Vishal

[email protected]

SureshThimiris/o.T.K.Thimiri
vs.
TheStateofMaharashtra

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ou

ANTICIPATORYBAILAPPLICATIONNO.326OF2016
WITH
CRIMINALAPPLICATIONNO.360OF2016

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INTHEHIGHCOURTOFJUDICATUREATBOMBAY
CRIMINALAPPELLATEJURISDICTION

...Applicant

...Respondent

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h

WITH
ANTICIPATORYBAILAPPLICATIONNO.327OF2016
WITH
CRIMINALAPPLICATIONNO.361OF2016

MichaelJosephFerreira
vs.
TheStateofMaharashtra

Applicant
Respondent

om

ba
y

WITH
ANTICIPATORYBAILAPPLICATIONNO.328OF2016
WITH
CRIMINALAPPLICATIONNO.362OF2016

ShinivasRaoVanka
s/o.PattabhiRamaRaoVanka
vs.
TheStateofMaharashtra

Applicant
Respondent

WITH
ANTICIPATORYBAILAPPLICATIONNO.329OF2016
WITH
CRIMINALAPPLICATIONNO.363OF2016
MagaralVeeravalliBalaji
s/o.MagaralVearavalliChellapillai
vs.
TheStateofMaharashtra

Applicant
Respondent
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MalcholmNozerDesai
vs.
TheStateofMaharashtra

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WITH
ANTICIPATORYBAILAPPLICATIONNO.330OF2016
WITH
CRIMINALAPPLICATIONNO.364OF2016

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[email protected]

...Applicant

...Respondent

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Mr.AmitDesai,SeniorAdvocatea/w.Mr.GopalShenoyforthe
ApplicantsinABA.Nos.326and328of2016.
Mr.AshokMundargi,SeniorAdvocatefortheApplicantinABA.
No.329of2016.
Mr.GirishKulkarni,fortheApplicantinABA.No.330of2016.
(AllthecounselfortheapplicantsareinstructedbyMrs.S.J.
Patila/w.Mr.VikramsinghParmar,Mr.KedarPatil,Mr.Santosh
KoreandMs.TruptiBharadi).
Mr.PradeepGharat,SpecialPPa/w.Mrs.P.P.Shinde,forState.
Mrs.SharmilaKaushik,APPfortheStateinA.B.A.328of2016.
Mr.G.S.Anand,thecomplainant/partyinpersonpresent.
MRS.MRIDULABHATKAR,J.

DATE:

6thMAY,2016

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y

CORAM:

om

P.C.:
.

The applications are moved for pre arrest bail as the

applicants/accused are facing charges for the offences punishable

underSections120(B)and420oftheIndianPenalCodeandunder
Sections3,5and6ofPrizeChitsandMoneyCirculationSchemes
(Banning) Act, 1978 and Section 3 of Maharashtra Protection of
InterestofDepositors(InFinancialEstablishmentsAct)inC.R.No.

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[email protected]

316of2013registeredwithOshiwarapolicestation,Mumbai.The

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offenceisregisteredattheinstanceofoneGurupreetsinghAnandon

2.

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16thAugust,2013.

Itisthecaseoftheprosecutionthatintheyear2000one

Vijay Ishwaran and Joseph, the founders of QI Group formed a

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companyunderthenameandstyleGoldQuestInternationalPrivate
Limited.Theapplicants/accusedalsojoinedthesaidgroupin2006.

GoldQuestInternationalPrivateLimitedusedtosalegoldplatedcoins.
In the year 2000 the rate of gold was Rs. 5,000/ per 10 gms.,

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y

however, they used to sale the gold plated coins for Rs. 30,000/
thoughthegoldwaslessthan10gms. Thereafter,thepurchaserof
thegoldcoinbecomesamemberofthegroup.Hewasrequiredto

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makemorepersonsasthememberofthe GoldQuestInternational
Private Limited. On the basis ofthe number of memberswhich he

brings,hewasplacedtogetthecommission.Sohewassupposedto
bringminimumtwopersonsandthehierarchyhadpyramidstructure.
So one member treatedat the right side and secondmember was
treated on the left side. The volume of the said business after
enrollmentofnewmemberincreaseswhen1000unitsarecreditedto

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[email protected]

theaccountoftheoldmemberwhicharetreatedequivalenttothe

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ou

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commissionofRs.11,500/.

3.

