TaxTMI 
TaxTMI 
2021 (10) TMI 240
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....nafter referred to as the Act or the Kerala Act). The petitioners are all companies which are engaged in the business of developing and offering online games of skill in India and they are aggrieved by the notification issued by the Government, amending the exemption notification issued on 30.09.1976 under Section 14A of the Act. The reference to the exhibits is as they are produced in W.P.(C)No.7785 of 2021 which is treated as the lead case. STATUTORY PROVISIONS:- 2. The State of Kerala which was formed by including areas which were under the erstwhile Governments of Travancore, Cochin and Malabar Presidency, was governed with respect to Gambling, by the Travancore Public Gambling Act, III of 1071ME (corresponding to 1896), The Cochin Public Gambling Act, IV of 1082 ME (corresponding to 1907) and the Madras Gaming Act, 1930 (III of 1930). After the formation of the State of Kerala, the Kerala Gaming Act, 1960 was enacted and the aforesaid enactments were repealed (to the extent it applied to the Malabar District, in the case of the Madras Act). The Kerala Gaming Act, 1960 was enacted to make better provision for the punishment of gaming and the keeping of common gaming house....
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....e year, or with fine which may extend to one thousand rupees, or both. Provided xxxxxxxx xxxxxxxxxxx " Section 14. Act not to apply to certain games.- Nothing in the foregoing provisions of this Act shall be held to apply to any game of mere skill wherever played. Section 14A. Exemptions.-The Government may, if they are satisfied that in any game the element of skill is more predominant than the element of chance, by notification in the Gazette, exempt such game from all or any of the provisions of this Act, subject to such restrictions and conditions as may be specified in the notification". 4. Section 14A was introduced by Act 24 of 1973 by way of amendment. Subsequent to the introduction of Section 14A, the Government of Kerala issued Ext.P7 notification dated 30.09.1976, which reads thus: "The Government of Kerala being satisfied that the element of skill is more predominant than the element of chance in the following games, hereby exempt those games from all the provisions of the said Act subject to the condition that no side betting shall be allowed in such games. 1. Rummy 2. Card games - 28, 56, 112 3. dart th....
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....d that the apprehensions regarding the children playing the game is more of a parental problem rather than a legal issue. Referring to paragraph 21 of the counter affidavit, it is submitted that the statement that rummy played for stakes is punishable is without any basis whatsoever, and is without any statutory backing. 7. The learned Senior Counsel submitted that Section 14 of the Act specifically excludes games of skill. It is submitted that 'skill' means 'predominant skill' since every game involves an element of chance. According to him, the game can become a gamble only if the chance is predominant and based on that bets are made. It is submitted that rummy played in club on a table is a permitted activity and "Online Rummy" played using the platform provided by the petitioners is only in the nature of a virtual court and does not in any manner differ from the game rummy which is played in a club house. Reference is made to Section 11 of the Act which says that it shall not be necessary, in order to convict any person of keeping a common gaming house, or of being concerned in the management of any common gaming house, to prove that any person found playing ....
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....at were taken into account by the Hon'ble Supreme Court in the judgment in Satyanarayana (supra). 9. Sri S.Sreekumar, Senior Advocate adopted the arguments of the learned Senior Counsel Sri Rohatgi and Sri Joseph Kodianthara and submitted that in paragraphs 18 and 19 of the judgment in K.R.Lakshmanan (supra) it has specifically been laid down that rummy is a game of skill. The learned Senior Counsel referred to Ext.P7 and submitted that many of the games included there are actually games of skill and not of chance. 10. Sri Santhosh Mathew appearing for the petitioner in W.P. (C)No.8440/2021 submitted that Act itself will not apply to the game of rummy, since rummy is a game of skill. According to him, no notification itself was required under Section 14A for the purpose of excluding rummy from the purview of the Act, since the game is covered by Section 14 of the Act. Reference is made to the judgment in Satyanarayana (supra) at paragraphs 3, 5 and 12 to say that the game of rummy is not a game of chance. 11. The counsel referred to Ext.P3 judgment of a Division Bench of this Court in W.P.(C) No.2096/2021, which was filed in public interest. In paragraph 8 of the judgm....
