TaxTMI 
TaxTMI 
2021 (10) TMI 240
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....la 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 After the formation of the State of Kerala, the Kerala Gaming Act, 1960 was enacted and the aforesaid enactments were repealed (to the extent it applied to the Malabar District, in the case of the Madras Act).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 houses in the State of Kerala. As per Section 2(1)....
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....ly 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 throw 4. ball throw 5. cup and coin; and 6. shooting contests" GRIEVANCE OF THE PETITIONERS 5. As per Ext.P7 notification, the game of rummy was taken out of the purview of the....
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....at 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 at any game was playing for any money, wager or stake; and it is contended that as far as games which come within the purview of the Act are concerned, stakes or no stakes is immaterial. According to him, rummy wh....
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....ph 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 judgment this Court observed that from the statement made on behalf of the Government it is revealed that the existing law, does not bring online gambling or online betting, within the purview of the Kerala Gaming Act, 1960, a....
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....bmitted 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 the basis of the submissions made by the counsel on either side, the following questions arise for consideration; a) Is Rummy is a game of mere skill, so as to take it out of the purview of the Act, as provided in Section 14 of....
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....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 which the State had approached the Hon'ble Supreme Court. The statutory provision which was considered by the Apex Court was Section 14 of the Public Gambling Act, 1867, which is similar to Section 14 of the Kerala Act. In paragraph 12 of the judgment, the Hon'ble Supreme Court held....
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.... 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 games which depend to a substantial degree upon the exercise of skill come within the stigma of "gambling", the Apex Court referred to the two Chamarbaugwala cases (supra), and held that a competition, success wherein does not depend to a substantial degree upon the exercise of skill, is now recognised to b....
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....8 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 is a game of chance and there is no skill involved in it." 20. The judgments of this Court in the two Chamarbaugwalla cases and in the Satyanarayana case [(1968) 2 SCR 387 : AIR 1968 SC 825 : 1968 Cri LJ 1009] clearly lay down that (i) the competitions where success depends on substantial degree of skill are not 'gambling' an....
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....d 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 of the Kerala Act provides for issuance of a notification exempting any game, the playing of which depends predominantly on skill, from all or any of the provisions of the Act subject to such restrictions and conditions as may be specified in the notification, admittedly (emphasis supplied), no such notification was issued by the Government exempting the game of Rummy played for stakes. There appears to be some....
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....stime 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 about the fact that in view of Ext.P7 notification, playing rummy is excluded from the provisions of the Act and that the Hon'ble Supreme Court has held that element of skill is predominant than the element of chance in the game of rummy. Regarding the question whether rummy played for stakes will amount to a violation of the provisions in the Act or not, the Bench expressed the view that it is a matter that has t....
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.... 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 ignorance or forgetfulness of some statutory provision or authority binding on the court concerned, or a statement of law caused by inadvertence or conclusion that has been arrived at without application of mind or proceeded without any reason so that in such a case some part of the decision or some step in the reasoning on which it is based, is found, on that account to be demonstrably wrong." 25. Applying the above legal principles, with all due re....
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....ment 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). Question No.4 appears to be a mistake since the word 'gambling' is not defined under the Kerala Act and only the word 'gaming' is defined. Regarding Question No.5, application of Sections 7 and 8 itself will depend on the question whether Rummy is covered by Section 14 or not. The Division Bench has not considered Section 14 of the Act at all. Question No.6 also appears to be a mistake since exclusion of a game of skill from the Kerala Act is under Section 14 and not under Sections 7 and 8....
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....an 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 respectively. 27. A Division Bench of the High Court of Madras in a batch of writ petitions considered the validity of the amendment introduced by the Tamil Nadu Government to the Tamil Nadu Gaming Act, whereby all forms of games being conducted in cyberspace, irrespective of the game involved being a game of mere skill, if such game is played for a wager, bet, money or other stakes was prohibited and struck down the amendment. In the judgment in Junglee Games India Private Limited & Anr. v. The State of Tamil Nadu & Ors. repo....
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.... 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 protection of Section 14 is available in the case. Section 14 deals with games of mere skill. The observation referred to by the State Attorney can hence only take in situations like "side betting" during a game of Rummy, which has been taken care of by Ext.P7 notification and to profit or gain made by the owner of the house or club from the game of rummy or any other game played for stakes. What matters is not the stakes but the profit or gain made by the owner of the house. "Side betting" is not a term that the law is not aware of. ....
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....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 the issuance of a notification under Section 14A is a legislative exercise and not a mere executive order capable of being set aside by the issuance of a certiorari. The question regarding the power to issue a writ of certiorari is no longer relevant since the petitioner has sought amendment of the writ petition by addition of a prayer for declaration. The contention that Section 14A takes away the substratum of the decision in Satyanarayana (supra) is not legally sustainable. The judgments of the Apex Court in Satyanarayana and K.R.Lakshmana....
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.... 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" contained in Section 14 and "any game the element of skill is more predominant than the element of chance" contained in Section 14A do not suggest that skill in playing a game is in any manner dependent on stakes. As such playing for stakes or playing not for stakes can never be a criterion to find out whether a game is a game of skill. On the question whether Online Rummy is a 'game of skill' and 'not of chance', I hold that on the very same reasoning adopted by the Hon'ble Supreme Court to find the game of Rummy as a 'game of....