Madras High Court has described multi-level marketing schemes as Pyramid schemes stated to be non-sustainable business model and asked the government to consider preventive measures so that people are not lured by such schemes.
“The state government may look into the issue from the perspective of not only prosecuting the offending parties, but taking preventive measures, including appropriate publicity, so that people are not lured by such schemes,” it said.
“The greed for extracting money without realising the pitfalls has resulted in public being misled into investing in these MLM’s,” a bench comprising Chief Justice Sanjay Kishan Kaul and Justice TS Sivagnanam said disposing of a PIL.
Petitioner V R Othisamy had sought a direction to the government and the Police authorities to take necessary action by framing appropriate guidelines to prevent and stop running of any business in the name of MLMs.
The court said MLM was a scheme involving exchange of money primarily for enrolling other people to earn more by simple method of introducing new members to grow in the pyramid.
The PIL was filed in the background of an MLM in Erode collecting Rs 800 crore investments from public and defaulting on interest and principal repayment.