Itisthecaseprosecutionthatintheyear2003afraudwas

detectedandtheoffencewasregisteredatChennaiagainstthesaid
GoldQuestInternationalPrivateLimitedcompany. Sotheownersof

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h

thesaidcompanyrepaideverythingtothememberstowhomthey
havepromisedtopayandtheoffencewascompounded.Hence,the

first information report was quashed. However, the company

continued the illegal activities by forming another company by

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y

differentnamei.e.QuestNetEnterprise(P)Limited.Theystarted
one Pallava Resorts Private Limited and also launched various
products especially the products by name Biodisck, Chi Pendent,

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Watches,GoldCoins.TheseproductsweresoldfromminimumRs.
30/toRs.7lacs.Thefalserepresentationwasmadebythecompany

thatthesaidproductBiodiskcuresdiseases.Biodiskistobekeptin
the water and due to molecular effect, the quality of the water is
changedandifthatwaterisconsumed,itwillgivegoodresultand
curesthediseasesincludinglikecancer.

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4.

Itisthecaseoftheprosecutionthattheapplicant/accused

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SureshThimiriwasappointedasIndianheadandC.E.O.ofQuestNet

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Enterprise (P) Limitedandthe applicants/accused MichaelFerreira

andMalcholmDesaihadjoinedthesaidcompanyintheyear2006

andactivelyparticipatedintheexpansionofthiscompany.In2008
the offences were registered at Chennai, Andhra Pradesh and

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h

Karnatakabutthesaidcompanycontinueditsactivitiesofchitfund
and money laundering till 2012. They stopped the business of

QuestNetEnterprise(P)Limitedcompanybutformedanewcompany
by name Q Net. Under this brand of Q Net, three companies i.e.

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VanmalaHotels,TravelsandTourismServicesPrivateLtd,Transview
EnterprisesIndiaPrivateLimitedandVihaanDirectSelling(I)Pvt.
Ltd.starteditsbusinesssinceApril,2012.Inthesaidcompany,the

om

applicant/accusedMalcholmDesaiwasholding20%sharesandthe
applicant/accused Michael Ferreira was holding 80% shares. Other

two applicants /accused Magaral Balaji and Shinivas Vanka were

appointedasDirectorsoftheVihaanDirectSelling(I)Pvt.Ltd.Under
thesaidVihaancompany,theycontinuedtheactivitiesofsellingthe
same products of Biodisk, Gold coins, Chi Pendents etc. They
establishedonePallavaResortsPrivateLimitedandVanmalaHotels,
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[email protected]

Travels and Tourism Services Private Ltd. The applicant/accused

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Suresh Thimiri was the C.E.O. since 2010 and became Director of

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Transview Enterprises India Private Limited. The holiday packages

wereissuedbythesaidcompany.However,alltheseholidaypackages
were not given but only few were provided. Many persons also
became members could not get a business as promised by the

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company. Therefore they felt deception. Thereafter the police

registered offence on 16th August, 2013 against the present

applicants/accused. At that time, it was found that nearly 90000

memberswerecheatedatthehandsofapplicants/accusedandthey

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y

suffered wrongful loss of amount of Rs. 425 Crores and as such

moneylaunderingwasofRs.425Crores.However,tilltodayduring
the investigation, it was found that number of members who are

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deceived are around 5 lacs and misappropriation and money

laundering was about more than of Rs. 1000 Crores. Hence, this

complaint.

5.

Mr. Amit Desai, Mr. Ashok Mundargi, the learned

SeniorCounselandMr.GirishKulkarni,thelearnedcounselforthe
applicantshavesubmittedthattheapplicants/accusedareinnocent.

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[email protected]

Theyhaveneithercheatedanybodynorcommittedanyoffence.Itis

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submittedthatthecomplainantisamotivatedpersonwhohaslodged

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a false complaint against the applicants/accused due to business

rivalry. They submitted that the applicants/accused are in the
businessofdirectmarketingwhichislegallypermissibleinallover
theworld.VihaanDirectSelling(I)Pvt.Ltd.companyhastotal50

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products and they are categorized sales known for nutrition and
herbalproducts,thetourismholiday,wellnessproductsetc.Mr.Amit

Desai, the learned Senior Counsel, further has submitted that the
applicants/accused neither promoted any investment nor collected

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y

depositsinanyscheme.Theyaresellingproductsandthebuyersget
thecommission.Hedescribedthepolicyofthecompanyasifyousell
more, you earn more. It is not a flybynight operation of money

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launderingbuttheapplicants/accusedareinthebusinesswiththe
largenumberofIndividualRepresentativeswhohaveearnedlotof

money.However,theirstatementsarenotrecordedbythepolice.He
submittedthatpoliceareselectiveintheinvestigation.Hereliedon
thetermsandconditionsofthecontract/policywhicheverymember
has to sign with the company after he gets Independent
Representativenumberandthemembership.Hesubmittedthatthe
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companyhasalsorefundpolicyandthepersonswhodidnotreceive

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company.Thecompanyhasrefundednearly95100Crores.

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theserviceorarenotsatisfiedwiththeservice,theycanapproachthe

6.

