Corporate Frauds Watch

Consumers need to think twice when someone approaches them with the offer of 'good business opportunity' or 'good investment opportunity'.
Duck Development Society is a classic example to study how easy is it to dupe the gullible in the name of good investment opportunity.
Prakasam district-based Duck Development Society offered people a good investment opportunity with abnormal returns within a short span of three months. All the investors have to do is investment the amount and wait for three months. Meanwhile, if they want to make extra amount, they could refer the investment opportunity to their friends and relatives to get commission from the recruitment of new investors.
The modus opereandi is simple. The Duck Development Society would be paid Rs. 23,000 by each investor and the amount would be spent to purchase some ducklings and the society would undertake the responsibility to rear them. After three months, the grownup ducks would be sold for an unspecified amount and the investor would be paid Rs. 38,000.
It is an attractive proposal of getting returns of Rs. 15,000 in three months with an investment of Rs. 23,000.
Many people fell for it and soon the Duck Development Society spread its tentacles all over the State.
An anxious investor from Gadval in Mahaboobnagar district approached Vijayawada-based Corporate Frauds Watch to know whether it is a good investment opportunity. After telling him that it is a fraud, the Corporate Frauds Watch has also taken up the matter to the notice of the police.
Surprisingly, the police were still under the impression that it was a good business opportunity.
Corporate Frauds Watch told the police that if duck-rearing is really good business opportunity and fetches good returns, the Society should approached the commercial banks with its project. The Banks would be too happy to extend financial support for such projects. Why the Society is collecting money from people? The police have seen the gameplan of the Society and registered a criminal case against the society.
Even after the criminal case was registered, the Society continued its operations for sometime. However, the Society soon started defaulting the payments. People took to streets demanding payments. But by that time the Society has already garnered about Rs. 80 crore and vanished.
The Duck Development Society has indulged in several crimes. One, collecting deposits from public without the permission of the Reserve Bank of India is a crime under the provisions of the AP Protection of Depositors Act, second enrollment by paying commission is a crime under the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, thirdly knowing fully the chain would break sooner than later, they encouraged the chain scheme and it is a crime under the Section 420 read with Section 34 (jointly and severally liable) of Indian Penal Code.
The organisers were caught later and spent sometime behind the bars before they were released on bail. The case is still under investigation.

Tupperware is another American company which set foot in India in the name of direct selling after liberalization was introduced in the country. It also claims like other members of Indian Direct Selling Association (IDSA)that it is a good business opportunity and the consumers would get benefit through this business model.
Like the products of all these direct selling association members, the products of Tupperware are also exorbitantly priced and one has to become a member by paying certain amount. Never ask the question why should anybody become a member to purchase products. That is the racket behind the business model.
But there is a difference in this business model. The Tupperware targets women, that too, upper middle class women, all over world. Generally, they are all housewives with 'disposable' income. They are induced with the pep talk of easy and quick money and good business opportunity sitting at home.
Once they fell for the trap, they are encouraged to make their friends and relatives to buy products by becoming members. The members who introduced the new members would also be rewarded with commission.
The women try their hand to enroll new members and sell the products to them. But it would be very difficult to sell a plastic water bottle for Rs. 250 though it is guaranteed to last for a life time. By the time they realised that it is not easy, they would be losing some thousands of rupees by way of buying kitchen plasticware.
Anyway, they do not realise that they are cheated. They believe that they could not do that 'wonderful business' like everybody and they themselves are to be blamed for the failure. They never realised that the scheme itself is cheating. On the other hand, they are afraid that their husbands would scold them if they learnt about it. Moreover, their friends and relatives who were joined into the scheme by them would never trust them again.
Vijayawada-based Corporate Frauds Watch filed a criminal case against the Tupperware. So far, the police could spare no time to investigate into the scam. Already several millions of Indian were duped into the scam and several hundreds of crores of rupees were siphoned out of our country.

Herbalife Side Effects

Some people experience unpleasant side effects when using various Herbalife products.

Bloating:

If you experience bloating, try changing the portion size to reduce this feeling. Enjoy healthy snacks during the day and smaller meals to assist your digestion. If you are using the shake mix as a meal replacement you may want to reduce the portion size or frequency.

