Supreme court order gives boost to Direct Selling Industry

  The Supreme Court’s decision this week to grant bail to former world billiards champion Michael Ferreira in the alleged Rs 1,000-crore QNet multi-level marketing case has cleared confusions clouding India’s billion dollar direct selling market.

The bench of Justices P C Ghose and Rohinton Nariman, this week, agreed Ferreira (80), and his partner Malcolm Desai (45) – in jail for about six months – were not running a ponzi scheme through their company, Vihaan Direct Selling (India), a subsidiary of the Hong Kong-based direct selling company QNet, and that they had not duped thousands of buyers as alleged.

The court agreed that Vihaan’s business was legitimate and not a ponzi scheme as described by those filing complaints.

The Supreme Court has also stayed further proceedings in all 19 FIRs against the company across India. In Mumbai, Fay Farreira, the wife of the a Padma Bhushan awardee, said she was happy to see her husband home.
“The Supreme Court brought smiles in our homes, we have full faith in the judiciary.”

Interestingly, the apex court’s order comes on the heels of another one from the Karnataka High Court that quashed the chargesheet filed by the CID in Bangalore, stating “QNet is not a Ponzi scheme and the company does legitimate business” in his detailed order.” The High Court of Telangana and AP had also stayed all proceedings against the company in late 2016.

India’s direct selling market – for years – has suffered because of iceberg arguments, whats on surface is not the reality. And what’s not seen has remained unseen. But its changing fast.

For thousands in India’s direct selling market, the court decision was the second, solid move to accord stature to the much-maligned market, the first being guidelines on direct selling issued last September by the consumer affairs ministry that released its much-awaited paper “The Model Framework for Guidelines on Direct Selling”.

Interestingly, one of the biggest challenges for the Indian direct selling industry is a lack of an express regulatory framework, as a result, often direct selling companies are compared to pyramid schemes under the Prize, Chits and Money Circulation Schemes (Banning) Act.

Hopefully, various state governments will now start implementing the 2016 guidelines which would help distinguish between genuine and malicious direct selling schemes and protect legitimate concerns of consumers and companies.

Guidelines are important, ostensibly because the direct selling industry in India has grown in to become a part of the ‘billion-dollar club’ of the global direct selling industry.The direct selling industry in India has generated approximately $1.18 billion in revenues in 2015, employs a little over 40 lakhs and ranks among the top 25 countries in the world.

This billion-dollar industry has been growing in India despite various issues ranging from a widely misconstrued business model, MNCs such as Amway, QNet and Klink have been charged with multiple violations which are being – slowly yet steadily – proved to be baseless, mainly due to the regulatory vacuum.

But now, the double move, one by the legislature and the other by the judiciary will clear the air for once and all. It was long due because it is a well-established fact globally that direct selling industry generates employment and promotes entrepreneurship. In several countries it has also boosted the manufacturing sectors and SMEs and MSMEs, perfectly in sync with the government’s agenda of Start-up India, Stand-up India and Make in India.

The direct selling industry has the potential to touch Rs 64,500 crore in turnover by 2025, from a Rs 7,200 crore size in 2014, says a report by industry body Federation of Indian Chambers of Commerce and Industry (FICCI) and consulting firm KPMG. In India, direct selling grew by 11 percent in current value terms in 2016. In India direct selling market is around 0.08 per cent of the GDP as of 2014.

The dust has finally been cleared. If guidelines were issued earlier by the ministry, crucial business and cash lost could have been averted and India’s direct selling companies acquired a face of honour and respectability.

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