Insupportofhiscontention,the learnedseniorcounsel

has relied on the judgment of Gold

QuestInternational

Private

ig
h

Limitedvs.StateofTamilNaduandOthers,(2014)15Supreme
CourtCases,235wherethecompanyhasfiledPetitionforquashing

the first information report and wherein a compromise/settlement

betweenthepartieshastakenplaceandtheSupremeCourtquashed

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y

thefirstinformationreportandallowedtheAppeal.Hefurtherrelied
onthejudgmentof StateofWestBengalandOthresvs.Swapan
KumarGuhaandOthers,1982SupremeCourtCases(Cri)283.So

om

alsointhecaseof StateofWestBengalandOthersvs.Sanchaita
Investments and Others, 1982 Supreme Court Cases (Cri) 283.

Thejudgmentof SanchaitaInvestments isonSections3and4of

PrizeChitsandMoneyCirculationSchemes(Banning)Act,1978.He
further relied on para 6 of the said ruling. He submitted that the
offenceunderPrizeChitsandMoneyCirculationSchemes(Banning)
Act,1978isbailable.Onthepointofnecessityofarrest,hereliedon

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[email protected]

Siddharam Satlingappa Mhetre vs. State of Maharashtra and

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Others,(2011)1SupremeCourtCases694andJogindarsinghvs.

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U.PandOthers,1994(4)SCC260.ThelearnedseniorcounselMr.
AmitDesaihassubmittedthatinanycasearrestisnotrequiredand
arrestisnotjustifiedespeciallywhenthepunishmentislessthan7

years.Inordertosubstantiatehissubmissions,hereliedon Arnesh

ig
h

Kumarvs.StateofBiharandAnother,(2014)8SupremeCourt
Case,273.HealsoreliedonAmwayIndiaEnterprisesvs.Unionof

India,2007SCCOnLineAP494.

Thelearnedseniorcounselhassubmittedthatsincethe

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y

7.

case of Joginder Kumar vs. State of U.P. And Others, (1994) 4

SupremeCourtCase,260tothecaseofArneshKumar(supra),the

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lawonthepointofarresthaschangedasthepoliceofficermustbe
satisfiedaboutnecessityandjurisdictionofsucharrestonthebasisof

investigation. He submitted that there should not be violation of

humanrights.Hereliedon GurbakshSinghSibbiaandOthersvs.
State of Punjab, (1980) 2 Supreme Court Cases, 565 and
Siddharam Mhetre (supra), wherein the principle of arrest in the
casesofanticipatorybailisexplained.Hefurtherplacedrelianceon

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thecaseofBhadreshBipinbhaiShethvs.StateofGujrat,2015SCC

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OnLine771. ItwasthecaseunderSection438ofCodeofCriminal

principlesofgrantofanticipatorybail.

8.

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Procedure wherein the Hon'ble Supreme Court has laid down the

Mr. Pradeep Gharat, the learned special prosecutor

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submittedthatChiPendentandBiodiskweresenttoBhabhaAtomic
ResearchCenterforradioactivitytestwhichwasconductedon20 th

February, 2015 wherein it was reported that no radio activity was

detected. He further submitted that the company was not selling

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actually any product but everything is shown on Internet and on

social website. The police have recorded the statements of three
personswhohavestatedthattheseminarswereconductedforthe

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personswhowereinterestedingettingdegreeofM.B.A.Theyhave
statedthataspertherepresentationmadebeforethem,theypaidthe

amounts as they were promised Ecourse of M.B.A. which was

affiliatedtosomeSwissUniversity.Theywereinformedthatasand
whenpaymentismade,youwillgetidentityandoneIndependent
Representative (I.R.) number and a link will be provided with a
password so that they could have access to the site. However,

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irrespectiveoftheireffortstheycouldnotgetaccessandcouldnot

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completethedegreeandthustheywerecheated.Hesubmittedthat

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VanmalaHotels,TravelsandTourismServicesPrivateLtd.andPallava
ResortsPrivateLimitedhavecreatedaWebsiteandtravelpackages.

The commission was not paid on the products though the new
memberswereintroduced.TheregisteredofficeofVanmalaHotels,

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TravelsandTourismServicesPrivateLimitedcompanyisacallcenter.
He further submitted that in December, 2014 the Ministry of

Corporate Affairs sealed their office at Chennai and declared Gold

Quest International Private Limited and QuestNet Enterprise (P)

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Limitedasthefraudcompanies.Thusmoneyiscollectedonlineand
though the Independent Representative number is given, actual
moneywasnotavailableforwithdrawal.Saidmoneywaslaundered

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outside India. The policein theinvestigation have comeacross73

bank accounts of Q NetLimitedandtotallaunderingofRupeesis

around135Crores.

9.

