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Home / Crime / Cyberabad Seluth Cracked Down Vihaan Direct Selling Pvt. Ltd. Fraud

Cyberabad Seluth Cracked Down Vihaan Direct Selling Pvt. Ltd. Fraud

Hyderabad: Vihaan Direct Selling Pvt. Ltd. formerly known as Gold Quest, Quest Net, is a Hong Kong-based Direct Selling /Multi-level marketing (MLM) company owned by the QI Group. Gold Quest was established in the year 2001 and was registered with ROC Chennai. The company started business of selling numismatic products in the form of specially crafted gold/silver coins which were claimed to be limited edition coins and were imported from Germany. The methodology of selling was so called direct selling through personal approach and based on referral system. But in fact it was running money circulation scheme in the guise of selling products. The company faced complaints from 172 persons in Chennai and from all over the country. When the litigation and criminal cases were going on, the promoters of this scheme shifted completely to a newly formed private company called as Quest Net by the same promoters. After facing several complaints all over the county including Telangana, a new company called QNet was formed. The company runs many Ponzi schemes and Binary Schemes. It mainly showcases itself as dealing with Products such as Vacation Packages, famous club memberships, etc. as business tactics, but in the guise of selling products they enroll members and commissions will be paid to the members. QNet, the main subsidiary of the QI Group of Companies was founded by Vijay Eshwaran and Joseph Bismark in Hongkong. Trevor Kuna (joined Q Net in 2008) who was Chief Marketing Officer was appointed as CEO of Q Net. Michael Ferreira and Malcolm Desai are the shareholders of Vihaan Direct Selling Pvt. Ltd. Further QNet has appointed Vihaan Direct Selling Pvt. Ltd. as its franchisee. Dilipraj Pokkella and Md.Imthiyaaz were made directors of this franchise.

MO- Business Model:

The Q-net / Vihaan promoters target software employees, unemployed youth, homemakers etc., stating that there is a business project which will yield huge profits to them. They give motivational speeches to the people whoever comes to the meeting and make them believe it is a good opportunity to earn quick money. Once the customer joins by paying cash or making online transaction to the upliner/ Introduced person or to the Vihaan account (Q-net franchisee), a User name and Password will be generated, but neither the User name nor the Password will be given to the down line person or the newly joined person and it will be with the upliner or the introducing person till the completion of 30 days which is the time given for refund so that the newly joining member will not have any choice but to continue with the scheme.

The company has various combinations of product based packages to the new entrants based on their payment. But, the new entrants will not have an iota of knowledge about the products and their quality. They even do not bother to verify the quality of the products as they are interested only in the huge monetary returns the company had promised for them.

The QNet/Vihaan business model is a simple pyramid scheme in which the early entrants earn quick money and as the number of independent representatives (IR) increases, finding more IRs (New Comers) to join the scheme becomes difficult or impossible. IRs who joins late does not earn enough to cover their first outlay and the model collapses. It works as a binary scheme.

 

Arrests, Search and Seizure:

So far about (70) persons have been arrested in about (38) cases which were registered against Vihaan Direct Selling Pvt. Ltd. (Q Net) in different Police Stations of Cyberabad Commissionerate. Apart from above, several cases were also lodged against Vihaan Direct Selling Pvt. Ltd. (Q Net) and its promoters in different states in India.

The Godown of Vihaan direct selling Pvt. Ltd. at Bangalore and the office of Transview Enterprises (A Marketing Agency for Q Net products) were seized. An amount of Rs. 2.7 crores was freezed in the Bank account of Vihaan Direct Selling Pvt. Ltd. During the course of investigation, notices were served to celebrities – Anil Kapoor, Shahrukh Khan, Boman Irani, Jackie Shroff, Vivek Oberoi, Pooja Hegde and Allu Sirish for participating in company’s programmes. Anil Kapoor, Shahruk khan and Boman Irani responded to the notices through their advocates and reply is awaited from other celebrities. The response of the three celebrities also is being studied. Notices were also given to top 500 promoters of the scheme and replies are yet to be received from them.

