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2023 (5) TMI 926
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....Manjunath B, Sri. Varun Thomas Mathew, Sri. Onkar Sharma, Advocates) For the Respondents: (By Sri. N. Venkataraman, Additional Solicitor General A/W Sri. Jeevan J Neeralagi, Advocate Sri. Mukul Rohtgi, Senior Counsel A/W Sri. Pradeep Nayak & Smt. Anupama Hebbar Sri. Sankeerth Vittal And Sri. Karan Gupta, Advocates A/W Sri. Amit Anand Deshpande, Advocate For R-1 TO R-3, Smt. Jai M. Patil, Advocate For R-4) For Impleading Applicant ON IA 1/2022 Sri. Aravind Datar and Sri. Sajjan Poovayya, Senior Counsel A/W Miss, Raksha Agarwal Sri. Sameer Singh and Sri. Ravi Raghavan, Advocates For Impleading Applicant On IA 2/2022) ORDER The main question/issue that arises for consideration in these petitions is, whether offline/online games such as Rummy which are mainly/preponderantly/substantially based on skill and not on chance, whether played with/without stakes tantamount to 'gambling or betting' as contemplated in Entry 6 of Schedule III of the Goods and Services Act, 2017. I. FACTUAL MATRIX M/s.Gameskraft Technologies Pvt. Ltd., (for short 'the GTPL') claims to be an Online Intermediary Company incorporated in June 2017, who runs technology platforms that allow users to play....
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....022, W.P. No. 19561/2022, W.P.No. 20119/2022 and W.P.No. 20120/2022. Accordingly, the details of the instant writ petitions are as under: (a) W.P. No. 22010/2021 has been preferred by GTPL challenging the Attachment orders dated 17.11.2021 and 30.11.2021; (b) W.P. No. 18304/2022 is preferred by GTPL against the Intimation Notice dated 08.09.2022 issued under Section 74(5) of the CGST Act; (c) W.P.No. 19570/2022 is filed by GTPL assailing the impugned Show Cause Notice (SCN) dated 23.09.2022; (d) W.P.No. 19561/2022 is preferred by the Chief Financial Officer of GTPL challenging the impugned SCN dated 23.09.2022; (e) W.P.No. 20119/2022 is preferred by the Founders of GTPL challenging the impugned SCN dated 23.09.2022; (f) W.P.No. 20120/2022 is preferred by the Chief Executive Officers of GTPL challenging the impugned SCN dated 23.09.2022; 7. At the outset, it is relevant to state that the impugned Attachment orders having been passed on 17.11.2021 and 30.11.2021, the period of one year prescribed in Section 83 of the CGST Act having expired during the pendency of the subsequent petitions challenging the impugned SCN, this Court....
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....40 which is its consideration for facilitation of the game play and on which the Petitioner has been depositing GST. (ii) It is contended that the Respondents have issued the Impugned SCN whereby it has been alleged that the Petitioner is involved in 'betting/gambling' and supplies 'actionable claims' and that the petitioner is guilty of evasion of GST by misclassifying their supply as services under SAC 998439 instead of actionable claims which are goods and mis-declaring their taxable value, though the activities undertaken by the petitioner were in the form of betting/gambling which is an actionable claim and not a service. (iii) It is contended that the Impugned SCN is completely fallacious, perverse, and without jurisdiction or authority of law and the same is vitiated with malice and deserves to be quashed for the following grounds: • It is an undisputed fact that more than 96% of the game played on the platform of the Petitioner is 'Rummy' which a 'game of skill' and is Constitutionally protected as established by judgments of the Apex Court, this Court and other High Courts and the said position has remained unchanged even till today. It is also settled l....
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....ver the withdrawal wallet remains with the player and the Petitioner has no influence on the same. In such a scenario, it is completely absurd to say that the Petitioner induces the players to play more games by giving bonuses / discounts when in reality the option entirely lies with the players. A player exercising its own discretion to use the amount lying in his withdrawal wallet to play further games cannot be equated or even alleged to be an inducement on the part of the Petitioner. Further and without prejudice to the foregoing, providing discounts and incentives to market one's business and platform does not and cannot change the nature of games played on that platform. For instance, rummy will remain a game of skill irrespective of whether discounts were offered to a player for playing the game. • Insofar as issuance of invoices are concerned, the Petitioner has in fact acted in accordance with Section 31(3)(b) of the CGST Act which allows an assessee to not issue an invoice if the value of supply is less than INR 200. The Impugned SCN does not dispute the fact that more than 99.5% of the supplies made through the platform of the Petitioner had a value of less ....