Thelearnedspecialprosecutorfurthersubmittedthatin

the year 2014 the complaint was filed against Q Net Limited and
QuestNetEnterprise(P)LimitedcompaniesofQ1Groupastheyhave

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cheatedmanypersons.HesubmittedthatQ1GroupisfromMalaysia

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and through the said group these activities are carried out under

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differentnameandstyle.Therearemultiplebankaccounts,thereis
mensreatocheatthepeopleandthus,thecompaniesi.e.Transview
EnterprisesIndiaPvt.Ltd.andVanmalaHotels,TravelsandTourism
ServicesPvt.Ltd.andVihaanDirectSelling(I)Pvt.Ltd.cheatedmany

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personsandthatiscontinuedtilltoday.Thereismoneytrailwhichis
disclosing money level circulation scheme. In support of his

contentions,hereliedonthefollowingauthorities:
1) State of Gujrat vs. Mohanlal Jitamaljiporwal and
Another,1987AIR1321.

ba
y

2)NarayananRajagopalanvs.TheStateofMaharashtra,in

Cri.A.B.A.No.1416of2013dated2ndApril,2014.

3)AshokBahirwanivs.TheStateofMaharashtra,inCri.

om

th
A.B.A.No.1083of2012dated19March,2013.

4)AmwayIndiaEnterprisesvs.UnionofIndia,2007(4)
ALT808.

5) Y.S.JaganMohanReddy vs.C.B.I.,in Cri.AppealNo.

th
730of2013,S.C.dated9May,2013.

6) Kasturchand Ramlal Badjate vs. The State of

Maharashtra,(1981)83BOMLR8.
7) Central Bureau of Investigation vs. Anil Sharma, S.C,
rd
Cri.Appealdated3September,1997.

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st
AppealNos.12861287of2015dated1October,2015.

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8)Sudhirvs.TheStateofMaharashtraandAnother,Cri.
9)K.K.Baskaranvs.StateofTamilNaduandOthers,Cri.

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ou

th
AppealNo.2341of2011dated4March,2011.

10) Shrinivasa Enterprise and Others vs. Union of India,

(1980)4SCC507.

11)StateofMaharashtravs.SomNathThapa,1996AIR

10.

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1744.

The learned Special prosecutor submitted that the

economicoffendersruintheeconomyoftheStateandtheeconomic
offencesarecommittedwithcoolanddeliberatemannerregardlessto

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y

theconsequencesonthecommunity.Hereliedonthejudgmentof
Mohanlal Jitamaljiporwal (supra). He further relied on the
judgmentoftheDivisionBenchinthecaseofTransviewEnterprise

om

IndiaPrivateLimitedvs.TheStateofMaharashtra&Anr. ofthis
th
Courtpassedon 12

February,2014 in CriminalApplicationNo.

844of2014 wheretheapplicantinTransviewEnterprisesIndia(P)
Ltd.hasfiledanapplicationfordefreezingtheaccountswhichwas
refused by this Court. He also placed reliance on Amway India

th
Enterprise vs. Union of India daed 19
July, 2007. (2007 SCC

OnlineA.P.494). Hefurtherreliedonthejudgmentinthecaseof

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KuriachanChackoandOthersvs.StateofKerala,SupremeCourt,

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th
inCri.AppealNo.1044of2008passedon10
July,2008. This

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matterwasagainsttheorderofdischargeoftheaccusedpersonsfor

theoffencespunishable underSections4and5readwithsections
2(e) and 3 of the Prize Chits and Money Circulation Schemes
(Banning)Act,1978.Hereliedonthejudgmentof GautamKundu

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h

vs.ManojKumar,inCri.AppealNo.1706of2015arisingoutof
SLP(Cri.)No.6701of2015. Inthesaidcase,thetrialCourthas

rejectedbailunderSection439ofCodeofCriminalProcedurewhere
theaccusedwasprosecutedfortheoffencepunishableunderSection

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3ofPreventionofMoneyLaunderingAct,2002.Inthesaidcase,the
CourthasreferredSection45ofPrizeChitsandMoneyCirculation
Schemes(Banning)Act,1978andwhichhasoverridingeffectonthe

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generalprovisionsoftheCodeofCriminalProcedure.

11.