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....augwala reported in [AIR 1957 SC 699], R.M.D. Chamarbaugwala v. Union of India reported in [AIR 1957 SC 628], Satyanarayana (supra) and M.J.Sivani & Ors. v. State of Karnataka & Ors. reported in [(1995) 6 SCC 289]. It is submitted that the notification does not violate either the Parent Act or the plenary legislation nor is it against the Constitution and hence there are no grounds available to challenge the same. It is submitted that the Act came into force in 1960 and only Section 14 was then available. On 22.11.1967, the judgment in Satyanarayana (supra) was delivered. The said decision was under the Andhra Act where, only Section 14 was available and there was no provision like Section 14A at that point of time. It was in 1973 that Section 14A was introduced. A contention is hence raised that the judgment in Satyanarayana (supra) cannot be applied on all fours, since the Hon'ble Supreme Court was not considering a case wherein the enactment contained a provision in the lines of Section 14A. Reference is also made to the decision in Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise & Anr. reported in [(2016) 3 SCC 643]. ISSUES TO BE DECIDED 13. On th....
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....vities which can be regarded as lawful trading activities and that gambling is not a trade but res extra commercium. It was held that the enactment by which the control and regulation of the prize competition can only have application with regard to competitions in which success does not depend on any substantial degree of skill. 16. Ten years later, the question whether the game 'Rummy' is a game of chance or of skill, came to be considered by the Hon'ble Supreme Court, in Satyanarayana (supra). The question that was considered was whether the premises of a club known as the "Crescent Recreation Club" situated in Secunderabad was being used as a common gambling house and whether the persons who were found to be playing the game Rummy for stakes, at the time of a raid by the police could be said to be gambling therein. The Magistrate convicted the accused. On a revision petition filed by the accused, the Sessions Court referred the issue to the High Court under Section 438 of the Code of Criminal Procedure, recommending the quashing of the conviction and the setting aside of the sentences. A learned Single Judge of the High Court accepted the recommendation, against ....
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....n'ble Supreme Court took note of the definition of the word "gambling" contained in the The New Encyclopaedia Britannica, as "the betting or staking of something of value, with consciousness of risk and hope of gain on the outcome of a game, a contest, or an uncertain event the result of which may be determined by chance or accident or have an unexpected result by reason of the better's miscalculations" and the definition in Black's Law Dictionary which says "Gambling involves, not only chance, but a hope of gaining something beyond the amount played. Gambling consists of consideration, an element of chance and a reward". The Hon'ble Court held that Gambling in a nutshell is payment of a price for a chance to win a prize.(emphasis supplied). After comparing with a game of skill, the Court held that a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance and that it is the dominant element - 'skill' or 'chance' - which determines the character of the game. 18. In paragraphs 8 and 9 of the judgment, on the question whether the game....
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....e of rummy to be a game of mere skill (emphasis supplied) on the following reasoning: "We are also not satisfied that the protection of Section 14 is not available in this case. The game of rummy is not a game entirely of chance like the 'three-card' game mentioned in the Madras case [Somasundaram Chettiar, In re, AIR 1948 Mad 264 : 49 Cri LJ 434] to which we were referred. The 'three-card' game which goes under different names such as 'flush', 'brag' etc. is a game of pure chance. Rummy, on the other hand, requires certain amount of skill because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of rummy is a game of entire chance. It is mainly and preponderantly a game of skill. The chance in rummy is of the same character as the chance in a deal at a game of bridge. In fact in all games in which cards are shuffled and dealt out, there is an element of chance, because the distribution of the cards is not according to any set pattern but is dependent upon how the cards find their place in the shuffled pack. From this alone it cannot be said that rummy ....