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....ndents supposedly had the intelligence from the beginning that the Petitioner is involved in 'betting', however, never disclosed the same in the provisional attachment orders. The entire approach of the Respondents is motivated in nature. • It is well settled that "games of skill" played with monetary stakes does not partake the character of betting and it still remains within the realm of 'games of skill' only. The term 'betting and gambling' cannot be artificially bifurcated by the Respondents to carve out an exception by stating that 'games of skill' played with monetary stakes can also partake the character of betting and hence, be taxable at the rate of 28%. Trying to do so would result in obliterating well settled distinction between 'games of skill' and 'betting and gambling'. The Respondents have been unable to discharge the burden of proving that the Petitioner's games fall within the category of 'betting and gambling'. Further, no material or legal basis for such a classification of the Petitioner's business has been referred to in the Impugned SCN. • The Impugned SCN is premised on the fact that the Petitioner is involved in the supply of 'actio....
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....AS Services Pvt. Ltd., vs. State of Jharkhand -(2022) 58 GSTL 257; (21) Gurdeep Singh Sachar vs. Union of India - (2019) 30 GSTL 441 (Bom); (22) Ravindra Singh Choudhary vs. Union of India - (2020) 42 GSTL 195 (Raj); (23) State of Karnataka vs. State of Meghalaya -2022 SCC Online SC 350; (24) Varun Gumber vs. Union Territory of Chandigarh -2017 SCC Online P & H 5372; (25) Executive Club vs. State of Andhra Pradesh - (1998) 3 APLJ 138; (26) Patamata Cultural and Recreation Society vs. Commissioner of Police - 2004 SCC Online AP 963; (27) D.Krishna Kumar vs. State of A.P. - 2002 (3) APLJ 211; (28) Uniworth Textiles vs. Commissioner of Central Excise - (2013) 9 SCC 753; (29) Tamilnadu Housing Board vs. Collector of Central Excise - (1995) SUPP(1) SCC 50; (30) Continental Foundation vs. Commissioner of Central Excise - (2007) 216 ELT 177 (SC); (31) Densons Pultretaknik vs. Commissioner of Central Excise - 2003 (155) ELT 211 (SC); (32) Shreya Singhal vs. Union of India - (2015) 5 SCC 1; (33) Shayara Bano vs. Union of India - (2017) 9 SCC 1; (34) Twin Cities Cinem....
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.... but a pure game of chance. The test according to the Hon'ble Supreme Court is threefold to determine, whether a particular game is a Game of Chance or a Game of Skill. Firstly, it has to be identified on the facts and circumstances of each case. Secondly, the underlying facts must disclose that the success in the game preponderantly depends on skill or chance. If it is skill, then it is Game of Skill and if it is chance, then it is a Game of Chance. Thirdly, the skill must be discernible from the superior knowledge, training, attention, experience and adroitness of the player. • In the present facts of the case, the only criteria to enter a particular table in the Petitioner's platform is to stake a particular amount. Once an amount is staked, the Petitioner's platform places the player in a table where fellow players have also staked an equal amount. The Petitioner admits to this position. Further, the Petitioner's platform does not record the skill level of a player and does not disclose the skill level of a particular player to all the players seated at a table. This position is also admitted by the Petitioner. Therefore, a player of rummy on the Petitioner's platf....
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....unjab and Haryana High Court, Bombay High Court and Rajasthan High Court in the cases of Varun Gumber, Gurdeep Singh and Ravindra Singh's cases supra, pertaining to Dream 11 will have no application, as no factual investigations were made on a case to case basis and the Petitioners therein approached by way of public interest litigations. When the Bombay High Court decided on aspects relating to GST, the Hon'ble Supreme Court permitted the Union of India to file a review before the High Court and the same is still pending. The Rajasthan High Court took note of this and left it to the GST authorities to decide the issues. Therefore, the aspects of GST are still wide open and have not attained finality. Out of abundant caution, it is clarified that even the aspects of betting/gambling was decided without underlying facts and the Respondents are at liberty to revisit and examine the facts as it has never been done before. • Lastly, the judgment of this Court in All India Gaming Federation supra, will have no applicability as what was decided was only the vires of the 2021 Amendment treating Games of Skill on par with Games of Chance. Taking note that they fell under diffe....
