Uncovered: Mattress that's more pain than gain

You could call it a Magic Mattress. Priced between Rs 85,000 and Rs 1 lakh, it promised to bring about wonderful cures while one slept, no matter what ailment the person suffered from. But the magic seems to be wearing off. Months after taking money from many consumers, Frontier Trading, the company licenced to distribute these mattresses in India on behalf of Japan Life, is unable to deliver them.

Ajay Prabhu (name changed) had heard of the Japan Life Sleeping System way back in 1997. It seemed like the perfect product to ease his diabetic mother's suffering. The therapeutic mattress with magnetic properties and acupressure functions was however prohibitively priced. It would cost him over a lakh to acquire one. An amount he could not afford.

Six years later, Prabhu was finally in a position to buy the mattress for his mother. The Japan Life Sleeping Solution was by now well known and sold across the country. The mattress could be bought only through the product's Indian distributor Frontier Trading Ltd's multi-level marketing system.

To buy the mattress, Prabhu also needed the reference of someone who already owned the mattress. Ajay was taken to a promotional seminar by a friend. He was impressed enough to make a downpayment of Rs1 lakh by demand draft. The company promised delivery within 60 days of payment.  

Prabhu's joy turned out to be shortlived. Now a year and a half later, he is yet to receive the mattress and has lost hope of ever seeing the bed he paid so heavily for.

Says Prabhu, "I don't feel confident at all. Whenever I approach a company official, they say so much. When I ask them to give me in writing whatever they are saying,they are not giving anything in writing. When I asked them if I can meet Vasant Pandit (Frontier Trading's proprietor). They said yes but when, we don't know. I have lost confidence in this company."

When Prabhu asked for a refund of his money, he met with an equally disappointing reponse. He said, "Currently, thay have 2,200 sales, out of which 2,000 are stuck in the docks. They (Frontier Trading) have 900 refund applications. Now they are saying even if they get a loan, they won't repay all the applicants. What they are doing is criminal. They said out of 900, they will refund 100 people. I don't know what their criteria is? The rest will be forced to accept the bed. Those who don't want the bed will be refunded the money after six month as the case may be."

Trailing Frontier Trading

CNBC-TV18's investigative show Uncovered looked into how Frontier Trading, which was selling mattresses worth crores, turn into a defaulter. 

Frontier Trading's distributors say it started importing the magnetic mattresses from Japan in 1996, under the category of medicinal products, so that it could pay lower customs duty.

Customs Commissioner (imports) AK Prasad said, "The company started importing a product called sleeping system or acupressure system. They called it a massage apparatus. They claim it has some therapeutic functions. They had some certificates to support this. At that time, the assessment was done under Chapter 90 of NTE Customs Tariff and was accepted. Later on, we got some infornmation that the description was not correctly made. It is not a massage apparatus, it is nothing but a mattress."

Frontier Trading approached the customs tribunal to re-classify their mattresses as medicinal. The company also approached the ministry concerned. The ministry after examination was of the view that the original classification for therauputic products was more appropriate.

But that was not the end. The mattresses came in for further investigation.

Says Prasad, "The matter was investigated in more detail in Mumbai and a reference was made by the Chief Commissioner for the report to be reconsidered, since there was some fresh evidence. Since there was a matter of interpretation - one was chapter 90 - and the other was Chapter 94, so it was decided by the government to refer the matter to the World Customs Organization. They got back to the government saying the classification is more appropriate under Chapter 94. The government issued a fresh circular in 2003, that Chapter 94 was the correct classification. Then the pending case was taken up by the Commissioner. He confirmed the classification and charged the differential duty. Now the importer has gone to the tribunal for approval and the next date is January 27, 2005."

The company allegedly owes customs Rs 22 crore plus taxes as differential duty, say customs officials. Consumers spoke to CNBC-TV18 saying they have been told that the mattresses are stuck with the customs owing to some pending dues.

When CNBC-TV18 visited the headoffice of Frontier Trading at Nariman Point, posing as an accomplice of an aggrieved customer, it was witness to unfriendly behaviour from the staff.

There were more surprises in store at the company's showroom in Mahim. People were clearing the store, and said the showroom was moving to a new place in Andheri. Further enquiries were met with a request to read a memo issued by Vasant Pandit, which was displayed in the showroom. The memo stated that the company had not received as much monetary support from its distributors as it had expected. Instead of Rs 6 crore, the company was able to garner only Rs 60 lakhs. Hence instead of reopening seven showrooms as initailly planned, the company would be restarting only one showroom in Indore.

The premises in Indore is owned by proprietor Asant Pandit. The memo also stated that lectures and other promotional activities of the company would begin again from the January 10, 2005.

To get a sense of what went wrong at Frontier Trading, Uncovered spoke to one of the distributors who was lucky enough to make money and get out while the party lasted.

Former distributor Jade D'souza (name changed) said, "Up North, in rural areas and down South people began doing this business purely as a business, without even using the product. When we started off, we were just around 5,000 people during the time I joined. But as things progressed, we had to move to different cities. We used to monitor operations in these cities through our own people, we would nominate someone and he would be in charge of the showrooms. Beyond a certain point I thought there was no proper accountability, or no guidance and people went astray and that's how it precipitated in all other parts of the country as well."

