BackOfficials cite jurisdiction issues on Speak Asia
Officials cite jurisdiction issues on Speak Asia
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Mumbai/Delhi: Amonth after the government said, in response to an investigation by television channel Headlines Today, that it would investigate Speak Asia Online, another company with a get-rich-quick sales line, it emerges that it has done nothing because the company doesn’t fall under the purview of any agency.
Last month, D.K. Mittal, secretary, ministry of corporate affairs (MCA), had said that the department would investigate Speak Asia along with the Reserve Bank of India (RBI) and market regulator Securities and Exchange Board of India (Sebi). On Wednesday, he said he was not aware of the latest developments.
Another senior MCA official, who did not want to be identified, said that the ministry cannot do anything because Speak Asia is not registered in India as a company under the law.
RBI and Sebi have also said they cannot investigate the company.
An RBI spokesperson said that Speak Asia does not come under its purview because it is a marketing-cum-chit fund company and “gives users some kind of service in exchange for money".
A Sebi official said Speak Asia does not come under its regulatory purview because it has issued no securities till date. “This is a marketing company which has just sold a software through its website for a price."
There is clearly confusion over what Speak Asia does— its detractors claim it runs a Ponzi scheme; its ads make it look like a multi-level marketing company; and the company describes itself otherwise. Manoj Kumar, chief executive of Speak Asia Online Pte Ltd, denied that Speak Asia is a multi-level marketing company as being perceived. “We are a referral marketing company where our panellists (consumers) get reward points for referring products sold by Speak Asia to their peers or friends."
The product itself involves the aggregation of consumers who purchase goods online and may get a price break because they are buying goods in bulk.
The vagueness surrounding the company’s product proposition and a slick advertising campaign have caused activists to take notice of it.
Last month, Kirit Somaiya, president of the Investors’ Grievances Forum in Mumbai, filed a complaint with the economic offences wing (EOW) of Mumbai Police against Speak Asia, claiming to have received several complaints from consumers across the country.
“It is the duty of government authorities to investigate this issue. However, it seems they are not taking any action and I am upset by the authorities," said Somaiya.
Somaiya has also filed an application under the Right to Information Act with MCA, RBI, EOW and Sebi enquiring about the current status of investigation in the case.
Mint couldn’t independently ascertain whether there were any complaints. Phone calls and a text message sent to Himanshu Roy, joint police commissioner of Mumbai, did not get any response.
Speak Asia has close to two million customers (it calls them members) in India and has clocked a revenue of $80.5 million (Rs 360 crore today) over the last three quarters according to a company presentation.
The company has not taken any approval from the Registrar of Companies or from the Foreign Investment Promotion Board, FIPB, necessary for any overseas company establishing a business in the country. In fact, the company is not registered anywhere in India.
“Since there is no need for a Web-based company to be registered in India we entered India without registering. Now we are moving to RoC (Registrar of Companies) Mumbai to register three companies. One will be a content company, Speak Asia India will be another one and a third one may be called Precision Marketing," said Manoj Kumar, speaking on the sidelines of a press briefing in Delhi on Wednesday.
The company will complete the registration formalities with the Mumbai office of RoC next week, according to Narayanan Rajagopalan, director, emerging markets, Speak Asia Online Pte Ltd.
Kumar also added that the company would approach regulators such as the Reserve Bank of India and Foreign Investment Promotion Board and ministry of corporate affairs for various clearances, and to clear doubts about its business model.
The unnamed MCA official confirmed that the the Companies Act 1956 does not have provisions for registering online companies, “which is a problem in this case".
Speak Asia, which has been in India since 2010 and which has so far not released an authenticated list of its corporate clients, has been paying service tax in India although the tax department is now reviewing the business model of the firm to check for tax discrepancies, according to a senior service tax official who did not want to be identified. “Last year the company paid service tax but we feel the company has been making short payments (suppression of value of services)," this person added.
The official said that Speak Asia has collected around ₹ 1,200 crore in the last four months, out of which ₹ 1,000 crore has been transferred to Singapore to its parent company through Indian banking channels. Mint has no way of confirming these numbers.
Speak Asia’s Kumar said that the company had paid service tax of ₹ 68 crore levied for distribution of an online magazine that customers buy. “To the best of my knowledge, everything that was charged has been paid and the service tax department should have no issues with Speak Asia. However, if there are doubts, we are willing to talk (to it)."
A partner with a law firm based in Mumbai said that the company should come under RBI’s purview because the company is using Indian banking channels to remit money abroad. “This company has listed bank account details with names of the banks. Money is going out of the country, which means the RBI has to look at it," added this person who did not want to be identified.
Speak Asia said that its parent company, Speak Asia Online Pte Ltd, was regulated in Singapore. But according to the Accounting and Corporate Regulatory Authority of Singapore, the parent currently does not have a certificate of compliance. According to Speak Asia, this is because of a delay of about 10 days in providing minutes of the AGM (annual general meeting) for the last accreditation cycle.
According to a press release issued by the company, 1.2 million of its customers here have received over $52 million over since last year through bank transfers via Reserve Bank of India-authorized foreign exchange channels.
This income has been generated by filling up surveys, giving online opinions on advertisements watched and income accrued from referring other panellists. The firm has, to date, since its entry into India, invested over $9 million in various marketing, training and business development programmes.
The unnamed MCA official said the ministry will soon issue an “ad warning the public to check things like whether any company is registered with MCA through its portal MCA21 before making investments." He clarified that the ad will be generic and is not aimed at warning customers about Speak Asia.
khushboo.n@livemint.com
Deepti Bhaskaran contributed to this story.
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