ThecomplainantGurupreetsinghAnandwhowaspresent

intheCourtwantedtoaddresstheCourtandsoinallfairness,the
opportunitywasgiventohim.Hewasheard.Hehasalsofiledthe
intervention application. He stated that QuestNet Enterprise (P)
Limited carried out their business and after the prosecution of

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QuestNetEnterprise(P)Limited,theyintroducedthebusinessplan

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under the name and style Q Net Limited. He submitted that the

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companygivesrosypictureof'moneybackscheme'tothepublicat
large. However, once a person become a member, he is called as

'Independent Representative' (I.R.) and then he can get the

commission. However, he does not earn money as promised. The

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applicants/accusedandtheotherrepresentativesarenotaccessible
andfinallythepersonlosehismoney.Hesubmittedthatthesame

personsarerotatedfromQuestNetEnterprise(P)LimitedtoVanmala
Hotels, Travels and Tourism Services Pvt. Ltd. and Vihaan Direct

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Selling(I)Pvt.Ltd.Hesubmittedthatthepaymentswerepromised
andthepartnershipwasasperthebusinessplan.Thecompensation
promisedbytheQNetLimitedwasonweeklybasis.Hesubmitted

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thatasGovernmentfoundthatthereisafraudofCroresofrupees,
Government agency started to investigate the matter and through

website qnet.net.com which was blocked by the order of the

Magistrate Court. He submitted that nearly 15000 Independent
Representative of Q Net Limitedwere transferredtoVihaan Direct
Selling(I)Pvt.Ltd.company.Thecomplainantreliedonthebusiness
planofQuestNetEnterprise(P)Limited.SoalsotheFrequentlyAsked
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Questions(FAQ)inthebusinessofVihaanDirectSelling(I)Pvt.Ltd.

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company.Soalsothegenealogyreport.Hesubmittedthattheyare

12.

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attractingpeoplebygivingfalsepromises.Hence,thereischeating.

The learnedcounselfortheapplicants/accusedinreply

submitted that the applicants/accused have fully cooperated the

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policeandthedetailsoffinancialtransactionsalsosuppliedtothe
police.Thereisnocaseofmoneylaundering.Onlyfewcroreshave

goneoutofIndia.ThelearnedseniorcounselMr.Desaihassubmitted
that direct marketing is promoted by Government of India and

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Government has supported direct marketing i.e. how the

applicants/accusedarecarryingoutthebusinessandalltheactivities
are legal. The applicants/accused who are running company

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explainedthefactstothepublicatlargeandthepersonswhobecame
members.Acontractisenteredbetweenthem.Theentirebusinessis

legalsothatpeoplecanearnmoremoneyandquickmoneyanditis
notdependentonenrollmentofmembersbutonthesell.Hereliedon
thejudgmentinthecaseof SanchaitaInvestments (supra) under
PrizeChitsandMoneyCirculationSchemes(Banning)Act,1978.He
submitted that in this scheme, income is on the basis of sale of

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products.Itisnotcompulsoryforanypersontobecomememberand

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enrollinit.HesubmittedthatearlieritwasGoldQuestInternational

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PrivateLimited andifatallthereissomefaultorillegalityfoundin

the scheme, then the person can change the scheme as per the
requirementofthelawanditcanbecorrectedandthereforeanew
schemecanbeintroduced.Therefore,thereisdifferencebetweenQ

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Net Limited and QuestNet Enterprise (P) Limited. There are no

registration charges forbecomingIndependentRepresentativeinQ

Net Limited, which were compulsory in QuestNet Enterprise (P)

Limited.Thecommissiondependsonlyonsaleofgoods.Thereisalso

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a refund policy in the working of Q Net Limited. The

applicants/accusedarenotsittingonanybody'smoney.Inthecaseof
QuestNetEnterprise(P)Limited,theMadrasHighCourtinitiatedthe

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prosecution against different persons than the applicants/accused.

However, the order passed by the Madras High Court was

subsequentlysetasidebytheHon'bleSupremeCourtastheparties
enteredintoacompromise.AspertherequirementofSection2(c)of
M.P.I.D.Act,itisnecessarytocollectdeposits.Inthepresentcase,no
depositsarecollected.

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13.

Before adverting to the facts of the present case, it is

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SupremeCourtinsomeimportantcases.

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usefultoculloutandreproducetheratiolaiddownbytheHon'ble

The question before the Hon'ble Supreme Court in the

caseofAmwayIndia(supra)waswhetherthebusinessactivitybeing

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carriedoutbythePetitionercomesunderthePrizeChitsandMoney
Circulation Schemes (Banning) Act, 1978 and the other issue was

about the legality of seizure and search carried out by the

investigatingagencyatvariousplacesofAmway.TheWritPetitions

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weredismissedbytheSupremeCourtanditwasheldthattherights
of seizure and search on various places are legal. The Hon'ble
SupremeCourtinthecaseofAmwayIndia(supra)hasdiscussedand

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analyzedmoneycirculationschemeandwhereitisheldasunder:
Money circulation scheme means any scheme, by
whatevernamecalled,forthemakingofquickoreasymoney,
or for the receipt of any money or valuable thing as the
consideration for a promise to pay money, or any event or
contingencyrelativeorapplicabletotheenrollmentofmembers
intothescheme,whetherornotsuchmoneyorthingisderived
fromtheentrancemoney ofthemembersofsuchschemeor
periodicalsubscriptions.

