Amway India Chairman William S Pinckney, two Directors granted bail

KOCHI: A local court in Kerala has granted bail to three senior executives of the Indian arm of Amway whose arrest on Monday sent shockwaves across the fledgling direct marketing sector and once again raised concerns about the country's image as an investment destination.

The three, including Amway India managing director and CEO William S Pinckney, were remanded to 14 days custody by the chief judicial magistrate court in Wayanad in Kerala on Monday, under a 2011 complaint that accused the company of running a pyramid-type operation and selling overpriced products to customers. The court granted bail on Tuesday afternoon.

Pinckney and two other directors, Anshu Budhraja and Sanjay Malhotra, were arrested by the Crime Branch of the Kerala Police in Kozhikode and later taken to Wayanad and produced before the chief judicial magistrate.

The arrests were made on the basis of three cases registered against the company in Wayanad in 2011.
The main charge against Amway India is that its operations have violated the Prize Chits and Money Circulation Schemes (Banning) Act of 1978, a law primarily aimed at ponzi schemes that involve taking public deposits and offering promised returns.

"Companies like Amway sell its products by enrolling new members. The sales by members at the lower level will bring in returns for the members at the higher level, which is in violation of the Act," said P A Valsan, a superintendent of police in the Superintend Economic Offenses Wing of the Crime Branch.

The company is also accused of cheating its customers by selling its products at inflated prices.

Finally, there were also complaints about the way it operated, notably a complaint from a Kozhikode-based woman in which she said that she was asked to buy Rs 3 lakh worth of products from Amway but did not get a refund when she was unable to sell those.

It was based on her complaint that the police registered a case in Kozhikode against Amway India, but the company officials took anticipatory bail against the case from the Kerala High Court. But there were three more cases registered against the company in Wayanad district, which ultimately led to the arrests of the three executives.

Amway said in a statement it was shocked at the "sudden and unwarranted" detention of its officials, especially when they were fully cooperating in the investigations.

It said "a routine consumer redressal issue or complaint, has been misinterpreted and booked" under the 1978 PCMCS law, which is a scourge of the direct selling industry because it was conceived at a time the direct sales business model did not exist.

"This has repeatedly been a challenge not only in Kerala, but elsewhere across India, for the direct selling industry," Amway said, adding that the sector has been seeking an amendment to the PCMCS law on grounds its business model involves the sale of products and does not involve taking deposits or makes promises of financial returns.

"Such rash action serves little purpose but to tarnish the image of India as an investment destination," the firm said, adding that it was a legitimate direct selling FMCG organisation which operates in 108 countries across the world retailing more than 450 products globally and 140 products in India.