Sunday, October 1, 2023

QNET and Supreme Court | Summary of Important Legal Verdicts in India

QNET’s sub-franchisee Vihaan Direct Selling India (Pvt. Ltd) (“Vihaan”) and its business legitimacy was recognised in January 2022 by the High Court of Karnataka. This was established after the court heard the submissions of the company on the illegal invocation of the provisions of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, against the company by the Govt. of Karnataka. While directing the company to cooperate with the authorities in the investigation, the Court protected the company from any coercive action.

Presiding over the division bench, Chief Justice Ritu Raj Awasthi and Justice Suraj Govindaraj passed the interim order after hearing the petition filed by the company questioning the legality of invoking the provisions of the KPIDFE Act. The company explained to the court that it is a direct selling company and not a financial establishment as alleged by the government. The Company is not into the business of accepting deposits and as such the provisions of the KPIDFE Act are not applicable against the company.

Source: The Hindu

In the past five years, QNET has received the imprimatur of the courts through various such positive orders.

Here are a few important legal verdicts in favour of QNET in India

The initial favourable verdicts for QNET came at a crucial time when the government was taking important steps towards recognising and regulating the direct selling Industry. The Ministry of Consumer Affairs gazetted the Direct Selling Guidelines of 2016. It was a huge step in recognising the direct selling industry since it set in vivid guidelines to conduct direct selling business, both from the point of view of the direct selling entities and their distributors.

QNET has continued to cooperate with the authorities in relevant investigations since 2013 and has submitted relevant documentation to support its stand as a legitimate business.

Karnataka High Court quashes Cybercrime complaints against QNET in 2017

In February 2017, the Karnataka High Court dismissed a cybercrime case wherein it made certain valuable observations with respect to the company’s business and its legitimacy. The FIR and chargesheet quashed by the Court arose from a complaint filed under the provisions of Indian Penal Code and the Information Technology Act.

After hearing arguments from both sides, the Judge quashed criminal proceedings. Dismissing the FIR, Justice Anand Byrareddy stated,

“The instant case is a typical case where criminal legislation which are not even remotely applicable to the circumstances of the case have been invoked to substantiate the charges. The dispute, if at all, is between a consumer and a direct seller and (is) out to be adjudicated under the provisions of the Consumer Protection Act. As a consequence, the First Information Report and the charge sheet are unsustainable and deserve to be quashed”.

The Court further held “Material of unimpeachable character pertaining to the activities of QNET have been produced before the Court. A perusal of the material and the charge sheet averments prima facie indicate that the activities of QNET and Vihaan, i.e., the multilevel marketing companies, do not constitute offences under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The activities of the company do not fall within the definition of ‘Money Circulation Scheme’ under Section 2(c) of the Act, nor does it fall within the definition of ‘Prize Chit’ under Section 2(e) of the Act. When the activities of these companies do not constitute either (the) Money Circulation Scheme or Prize Chits, the offences under sections 4 and 5 of the Act do not even remotely apply to such activities and, consequently, charging the accused for such offences is unsustainable.”

The order unequivocally stated that direct selling, particularly QNET, does not fall under the Prize Chits and Money Circulation (Banning) Act, PCMC Act of 1978. Further, reinstating the fact that QNET is not a Ponzi scheme. It is legitimate e-commerce based direct selling company.

Source: India Today

The Supreme Court of India

QNET and Honourable Supreme Court ruling of 2017

The Supreme Court of India stayed proceedings against Vihaan Direct Selling Pvt. Ltd. The Supreme Court bench comprising Justice Pinaki Chandra Ghose and Justice Rohinton Fali Nariman passed the order on grounds mentioned in the petition filed by the Company.

Source: Business for Home

The Honourable Supreme Court in 2019 issued a no coercive action notice in favour of QNET

In January 2019, the Supreme Court of India directed no-coercive action against the Company and its directors, in more than 60 FIRs including several cases filed in States of Karnataka and Telangana. Despite such order, the Cyberabad Police in Telangana, arrested the Director of the Company and thus on a petition filed by the Company for contempt of orders, the Hon’ble Supreme Court issued notice to the Commissioner of Police, Cyberabad.

Soon thereafter, and despite the orders of the Supreme Court, the Cyberabad police harassed the independent representatives of the company and registered cases for cheating against them. QNET Distributors Welfare Association (QDWA) filed a petition against such harassment in the High Court of Telangana seeking protective orders. The court was pleased to direct no coercive action against the independent representatives. Similar orders were also passed by the High Courts of Karnataka and Andhra Pradesh on petitions filed by the QDWA.

“The action taken by the police has no civil and criminal law conformance and is in direct contempt of the order granted by the Supreme Court of India that has directed all states including the state of Telangana not to take any coercive action against the company”, according to a statement.

Source: Times of India

The Myth of QNET Scam

QNET is at times wrongly positioned by certain sections of the media as a scam or a pyramid scheme. With multiple reports suggesting an alternate narrative, it is a cause of major concern for individuals who might misconstrue its legitimacy. QNET is one of Asia’s leading direct selling companies that offers a wide range of products on its e-commerce platform. The company follows a grassroots business model integrating business and technology to empower millions of entrepreneurs through its direct selling opportunity.

The Supreme Court of India

Read more about QNET and myth busters:

“Many businesses around the world use the direct sales business model to promote unique products and services. For many people, direct selling offers them a great platform to become micro-entrepreneurs. Distributors can build a sales business promoting such products when they sign up as distributors of a direct selling company, like QNET”, says Malou Caluza, CEO of QNET.

To learn more about QNET and its entrepreneurial opportunity, visit –

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