Fiawin International Private Limited V. Union of India and State of Kerala and Monitoring Authority of Direct Selling/MLM Committee and ADGP, Member Monitoring Authority of Direct Selling/MLM Committee and Superintendent of Police Thrissur and Circle Inspector of Police Mannuthy

WP(C)/15515/2020

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The case involves FIAWIN International Private Limited, which filed a writ petition against various respondents including the Union of India, State of Kerala, and local police authorities. The petitioner sought relief from alleged harassment by the police, who were pressurizing the petitioner to stop selling 10% gold imitation jewelry through direct selling/multilevel marketing. The petitioner argued that their business model was compliant with the Consumer Protection Act, 2019, and relevant government guidelines on direct selling. The court examined the submissions and the legal framework governing direct selling and concluded that the police should not interfere without a lawful basis.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 819267 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 27-07-2021
• Assessment Year: misc
• Laws Referred To: Consumer Protection Act, 2019, Prize, Chits and Money Circulation Schemes (Banning) Act, 1978
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAJAGOPALAN; N B SUNIL NATH
• Assessee Lawyers: RAJIT
• Keywords: Consumer Protection; Consumer Protection; Direct Selling; Multilevel Marketing; Gold imitation jewellery; Police harassment
• Section: 2(13); 2(7)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN TUESDAY, THE 27TH DAY OF JULY 2021 / 5TH SRAVANA, 1943 WP(C) NO. 15515 OF 2020 PETITIONER: FIAWIN INTERNATIONAL PRIVATE LIMITED NO.4/284-3, MARS ARCADE, PARVATTANI, OLLUKKARA, THRISSUR -680 655, REPRESENTED BY THE MANAGER, BINID O.B., AGED 49 YEARS, S/O.BALAKRISHNAN, ORAYAMPURATH HOUSE, CHITTILAPPILLY P.O., THRISSUR THALUK, THRISSUR DISTRICT - 680 551. BY ADV RAJIT RESPONDENTS: 1 UNION OF INDIA REPRESENTED BY SECRETARY, MINISTRY OF CONSUMER AFFAIRS, KRISHI BHAVAN, NEW DELHI- 110 001. 2 STATE OF KERALA REPRESENTED BY SECRETARY, MINISTRY OF CONSUMER AFFAIRS, SECRETARIAT, THIRUVANANTHAPURAM - 695101. 3 MONITORING AUTHORITY OF DIRECT SELLING/MLM COMMITTEE REPRESENTED BY ITS NODAL OFFICER, THE DIRECTOR OF CIVIL SUPPLIES AND CONSUMER AFFAIRS, THIRUVANANTHAPURAM - 605 101. 4 ADGP, MEMBER MONITORING AUTHORITY OF DIRECT SELLING/MLM COMMITTEE, THIRUVANANTHAPURAM - 605 101. 5 SUPERINTENDENT OF POLICE THRISSUR, AYYANTHOLE, THRISSUR - 680 003. 6 CIRCLE INSPECTOR OF POLICE MANNUTHY POLICE STATION, THRISSUR DISTRICT - 68651. BY ADVS. SRI.RAJAGOPALAN NAIR.K.R., CGC GOVERNMENT PLEADER SRI.N.B.SUNIL NATH, GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 27.07.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C).No.15515/2020 2 P .V .KUNHIKRISHNAN, J. ------------------------------- W .P .(C).No.15515 of 2020 ---------------------------------------------- Dated this the 27th day of July, 2021 JUDGMENT This writ petition is filed with following prayers: i. Issue a Writ of Mandamus or any appropriate writ order or direction commanding the respondents 5 & 6 not to harass the petitioner by pressurizing the petitioner to stop selling the 10 % gold imitation jewellery through the Direct selling/multilevel marketing method. ii. Issue a Writ of Mandamus or any appropriate writ order or direction commanding the respondents 2 & 3 to immediately communicate to the 5th and 6th respondent the constitution of the monitoring committee and also issue strict instructions to encourage sale by Direct selling/multilevel marketing methods. iii. Declare that the respondents cannot stop the conduct of the business by the petitioner using the Direct selling/multilevel marketing method. iv. Issue a Writ of Mandamus or any appropriate writ order or direction commanding the respondents 5 W.P.(C).No.15515/2020 3 & 6 not to harass the petitioner by pressurizing the petitioner to close down the shop selling the 10% gold imitation jewellery. v. Grant such other relief deemed fit to this Hon'ble court. 