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.... (21) Mahalakshmi Cultural Association vs. Director General of Police & Ors. - SLP(C)No.15371/2012 Dated 13.08.2015; (22) Mahalakshmi Cultural Association vs. Director General of Police & Ors. - SLP(C)No.15371/2012 Dated 18.08.2015; (23) M/s. Krida Sports And Games Pvt. Ltd., vs. Director General of Police & Ors. - Diary No(s). 7161/2019; (24) Ramachandran K. vs. The Circle Inspector of Police Perinthalmanna - WP(C)No.35535 of 2018; (25) Play Games 24 x 7 Private Limited vs. Ramachandran K. and Anr. - 2019 SCC Online Ker 23736; (26) Skill Lotto Solutions Pvt. Ltd., vs. Union of India and others - 2020 SCC Online SC 990; (27) Gaussian Network Pvt. Ltd., vs. Monica Lakhanpal & Anr. - C.R.P.119/2012 Dated 21.04.2016; (28) The State vs. Ramprakash P. Puri and Ors. - AIR 1964 Guj 223; (29) R.Chitralekha & Anr. Vs. State of Mysore & Ors. - 1964 AIR 1823; (30) Santosh vs. Central Bank of India - AIR 2003 MP 218; (31) State of U.P. & Ors. Vs. Jeet S. Bisht & Anr. - (2007) 6 SCC 586; (32) Deb Narayan Shyam and Ors. Vs. State of West Bengal and Ors. - AIR 2005 SC 1167; (33) State of M....
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....thority of law for the following reasons: • "Games of skill" are always a distinct class (never 'gambling' or 'gaming' or "betting & gambling") and always have been judicially differentiated from games of chance; • For distinguishing between skill and chance, the Courts have applied 'predominance' test, which is the watershed test. Statutes which save games of "mere skill" mean that the skill element is more than chance - never 100% skill - For example - how cards are distributed from a pack. • We are concerned with 'Rummy' - 'Rummy' per se in law has always been designated as a game of skill; The age-old distinction between skill and chance is vital and has been maintained in all statutes because States have no competence over skill but only chance. There is a rationale behind this distinction - goes to the root of legislative competence - since skill cannot fall under Entry 34 of List II of the Constitution; • It makes no difference if game of skill is played physically or virtually - the same 'predominance' test applies to ascertain the true character of the game - this artificial distinction between online and offline is merel....
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....are "business activities" that stand protected under Article 19 (1) (g) of the Constitution. This has been held so in RMDC-2's case supra, while discussing the consequences of 'Gambling'. Therefore, organising a game of rummy played with stakes for a commission is a business that stands protected under Article 19(1)(g). • Rummy played with stakes has been judicially permitted and is not considered as 'gaming' or 'gambling' as held in AIGF, Head Digital, Junglee Games cases supra and the Andhra Pradesh High Court. • In the case of G.S. Ananthaswamy Iyer vs. State of Karnataka, 1982 SCC OnLine Kar 104, this Court dealt with the latter portion of para -12 of K. Satyanarayana's case supra and rejected the arguments (which were similar to the arguments advanced by the learned ASG behalf of the Respondents herein) advanced by the State in the said case. • In another case of D.V.R Recreation Club vs. State of Karnataka - 2016 SCC OnLine Kar 8878, this Court has clearly held that rummy played with stakes is permissible and not an offence. The Judgment of a Court is not to be read as the "Euclid's Theorem" shorn of the facts and the context in which th....
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....gal principle that can be applied to the game of rummy played with stakes. The said sentence is a finding qua the specific competitions covered under sub-clause (ii)/Category II competitions offered through the medium of a News Paper, which is wholly distinct from the game of rummy played with stakes between two actual players. • In RMDC-1, the Apex Court noticed that Category (ii) was clubbed in between clauses (i) and (iii) which cover competitions that are of a pure gambling variety offered to the general public via a Newspaper. Therefore, Category II covers competitions which are akin to competitions that fall under Category I and III offered through the medium of a Newspaper. Category (ii) covers those rare category of games whose success requires the forecast of an event or a result, which cannot be made by ordinary persons (given that it may involve several imponderables). Such a forecast may possibly be made by conducting rigorous forensic or statistical study by persons who have the scientific or the technical or the super specialised knowledge to do so; it is when such games are offered to the general public, the forecast becomes a "shot at the hidden target"....