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....if a case is registered by the Police under Sections 7 and 8 of the Kerala Act based on credible information or reasonable doubt that the activities carried on by the club or its members are not in accordance with law and thereby indulging in unlawful activities or nuisance? 20. The contentions before the Court were to the effect that playing the game of Rummy with stakes amounted to gambling and Sections 7 and 8 of the Kerala Act will be attracted. In paragraph 19 of the judgment the Division Bench observed that going by the decisions considered, it is clear that if the club is used as a gaming house for the purpose of playing rummy for stakes and all persons physically present there are found playing rummy, then they are certainly accused in the eye of law, provided the detecting officer has complied with Section 5 of the Kerala Act before making such a raid or inspection in the club. In paragraph 20, the Division Bench specifically held that Section 2(a) of the Kerala Act is not in pari materia with the Hyderabad Gambling Act, which arose for consideration before the Apex Court in Satyanarayana (supra). In paragraph 21, the Division Bench observed that even though Section 14A....
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....n K.R.Lakshmanan (supra) was rendered by a Three-Judge Bench in which Justice B.L.Hansaria who was a member of the Bench which decided M.J.Sivani (supra) was also a member. The observations in M.J.Sivani (supra) was considerably tempered down in the decision in K.R.Lakshmanan (supra). It is worthwhile to note that in Satyanarayana (supra), the Hon'ble Supreme Court did not hold that rummy played for innocent pastime alone is a game of skill and that if it is played for stakes, it becomes a game of chance. 21. In paragraph 30, the Division Bench has observed that it cannot agree that playing rummy for stakes within club premises by professional gamblers is a game of skill and that the issue has to be looked at from the social perspective as well. One of the petitioners herein had filed an application seeking review of the above said judgment of the Division Bench. By order dated 11.10.2019, another Division Bench of this Court dismissed the review petition. While dismissing the review petition, the Bench considered Section 14A of the Act and the judgment in Satyanarayana (supra) and Dr.K.R.Lakshmanan (supra). In paragraph 7 of the order, it was held that there is no dispute a....
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....he Hon'ble Supreme Court in the decision in Indore Development Authority v. Shailendra reported in [(2018) 3 SCC 412], in paragraphs 206, 210 and 211 held as follows: "206. The concept of "per incuriam" signifies those decisions rendered in ignorance or forgetfulness of some inconsistent statutory provisions, or of some authority binding on the court concerned. In other words, the concept means that a given decision is in disregard of the previous decisions of the court itself, or that it was rendered in ignorance of the terms of an applicable statute or of a rule having the force of law. xxxx xxxx xxxx 210. In MCD v. Gurnam Kaur [MCD v. Gurnam Kaur, (1989) 1 SCC 101] , it was held that decision of ignorance of rule is per incuriam, the Court has observed: "11. ... A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute." 211. In State of M.P. v. Narmada Bachao Andolan [State of M.P. v. Narmada Bachao Andolan, (2011) 7 SCC 639 : (2011) 3 SCC (Civ) 875 : AIR 2011 SC 1989], this Court has observed: "67. Thus, "per incuriam" are those decisions given in....
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....ply to the game of Rummy. The Division Bench has not considered the effect of Section 14, read with the above said judgments of the Hon'ble Supreme Court. e) The observation of the Division Bench in paragraph 21 of the judgment that no notification has been issued under Section 14A of the Act, notifying Rummy played with stakes as exempted, is apparently without noticing Ext.P7 notification. f) Since Rummy already comes within the purview of Section 14, there is no requirement of any notification under Section 14A exempting it from the provisions of the Act. However, Ext.P7 notification cannot be said to be without any purpose, since it ensures that Rummy if played, accompanied by side betting, comes within the purview of the Act. The above statutory provisions and their impact on the issue has not been considered by the Division Bench. g) The Division Bench has in paragraph 7 identified 7 questions that emerge. Questions 1,4,5 and 6 alone are relevant for the purpose of this case. The question No.1 posed does not require any detailed consideration in the light of the binding decision of the Apex Court in Satyanarayana and K.R.Lakshmanan (supra). Ques....