2. When this writ petition came up for consideration before this Court on 04.08.2020, this Court passed the following order: “The learned Assistant Solicitor General takes notice for the 1st respondent. The learned Government Pleader takes notice for respondents 2 to 6. Specific instructions shall be obtained as to whether the 3rd respondent, which is the Monitoring Authority of Direct Selling/MLM Committee has examined the business module of the petitioner herein as per the guidelines issued by the State and Central Government and if the same has been done, their opinion in that regard. A report stating the details shall be submitted within a period of 10 days.” Thereafter the matter came up for consideration before this Court on 19.08.2020, on which date, this Court passed the following order: “The police shall not harass the petitioner or W.P.(C).No.15515/2020 4 summon the petitioner's officials except based on any complaint received from any person or the third respondent authority. Urgent notice to respondents 3 and 4 by speed post.” Again the matter came up for consideration on 11.01.2021 and this Court passed the following order: “This Court by order dated 04.08.2020 had directed the learned Government Pleader to get specific instructions from the Monitoring Authority of Direct Selling/MLM committee, whether they have examined the business model of the petitioner as per guidelines issued by the State and Central Government. 2. In the statement filed by the learned Senior Government Pleader for and on behalf of the 3rd respondent, it is stated that though guidelines were issued by the State, the Committee has not yet started the online registration process of companies engaged in the business of Multi-level Marketing/Direct Selling. The above statement portrays an unfortunate state of affairs. 3. As per Ext.P11 Government Order, a Committee was constituted with the Principal Secretary, Department of Consumer Affairs as the Chairman and 8 other members for monitoring and regulating the activities of Multi-level Marketing/Direct Selling in the State of Kerala. I find that by G.O.(P) No. W.P.(C).No.15515/2020 5 8/2018/CAD dated 4.6.2018, the Government had approved the guidelines on Monitoring Mechanism for regulating the activities of Multi-level Marketing/Direct Selling Entity in the State. As per the Direct Selling Guidelines, 2018, guiding principles have been laid down for regulating the business of Direct Selling and Multi-Level Marketing (MLM) and strengthen the existing regulatory mechanism for preventing fraud and protecting the legitimate rights and interests of the consumers. There is a prohibition of conducting Pyramid and Money Circulation Scheme under the garb of Direct Selling of business opportunities. Under the Rules, the Direct Selling Entity is required to submit an undertaking to the Department of Consumer Affairs narrating exact details of the business and also an undertaking that they shall not promote a Pyramid Scheme or Money Circulation Scheme as prohibited under the Prize, Chits and Money Circulation Schemes (Banning) Act, 1978. The Monitoring Authority is having the responsibility to provide facilities for the enrolment of Direct Selling Entities, provide appropriate platform receiving complaints, inform law enforcement authorities regarding the unethical and unlawful practice, provide Policy inputs, provide awareness among law enforcement authorities, consumers etc. It is only after enrolling with the Monitoring Authority can any Direct Selling Entity engage in Direct Selling/MLM business in the W.P.(C).No.15515/2020 6 State of Kerala. The Direct Selling Entity is also expected to send quarterly financial statements to the monitoring authority. 4. In view of the above, the 2nd respondent cannot be heard to contend that they have not started enrollment of Direct Selling Entities till date. This would result in various fly by night operators mushrooming up with Pyramid and Money Circulation Schemes to dupe unsuspecting persons who fall for their guiles under the hope that they can get easy money. It can also result in the law enforcement agencies causing harassment to legitimate companies engaged in legal business. 