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15.

In the case of Gautam Kundu (supra), the Bench has

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JaganMohanReddy(supra)whereinitisobservedasunder:

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referred the observation of the Supreme Court in the case of Y.S.

The economic offences having deep rooted

conspiraciesandinvolvinghugelossofpublicfundsneed
tobeviewedseriouslyandconsideredasgraveoffences

affecting the economy of the country as a whole and

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therebyposingseriousthreattothefinancialhealthof
country.

In the case of Kuriachan Chacko (supra)saidcasethe

16.

Hon'bleSupremeCourtheldasunder:

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The scheme is so grossly unworkable that the

persons who made representations to that effect and

inducedpersonstopartwithmoneydidentertainthe

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contumacious intention. They knew fully well that

unworkablefalserepresentationswerebeingmade.The
obviousattempt,itcanbepresumedatthisstage,wasto
inducepersonsbysuchfalseunworkablerepresentations
to part with money. Initially some subscribers can be
keptsatisfiedtoinducethemandotherssimilarlyplaced
tojointhelongqueue.Butinevitablyandinescapably
later subscribersareboundtosuffer unjustlosswhen
theyswallowthefalseandthereforethechargecanbe

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framedunderSection420readwith34ofIndianPenal

This scheme is undoubtedly a multilevel marketing

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17.

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Codeatthesaidstage.

activityandapyramidstructureofsuchschemeispreparedsothat
the members are promised to get money on purchase and sale of
products. The money circulation or multilevel marketing pyramid

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structureasdescribedaboveisacognizableoffenceunderPrizeChits
andMoneyCirculationSchemes(Banning)Act,1978.Aletterdated

1stJanuary,2015issuedbytheChiefGeneralManager,R.B.I.isplaced
beforeme,whereinR.B.I.hascautionedthepublicagainstmultilevel

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marketingactivitiesasthepeopleduetoattractiveoffersarefalling
preytothesaidschemesandfinallytheysufferlosses.However,the
offenceunderPrizeChitsandMoneyCirculationSchemes(Banning)

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Act,1978isbailable.

18.

In the case of Shrinivasa Enterprise (supra), the

competency of the legislature to enact the Prize Chits and Money

CirculationSchemes(Banning)Act,1978waschallenged.Inthesaid
case,theHon'bleSupremeCourthasobservedthatasunder:

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In the matters of economics, sociology and other

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specialisedsubjects,Courtsnotembarkuponviewsofhalf

litinfallibilityandrejectwhateconomistsorsocialscientists

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have, after detailed studies, commanded as the correct

course of action. The final word is with the Court in

constitutionalmattersbutjudgeshesitateto'rushin'where
even specialists 'fear to threat', If experts fall out, Court,

perforce,mustguideitselfandpronounceuponthematter

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fromtheconstitutionalangle,sincethefinalverdict,where
constitutionalcontraventionsarecomplainedof,belongsto

thejudicialarm.

19.

InthecaseofBhadreshSheth(supra)thechargesforthe

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offencespunishableunderSections506(2)and376ofIndianPenal
Codeandthecomplaintwasgivenintheyear2001andafter17years

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theSupremeCourttriedthematterforcancellationofanticipatory
bail. The Court referred the principles laid down in the cases of

Gurbaksh Singh Sibbia and Siddharam Satlingappa Mhetre

(supra)andsetasidetheorderofthetrialCourtofcancellationof
anticipatory bail. In sum and substance, while entertaining
anticipatorybailapplication,theCourthastorelyandrefertheratio
laiddowninthecasesofoldgoodlawofGurbakshSinghSibbiaand

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Siddharam Satlingappa Mhetre (supra). The present offence is

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fallingunderthecategoryofeconomicoffencesandthereforeithasof

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different complexion than the case of Bhadresh Bipinbhai Sheth

(supra).

20.

Perused the documents presented by both the sides. I

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have gone through the plan which is given by Qnet to every

individualrepresentative(IR).Ihavegonethroughthestatementsof

manywitnesses,whoclaimedthattheyhavebeencheatedunderthe
scheme launched by Qnet. I have also considered the conclusive

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report of (Serious Fraud Investigation Agency under the Company

Act)S.F.IO.Primafacie,thereismaterialtoholdthatthebusiness
conductedbyQnetiscoveredunderPCMCActandalsounderDrugs

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and Magic Remedies (Objectionable Advertisements) Act, 1954.

However,allthesesectionsarebailable. Consideringthemannerin

whichthebusinessisconducted,Ihavedoubtwhetheroffenceunder
section3oftheMPIDAct,whichisanonbailablesection,canbe
attractedornot?

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21.

