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Pyramid schemes

(Querist) 05 March 2008 This query is : Resolved 
Sir,

It is well known that Pyramid schemes,chain referral.binary compensation,matrix marketing schemes are
frauds and duping lakhs together people in
India.Is any law to curb them?If not why
there is no strict laws regarding in India.For Ex:-Quest net company is in the
news in Karnataka for the same.

Thanking you,

yours sincierely

Ghouse Mohiddin
manmeet singh arora (Expert) 06 March 2008
DEAR SIR,
1.THE PYRAMID OR CHAIN MARKETINGS SCHEMES
ARE OFTEN DISGUISED FOR INDEPENDENT BUSINESS UNITS WHERE THEY PROMISE TO MAKE PEOPLE ENTERPRENEURS AND PROMISE HUGE PROFITS
2. THE ONLY PROBLEM IS WITH THE LEGISLATION WHICH IS STILL NOT IN EXISTENCE, MANY JUDGEMENTS HAVE BEEN PASSED BUT ALL WITH DUAL EFFECT.
3. THE ONLY ANSWER IS THAT THE PEOPLE HAVE TO BECOME CONSCIOUS OF THE SCHEMES
AND UNDERSTAND THAT THERE ARE NO SHORT CUTS TO SUCCESS.
4. BEFORE INVESTING IN ANY SCHEMES COLLECT FULL INFORMATION ABOUT ITS STATUTORY STAND,PAPERS,SOURCE OF CAPITAL OF COMPANY,THE ACTIVE MEMBERS WHO FORM THE COMPANY , AND THERE CRIMINAL BACKGROUND CHECK IS ALSO IMPORTANT.
SANJAY DIXIT (Expert) 23 August 2008
Pyramid selling is a fraudulent activity.It is a mechanism by which the promoters of so called ''investment'' or ''trading''schemes enrich themselves in a geometric progression through the payment made by recruits to such schemes.Related deceitful schemes have been proscribed in various international jurisdictions as ''chain letters'',snow ballss'',''chain selling'',''money games'',''referral selling''and ''investment schemes''.

It is unfortunate to tell that we don't have a separate legislation for Multi-Level Marketing(MLM).But there are adequate provisions available in the Sale of Goods Act,1930(for regulating the sale of goods) and the Consumer Protection Act 1986(to promote and protect the right of consumers).

The provisions of the Prize Chits and Money Circulation (Banning )Act 1978 seek to ban the promotion or conduct of prize chits and money circulation schemes.The provisions of the Act had once come up for scrutiny before the Supreme Court of India which ruled that the Multi-level Marketing and direct sale of goods and services by the direct selling companies do not fall within the mischief of the above Act.



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