It is reliably learnt that basing on the complaints received against Vihaan Direct Selling Pvt. Ltd. (QNET), the Ministry of Corporate Affairs, Govt. of India has ordered an inspection u/s.206 (5) of the Companies Act, 2013. The ROC – Hyderabad (South East Region) conducted an enquiry on the company and submitted a report to the Ministry of Corporate Affairs. Based on the report, the Ministry of Corporate Affairs directed ROC – Bengaluru to file a petition U/s 271 of the Companies Act 2013 before the NCLT, Bengaluru for winding up of the company. Further, the Ministry of Corporate Affairs has also issued LOCs against 12 persons associated with the company. They are 1. Guhan Ramachandran, 2. M.N. Gunasheela, 3. Subha Thulasiram, 4. Vanka Srinivasa Rao, 5. Balaji Magaral Veeravalli, 6. Premdas Ramunni Kurup, 7. Kantha Vijaya Sarathi, 10. Muhammad Imthiaaz, 11. Molckam Nozer Desai and 12. Michkel Joseph Ferreira.

The highlights of the Inspection report are:-

Vihaan Direct Selling Private Limited (QNET) is executing a Ponzi scheme and had raised huge money as advances from customers. The Ministry has received many complaints.

From examination of the various complaints received, it was observed that complaints are mainly relating to illegal product based Ponzi Scheme being promoted in India by the Vihaan Direct Selling (India) Private Limited with the brand name ‘QNET’. Vihaan Direct Selling (India) Pvt. Ltd. is alleged to be the latest avatar of M/s. Goldquest International Private Limited and Questnet Enterprises India Pvt. Ltd., is involved in running illegal Pyramid Schemes and collecting deposits in the pretext of high returns for their investment and laundering. There are complaints that the money was collected by the Company from public on false promises by way of Cash and DD mentioning the products as gifts, e-coupons and holiday packages. No product was delivered and money was not returned.

It was evident from the Inspection report that the company has no material or supporting documents to deny the allegations of alleged acceptance of amount promising high returns through chain/multi-level marketing activities and the money so collected was misused for payment of high amount of commission to the promoters and their friends.

The Inspection has revealed that the company has been carrying on business of multi-level marketing in a pyramid system. The promoters/top end people in the Chain controls the activities of the company and earn huge money out of money collected from the persons who are new members. Physical products/Virtual products (for providing future services) are sold at an exorbitant price to these new members, without their consents, as per the complaints received against the Company. Once these new members realize the business model, they are unable to recover the money and forced to continue to in the chain.

During Inspection, it has come to the knowledge of the IOs that QNET, which is a foreign company, was doing the similar operations in India from 2001 onwards through Goldquest International Private Limited and through Questnet Enterprises India Private Limited, Pallava Resorts Private Limited, but the said operations have been stopped upon intervention of the various regulatory agencies. Now QNET is doing the same business in India from 2011 onwards through Vihaan Direct Selling India Private Limited, Transview Enterprise India Private Limited and Vanamala Hotels, Travel and Tourism Services Private Limited.  The company has been seen procuring products and services from these companies and making payments to them. From the bank statements provided by the company, the IOs have noticed that the subject company has made payment of around one Crore rupees each on multiple occasions to Transview Enterprise India Private Limited and Vanamala Hotels Travel and Tourism Services Private Limited. However, the Company and its Directors have failed to explain the trading relationship with the above Companies.

During the course of inspection, it was observed from the Purchase and Sales invoices that the Company is purchasing the products at nominal prices and selling the same products without any value addition at exorbitant prices. Huge profit margin of 160% to 416% found in many products clearly establishes that an Unfair Trade practice has been adopted by the Company. The inspection reveals that the company gained unreasonable profit margin and paid huge commission to its top Independent Representatives (IRs) by recruiting more and more IRs by falsely representing that the Products/goods and Services offered by the company are of a particular standard, quality, grade, composition, style or model.

On examination of the balance sheet, it was revealed that the products sold by the company are immaterial and the company is running an illegal product based pyramid scheme by offering huge commissions to its members.

It was also revealed that the company, with the intention of deceiving the depositors, is not telling the enrolled members that the amount so deposited are being distributed to those on the top of the chain which is nothing but fraud u/s. 447 of the Companies Act 2013.

The company has also paid huge amount to some persons who are neither directors’ nor employees’ of the company without any resolution or approval of the board of directors. Thus the board of directors have committed fraud u/s.447 of the Companies Act 2013.