Apart from these offences for which the

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applicants/accusedareprosecuted,cheatingistheonlynonbailable

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offenceundersection420oftheIPC.Whilehearingthecaseofthe
prosecutionandthedefence,mymainquerytoboththepartiesand

myselfwaswhetheroffenceofcheatingis primafacie madeoutor

not. In order to attract the offence of cheating, the ingredient of

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intentiontocheatshouldbepresentinthemindoftheaccused. If
mens rea is absent, then, even if other person or the complainant

sufferslossesinthebusiness,then,itisnotcheating.Then,itcanbe
simplylabelledasafinancialbusinesstransactionwhichdidnotfetch

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positive returns. As per the submissions of the learned Senior

CounselandtheotherlearnedCounselfortheapplicants/accused,it
is true that the company has launched an emarketing business to

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make money. As observed by the Supreme Court in the case of

Chacko(supra)toearnmoremoneyisnotanoffence;toearnquick

moneyoreasymoneyisalsonotanoffence.Therefore,ifsuchproject
islaunched,thatitselfcannotbeanoffence.Thereisnocompulsion
orforceoperatedonthepublictobeamemberofthebusinessor
participateinthebusiness.Thus,theoptionwasalwaysopentothe
aggrievedpersonstosaynotothescheme.However,thethingsare
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notasstraightastheyareperceivedonthesurface. Assumingthat

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the scheme was launched with a noble object to give benefit to

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maximum people to make money quickly and easily by selling

productsofthecompany,however,aftergoingthroughthematerial
placedbeforemeincludingthestatementsofthewitnesses,Iamof

theviewthatinthemidway,theintentionoftheapplicants/accused,

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who are the Directors and shareholders of the company, became

dubious. They had knowledge that more members are suffering

financiallossesandtheyarenotsatisfiedwiththeproducts.Theclaim
thatthewellnessproductsi.e.,BiodiskandChiPendentaremedicinal

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andspiritualproducts,isafterall,amatteroffaith. However,the
applicants/accused have launched these wellness products with
ulterior motive and with correct judgment of vulnerability of the

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people.Theholidaypackageswhichweresoldoroffered,withoutany
choicelefttothebuyers.TheentirebusinesswasInternetbasedand,

therefore,thepersonswhoareresponsiblei.e.,thetopbrassi.e.,the
applicants/accused,werenotapproachabletothepersonswhowere
aggrieved. Thenatureofthebusinesswasknittedintheinterestof
theDirectorsandshareholdersinsucha mannerthatthepersons
whoareatthelowerlevelofthepyramidcannotgetanyaccesstoput
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up their grievances. The manner in which the persons were

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contacted,incentivesoffered,theworkshopswereconducted,arebest

22.

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examplesofinducement.

Respondingtothesubmissionsoftheprosecutionthatthe

IRsoflowerlevelofpyramidaredoingaggressivemarketingandthey

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arethreateningandpesteringpeopleforsellingtheproductsandfor
becoming members, Mr.Desai argued that the applicants/accused

cannotbevicariouslyliable. Theyhavestartedtheschemewitha
nobleobjectandtheycannotbeheldresponsibleforsomeoverreach

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or aggressive steps or illegality of some IR while marketing the

companyproducts.Itistruethatthedoctrineofvicariousliabilityis
unknowntothecriminallaw.However,apartfromthebehaviourof

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suchpressurisingtacticswhichareusedbytheIRsonthelowerlevel
of the pyramid, material is brought before me to show that many

workshopsandsessionsareconductedregularlyatvariousplacesby
the company. Undoubtedly, all these workshops and sessions and
trainingcentresarerunatthebehestoftheapplicants/accusedbythe
Directorsandshareholdersi.e.,theapplicants/accusedandthus,they
have control either directly or remotely, over the dishonest

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inducementandaggressivemarketingwhichisthemodusoperandiof

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thiscompany.
23.

To protect the fundamental right of every individual to

practice any profession or to carry on any occupation, trade or

businesswhichisguaranteedunderArticle19(g)oftheConstitution

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ofIndiaisthedutyoftheCourt.However,itisalwaysqualifiedwith
reasonable restrictions. A particular business fetching profit to
handfulofindividualscannotbecarriedoutatthecostofotherswho

sufferlossesduetodeceitfulinducement.

Thestatementsofthewitnessesrevealthatthedishonest

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24.

concealmentoftruefactsandtherealbusinessofthecompany.The
persons,whodominateandnavigatethewilloftheothers,havean

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advantagewhichtheycanturntotheiraccount.Inthepresentcase,
suchadvantageisgainedundoubtedlybydishonestlyandindeceitful

manner. Thereareinstancesofdishonestconcealmentoffactsi.e.,
genuinenatureoftheproductsandbythepersonsworkingforthe
companyi.e.,I.Rsandwithintentiontoearnwrongfulgaintothem
and the company and wrongful loss to others. The motto of the
company 'sell more, earn more' appears very attractive and
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innocuous.However,thismottoisfullycamouflaged.Thecompany

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mottois'sellmoreearnmore'byfoolingpeople.