In high places

The matter seems to have been taken up at the highest levels. It was brought up in Parliament during the Winter Session in 2002 by Jaipal Reddy, who alleged that the company had collected more than Rs 1 crore in his constituency Nalgonda, and more than Rs 100 crore across Andhra Pradesh. He said the nationwide turnover would be in excess of Rs 700 crore. Further, he charged the then BJP government of shielding Pandit and alleged that when the police went to arrest him in Mumbai, it was asked to come back at the behest of a senior Cabinet minister.

Reddy had also argued that even though RBI had declared Frontier Trading's scheme illegal in September 2001 under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978, it had revoked its recommendation in February 2003, saying it had no role to play and its legal opinion should be considered null and void.

The then Finance Minister Jaswant Singh had admitted in the House that there was a dispute with customs on whether the mattresses had medicinal capabilities or not, and therefore whether they should get any preferntial customS duty benefit.

He had also said that violations, if any, by multi-level marketing companies like Japan Life had to be dealt with by state governments and not the Reserve Bank of India, which had from 2003 ceased to take up violations under the Prize Chits and Money Circulation Schemes.

Sleepless with mattress

But all this is just one part of the story. Those who have not received the mattresses are not the only ones unhappy. There are others who have received the product but are now filing police complaints across the country saying they are dissatisfied.

In 2001, Chander Mohan a resident of Chandigarh joined Japan Life India alias Frontier Trading. initially, Mohan invested Rs 85,000 in Japan Life and kept the rest of the money in a fixed deposit. With time, Mohan became more ambitious and pumped in more money. Mohan swiftly climbed the business chain by including three cousins in the business who  in turn inducted more members. With this, Mohan became an advisor for Japan Life and was entitled to 23% on each sale made by anyone in his chain.

It was then that the story took an unfortunate turn. According to the Chandigarh police, Mohan failed to get the incentives promised for inducting new members. Worse, the people he sold mattresses to never received any. They began putting a lot of pressure on Mohan. Unable to bear up the pressure and the loss of his savings, Mohan took his own life in 2004. He held Japan Life responsible for his death.

DGP of Chandigarh Police, Om Prakash says, "First they give you a lecture on how to go about this business. Then they rope you in and entice you to get family members and friends enrolled in their scheme. Once this happens, they collect on their investment and then it gets difficult for anyone to get out of their stranglehold."

Prakash adds, "We have filed a case against them, as per Section 3 and Section 4 of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. People with medical problems like blood pressure were urged to buy this mattress. They had to buy it and enroll three more people and this way more people came and these members (are promised they) will earn Rs 2 lakhs monthly. This is how people were cheated. In Chandigarh, where they have collected Rs 64 crore and had 7,474 members. The proprietor, Vasant Pandit lives in Bombay and the investigation is on."

The company has had a bumpy ride in other cities as well. In Bangalore, three consumers dragged the company to a consumer court on grounds of unfair trade practices. They claimed that they had not experienced any of the benefits that were promised and also that their complaints were not heeded by the company. The consumer court ruled that Japan Life Sleeping System was nothing but an ordinary sleeping bed.

Another complainant - Ram Nagaraj bought the Japan Life mattress on the insistence of his music teacher who was an independent representative with Frontier Trading. He was assured that the product would cure his thyroid problem. Nagaraj's health however worsened as he continued using the mattress.

Nagaraj took the company to the consumer court and got a verdict in his favour. He says, "The verdict was very clear, that the company had to reimburse the price of the product with interest up to date and Rs 10,000 as damages. After calculating, it was Rs 1,85,000 which is no small sum. The judge had given them a timeframe of eight weeks for them to settle my accounts. Tthis is the height of arrogance I must say, they did not even call. You are going against the verdict given by a judge. What kind of country is this, where you can get away scot-free by not paying heed to a judge's direction."

The consumer forum issued a non-bailable warrant against the company under sub-section 3 of Section 27 of the Consumer Protection Act. The company approached the high court asking for a strike down of sub-section 3 of Section 27 and a writ to quash the execution proceedings initiated by the complainants. The high court said that while the writ petition was pending, the consumer court shall not invoke its powers under sub section 3 of Section 27 of the Act.

Meanwhile, the doors are locked on what at one time used to be Frontier Trading's Bangalore office which in it heyday used to see an average of 100 visitors a day! Senior police officials in Bangalore say that though two first information reports, FIRs, have been lodged against Frontier Trading under IPC Section 420, no arrests have been made because the accused have fled before any action could be taken.

When CNBC-TV18 got in touch with Pandit, he replied in an e-mail which claimed that the company's financial mess was a result of a conspiracy by individuals that was acted out through various police departments. He accepted that his company had been unable to deliver the mattresses to customers but claimed that efforts are on to restart deliveries in a few months.

Clearly, Frontier Trading has left behind a trail of unhappy customers - either with or without mattress. The only common feature is - all have lost their sleep.