Q-Net scam: SC relief for Michael Ferreira but he still can't leave India

The billiards champion, lawyer, and Padma Bhushan awardee joined Q-Net investment scheme in 2006

The Supreme Court has granted bail to former billiards champion Michael Ferreira and his partner Malcolm Desai in the Q-Net direct selling case, but laid down conditions that include submission of passports with the trial court.

"If the petitioners are holding passport, they shall deposit the same in the concerned trial Court and if not, they should produce affidavit in that regard," the Supreme court said in its order dated March 27.

Ferreira and Desai were directed to cooperate with the investigation and report to the police station every month. They also cannot change their address without prior permission of the court. However, the duo got relief from fresh cases being filed in different parts of the country.

In December, the duo and their firm Vihaan Direct Selling, the franchisee of Q-Net in India, had been chargesheeted under the Maharashtra Prevention of interests of depositors (MPID) Act. But, in January, a Q-Net spokesperson had told Business Standard that fresh complaints were being filed by vested interests. He had also argued that the company was a direct selling company and laws like MPID were not applicable to them.

"Q-Net reiterates that it is a legitimate direct selling company and does not solicit any investments, take deposits or offer any jobs to its independent representatives. The question of running a ponzi scheme or an investment scheme does not arise. All products are sold through the company's e-commerce platform. Those who enrol as independent representatives have the opportunity to earn commissions from product sales," the spokesperson had said.

Similar grounds were presented before the Supreme Court referring to the direct selling guidelines issued by the ministry of consumer affairs in the writ petition.

"For the grounds stated in the Writ Petition, there shall be stay of further proceedings in all the 19 FIRs in terms of prayer at Clause (c) of the petition pending hearing and final disposal. Having regard to the fact that the petitioner Nos. 2 and 3 before us viz., Michael Joseph Ferriera and Malcolm Nozer Desai are detained in jail custody for about 6 months, they are directed to be released on bail, subject to the following conditions," judges Pinaki Chandra Ghose and Rohinton Mistry said in their order on Monday.

"The petitioners are directed to cooperate with the investigation of the case. In the event of necessity of any further condition(s), depending on the attendant facts and circumstances, it would be open for the concerned trial Court to prescribe the same. In case of any breach of the conditions, this Court, on being informed thereof, would, if inclined, initiate suo motu steps for cancellation of the bail, which is hereby granted," the court added.

A lawyer by profession, Ferreira, now 79, won his first World amateur Billiards championship 40 years ago. Controversy and Ferreira have been never far away. He famously refused to accept the Padma Shri award being offered by the Government of India upon his winning the World Billiards Championship in 1981. Ferreira was miffed that cricketer Sunil Gavaskar was conferred upon the Padma Bhushan, a more prestigious award, while he thought his achievements weren't any less. Finally, the Padma Bhusan came to him in the year 1983.

He would come back to limelight almost two decades later.

In a May 2016 order rejecting anticipatory bail application of Ferreira and others, the Bombay High Court had described the origin of Q-Net in a detailed manner. "It is the case of the prosecution that in the year 2000 one Vijay Ishwaran and Joseph, the founders of 'QI Group' formed a company under the name and style 'Gold Quest International Private Limited'. The applicants/accused (Ferreira and co) also joined the said group in 2006. Gold Quest International Private Limited used to sale gold plated coins. In the year 2000, the rate of gold was Rs 5,000 per 10 gms. However, they used to sale the gold plated coins for Rs 30,000 though the gold was less than 10 gms. Thereafter, the purchaser of the gold coin becomes a member of the group. He was required to make more persons as the member of the Gold Quest International Private Limited. On the basis of the number of members which he brings, he was placed to get the commission. So he was supposed to bring minimum two persons and the hierarchy had pyramid structure. So one member treated at the right side and second member was treated on the left side. The volume of the said business after enrolment of new member increases when 1,000 units are credited to the account of the old member which are treated equivalent to the commission of Rs 11,500."

It is the case of the prosecution that in the year 2003, a fraud was detected and the offence was registered at Chennai against the said Gold Quest International Private Limited company.

Subsequently, he owners of the said company repaid everything to the members to whom they have promised to pay and the offence was compounded. Hence, the first information report was quashed.

However, the prosecution argued that the company continued the illegal activities by forming another company under a different name, "QuestNet Enterprise (P) Limited". They allegedly started one "Pallava Resorts Private Limited" and also launched various products, especially products like "Biodisk", "Chi Pendent", watches, gold coins. These products were sold from minimum Rs 30 to Rs 7 lakh.

"The company claimed that Biodisk cured diseases. 'Biodisk is to be kept in the water and due to molecular effect, the quality of the water is changed and if that water is consumed, it will give good result and cures the diseases including like cancer'," the high court order noted.

It was the case of the prosecution that Suresh Thimiri was appointed as Indian head and CEO of QuestNet Enterprise (P) Limited and Michael Ferreira and Malcholm Desai had joined in the year 2006 and actively participated in its expansion.

By 2008, cases began to get registered in Chennai, Andhra Pradesh and Karnataka but the company continued its activities till 2012. As pressure mounted, they stopped QuestNet Enterprise's business but formed a new company under the name Q-Net.

Under this brand of Q-Net, three companies – Vanmala Hotels, Travels and Tourism Services Private Ltd, Transview Enterprises India Private Limited and Vihaan Direct Selling (I) Pvt Ltd – started its business since April, 2012.

In Vihaan, Malcholm Desai was holding 20 per cent shares and the applicant/accused Michael Ferreira was holding 80 per cent shares. Magaral Balaji and Shinivas Vanka, also accused in the case, were appointed as directors of the Vihaan Direct Selling (I) Pvt Ltd. Vihaan continued the activities of selling the same products of Biodisk, gold coins, Chi Pendents etc.

"Many persons also became members could not get a business as promised by the company. Therefore they felt deception. Thereafter the police registered offence on 16 th August, 2013 against the present applicants/accused. At that time, it was found that nearly 90,000 members were cheated at the hands of applicants/accused and they suffered wrongful loss of amount of Rs 425 crore and as such money laundering was of Rs 425 crore. However, till today during the investigation, it was found that number of members who are deceived are around 5 lakh and misappropriation and money laundering was about more than of Rs 1,000 crore. Hence, this complaint," the High Court order said.