Dry Mouth:

Some people report that their mouth is dry after black or fruit tea. Detox products often produce thirst so you can try increasing your intake of water. Dryness from using the shakes can be caused by acid reflux since it contains guar gum and psyllium husk. These have expanding properties, which can cause reflux. Guar bean is high in protein and oil and guar gum is used worldwide in many beverages, foods and supplements. In significant quantities, guar gum dehydrates the body and can cause some serious side effects. However, it is regulated by the FDA who only permits extremely small quantities of it in food. Guar gum in the shake mix is used to emulsify or bind the particles and has been determined to be of insignificant quantities.

Heart Palpitations:

Palpitations may be from caffeine sensitivity. The tea does have caffeine in it so you could either stop using the tea or eventually you will get used to caffeine and the palpations should recede. The shake mix does not contain any caffeine.
In the nineties it was found that Ephedra caused increased heart rate and Herbalife discontinued using Ephedra in any of its products.

Upset Stomach, Headache and Fevers:
In the first few days, many years of accumulated toxins and waste in the body begin to be expelled. Diarrhea, headaches, fever or nausea can arise.
These are temporary symptoms and will subside whether you continue the diet or not. The discomfort is not very common but happens to some people. Once you are detoxified you should feel great however. The body has toxins or free radicals surrounded by fat molecules, and when burning these fat molecules, the toxins are released into the bloodstream for elimination. They circulate through the body and are filtered out by the kidneys and liver. This can take up to 2 weeks. Areas where toxins and pollutants are expelled from the body can display reactions. You can first use a detoxification program to cleanse your system before starting the weight loss program if you wish.
Unpleasant-Smelling Urine or Perspiration:
This is another possible reaction to the body cleansing that is not caused by the products, but the waste you are cleaning out. The products are working just as they should.

Allergic Reaction and Blocked Sinuses:
People who are very allergic to fish need to know that some Herbalife products contain fish oil. See a medical specialist to determine if this is an allergic reaction. Sinuses are especially sensitive because they are soft tissue. Sinus irritations should clear in 1 to 3 weeks but if they get worse, discontinue using the product and consult a medical professional.

Malnutrition:
Beware of nutrient deficiency when losing weight. The Herbalife ShapeWorks program recommends that along with the 2 shakes and one healthy meal, you should add the Multivitamins and Cell Activator to ensure that you are getting enough nutrition. Cell Activator helps increase your nutrient absorption from food.

Stimulants:

Caffeine in green tea is not the same as in coffee. It is slower-acting and has a calmer quality. But if you feel too stimulated try half a cup instead of a whole cup for a while.

Swollen Legs:

This might indicate an allergic reaction to an ingredient in the Herbalife products. Please show your doctor the product labels and ask his advice. It would be best to discontinue using the product until you know what the cause of your swelling is.

Stomach Acidity:

If you are using Cell-U-Loss, try discontinuing it and see if that reduces your symptoms. If so, then Cell-U-Loss is not for you. If acidity persists when you are not taking it, there is some other cause. Cell-U-Loss contains 3 ingredients which may be causing the acidity: Apple Cider Vinegar, Vitamin C and Iron. It also contains herbs that have diuretic properties such as couch grass and corn silk extract.

Pregnancy:

Total Control (the metabolism booster) carries a warning to not be used by the pregnant, lactating (or those that want to get pregnant). Rapid weight loss and stimulants during breastfeeding can release too many toxins into your blood stream and thus into your milk. This can cause a decrease in your milk supply and be unhealthy for your baby. Avoid the stimulants in Total Control and the Herbal Tea, which contain caffeine. Herbalife products have nutrition labels that show warnings to guide women who are pregnant, nursing or who may become pregnant.

Rashes:

These are the most commonly reported side-effects that happen when the body is de-toxifying. Redness, blotchy skin and irritation can arise. Your skin being the largest organ, has the most cells to repair and also discharges toxins. It takes about 2 weeks to cleanse the blood stream and during this time the departing toxins can be irritating. Exercise produces sweat and will release toxins that can irritate the skin. Herbal Aloe Soothing Gel can provide symptomatic relief.

