V CAN NETWORK P LTD Vs. HOME SECRETARY

JUDGEMENT

(1.) V-Can Network (Private) Limited, through its Chairman cum Managing Director, Saligramam, Chennai-93 has filed Writ Petition No. 2908/2003 to issue a Writ of Mandamus, directing the respondents not to prevent the petitioner's company from carrying on their day-to-day business of selling their products and services under the multi-level marketing scheme by using their respective offices and network systems, in Chennai.

(2.) Five distributors of V-Can Network Private Limited have filed Writ Petition No. 4144/2003 seeking a Writ of Mandamus, forbearing the respondents from interfering with their business in selling the products of V-Can Network (P) Limited under their Multi-level Marketing Scheme by using their respective offices and Network Systems in Chennai. Since the issues raised in both the writ petitions are common, they are being disposed of by the following common order.

(3.) The case of the petitioner in Writ Petition No. 2908/2003 is briefly stated hereunder: According to the petitioner, V-Can Network is a private limited company, registered under the Companies Act on 2-11-2001. The company has also been registered as a dealer under Central Sales Act and the Tamil Nadu General Sales-tax Act. The company is engaged in manufacturing Home Appliances of consumer durables etc. The company is adopting the procedure for marketing the products which is called multi-level marketing or network marketing system, accordingly they had introduced 3 major products, namely, "Ozone Water Purifier", "Magnetic Bed", and "Companion" (multi-purpose foldable table with four seats and designed to look like a suitcase). These 3 products are sold under the distribution system in addition to the direct sales by the company and each of the above said items would cost Rs.5,990/-. The petitioner company is not making any advertisement through any media for selling their products, and the sale is being net-worked from individual to individual. This system already existed in India and many other companies are doing the same business of individual networking system. The consumer of their products makes the purchase out of his own will and there is no compulsion in the business and the same person out of his own decision and will may become a distributor or may remain as consumer himself. The distributor is getting commission for the sale he is undertaking and such independent distributor have the power not only to sell the products of the company, but also appoint two other distributors under him and all of them can sell the company products and earn the value points, apart from the incentive commission on the value of the products sold. The products are also sold under direct sale marketing including, door to door sales and by exhibiting the products and also by institutional sale. The purchaser of the products who became distributor on accumulation of 600 value points, then he became an independent distributor and became eligible to avail discount upto 30% of the sale price of the product. The principle underlying this system is instead of having the wholesale dealer or retailer, the network marketing system enables the consumer himself to be the distributor to venture upon marketing of the products. The significant feature of this network marketing system is providing opportunity to the purchasers who also earn money to become distributors by effecting the sale through them and, therefore, the profit is being shared reasonably by the company to the distributors on the sale of every product and the distributors also become consumers of the products. The said 3 items were manufactured scientifically for the day-to-day use. The magnetic bed is introduced as a resting medium and therapeutic device. The beds are embedded with Magnets on the surface placed in strategically spread locations across the bed that vitalizes the various areas of the body. Their products are not opposed to any law and the same are as per the legal requirements. Nearly 50,000 distributors in 5 States are depending on this business and nearly 2 lakh people are directly involved and earned their livelihood out of this network system. The petitioner company is paying sales-tax and income-tax regularly and their company is considered to be one of the highest deductors of TDS of income-tax. Though there is no complaint from any quarter, recently the third respondent had arrested four distributors of their company and registered a case against them in Crime No.42 of 2003. The respondents police sealed their office premises and froze their company bank account. Leading legal personalities have certified that their system of business would not fall within the ambit of the prize, chit as described in Section 2 (c) and 2 (e) of the Central Act 43 of 1978. They also opined that their business does not fall within the definition of Section 2 (1) of the money circulation or prize chit within the meaning of Section 2 (e) of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. In spite of all the above aspects, the third respondent had attached their bank accounts, internet servers and sealed their head office and other offices, godowns, factories, show rooms and other establishments in Chennai. Hence the present writ petition for necessary direction.