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....ention is also misconceived and untenable, since the Club in question in the said case was a "Members Club" and what was held to be possibly illegal was charging a "heavy charge" on the members for playing in card room for the purposes of making a profit or gain i.e. 5 points per game and the said scenario cannot be extended to the Petitioner Company's platform. Further, to suggest that paragraph- 10 of the said judgment prohibits making of any profit or gain derived from organising a game of skill would run counter to the definition of a "Common gambling-house" since to fall within the said definition, an "instrument of gaming" must be used for "profit or gain". However, at paragraph-12 of the said decision, the game of rummy was held to be protected under Section 14 of the Hyderabad Gambling Act, which necessarily implies that the said game is not hit by any of the other provisions of the Act and therefore, any profit or gain derived from playing 'rummy' would not make the organiser a Common gambling-house. If the said judgment is interpreted to mean that no fees can be imposed on players for playing a skill-based game, then effectively even an organiser of a chess competition, w....
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.... paragraph-14 is to be construed in this factual context alone. Notably, the Apex Court does not hold that "Video Gaming" is akin to Gambling. In fact, at paragraphs 13 and 18, the Apex Court acknowledges that offering video games is protected under Articles 19(1)(g) and 21 of the Constitution of India and in other words implicitly holds that such activities are not res extra commercium. In fact, nowhere in the judgment does the Apex Court hold that playing a game "predominantly of skill" played with money or money's worth or for stakes amount to 'gaming' or that such an activity amounts to 'gambling'. Thus Sivani's case cannot be construed to mean that playing a game which is preponderantly of skill played with either money or stakes amounts to gambling and must be seen to have been tempered by the clear enunciation of the law qua 'gaming' and 'gambling' in the later Three Judge Bench judgment in the case of K.R.Lakshmanan supra. • It is contended that K.R.Lakshmanan's case supra, apart from not favouring the petitioner, actually supported the claim of the respondents. This contention of the respondents is based on apparent misreading and misinterpretation of the rati....
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....he online versions of the game of rummy with other players on a real-time basis. • The players on these platforms are eligible to play the games upon payment of a platform fee (A) to the Operators which is charged as a consideration for providing the technology-based platform to the players to play such games. GST is discharged on the amount of platform fee collected by the Operators. • Each player is also required to contribute a pre-determined amount towards the prize pool (B), which shall be distributed to the winning player / players in accordance with the rules of each game. The players are informed of both (A) and (B) upfront before a game begins. The Operators only provide platform services in consideration of the platform fees (A) only. The contribution towards the prize pool is not a consideration for the platform services and the Operators have no interest over the same. In other words, the Operators do not have any "skin in the game". • The players contract with each other to make contributions to the prize pool and contract with each other to abide by the rules of the game. In terms of the service terms of the platforms, operators ....
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....ng the submission of the State that the Prize Competition Act, 1955, in so far it applies to competitions of skill will be governed under Entry 26 of List II. Therefore, in interpreting the Constitutional entry i.e., Entry 34 of List II, the Apex Court held that the phrase "betting and gambling" featuring in Entry 34 does not include games of skill. • The contentions urged by the petitioner with reference to RMDC-1, RMDC-2, Satyanarayana, M.J.Sivani, K.R.Lakshmanan, All India Gaming Federation, Junglee Games, Head Digital etc., are reiterated by the Intervenor. It is thus submitted that playing games of skill for stakes does not amount to gambling. Gambling is the act of playing a game of chance for stakes. Such staking in gambling amounts to betting. Betting and gambling are compendious terms and cannot be separated from one another. The term "betting" partakes the colour and character of the term "gambling", which means that the term betting can only be interpreted to apply to games of chance and games of skill stand excluded from betting. • It is not disputed that rummy is a game of skill. The key skills involved in rummy are memorizing the fall of the ....