General Detoxing Effects:

It is very well known that at the beginning of a diet or fast there may be some adverse side effects. These usually subside within a few weeks however. If you detoxify for a few days using plain water, fruit or vegetables you will also experience some side effects. When we have better nutrition, or when toxic substances such as coffee, tea, chocolate, tobacco, salt, and pepper are discontinued, amazing changes take place. Our bodies discard the lower grade materials and tissues to make room for newer, healthier ones.
Weight Gain:
An ideal weight-loss rate is between 3 and 5 pounds per week. If you lose weight gradually and are getting proper nutrition, it will stay off. Moderate exercise like walking is necessary to get the fat burning process going. Adequate hydration (drinking water regularly) is essential to flush the toxins.
Do not try to stop any Herbalife side effects by taking drugs. Either let the healing take its natural course or stop using the product if you experience an allergic reaction.
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If you’ve just started taking Herbalife to lose weight, or you’re considering it, you may be wondering if there are any Herbalife side effects. It’s a reasonable question for anyone who is unfamiliar with the program.
Herbalife has a broad product range for health, nutrition and weight loss. The core product offering is the Formula 1 Nutritional Shake Mix. This is a protein based shake mix designed to be used as a meal replacement. The program also includes certain herbal supplements and vitamins to target specific weight loss needs, such as supporting metabolism, reducing fluid retention, burning fat and building energy.

Herbalife Side Effects

Certain ingredients in some of the Herbalife products may cause Herbalife side effects for various people. Fortunately the USDA requires that any such warnings be included on the Herbalife product labels. Herbalife aside, you should always inspect the product label for any over the counter weight loss supplement.
Here are three ingredients that could possibly cause side effects:

Caffeine – Some Herbalife products contain caffeine as a metabolism booster. Caffeine can cause nervousness, headaches and higher blood pressure. A typical cup of coffee has about 85mg of caffeine per cup. Per serving, Herbalife teas, tablets, and effervescent products have between 65-75 mg of caffeine per serving. If you are allergic to caffeine you should avoid the products that include caffeine. Some of these are: N-R-G Tablets and Liftoff energy drink. Check the product labels on other products for the ingredients.
Protein and/or Soy – Some people are allergic to concentrated protein. Although the body has protein in our cells, the problem occurs when too much protein upsets the balance in the body’s ability to process protein. Again, check the product labels for each Herbalife product you are considering.
Shellfish – According to Herbalife certain products contain shellfish, so if you are allergic to shellfish, you may want to avoid these products:

Herbalifeline®, Tri-Shield®, Joint Support.

Herbalife side effects should not be confused with the normal detoxification process our bodies go through as a result of the healthy nutrients we’re now consuming. Also, consider the side effects from prescription drugs. Just listen to the end of any commercial or read the small print. It can be enough to scare you half to death! So, put any Herbalife side effects that you may experience into perspective.
Something else to consider when discussing Herbalife side effects is that especially for children and pregnant or lactating women, you should consult a physician or dietitian before considering any weight control program.
Finally, when your body becomes dehydrated, it can cause numerous side effects. As with any weight loss program, it is important that your body does not become dehydrated, so as you begin your weight loss program, it is important to consume enough water throughout the day.
Source: Blog healthy diet online

IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH

RMP INFOTEC PVT.LTD

VS

THE STATE OFAP.,REP BY PP.,HC.,HYD & 4 OTHERS

HON’BLE SRI JUSTICE SAMUDRALA GOVINDARAJULU

Crl.P.Nos.9771, 10597, 10603, 11729, 12472, 12476, 12610, 12913 of 2011 and W.P.No.17544 of 2012

COMMON ORDER:

