IndusViva permitted to resume operations: Interim Order by High Court of Telangana

26th July 2021 will be written in golden words in the history of IndusViva, a Direct Selling company in Bangalore. When the company filed a Writ petition in Telangana high court, the court had directed to continue the business, defreeze bank accounts and release seized goods, as the company complies to all the guidelines existing in the country for the direct selling industry. On 27th September 2021, the court had also set aside an impugned PD order on the top management.
Let’s take a look back as to why this commotion happened and how it all started.
Direct Selling is the marketing, distribution and sale of goods or providing services through a network of people, known as direct sellers. However, the growth and success of this industry led to the development of fraud money circulation schemes in the name of Direct Selling. The absence of specific laws and norms to regulate direct selling companies was the reason behind this misconception.
The industry witnessed a revolution by issuing Direct Selling Guidelines 2016.
Consisting of the guiding principles for State Governments to consider Direct Selling as regular businesses and appointing a monitoring mechanism to prevent any fraud in the best interests of the people involved in the business or customers, was the main highlight. Following the guidelines, many states have appointed a nodal authority for supervision.
According to Consumer Protection Act 2019, it is a legal, economic activity that helps entrepreneurs build a business. Multi-Level Marketing is a kind of direct selling in which a direct seller is paid compensation for the sales generated and the sales of their direct selling network, who they recruit or sponsor directly or indirectly. People can enjoy financial freedom by earning a commission from the sale of products or services.
Although there is a guideline and most state governments have appointed monitoring mechanisms, the absence of an exclusive law still leads to the discriminatory approach of people or authority. They cannot distinguish between legitimate Multi-level Marketing companies and fraudulent money circulation schemes. This results in disbelief and mistrust among ordinary people leading to defamation of several companies of this industry. It is hopeful for the industry that the Department of Consumer Affairs have come up with Consumer Protection (Direct Selling) Rules 2021, as specified in the Act, which is about to be notified at any time, shall help. According to Direct Selling Guidelines 2016 (Clause 1.7), a Direct Selling organization is not engaged in a pyramid scheme that sells or offers to sell goods or services through a direct seller. In the Guidelines, Clause 1, Sub-clause 11, the first paragraph defines the Pyramid scheme, and the second paragraph clearly explains how Direct Selling is different from Pyramid Scheme by laying down few conditions.

Even after the clarity provided in the Guidelines, as mentioned above, misinterpretation by the law enforcement agencies continued. Let’s consider the case study of India's one of the leading Direct Selling companies, IndusViva HealthSciences Private Limited, situated in Bangalore. It complies with the Central Direct Selling Guidelines-2016, Telangana State Direct Selling Guidelines2017 and is registered as per Companies Act-2013. Kerala Govt. issued their first Multi-level Marketing guidelines on 14th September 2015, in accordance to Kerala Finance Bill 2015, amending to Kerala Value Added Tax (KVAT) Act, 2003, which was the first of its kind. IndusViva got the first registration as per the abovementioned guidelines and was the first direct selling company to be legalized by any government in India. It is enlisted in the provisional list of direct selling entities published by the Department of Consumer Affairs after due scrutiny, hence stands upright as a legal entity. With valid and authorized certifications, IndusViva conforms with the Consumer Protection Act 2019 and the Direct Selling Guidelines 2016.
However, since March 2021, the company has been struggling to prove its legitimacy, despite abiding by all rules and regulations for more than seven years, during which they have paid more than 190 crores to Govt. as various taxes out of their total turnover of nearly INR 1500 crores which were projected as a scam by the police. During this period, the company could change the lives of lakhs of people with its high premium quality wellness products manufactured under the licence of the Department of Ayush and through the business opportunity of marketing these products, which the Department of Consumer Affairs, Govt. of India, duly scrutinised. IndusViva and other direct selling/ multi-level marketing organizations are getting stuck due to a lack of expert opinion though the Direct Selling guidelines 2016 has differentiated the pyramid scheme based on enrolment and direct selling in Clause 1, sub-clause 5, 6, 11 & 13.

To determine if an organization is involved in legitimate multi-level marketing or a pyramid scheme, the best way is to analyse their business model in accordance to the abovementioned clauses of Direct Selling Guidelines. Accordingly, when IndusViva business model is analysed, it can be inferred that it is a legitimate direct selling/multi-level marketing entity.