/2021-AE DATED 28-
W.P.(C)No.2091/2022 10 12-2021 ISSUED BY THE ASST. COMMISSIONER (ANTI EVASION), O/O THE COMMISSIONER OF CENTRAL TAX & EXCISE, KOCHI RESPONDENT EXHIBITS Exhibit R8 A TRUE COPY OF THE DIRECT SELLING GUIDELINES 2016, ISSUED BY THE DEPARTMENT OF CONSUMER AFFAIRS, GOVERNMENT OF INDIA DATED 9.9.2016 Exhibit R8 B TRUE COPY OF THE APPLICATION SUBMITTED BY THE 8TH RESPONDENT BEFORE THE SECRETARY, MINISTRY OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION, DATED 9.3.2020, WITHOUT ITS ENCLOSURES.
Exhibit R8 C TRUE COPY OF THE APPLICATION SUBMITTED BEFORE THE DIRECTOR OF CIVIL SUPPLIES & CONSUMER AFFAIRS, NODAL OFFICER, MONITORING AUTHORITY OF DIRECT SELLING/MLM, DATED 26.5.2020, WITHOUT ITS ENCLOSURES.
Exhibit R8 D TRUE COPY OF THE APPLICATION DATED 12.8.2021 SUBMITTED BY THE DIRECTOR, VICIB HOMELY, PV.LTD TO BE DECLARED AS A DIRECT SELLING AUTHORITY, WITHOUT ITS ENCLOSURES.
Exhibit R8 E TRUE COPY OF THE CONSUMER PROTECTION (DIRECT SELLING ) RULES, 2021 DATED 28.12.2021 Exhibit R8F TRUE COPY OF THE FRANCHISEE AGREEMENT WITH PREMJI M.P. THE PRESIDENT OF THE WRIT PETITIONER ASSOCIATION DATED 22.9.2020 Exhibit R8 G TRUE COPY OF THE ACCOUNT LEDGER REFLECTING THE DEBT OF PREMJI M.P.
PRESIDENT OF THE PETITIONER ASSOCIATION.
W.P.(C)No.2091/2022 11 Exhibit R8 H TRUE COPY OF THE ACCOUNT LEDGE REFLECTING THE DEBT OF VIJU M.VARGHESE, SECRETARY OF THE PETITIONER.
Exhibit R8 I TRUE COPY OF THE ACCOUNT LEDGER REFLECTING THE DEBT OF ANILKUMAR K.P.
TREASURER, OF THE PETITIONER ASSOCIATION.
Exhibit R8(J) TRUE COPY OF THE COMMUNICATION DATED 30- 05-2022 ISSUED BY THE STATION HOUSE OFFICER, MELUKAVU POLICE STATION.
PETITIONER EXHIBITS Exhibit P10 A TRUE COPY OF THE PAGE NAMED "PROJECTS" OBTAINED FROM WWW.VICIBHOMELYINDIA.COM.
Exhibit P11 A TRUE COPY OF THE MARKETING PLAN OF RESPONDENTS 8 AND 10 OBTAINED FROM WEBSITE WWW.VICIBHOMELYINDIA.COM.
Exhibit P12 A TRUE COPY OF THE BROCHURE CIRCULATED BY THE RESPONDENTS 8 AND 10 OF THEIR SCHEME.
Exhibit P13 A TRUE COPY OF NOTICE PUBLISHED ON THE WEBSITE WWW.VICIBHOMELYINDIA.COM PRINTED ON 12.7.2022.
Exhibit P14 A TRUE COPY OF THE PROFILE PAGE OF SMT.
BINDU K.M. HAVING UNIQUE IDENTIFICATION NO. "VB7321068" UNDER THE RESPONDENTS 8 AND 10.
Exhibit P15 A TRUE COPY OF THE NOTICE OF INAUGURATION OBTAINED FROM THE WEBSITE WWW.VICIBHOMELYINDIA.COM PRINTED ON 12.7.2022.
Exhibit P16 A TRUE COPY OF THE REQUEST UNDER RTI ACT DATED 23.7.2021 SUBMITTED BY SRI. PREMJI,
W.P.(C)No.2091/2022 12 PRESIDENT OF THE PETITIONER SOCIETY BEFORE THE 2ND RESPONDENT.
Exhibit P17 A TRUE COPY OF THE LETTER NO.
CCS/3090/2021-D3 DATED 22.8.2021 ISSUED BY THE 2ND RESPONDENT.