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standsonabasicstatementthatpeoplecanbefooled.Thus,thetrue

25.

The submissions of the learned Senior Counsel for the

applicantsaccusedthatsellingtheproductataveryhighpriceisnot

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an offence, is true and cannot be controverted in the marketing

business.Itdependsonthemarketingcapacityofanindividualand
sothelevelofhisprofit. However,inthismarketing,theIRs are

directed to give all the names and details of the relatives, phone
numbersoftheiracquaintances,referencesandthereafterthepersons

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in the higher level, who are given some positions, contact these
acquaintances and references and the chain is multiplied. The

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persons who are gullible, are bound to be prey of such kind of

persuasionwhichiscolouredwithinducement.Infact,itisachain

whereapersonisfooledandthenheistrainedtofoolotherstoearn
money.Forthatpurpose,workshopsareconductedwherestudyand
businessmaterialisprovidedwithajuggleryofwords,promisesand
dreams.Thus,thedeceitandfraudiscamouflagedunderthenameof
emarketingandbusiness.

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Mr.Desai,thelearnedSeniorCounselfortheApplicants,

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26.

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hassubmittedthatthelawundersection438oftheCodeofCriminal
Procedurehasdevelopedandchangedalottilltoday.TheSupreme
Court has taken a veryliberalviewandahumanisticviewon the

pointofarrest. Hereliedon JoginderSinghSibiya and Bhadresh

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BipinbhaiSheth(supra) andsubmittedthatinthecasesespecially
wherethepunishmentislessthan7years,theSupremeCourthas

disapproved arrest and, therefore, section 41A of the Code of

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CriminalProcedureisenacted.

27.

It is true that the Legislature in order to avoid illegal

arrest,rathertocheckthepolicemaniaofarrest,hasenactedsection

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41A of the Code of Criminal Procedure and the Supreme Court

respondingtothesaidlegislationinArneshKumar(supra),haslaid

down guidelines directing the police how to give notice and the
person should get opportunity to put up his explanation. In the
present case, the offence is registered in the year 2013. The
applicants/accused were granted interim prearrest bail by the
learnedSessionsJudgeandthus,theapplicants/accusedhavevisited
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thepolicestationonanumberofoccasionsandgaveexplanationto

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thepolice,whichtheywantedto.However,thepolicehaveopposed

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their applications for prearrest bail in the Sessions Court and the
SessionsCourthasdeniedthesame.Itshowsthatsection41Awasin

fact fully complied with. This shows that the police whatever
explanation and information they received from the

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applicants/accusedarenotsatisfied.Imadesearchingqueriestothe
learned Prosecutor in order to clear the doubt as to whether the

policewantedtoarresttheapplicantaccusedonlyoutofvengenace
ortheyhavemadeitaprestigeissue.However,aftergoingthrough

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the record, which is placed before the Court and the submissions
madebyboththeparties,Ifoundthatsuchelementisabsent.There
maybemisdirectedoverenthusiasmonthepartoftheprosecutionin

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sendingBiodisk andChiPendenttoBARC. However,Iamofthe

viewthattheyneedtoinvestigateproperlyandmoreeffectivelyto

find out the money trail and from where the products are
manufactured, also to check the correct addresses, bank accounts,
networking of the company, etc. Moreover, by this deceitful
inducement,largenumberofpeople,maybeapproximately2.5lakh
people, are trapped in this moneytree planting business and
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everyday,asitisanongoingactivity,morepeopleareacceptingthese

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attractivecamouflagedoffers.

28.

It has very grave and serious impact on the economic

status and mental health of the people on a large scale. On

considering parameters of section 438 of the Code of Criminal

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Procedure,Iamnotinclinedtoprotecttheaccused.Itwon'tbeoutof
placetomentionthatsuchcirculationisrequiredtobestopped.Itis

necessary for the prosecution to take injunctive steps against this

businessactivitywhichisprimafacie,illegal.Thoughbystoppingthis

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business, a large group of people may get financially affected,

however,itwillsavelargergroupsofpeoplefrombecomingpreyof

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thisactivity.
29.

In the result, the Anticipatory Bail Applications are

rejected.CriminalApplicationsforinterventionsstanddisposedof.

30.

At this stage, learned Counsel appearing for the

applicants/accusedseekscontinuationofearlierinterimrelieffora
periodof10weeksastheapplicants/accusedintendtochallengethe

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orderbeforethehonourableSupremeCourt.LearnedProsecutorhas

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continuedtill15thJuly,2016.

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opposed this oral prayer. However, the earlier interim relief is

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(MRIDULABHATKAR,J.)

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