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Issues: (i) Whether the Host State has power under section 12 of the Lotteries (Regulation) Act, 1998 to make rules for monitoring the conduct of lotteries organised by other States within its territory; (ii) Whether the Kerala Paper Lotteries (Regulation) Amendment Rules, 2018 are ultra vires the parent Act or the Central Rules, and if so, to what extent.
Issue (i): Whether the Host State has power under section 12 of the Lotteries (Regulation) Act, 1998 to make rules for monitoring the conduct of lotteries organised by other States within its territory.
Analysis: The power under section 12 is a general rule-making power conferred on the State Government to carry out the provisions of the Act. The scheme of the Act, the Central Rules and the obligation cast on the Host State to ensure that no unauthorised lottery is organised within its jurisdiction support a construction that permits the Host State to frame rules for compliance monitoring and for forming an objective opinion on violations or irregularities. Such rules do not amount to a prohibition of another State's lottery. A restrictive reading confining the power only to the Organising State would create an anomalous situation and frustrate the Act's object of preventing exploitation and ensuring compliance.
Conclusion: The Host State has power to make rules under section 12 of the Lotteries (Regulation) Act, 1998 to monitor the conduct of lotteries of Organising States within its territory.
Issue (ii): Whether the Kerala Paper Lotteries (Regulation) Amendment Rules, 2018 are ultra vires the parent Act or the Central Rules, and if so, to what extent.
Analysis: Rules 2(3A), 2(6A), 4(5) and 9A were held to be regulatory measures intended to secure compliance with the Act and the Central Rules, and were not found to trench upon the exclusive right of the Organising State. Rule 9A(3) was also sustained as a monitoring measure. Rule 4(4), however, went beyond monitoring and purported to make the Secretary to Government, Taxes Department the authority for the conduct of lotteries run, organised or promoted by other States, which intruded into the Organising State's statutory right to conduct its lottery. Applying severability, only the offending words were liable to be struck down.
Conclusion: The Amendment Rules are valid except that the words "including lotteries run/organized/promoted by other States" in Rule 4(4) are ultra vires and stand severed.
Final Conclusion: The appeal succeeds to a limited extent. The judgment under challenge is set aside, the State's rule-making competence is upheld, and the impugned amendment is sustained save for the severed portion of Rule 4(4).
Ratio Decidendi: Where the parent Act confers a general rule-making power on the State and the Central Rules impose a duty on the Host State to ensure lawful conduct within its territory, the Host State may frame regulatory rules to monitor compliance, but cannot use that power to assume the Organising State's statutory function of conducting the lottery itself.
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