The company boasts of its refund policy but during the course of inspection of books of accounts the company was asked to furnish the details of refund requested by the independent representative of the company namely               Shri Nagi Reddy Musturu (IN4627478) and Shri Varun Kumar Anand (IN444499). The Company and its Officers by way of company reply dated 24th August, 2018, have made a statement as “They have not made any request for refund.” When the matter was examined with the complaint received by the Ministry, it was found that the above said statement by the Company is a false statement. Hence, the Directors of the company liable for action under section 447 of the Companies Act, 2013 for the contravention of Section 448 of the Companies Act, 2013

Further, the Inspection revealed that the financial statements of the company do not show true & fair view of the state of affairs of the company and when asked to produce documents the company produced only selected information which was found to be inadequate and insufficient. Even after repeated requests also the company failed to provide the details of the commission/incentives/ remuneration received/allotted in cash or in kind by the Independent Representatives (IR)/Promoters’/Directors’/Managers.

During the course of Inspection, it is found that the above said company is running a multi-level marketing or product based pyramid scheme business. This is a new version of pyramid scheme in which the consumers are turned into distributors and the promoters are able to sell far more products by selling to distributors than they would be selling directly to the consumers. The philosophy goes that it is easier to buy than to sell. If a person can be convinced that he will make money by buying products to qualify for commissions from sales by those he has recruited, the sale is an easy one. The products in these schemes have become merely a means of disguising or laundering investments in the pyramid schemes while the dynamics of the chain promotion system is essentially same. In fact, money from sales must go through the company’s infrastructure and only a portion of payout is rebated to participants. But most of its goes to top level Independent Representatives (IRs) and rest of the amount is spread amongst tens of thousands of participants, most of whom tend to loss money.

This business model contain endless chain of recruitment of IRs as primary customers, they are basically recruitment driven. The payment distribution is top weighted, lack of retail or direct sales for consumption etc and prove in itself that they are illegitimate business and only cater to the needs of only those at the top level. The company is using greater amount of deception for recruitment and selling of the products at exorbitant prices.

 

The inspection also revealed that the company has been selling the same Product on the same date at different prices to different buyers (IRs). The following are some of the observations from the Sales invoices submitted by the company to the Inspecting Officers which clearly establishes that an Unfair Trade practice has been adopted by the Company.

Sl. No. Product details Buyer (IR) Name Invoice No. & Date Sale price of one unit by the Company (Exclusive of GST & Shipping Charges) Rs. Difference of amount of Rs.
1. CHAIROS Amore Couple Watch Himansu Mahaling VHN/BLR/18/52256, Dated 21.08.2018 83,517/- 5,000/-
Arun Sriram VHN/BLR/18/52254, Dated.21.08.2018 88,517/-
2. CHAIROS Crusader LS Watch Nishant Tyagi VHN/BLR/18/52219, dated 21.08.2018 79,601/- 3,365/-
Aman Mehdial VHN/BLR/18/52220, dated 21.08.2018  82,966/-
3. Sharp QNET Zenstional Air Purifier Tarun Kumar VHN/BLR/18/52267, dated 21.08.2018 72,881/- 1,865/-
Deepak Assudani VHN/BLR/18/52268, dated 21.08.2018 74,746/-
4. KENT QNET Smart Alkaline Mineral RO Water Purifier Gowri Shankar Allam VHN/BLR/18/52280, dated 21.08.2018 28,919/- 1,508/-
Parin Kumar Solanki VHN/BLR/18/52281, dated 21.08.2018 30,427/-
5. Exagon Watch-Leather Strap Lakshman Kumar Chittimilla VHN/BLR/18/52250, dated 21.08.2019 49,308/- 1,138/-
Murugan M VHN/BLR/18/52261, dated 21.08.2018 50,446/-

Further, as per the Company’s “Sales Incentive Plan” issued to all IRs upon their joining, the page no.5 of the plan illustrates that the Retail Profit Margin (RPM) is the difference between the Independent Representatives (IRs) price and Maximum Retail Price (MRP) of the product and shown an illustration of 20% profit margin with MRP INR100 and IRs price is INR80. But from the Sales Invoices and MRP of different products furnished by the Company to the IOs reveals that the company is selling the products to its IRs at MRP only without any profit margin to IRs as agreed by the Company. Therefore, the Company (trader) has charged for the goods a price in excess of the price agreed between the parties.