5. The Secretary, Ministry of Consumer Affairs shall file a statement detailing all these aspects. It shall be stated as to whether the Monitoring Committee has started functioning, whether any Direct Selling Entity has been enrolled and if the Committee has not started functioning, the reasons for the same. 6. In the meantime, the petitioner shall file an application for enrollment along with an undertaking as contemplated under the Guidelines 2018 detailing all the aspects relating to their business within a period of ten days from today. The Monitoring Committee shall convene a meeting and consider the business model of the petitioner and take appropriate action as per the guidelines within a period of four weeks.” W.P.(C).No.15515/2020 7 3. The main grievance of the petitioner is that the Police is trying to pressurize the petitioner to stop selling the 10% gold imitation jewellery through direct selling / multi level marketing module. According to the petitioner, the same is permitted as per the Consumer Protection Act, 2019. The counsel for the petitioner takes me through Section 2(7) and 2(13) of the above Act, and the counsel also takes me through Ext.P10 Central Government Guidelines regarding the direct selling with Ext.P11 State Government Guidelines about the direct selling. The counsel submitted that the petitioner is doing business strictly in accordance to Exts.P10 and P11. The counsel submitted that if there is any complaint regarding the manner of direct selling, that has to be considered by the 3rd respondent, which is the monitoring committee. According to the petitioner, the Police has no authority to harass the petitioner. The Government Pleader submitted that the Police will act only if there is any complaint from any authority, as per the relevant provisions of the Act and Rules. The Government Pleader also submitted that if any complaint is received from the public, which make out a criminal offence, Police will do the needful as per the Code of Criminal W.P.(C).No.15515/2020 8 Procedure and the Kerala Police Act. The Government Pleader submitted that the allegation that there is police harassment, is not correct. In the light of the above submissions, I think this writ petition can be disposed, retaining the interim order dated 19.08.2020, with following observations: 1. The statement of the Government Pleader that there will not be any police harassment and if there is any complaint/representation from the public or the authority concerned against the petitioner, the Police will do the needful only in accordance to law. 2. The petitioner should follow Exts.P10 and P11 when doing his business. With the above observations, this writ petition is disposed of. Sd/- P .V .KUNHIKRISHNAN JV JUDGE W.P.(C).No.15515/2020 9 APPENDIX OF WP(C) 15515/2020 PETITIONER EXHIBITS EXHIBIT P1 TRUE COPY OF THE MEMORANDUM OF ASSOCIATION. EXHIBIT P2 TRUE COPY OF THE CERTIFICATE OF INCORPORATION. EXHIBIT P3 TRUE COPY OF THE REGISTRATION CERTIFICATE ISSUED BY THE GOVERNMENT OF INDIA. EXHIBIT P4 TRUE COPY OF THE COMMUNICATION ISSUED BY THE INCOME TAX DEPARTMENT. EXHIBIT P5 TRUE COPY OF THE COMMUNICATION ISSUED BY THE INCOME TAX DEPARTMENT. EXHIBIT P6 TRUE COPY OF THE LICENSE ISSUED BY THE THRISSUR CORPORATION. EXHIBIT P7 TRUE COPY OF THE RECEIPT ISSUED BY THE THRISSUR CORPORATION. EXHIBIT P8 TRUE COPY OF THE GENERAL TERMS AND CONDITIONS ISSUED BY THE PETITIONER COMPANY. EXHIBIT P9 TRUE COPY OF THE TRADEMARK REGISTRATION EXHIBIT P10 TRUE COPY OF THE OFFICE MEMORANDUM DATED 9TH SEPTEMBER 2016. EXHIBIT P11 TRUE COPY OF THE ABOVE G.O.(P) NO0.8/2018/CAD DATED 4/6/2018 ISSUED BY THE MINISTRY OF CONSUMER AFFAIRS. W.P.(C).No.15515/2020 10 EXHIBIT P12 TRUE COPY OF THE ABOVE COMPOSITION OF THE MONITORING AUTHORITY. EXHIBIT P13 TRUE COPY OF THE UNDERTAKING SUBMITTED BY THE PETITIONER TO THE 1ST RESPONDENT. EXHIBIT P14 TRUE COPY OF THE UNDERTAKING SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT. EXHIBIT P15 TRUE COPY OF THE TAX INVOICE EVIDENCING THE PURCHASE OF GOLD FROM BANGALORE REFINERY. EXHIBIT P16 TRUE COPY OF THE LETTER DATED 27/10/2020 UNDER THE RIGHT TO INFORMATION ACT EXHIBIT P17 A TRUE COPY OF THE EMAIL COMMUNICATIONS BETWEEN THE PETITIONER AND DIRECTOR OF CIVIL SUPPLYS "