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....pondents. • It is thus submitted that playing games of skill for stakes does not amount to gambling. Gambling is the act of playing a game of chance for stakes and such staking in gambling amounts to betting. Betting and gambling are compendious terms and cannot be separated from one another. The term "betting" partakes the colour and character of the term "gambling", which means that the term betting can only be interpreted to apply to games of chance and games of skill stand excluded from betting. VII. SUBMISSIONS OF APPLICANT IN I.A.No.1/2022 INTERVENOR: ALL INDIA GAMING FEDERATION • The business model of the Petitioner (i.e., of that of an intermediary that facilitates players playing on their platform) is similar to the one followed across the online gaming industry. The monies contributed by players to the prize pool is merely held in trust and the companies have no right, lien or interest over it as the entities merely charge a service fee for service provided (on which GST is paid). Accordingly, there is no supply of any goods or actionable claim by the entities involved. As on date, the revenue of the entire industry itself is not INR 21,000 cr....
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....ry of betting, separate from betting and gambling; and - Wagering on a game of skill does not amount to "betting and gambling". • "Betting and gambling" having attained constitutional significance and being nomen juris, "betting and gambling" under the Goods and Services Tax regime should be interpreted in the same manner as that in the Constitution of India. • Prior to the 101st amendment to the Constitution of India, the State legislatures had the power to tax "betting and gambling" under entry 62 of the List II. "Betting and Gambling" under Entry 62 is to be ascribed the same meaning as under Entry 34 (State of Karnataka vs. State of Meghalaya, C.A.No. 10466 of 2011, para 119). The deletion of "betting and gambling" from Entry 62 and simultaneous inclusion in the GST regime demonstrates the legislative / constitutional intention to transpose meaning. • Wagering or staking on a game of skill does not amount to "gambling". Section 9 of the Public Gambling Act, 1857 and Section 84 of the Karnataka Police Act, 1963 say that proof of playing for money is not required for conviction under the respective acts. Admittedly these acts deal w....
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....ames of skill played with stakes amounts to gambling and that when the Club makes a profit, it amounts to the offence of running a common gaming house is wholly erroneous. The Hon'ble Supreme Court went into the question of profits only because this was the only point considered by the High Court in the impugned order therein, as the High Court did not consider whether rummy was a game of skill or not. The Hon'ble Supreme Court subsequently holds in paragraph -12 that even otherwise, Rummy is a game of skill and that therefore the Hyderabad Gaming Act is question is not attracted. This is the ratio that emerges from Satyanarayana's case. • The last portion of paragraph-12 in Satyanarayana's case relied on by the Respondents says that the offence of being a "common gambling house" is attracted when the Club itself is concerned with the outcome of the game (or if there is side betting), as recognised by the Kerala High Court in Head Digital's case. It is no one's case that the Petitioner herein is interested on the outcome of a game played by players on its platform. Irrespective of who wins, the Petitioners, in terms of its contract with the players, collects a percenta....
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.... of law that playing of games of skill for wager amounts to gambling. • It was submitted that placing of stakes by a player who plays a game of skill (as in the case in the platform run by the petitioners), cannot be equated to gambling by third persons placing bets on the outcome of the cricket match. Playing a game of skill is a protected activity under Article 19(1) (g) and therefore, classifying such activity only on account of placing of stakes as gambling (and therefore a pernicious activity) will be manifestly arbitrary. Article 19(1)(g) guarantees the right to practice any profession or to carry on any occupation, trade or business. Any occupation, trade or business necessarily involves an element of earning monies to sustain one's livelihood and for profit. Therefore, it cannot be said in the same breath that playing of games of skill is protected under Article 19 (1) (g), while also saying that placing stakes on such games amounts to gambling and is illegal. • Reliance placed by the Respondents on paragraph-15 of M.J. Shivani's case to say that a novice playing a game of skill does not make it gambling is completely misplaced. This is effectively....
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..... Thus, the claim that the Petitioner is involved in supply of actionable claims is fallacious. Since the petitioner is not creating or transferring any actionable claims, the stakes placed by the players on the games cannot be treated as a supply of goods or services. VIII. SUBMISSIONS OF RESPONDENTS-REVENUE • Going by the nature and character of a game, Courts have classified them either as a game of skill or a game of chance. When the success in a game depends on skill or a substantial degree of skill, it gets classified as a game of skill or predominantly a game of skill. On the other hand, when the success in a game, depends on chance, then it becomes a game of chance. To reiterate, a skill based game becomes a game of skill. If skill predominates chance, it becomes a predominant game of skill, whereas a chance based game becomes a game of chance. • The question for consideration before this Hon'ble Court is not as to whether rummy played on the Petitioner's platform is a game of skill or chance, as Courts had already held that rummy is predominantly a game of skill. The question for consideration before this Hon'ble Court is something totally diff....