Crl.P.No.10597 of 2011 is filed by A.5 in Cr.No.338 of 2011 of Arundalpet Police Station, Guntur; Crl.P.No.10603 of 2011 is filed by the accused in Cr.No.267 of 2011 of Old Guntur Police Station; Crl.P.No.11729 of 2011 is filed by A.1 in Cr.No.206 of 2011 of II Town Police Station, Ongole; Crl.P.No.12472 of 2011 is filed by RMP Infotech Private Limited relating to Cr.No.82 of 2011 of Santhamagulur Police Station; Crl.P.No.12476 of 2011 is filed by the accused company in Cr.No.370 of 2011 of Pattabhipuram Police Station, Guntur; Crl.P.No.12610 is filed by RMP Infotech Private Limited in Cr.No.387 of 2011; and Crl.P.No.12913 of 2011 is filed by the same Company in Cr.No.95 of 2011 of Kothapeta Police Station for quashing respective FIRs under Section 482 Cr.P.C.
One of the main grievances of the petitioners in these petitions is that the accused are being harassed by the police in Guntur and Prakasam Districts by registering various crimes making the same or similar allegations in all the cases.
It is contended by Senior Counsel for the petitioners that instead of registering different cases, the police could have taken facts relating to the subsequent FIRs as additional information in FIR registered on the first occasion. The said course suggested by the petitioners’ Senior Counsel could not have been adopted because facts/allegations in each FIR occurred within the territorial jurisdictions of different police stations in different districts. The police from one police station may not have territorial jurisdiction to make investigation into the allegations relating to other FIRs occurred within the territorial limits of other police stations either in the same district or in another district. For that reason, the premier crime investigation agency of the State namely CID took over all the above cases from Guntur Urban and Prakasam Districts vide Memo C.No.2614/C.12/CID/2012 dated 13.06.2012 of Additional Director General of Police, CID, Andhra Pradesh, Hyderabad for investigation; and all the matters were entrusted to Deputy Superintendent of Police, CID, RICU, Guntur for further investigation.
2. It is contended by Senior Counsel for the petitioners that business activity of RMP Infotech Private Limited does not attract any penal provisions of any enactment. All the above cases were registered by the respective police against the respective accused in each case for offences punishable under Section 420 of IPC and Sections 4 & 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (in short, the Act). It is contended that there is no element of cheating in the business activity attracting Section 420 of IPC much less activity of the petitioners and more particularly RMP Infotech Private Limited (in short, the Company) does not attract definition of ‘Money Circulation Scheme’ contained in Section 2(c) of the Act. On the other hand, it is contended by counsel for the de facto complainant in Santhamaguluru Police Station that activity of the Company through its local branches in different parts of the State squarely attracts the definition under Section 2(c) of the Act. It is further contended on behalf of the de facto complainant that activity of the Company resembles that of Speekasia Online Private Limited covered by unreported decision of this Court dated 30.08.2011 in Crl.P.No.5626 of
2011 and also that of Amway Case as laid down by this Court in Amway India Enterprises v Union of India[1].
3. In police proceedings/special report of the police which is FIR in Cr.No.338 of 2011 of Arundalpet Police Station, Guntur the business activity andmodus operandi of the Company is noted in the words of an independent distributor of the Company who was taken into custody, from the following lines:

