MLM is a concept of selling product, not money generation. So there should be no scheme or offer to return high income without any sale.

2) it is legal in india only if the goods marketed are legal and not prohibited under Indian Law.

3) MLM business is governed by Indian Prizes and chits act. The company needs to obtain Reserve Bank of India Certification.

4) Under section 13 of the act it states that the state government has to power to make rules.

5) states like Rajasthan , kerala have come out with guidelines relating to MLM companies

Government guidelines for mlm companies in india

To regulate the sale of goods and services outside of retail establishments otherwise known as "Direct Selling (Multi Level Marketing)" and to provide for protection of consumers who purchase goods and services from direct sellers, following guidelines are issued with the approval of the Competent Authority. These guidelines will come into force from the date of publication in official Gazette and will remain in force till an appropriate legislation is enacted for the said purpose:-

1. Definitions:-

Direct Selling : Means marketing or sales of goods directly to the end user consumer using word of mouth publicity, display and/or demonstrations of the goods/products, and/or distribution of pamphlets. Explanation: Companies can open pick up points and delivery points for maintaining effective delivery system.

Direct Selling Entity : Means a business entity as recognized by law for the time being in force including but not limited to a Company duly incorporated under the Indian Companies Act, a registered Partnership Firm constituted under the Indian Partnership Act.

Direct Seller : Means a person who is authorized by the Direct Selling Entity to engage into the business of Direct Selling.

Consumer : An individual who buys goods or services for personal use and not for manufacture or resale and shall have the same meaning as provided under the Consumer Protection Act. 1986.

Goods/products : Goods/Products shall have the same meaning as defined in the Sale of Goods Act and section 3(26) of the General Clauses Act, 1897, that is, it shall include every kind of movable property other than actionable claims and money.

Sales Incentive : Sale incentive means share of profit payable to the Direct Seller for effecting sale of goods/products as stipulated in the contract between the Direct Seller and the Direct Selling Entity.

2. Conditions for Permissible Direct Selling:-

Should be a Direct Selling Entity, having sales tax/Vat, Income Tax, TDS and other license as may be required as per the law/regulations of its principle place of business.

Should have bank account with at least one nationalised bank.

Partnership Deed or Memorandum of Association should clearly state their nature of business. (Those who do not have such specific clauses should get their memorandum of Association or Partnership Deed, as the case may be, amended within 2 months from the date of publication of these Guidelines).

Pay sales incentive at the agreed rate within the agreed period.

Shall display names and Identification numbers of their authorized Direct Sellers in the official websites.

Should have a consumer grievance cell that should ensure redressal of consumer grievances within 7 days from the date of making such complaints.

Website should provide space for registering consumer complaints hassle free.

3. Appointments/Authorisations:-

Direct Selling Entity shall appoint/authorise Direct Sellers upon receipt and scrutiny of application in a prescribed format.

An agreement recording terms of such appointment should be executed between the Direct Selling Entity and Direct Seller.

No application should be considered unless such applicant is eligible to enter into a contract under the Indian Contract Act.

Each Direct Seller shall be allotted Unique Identification Numbers before granting license/permission to start Direct selling.

Direct Selling Entity should not give incentive to any persons for joining of Direct Sellers.

4. Prohibition:-

Payment of incentive by whatever name it is called unrelated to their respective sales volume.

Supply/Distribution of goods with the knowledge that such goods/products are inferior or exceeded its validity period as per the manufacturer.

Direct Selling Entity/Direct Seller will not indulge in money circulation scheme or any act barred by the Prize Chits and Money Circulation Scheme (Banning) Act, I978.

5. General Conditions:-

MRP of the goods should be visibly displayed on the package.

Accounts of individual Direct Sellers shall be maintained properly and should be made available through World Wide Web.

Sales incentive should be distributed to the respective Seller on or before the agreed due dates.

Goods sold by the Direct Selling entity should carry guarantee/warranty of the manufacturer. However consumer should be given opportunity to exchange/return the goods if he finds any manufacturing defect or the product purchased is not useful for the purpose it was meant, within 30 days from the date of purchase, provided any seal/protection on the product is kept unbroken.

6. Information Readiness (Ready Information file):-

Every Direct Selling Company should maintain a file with all relevant documents that include:

Certificate issued by Registrar of Companies, MOA and MOM.

Xerox copies of TIN, DIN of Directors, TAN, PAN.

Certificate of Sales Tax, Service Tax, CST Registrations.

Copies of all Sales Tax Returns filed with the authorities.

Copies of Service Tax Returns filed with the authorities.

Copies of IT Returns of company filed with the authorities.

TDS Statements of Distributors and respective challans paid.

Every Direct Selling Company should maintain KYC/KYDS (Know Your Customer/Know Your Direct Sellers) as a mandatory process. Specific formats are to be provided on their websites to be available for all at any time.