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....nclusions: • The act of placing stakes on forecasting the outcome i.e., predicting in anticipation of a future event which is uncertain and unknown is nothing but betting and gambling as the same is nothing but a shot at the hidden target.(RMDC-1 Paras 20 and 21). • If 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 i.e., the club will be a common gambling house and persons therein would be betting and gambling (K. Satyanarayana - Para 12). • Video gaming, therefore, is associated with stakes or money or money's worth on the result of a game, be it a game of pure chance or of mixed skill and chance. For a commoner or a novice, it is difficult to play video game with skill. Ordinary common people who join the game can hardly be credited with skill for success in the game. The forecast is nothing better than a shot at a hidden target (MJ Sivani Paras 14 and 15). • Section 49-A of the Police Act and Section 4 of the Gaming Act do not apply to wagering or betting in the club premises and on the horse-races conducted within the....
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....gher than the amount staked. • In short, Gambling is staking of money for a chance to win more money. • It was submitted that the answer to this question must lie in the negative. Be it a game of skill or a game of chance, both the games have one aspect in common and that is the uncertain outcome of the game. No player of the game knows with certainty the outcome of the game and it always remains an uncertain event until the game concludes. Therefore, placing stakes on an outcome of a game, irrespective of the game being of skill or chance, it amounts to betting and gambling. This contention can be explained by way of certain illustrations. • Assuming for a moment that two players A and B are placing a stake of INR 10 each on the outcome of a game of Mankatha. The outcome of the game is determined by a particular 'card number' falling on the inside a.k.a 'Ulle' or on the outside a.k.a 'Veliye'. There is no skill involved and the outcome is purely chance based. The winner of the game is rewarded INR 20 which is the total amount staked on the outcome of the game and this act squarely fits the definition of gambling as an amount of INR 10 was pla....
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....here all the players have staked a similar amount, after deducting the amount from the in-app wallet of the player. For example, if a player has determined INR 10,000 to be staked in a game of rummy, then the platform takes the player to a table where all players have staked INR 10,000 after deducting INR 10,000 from the wallet of the player. • Assuming there are four players in a table playing the Game of Rummy on the Petitioner's platform and each of them have staked INR 10,000, then the total amount staked on that particular table is INR 40,000. The Petitioner makes an average 10% profit at each game of Rummy played on the their platform and therefore, in this particular table, the profit of the Petitioner would be 10% of INR 40,000 i.e., INR 4,000. If this amount is reduced, then the four players are playing the game of rummy by placing INR 10,000 each with a hope to win INR 36,000. • In this example, what is important and pertinent is that each player is placing stakes of INR 10,000 to win INR 36,000 purely based on the outcome of a particular game of rummy which is equally uncertain for all the four players. The players on the Petitioner's platform a....
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.... power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well; * The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is, where an effective alternate remedy is available to the aggrieved person; * Exceptions to the rule of alternate remedy arise where, (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged; * An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law; * When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must....
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....x Court introduced this doctrine to India in order to constrict the scope of freedom of trade and commerce, a fundamental right, guaranteed under Article 19(1)(g) of the Indian Constitution. The said doctrine constricts the scope by excluding certain "immoral" or "noxious" trade activities from the scope of Article 19(1)(g) and thereby, depriving them of Constitutional protection. It was held that the doctrine of res extra commercium can be applied having regard to the obnoxious nature of trade. Gambling activities from their very nature are in essence are extra-commercium and are hence, not entitled to protection under Article 19(1)(g) of the Constitution. 2. In the case of State of Punjab Vs Devans Modern Breweries Ltd - [2004] 13 ILD 481 (SC), the Apex Court held that Res extra commercium means, things beyond commerce, i.e., which cannot be bought or sold, such as public roads, rivers, titles of owners etc. Similarly, in the case of Khoday Distilleries Ltd Vs State of Karnataka (1995) 1 SCC 574, it was held as under: "What articles and goods should be allowed to be produced, possessed, sold and consumed is to be left to the judgment of legislative and executive wisdo....