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....ngle Judge of the High Court of Punjab & Haryana held that an online game Dream fantasy 11 is a game of skill, applying the principles laid down by the Hon'ble Supreme Court in Satyanarayana and K.R.Lakshmanan (supra). A Division Bench of the Bombay High Court considered the very same issue of Dream 11 fantasy sports in the judgment in Gurdeep Singh Sachar v. Union of India reported in [2019 SCC OnLine Bom 13059] and agreed with the decision of the Punjab and Haryana High Court. A Division Bench of the High Court of Rajasthan had also considered the very same game Dream 11 in its decision in Chandresh Sankhla vs State of Rajasthan & Ors. reported in [2020 SCC Online Raj 264] and held that there is no element of betting or gambling involved and that it is a game of skill and not a game of chance. SLP (Civil) Diary No.18478/2020 filed by one Avinash Mehrotra against the judgment of the Rajasthan High Court was dismissed by the Hon'ble Supreme Court by its order dated 30.07.2021, wherein it is observed that Special Leave Petitions filed against the judgments of the Punjab and Haryana High Court and the Bombay High Court were dismissed on 15.06.2017 and 04.10.2019 & 13.12.2019 ....
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....e raised to the status of trade, commerce or intercourse and to be made the subject matter of a fundamental right guaranteed by Article 19(1)(g). We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient country's trade, commerce or intercourse to be declared as free under Article 301". The above observations are not in any way challenged since they apply in all cases where the element of gambling is involved over a game of chance. The observations will not however be of any help in cases where the statute excludes games where mere skill or predominant skill is involved. The Counsel referred to paragraph 12 in Satyanarayana (supra) which has been extracted above to submit that the observation "if there is evidence of gambling in some other way or that the owner of the house or the club is making a profit or gain from the game of Rummy or any other game played for stakes, the offence may be brought home" clearly shows that Rummy played for stakes is an offence. I am unable to accept the above proposition. The above said observation has necessarily to be read with the first sentence in paragraph 12 of the judgment which says that ....
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....ht to be exempted from the provisions of the Kerala Act, to a limited extent when it is not played for stakes, as a game predominantly of skill. Such a notification is totally ill-conceived in my opinion since, the moment online rummy is recognised as a game predominantly involving skill, it will come within the purview of Section 14 of the Kerala Act and nothing more is required to take it out of the purview of the other provisions of the Kerala Act, which speak of penalty for gaming. So also, stakes cannot be the criterion for assessing whether a game is one involving skill or chance. 31. Yet another contention advanced by the State Attorney is that Section 14A was brought in to remove the substratum of the decision of the Hon'ble Supreme Court in Satyanarayana (supra). It is contended that once the notification was issued under Section 14A, the process was complete. It is contended that the State has ample powers to take away the effect of the judgment by a legislative process. It is further contended that since power to grant exemption vide issuance of a notification includes the power to modify, Ext.P6 notification cannot be found fault with. It is also contended that t....
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....ation on something which is not betting or gambling. Ext.P7 to a certain extent be justified, if it is to be read as prohibiting side betting in a game of skill. CONCLUSIONS 33. On the basis of the considerations above, I go back to the issues identified in para.13 of this judgment. On the first issue whether Rummy is a game of mere skill, I hold on the basis of the binding judgments of the Apex Court in Satyanarayana and K.R.Lakshmanan (supra) and the statutory provisions contained in Sections 3 and 14 of the Kerala Act that Rummy is a game of mere skill. On the question whether Rummy is a game in which 'element of skill' is more predominant than the 'element of chance', and can be exempted from the provisions of the Act only by means of a notification, I hold that even without a notification being issued under Section 14A, Rummy remains to be a 'game of mere skill' as the word has been interpreted by the Hon'ble Supreme Court in Satyanarayana and K.R.Lakshmanan (supra). On the question whether Rummy when played for stakes becomes a game neither covered by Section 14 nor by a notification issued under Section 14A, I hold that the "mere skill" cont....