As per the Purchase and Sales invoices submitted by the Company, it is found that the Company is purchasing the products at nominal prices and selling the same products without any value addition at exorbitant prices. The following table compares the purchase and sale prices of some products and the percentage of profit gained by the Company. Huge profit margin against the normal business transactions clearly establishes that an Unfair Trade practice has been adopted by the Company.

Sl. No. Product details Purchase price of single unit by the company (inclusive of all taxes)

Rs.

Sale price of Single unit by the company (inclusive of all taxes)

Rs.

Percentage of profit
1. CHAIROS The Racer Watch Black 10,856/- 56,049/- 416%
2. Exagon Watch-Leather Strap 12,272/- 61,933/- 404%
3. CHAIROS Crusader LS Watch 23,010/- 98,649/- 328%
4. CHAIROS  Amore Couple Watch 27,004/- 1,05,200/- 290%
5. Sharp QNET Zenstional Air Purifier 31,057/- 94,200/- 203%
6. KENT QNET Smart Alkaline Mineral RO Water Purifier 14,134/- 37,900/- 168%
7. Nutriplus Busy Bee Honey – Indian Laurel 191/- 497/- 160%
8. Nutriplus Celestial Tea – Revive 358/- 1,210/- 238%
9. CHAIROS Lattitude LS 25,016/- 82,778/- 231/%
10. CHAIROS Lattitude SS 26,078/- 84,111/- 222%

There were number of complaints received against the company that the company without giving the actual details of functioning of the company forced them to invest their hard earned money. The Inspection revealed that the company and its Independent Representatives (IRs) mislead the Consumers deliberately to invest in the company in the pretext of high return within a short period. And the company neither delivered the products nor refunded the money.

Further, it was also revealed that the commission paid by the company is highly disproportionate to normal business transaction, it clearly shows that the products sold by the Company are immaterial and the Company is running illegal product based pyramid scheme and offering huge commission to its IRs. Therefore it seems that the Company is in the business of offering spurious goods for sale and adopts deceptive practices in the provision of services.

The Company was also able to gain unreasonable profit margin and paying huge commission to its IRs by falsely representing that the Products/goods and Services offered by the company are of a particular standard, quality, grade, composition, style or model.

The Inspection also revealed that the company procures all the products at nominal prices and without any value addition selling the same products at extortionate prices. The Inspection also reveals that most of the goods sold by the Company are Spurious goods, which are claimed to be genuine but they are actually not so.

Further, on inspection of the ‘Sales Incentive Plan’ given to the IRs of the company, it is found that the company has failed to clearly disclose the method of calculation of remuneration to its IRs before their joining.

The Inspection Team tried to reach the directors but the letters sent to director Dilipraj Pukkella were returned with the content that “left without instructions” and in respect of another Muhammed Imthiaaz it was received back as “left without instructions return to sender”.

Recently, Adapa Arvind a former software professional in Accenture, who was associated with QNET, committed suicide due to loss and cheating by the QNET Company in P.S. Madhapur limits. It has also come to notice that two other persons, who were associated with QNET, one from Chennai and other from Maharashtra have lost their life. Details of the cases are being ascertained.

Request to Public

It is informed to the public that the Ministry of Corporate Affairs (MCA) has initiated winding up proceedings against Vihaan Direct Selling Private Limited company which is a franchise of QNET Company and runs the Direct Selling/Multi Level Marketing Schemes in India.

Public are hereby requested not to join or enrol members into the QNET Schemes and also not to promote its illegal scheme by remitting any money to it or its sub franchise or its members or upliners of the scheme. If remitted they will be doing it at their own risk.

Cyberabad Police once again reiterates and request the Public not to join/ promote/enrol into such illegal money circulation schemes, which run in the name of Direct Selling/Multi Level Marketing/Network Marketing/Referral Marketing/Introduction Marketing, etc. These schemes not only destroy the fiscal system of the country but also destroy the well knitted social fabric of the society as these schemes aims at friends and relatives for enrolling them into their schemes.

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