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....d for medicinal purposes." 3. In the case of B.R. Enterprises Vs State of UP 2001 - (1999) 9 SCC 700, it was held as under: "Lottery is Gambling Activity. State government prohibiting the sale of lottery tickets of other states within its territory valid only if that state is declared to be a lottery free zone. There are three ingredients in the sale of lottery tickets, namely, (i) price, (ii) chance and (iii) consideration. So, when one purchases a lottery ticket, he purchases for a prize, which is by chance and the consideration is the price of the ticket. The holder of such ticket knows, the consideration which he has paid may be for receiving nothing (para 55).'Trade' [in Article 19(1)(g) or 301] is an exchange of any article either by barter or for money or for service rendered. In other words, it is exchange between two parties one who tenders the consideration and the other who returns for this consideration, goods, money, service or such other thing. Party paying consideration in any trade is aware for what he is paying the consideration. He receives for the consideration an ascertained thing or service. It is neither hypothetical nor it is a contract for any un....
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.... any, is permissible. The concept of res extra commercium may in future be required to be considered afresh having regard to its origin to Roman Law as also the concept thereof. Conceptually, business may be carried out in respect of a property which is capable of being owned as contrasted to those which cannot be. Having regard to the changing concept of the right of property, which includes all types of properties capable of being owned including intellectual property, it is possible to hold that the restrictions which can be imposed in carrying on business in relation thereto must only be reasonable one within the meaning of clause (6) of article 19 of the Constitution of India. Right of property although no longer a fundamental right, but indisputably is a human right. [See Vimlaben Ajitbhai Patel v. Vatslaben Ashokbhai Patel [2008] 4 SCC 649 and Karnataka State Financial Corpn. v. N. Narasimahaiah [2008] 5 SCC 176]." 5. It is therefore clear that there is sufficient jurisprudence to show that lottery, betting and gambling will be seen as noxious and per se classified 'res extra commercium' as beyond commerce. Concept of GST and Definition of Business under GST ....
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....rases 'goods' and 'services' * Goods: The term 'Goods' has been defined in Section 2(52) of CGST Act, 2017 as every kind of movable property but, Excludes Includes money and securities actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply * Service: The term 'Services' has been defined in Section 2(102) of CGST Act, 2017 to mean anything other than the following : (a) goods, (b) money and (c) securities but 'Services' includes the following : (a) activities relating to the use of money or (b) conversion of money by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination where a separate consideration is charged for the above. Concept of Supply Under the erstwhile regime, the various indirect taxes were levied on varied activities viz., manufacture, sale or import of goods and on rendering of services. Consequent to introduction of GST regime w.e.f., 1st July 2017, the GST is levied solely on the concept of 'supply' of goods and ser....
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....local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. Note: As amended by CGST (Amendment) Act, 2018 with retrospective effect from 1st July 2017. Notified to be effective from retrospective date vide Notification No. 2/2019-C.T., dated 29-1-2019 which came into effect from 1-2-2019. (4) It is interesting to note that though the 'supply' of goods or services is essential to attract levy of GST, there is no direct reference to the same in the Article 246A - 'Special provision with respect to goods and services tax' of Constitution of India as amended by the 101st Constitutional Amendment Act, 2016 w.e.f. 16th September, 2016. (5) Though both the Parliament and the Legislature of ev....
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.... a consideration. 2. It is relevant to note that Section 7 of CGST Act, 2017 has been amended by CGST (Amendment) Act, 2018 with retrospective effect from 1st July, 2017. Note: This amendment was notified with retrospective effect from 1.7.2017 vide Notification No. 2/2019-C.T., dated 29-1-2019 which came into effect from 1-2-2019. 3. The provisions of Section 7 consequent to the aforesaid retrospective amendment are analysed as under: (i) Section 7 has been amended to make it clear that the entries covered in Schedule II to the CGST Act, 2017 are merely for classification purposes and would not by itself constitute supply on standalone basis. Accordingly, the subsection (1)(d) has been omitted. (ii) The sub-section (1A) makes it clear that where certain activities or transactions, which constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. (iii) Consequently, amendments also made in the section so as to incorporate the references to sub-section (1A). (iv) In terms of Section 7(1)(c), the activities listed in Schedule ....
