HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
*****
Writ Petition No.43621 OF 2022
Between:
M/s.Bluelife Marketing Private Limited. ... Petitioner
And
The State of Telangana,
rep. by its Principal Secretary,
Home Department & others ... Respondents
DATE OF JUDGMENT PRONOUNCED: 27.12.2022
Submitted for approval.
THE HON'BLE SRI JUSTICE K.SURENDER
1 Whether Reporters of Local
newspapers may be allowed to see
Yes/No
the Judgments?
2 Whether the copies of judgment
may be marked to Law
Yes/No
Reporters/Journals
3 Whether Their Ladyship/Lordship
wish to see the fair copy of the
Yes/No
Judgment?
__________________
K.SURENDER, J
2
* THE HON'BLE SRI JUSTICE K. SURENDER
+ W.P. No. 43621 of 2022
% Dated 27.12.2022
# M/s.Bluelife Marketing Private Limited. ... Petitioner
And
$ The State of Telangana,
rep. by its Principal Secretary,
Home Department & others ... Respondents
! Counsel for the Petitioner: Sri Tej Prakash Toshniwal
^ Counsel for the Respondents: Government Pleader for Home
>HEAD NOTE:
? Cases referred
3
THE HONOURABLE SRI JUSTICE K.SURENDER
WRIT PETITION No.43621 OF 2022
O R D E R:
The present writ petition is filed questioning the FIR registered by the Chevella Police under Section 420 of the Indian Penal Code and Sections 4, 5 and 6 read with 3, 2 (C) of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. Further the Petitioner seeks directions of this Court to defreeze the bank accounts of its associates and also set aside the order of the Respondent/police to discontinue the broadcast of the website of Petitioner.
2. A complaint was lodged by the 14th respondent who was impleaded vide order dt.20.12.2022 in IA.No.3 of 2022 that he met a person who explained about Petitioner company which is Blue Life Marketing Private Limited Company regarding a business scheme run by the petitioner and also saw You Tube videos which showed about the scheme to earn more money in less time. After watching the videos the 14th respondent was interested in joining the scheme and he transferred an amount of Rs.2,500/- to phone No.9491906035. He was also informed that he would receive products within five working days. After joining the firm/company, the persons responsible in running Blue life 4 Marketing Private Limited were forcing him to join other persons for getting more commission. Since the Pyramid scheme which is now adopted by the Company is illegal, he requested to take action.
3. After registration of crime, the case was transferred to Economic Offences Wing. During the course of investigation, the accounts of the Blue Life Marketing Private Limited and seven others associated with the company were frozen.
4. The economic offences wing of Cyberabad Police Commissionerate addressed a letter to Axis Bank, requesting to freeze the said eight accounts. Further a notice was also sent to Graylogic Technologies Private Limited, which was maintaining the website of the Blue Life Marketing Private Limited. The said freezing of the accounts and also blocking the website of Blue Life Marketing Private Limited was for the reason of the said company being involved in multi-level marketing activities which is in violation of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978.
5. The counsel appearing for the petitioners would submit that only stolen property can be seized and the Police have no authority to either freeze the bank accounts of the petitioner 5 company or block the website. Economic Offences Wing, Cyberabad, is assuming that the business carried out by the petitioner Company is Pyramid scheme which is banned. The said assumption is incorrect and the business carried out by the company is not in violation of any of the penal provisions of any enactment. The counsel further argued that the Police/4th and 5th respondents have no power to order such freezing of accounts and also directing blocking of broadcasting of the website of the company.
6. Counsel further argued that the State Government has issued a notification with concurrence of the Central Government on 09.09.2016 which is called the "Telangana Direct Selling Guidelines, 2017". In accordance with the said guidelines, only a Nodal Officer who is appointed shall have the powers to deal with such direct selling undertaken by the petitioner Company. According to the notification a direct seller means a person appointed or authorized, directly or indirectly, by a Direct Selling Entity through a legally enforceable written contract to undertake direct selling business on principal to principal basis.
