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2017 Supreme(Del) 159
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIPIN SANGHI, J.
MALCKOM N DESAI & OTHERS – Petitioners
Versus
GOVT. OF NCT OF DELHI & ANOTHER – Respondents
W.P. (CRL) No. 3267 of 2016
Decided On : 18-01-2017
For the Petitioners: Mr. Sudhir Nandrajog with Mr. Nikhil Goel, Mr. Ashutosh Ghade and Ms. Surya Rajappan.
For the Respondents: Ms. Richa Kapoor, Ms. Mallika Parmar, Ms. Seema Patnaha and Parveen Kumar.
The main legal point established in the judgment is that the accused Company and its IRs were involved in cheating, dishonest inducement, and criminal breach of entrusted property, and the petitioners had knowledge and control over the activities of the accused Company, indicating their involvement in the fraudulent transactions.
Headnote:
FIR Quashing - Multi-Level Marketing - IPC 420/120-B/34, PC & MCSB Act 4/5/6 - Summary of Acts and Sections: IPC 420/120-B/34, PC & MCSB Act 4/5/6 - The court discussed the fraudulent money circulation scheme operated by the accused Company through unauthorized business module, the role of the petitioners as shareholders and ex-directors, and the statutory provisions related to vicarious liability and cheating. The court found that the accused Company and its IRs were involved in cheating, dishonest inducement, and criminal breach of entrusted property, and the petitioners had knowledge and control over the activities of the accused Company, indicating their involvement in the fraudulent transactions.
Fact of the Case:
The case involves a Multi-Level Marketing (MLM) Company accused of cheating and fraud by running a money circulation scheme through an unauthorized and faulty business module. The petitioners, as shareholders and ex-directors, sought to quash the FIR and proceedings arising from it, claiming no personal involvement in the alleged misrepresentations made by the accused Company's Independent Representatives.
Finding of the Court:
The court found that the accused Company and its IRs were involved in cheating, dishonest inducement, and criminal breach of entrusted property. It noted the petitioners' knowledge and control over the activities of the accused Company, indicating their involvement in the fraudulent transactions. The court dismissed the petition to quash the FIR, stating that doing so at this nascent stage would thwart the unravelling of a huge multi-victim scam and send a wrong signal to the society.
Issues: The issues revolved around the alleged misrepresentations made by the accused Company's Independent Representatives, the role and liability of the petitioners as shareholders and ex-directors, and the ongoing investigation into the multi-victim scam.
Ratio Decidendi: The court's decision was based on the finding of the accused Company and its IRs' involvement in cheating, dishonest inducement, and criminal breach of entrusted property. It also considered the petitioners' knowledge and control over the activities of the accused Company, indicating their involvement in the fraudulent transactions.
Final Decision: The court dismissed the petition to quash the FIR, stating that doing so at this nascent stage would thwart the unravelling of a huge multi-victim scam and send a wrong signal to the society.
VIPIN SANGHI, J.
1. The present petition has been filed to seek quashing of FIR No. 87/2016 dated 10.06.2016 under Sections 420/120-B/34 IPC and Sections 4/5/6 of PC & MCSB Act, registered by EOW Delhi and the proceedings arising therefrom, and in the alternative, compound the offence as against the petitioners.
2. The case concerns – what is claimed to be, a Multi-Level Marketing (MLM) Company called Vihaan Direct Selling Private Limited (hereinafter ‘the Company’/‘accused Company’), accused of cheating and fraud by running a money circulation scheme through an unauthorized and faulty business module. Petitioners No. 1 and 2 are current shareholders of the Company, while the Petitioner No. 3 and 4 are ex-directors of the Company.
3. The petitioners submit that the business carried on by the Company, in short, is that products of different kinds are allegedly sold through independent contractors known as “Independent Representatives” (IRs), who are enrolled as part of the company, allegedly, without collection of any deposit, fee or money for same. These IRs are given authority to deal with consumers and sell the products of the company to third parties. Depending upon the value of products sold and number of persons referred by such IRs who, in turn, buy products of the company, and also depending upon the value of products sold by the referred IRs, commission is paid to the IRs.
4. The petitioners submit that information about the nature of the business of the company is available on its web site. The agreements with the IRs are in the nature of independent contracts, which are also available on its website. Every agreement which the Company enters into with every purchaser, contains a clause disclosing the refund policy of the company. Anybody who is unhappy with the product sold by the Company can seek refund within a period of 30 days, upon which the money is refunded. It is further submitted that the company had complied with all the necessary statutory registrations. Permissions/ registrations were obtained from over 20 authorities. The Company has returned nearly 90 Crores to those customers who were unhappy with its product. The Company has also paid direct and indirect taxes to the tune of Rs. 292 Crores for the financial year beginning from 2013 till the last financial year.
5. The case of the petitioners is that the present allegations are in relation to the alleged misrepresentations made by some Independent Representatives of the Company, and not by the Company and the petitioners in particular. The aforesaid FIR is registered pursuant to a complaint dated 4.3.2016 made by the second respondent, in which four persons are named as accused, namely (a) Vihaan Direct Selling India Private Limited, (b) Mr. Himanshu Aggarwal, (c) Ms. Anita Jaggi and (d) Ms. Kanika. The amount involved as shown in the FIR, is to the extent of Rs. 6.5 Lakhs.
6. The case of the complainant in the FIR is that the complainant was approached by his friend called one Mr. Himanshu Aggarwal who is an “Independent Representative” of the accused Company for a business opportunity and upon enquiry, Himanshu Aggarwal, the second accused informed the complainant that this is an E-Commerce business. He specifically denied that the business opportunity provided by the said company was that of Network Marketing. On 29.11.2015, accused 2 to 4, as named in the FIR met the complainant requiring him to invest Rs. 6.5 Lakhs. It was also represented to the complainant that without payment of money the company website could not be accessed by him. It is the version of the complainant that since he was not able to arrange Rs. 6.5 Lakhs, he did not want to opt in. However, after representation by one of the named accused that he could join with whatever amount he has arranged, the former handed over Rs. 4.5 Lakhs to the named accused on 4.12.2015, and another cheque of Rs. 2 Lakhs in name of co-accused was also handed over on 8.12.2015. After payment of the