“2. Mr.Pravin Jaya Chandan is the Managing Director, Mr.Dhaval Jaya Chandan is the Chairman along with few more directors of our company.
3. Head office is located in Chennai, Mahalingapuram.
4. In the beginning through multi level marketing I have purchased an Oven and Siyaram suit length for 6500 from RMP Infotec Private Limited and from that time I am working as independent distributor.
5. In the beginning when I joined the company as independent distributor, I submitted a demand draft of Rs.6500 in favour of RMP Infotec Private Limited payable at Chennai along with a completed
application, ID Proof, Age proof and Pan card at the franchisee located in Gandhinagar, Vijayawada and took my product from there.
6. There are 16 products in our company.
7. Whenever I sell these products to two people, the company gives a commission of Rs.1000 on my name.
8. In this way I have said my friends and relatives about this scheme and products, likewise 1 person grew into 2, 2 grew into 4 and so on and as of now I am earning Rs.60,000 as commission per week.
9. In the same way I have given training to other people and help them to increase the turnover.
10. There are 98 franchises of our company in India.
11. We are buying products and applications from these franchisees by paying the concerned prices through DD.
12. After purchasing product, all independent distributors are paid commissions on product sales.
13. We consider this as multi level marketing.
14. There are around 18000 people who have purchased products and are placed below me as distributors.
15. My ceiling money does not exceed 1,30,000 per week.
16. We some times conduct Business Opportunity presentation.
17. We keep on training our distributors and that’s how we increase our company sales.
18. We create complete confidence on our company to the public and cheat them by telling that they can make huge money in less time and make them join us as distributors.”
4. It is contended for the petitioners that the Company which is based in Chennai is indulging in direct selling of products to the customers for lower cost which is upto 70% of maximum retail prize (MRP)
of the products by directly securing them from reputed Companies like Siyaram, Big Bazar, Wipro, HCL etc. and in that process, the Company avoids C & F Agent, Super Stockist, Stockist, Distributor, Wholesale dealer and retail dealer and also avoids cost of advertisement and that by virtue of direct selling of products to the customer/buyer who joins as
independent distributor/member of the Company and that in that process, the company earns huge profits out of which 35% is distributed among independent distributors. In the process of business of the Company, when a member joins as independent distributor, by purchasing products of the Company, he has to sell the Company’s products to at least two new customers and in which event, he gets profits/commission from out of value of products sold by him to those two new members and also certain percentage of money paid by those two new members towards their membership. Those two new members/independent distributors have to again sell the products by each of them
to two more outsiders; and the activity percolates to the downwards. In all such types of Direct Selling or Multi level marketing, the process reaches a saturation level when new members joining at that level will not be able to sell products to any new members.
5. In State of West Bengal v Swapan Kumar Guha[2] three Judges Bench of the Supreme Court after re-arranging definition of Money Circulation Scheme in Section 2(c) of the Act, observed:
“On a plain reading of the said definition, the requirements of a
money circulation scheme are-
(i) there must be a scheme;
(ii) there must be members of the scheme;
(iii) the scheme must be for the making of quick or easy money on any event or contingency relative or applicable to the enrollment of members into the scheme or there must be a scheme for the receipt of any money or valuable thing as the consideration for a promise to pay money on any event or contingency relative or applicable to the enrollment of members into the scheme;
(iv) the event of contingency relative or applicable to the enrollment of members into the scheme will however not be in any way affected by the fact whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscription.”
6. This Court is of the opinion that at the threshold of the investigation, it may not be proper for this Court to scrutinize the alleged activity of the Company and its branches, independent distributors etc.
and to come to any conclusion whether the said activity attracts the definition of Money Circulation Scheme contained in Section 2(c) of the Act or not.
7. Senior Counsel for the petitioners also fairly submitted that even if investigation is allowed to be proceeded further, freezing of bank accounts of the Company by the police during investigation is causing untold hardship to the Company in its business activity. For that reason, the Company filed Crl.P.No.9771 of 2011 questioning the same and seeking quashing of directions of Sub-Inspector of Police, Arundalpet (L&O) Police Station, Guntur directing IDBI Bank to freeze two CMS accounts of the Company in that bank, by way of letter dated 04.10.2011 addressed to the bank. Further, after CID took over investigation of all the cases, Inspector of Police, CID, RCIU, Guntur addressed another letter dated 15.05.2012 to ING Vysya Bank Limited, Chennai to freeze another account of the Company pending investigation. Questioning the same, the Company filed W.P.No.17544 of 2012.
8. It is contended by the Public Prosecutor that Section 7(1)(d) of the Act empowers the Investigating Officer to seize all things which are intended to be used or reasonably suspected to have been used in
connection with any Money Circulation Scheme. It is further contended that it is only for the purpose of ultimate seizing of money which is derived from the Money Circulation Scheme covered by these offences, the Police Officers have frozen bank accounts of the Company.
9. As interim measure in Crl.P.No.9771 of 2011, this Court permitted the Company to withdraw Rs.11.00 crore from IDBI Bank to meet immediate needs of the Company towards his obligations to its employees etc. It is reported that the Company could not withdraw the said amount as by then the Kerala High Court also have passed an order relating to freezing of the said accounts. In the circumstances and having regard to there being prima facie case for the prosecution, this Court is of the opinion that it would not be just and proper to allow the Company to deal with the bank accounts as it likes.
10. I find no legal or justifiable reason either for quashing FIRs in these crimes or for quashing letters of Police Officers freezing bank accounts of the Company pending investigation.
11. In the result, all the criminal petitions as well as writ petition are dismissed. At the same time, in case of any compulsive circumstances and dire necessities, the Company is at liberty to approach
this Court by separate and independent petitions for withdrawal of portions of monies lying in the bank accounts.

_____________________________

SAMUDRALA GOVINDARAJULU,J

Dt.11th December, 2012

2007(4) ALT 808 (D.B)
(1982) 1 Supreme Court Cases, 516

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