7. Further, the Network of Direct Selling means a network of direct sellers at different levels of distribution, who may recruit or 6 introduce or sponsor further levels of direct sellers, who they then support. However, a direct selling would not include a Pyramid scheme.
8. Perused the record. The allegation against the petitioner Company is that they were not indulging in any direct selling but, were promoting a Pyramid Scheme. In the said Pyramid Scheme, according to Police the complainant was inducted and was asked to get more members. The circulation of money is banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. According to the said Act a money circulation would mean any scheme for making of quick or easy money which basically promises consideration on the enrolment of members into scheme.
9. In the present case even according to the complaint, respondent No.14 was asked to pay introductory amount of Rs.2,500/- and was asked to enroll members to get benefits. The said procedure adopted by the Company squarely falls within money circulation scheme.
10. Clause-8 of the Telangana Direct Selling guidelines Order, 2017 reads as follows;
"Clause 8: Prohibition of Pyramid Scheme & Money Circulation Scheme:
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1. No person or entity shall promote a Pyramid Scheme, as defined in Clause 1 (11) or enroll any person to such scheme or participate in such arrangement in any manner whatsoever in the garb of doing Direct Selling business.
2. No person or entity will participate in Money Circulation Scheme, as defined in Clause 1 (12) in the garb of Direct Selling of Business Opportunities."
11. Clause-1 of the Telangana Direct Selling guidelines Order, 2017 regarding Direct Selling issued by the Government is extracted for reference.
"Clause-1
6. Direct Selling means marketing, distribution and sale of goods or providing of services as a part of network of Direct Selling other than under a pyramid scheme; Provided that such sale of goods or services occurs otherwise than through a "permanent retail location" to the consumers, generally in their houses or at their workplace or through explanation and demonstration of such goods and services at a particular place."
12. Learned counsel relying upon the notification argued that only the Nodal Officer under the said notification is competent to conduct any enquiry, cannot be accepted. The said notification in fact has no applicability in the facts of the present case and even under clause-8, Pyramid scheme or money circulation scheme 8 cannot be permitted under the garb of doing direct selling business. The modus adopted by the petitioner cannot be said to be 'Direct selling' as according to the complaint, respondent 14 was asked to enroll members for getting benefits, which is a 'pyramid scheme' in the process of circulating money. Such activity of promising consideration on the enrolment of members into scheme is made punishable under The Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
13. In the said circumstances, when the respondent Police are competent to investigate and this Court finding that prima facie the activity of the Company falls within the meaning of a 'pyramid scheme' under the Prize Chits and Money circulation Schemes (Banning) Act, 1978 and not 'Direct Selling' Business, the request for de-freezing the accounts and broadcasting the website of the petitioner company is refused.
14 The Respondent-Police have not filed any details of the victims or the persons who are in the Pyramid scheme and the amounts paid by them. Further, it is not brought to the notice of this Court that the amounts lying in the 8 accounts which were frozen by the investigating agency had funds accrued from the Pyramid scheme. The present writ is not decided on the basis of 9 the evidence collected during the course of investigation to ascertain whether the petitioner company was involved in Pyramid scheme as claimed by the respondent-police or "direct selling" as claimed by the petitioner.
15. In the said circumstances, this Court deems it appropriate to direct the petitioner to approach the concerned Criminal Court. In the event of the petitioner filing such application seeking de- freezing of accounts and permission for broadcast of the website of the petitioner company, the concerned Trial Court shall decide on the basis of the CD file and also the evidence collected by the prosecution till date and pass appropriate orders. The findings in the present writ petition are made on the basis of record available and the Trial Court is at liberty to draw its own conclusions whether the petitioner company is a "direct selling" company or involved in money circulation.
16. Accordingly, the Writ Petition is disposed off.
Miscellaneous Petitions, pending if any, shall stand closed.
__________________ K.SURENDER, J Date: 27.12.2022 Note: LR copy to be marked.
B/o.tk 10 THE HON'BLE SRI JUSTICE K.SURENDER WRIT PETITION No.43621 OF 2022 Dt. 27.12.2022 tk