Supreme Court has ordered a stay on all further proceedings against direct selling company QNET and its franchisee Vihaan Direct Selling Pvt Ltd (Vihaan).

2) As per the order of the Hon’ble Supreme Court, the FIRs are being stayed on the grounds mentioned in the Writ Petition. The petition explains that the business model followed by Vihaan Direct Selling (India) Pvt. Ltd is not a money circulation scheme as alleged and does not fall under the purview of the Prize Chits and Money Circulation (Banning) Act 1978. The petition further states that the business of Vihaan is compliant with all legal requirements of conducting business in India.

3) it is for you to take a call whether you want to act as their IR and sell their products

Hi

1) QNet is a multi level marketing company and its promoters had been arrested by Hyderabad police in the month of November 2016 and were later released on bail.

2) As per Government of Andhra Pradesh and Government of Telangana, Q Net, Vihaan Direct Selling India Private Limited, Amway etc are companies specifically prohibited by many states in india including andhra and telangana under Prize Chits and Money Circulation (Banning) Act 1978

3) The High court at Hyderabad on 15 December 2016 permitted the Telangana police to go ahead with the investigation into a case against former billiards champion Michael Ferreira and four of his associates with regard to an alleged `400-crore fraud through the multi-level marketing (MLM) company QNet and its directors namely Malckolm N Desai, Michael Joseph Ferreira(Former world billiards and snooker champion), Srinivasa Rao Vanka, Magaral V Balaji and Nozer K Desai in the case.

In the said case, prosecution had explained to the High court Bench that five lakh investors across the country were allegedly cheated in the QNet scam running into crores of rupees and hence the High court to proceed with the investigation.

Hope this information is useful.

MLM Is legal certain term condition apply by Direct Selling Guidelines 2016 (ministry of consumer affairs India)

There has been the new law governing the Direct selling business in India. So there cannot be a better time to enter into Direct Selling Business.

A binary plan is an organizational structure used in multi-level marketing (MLM) organizations. In this structure, new members are introduced into a Binary Tree where each “node” or new member of the organization has a left and right sub-tree. In each sub-tree of a binary plan, there is an outside leg, also known as a power leg, and an inside leg, known as a profit leg.

When new distributors are recruited, they are always placed underneath their recruiter, typically in the next available node in the power leg, even if the recruiter does not have any leaf nodes left.

Binary plans work under the same logic as other MLM operations under the law, meaning that it is subject to four main areas of law governing the multilevel marketing industry, namely :

Anti pyramid laws; To be classified as not a pyramid scheme, which are illegal to operate, binary plans must give compensation based upon legitimate sales versus giving compensation for recruiting other members alone.

Business Opportunity Laws. Depending on the state or nation, the company with the binary plan must be able to file an annual or bi-annual report on their operations to the correct government office detailing the program;

Securities Laws. To avoid being a type of an illegal security known as an investment contract, the recruiters of a binary plan must not lead potential members to believe that profits will come from the recruiter or some other third party;

Lottery Laws. Similar to security laws, the recruiters and promoters of a binary plan must not imply that profits are determined by random chance as opposed to direct skill of the potential new member or at the people in the organization.[

A lot of companies like QNET, Amway, Herbalife, ebiz, etc have abused the model focusing on selling million dollar opportunities instead of product. This is against the law. Income claims are prohibited by MLM laws as it’s mostly done to manipulate and recruit innocent gullible people into a scam company that doesn’t have a well priced or usable product.

It is you who has got to be careful while joining such companies, because they dont register themselves to avoid legal liabilities and they do business by registering themselves in the shops and establishment acts, hence the company cannot be banned.

QNET - VIHAAN DIRECT SELLING (INDIA) PRIVATE LIMITED - Legal In India ?

Can we join with VIHAAN as "IR" Independent Representative & sell the Products via Network Marketing

Direct selling is a thriving industry in India that provides people with an opportunity to earn a living while promoting high-quality products and services.

QNET is featured in the report as one of the legitimate direct selling companies operating in the booming direct selling space.

Vihaan Direct Selling (india) Private Limited is a Private incorporated on 10 October 2011. It is classified as Non-govt company and is registered at Registrar of Companies, Bangalore.

Now to move on to legality. First let us understand the concept of network marketing. A company produces a product and to reduce its overheads; adopts a compensation plan such that its customers become its sales representatives. Simple. Is this mode of operation legal? Yes, no problem at all, provided that there is an agreement in writing between the company and the independent representative that is enforceable in a court of law; should the representative use unscrupulous ways to achieve levels or sales for the company.

MLM is legal in India but being legal doesn’t mean anything and everything the company does is legal. There is such a thing as fraudulent practices that gets noticed and then everything falls apart.

Network marketing is a great concept, but poor in execution. It’s a important lesson to learn but a silly way to make money.