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....ere should be consideration, it should be in course or furtherance of business should be satisfied even by the activities falling under section 7(1)(d). This view is now reiterated by the insertion of sub-section (1A) to Section 7 after omission of sub-section (d) to Section 7(1). Definition of 'Business': We must necessarily notice the definition of 'business' in the GST legislations, as there is a marked departure as is highlighted below and as found in Section 2(17) of CGST Act, 2017, which reads as under:- "business" includes-- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of subclause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a....
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.... ambit of the expression 'wagering contract' as contemplated under Section 30 of the Act. [Subhash Kumar Manwani vs State of MP, AIR 2000 MP 109, 110] Black's Law Dictionary Wager - A contract by which two or more parties agree that a certain sum of money or other thing shall be paid or delivered to one of them or that they shall gain or lose on the happening of an uncertain event or upon the ascertainment of a fact in dispute, where the parties have no interest in the event except that arising from the possibility of such gain or loss. The word "wagering" is practically synonymous with the words betting and gambling and the terms are so used in common parlance and in statutory and constitutional enactments (Mc Donald v Bryant, 238 Ark. 338, 381 S.W.2d 736, 738] Any other similar activity - * Rule of Ejusdem Generis shall apply. As per this doctrine, when particular words pertaining to a class, category or genus are followed by general words, the words are construed as limited to things of the same kind as those specified. Therefore, applying the above principle, the phrase "any other similar activity' would include those activities that are akin to wager. B....
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....ottery, etc. But that in itself, therefore, would not mean that lottery, betting and gambling are the same as other games of skill, which distinction can still be made to justify lower tax rates for the latter, if any and that is precisely what would be decided in this petition. Actionable claim under Schedule III of CGST Act The said Schedule III referred in Section 7(2) of the Act reads as under: "SCHEDULE III [See Section 7] Activities or transactions which shall be treated neither as a supply of goods nor a supply of services 1 ..... 6. Actionable claims, other than lottery, betting and gambling." As per Entry No. 6 of Schedule III, actionable claims except lottery, betting and gambling are neither considered as goods nor services. Section 2(1) of CGST Act, 2017; "Actionable claim shall have the same meaning as assigned to it in Section 3 of the Transfer of Property Act, 1882." Section 3 of the Transfer of Property Act, 1882 - "actionable claim means a claim to any debt, other than a debt secured by mortgage of immovable property or by the hypothecation or pledge of movable property, or to any bene....
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....on of business would include wagering and other similar activities and that lottery, betting and gambling which are actionable claims is defined as goods under the legislation. However, since Schedule III clearly mentions and excepts lottery, betting and gambling from the generic term of actionable claims to ensure that it could be taxed, necessarily the interpretation of games of skill is fundamental to understand whether they fit into the realm of actionable claim on one side or whether they would fit into the realm of the sub sect of actionable claim, that is, lottery, betting and gambling so that they could be subjected to tax in the latter category. If they are in the former category, they would not be exigible to tax by virtue of Schedule III. 2. The scope of "betting and gambling" came to be considered by the Hon'ble Supreme Court in RMDC-2 wherein the Apex Court followed its decision in RMDC-1 and recognized the distinction between gambling activities and games of substantial skill and excluded games of skill (where success depends on skill to a substantial degree) from the scope of gambling (and consequently from the scope of entry "betting and gambling"). ....
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....ument. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law. 147. xxx xxx xxx 147.1. In Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209, this Court had examined the question of stamp duty in an underlying contract with an arbitration clause and in the context had drawn a distinction between the first and second part of Section 7(2) of the Arbitration Act, albeit the observations made and quoted above with reference to "existence" and "validity" of the arbitration agreement being apposite and extremely important, we would repeat the same by reproducing para 29 thereof: (SCC p. 238) "29. This judgment in Hyundai Engg. Case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607] is important in that what was specifically under consideration was an arbitration ....
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.... In Jayant Verma (supra), this Court has referred to an earlier decision of this Court in Dalbir Singh & Ors. vs. State of Punjab 5 to state that it is not the findings of material facts, direct and inferential, but the statements of the principles of law applicable to the legal problems disclosed by the facts, which is the vital element in the decision and operates as a precedent. Even the conclusion does not operate as a precedent, albeit operates as res judicata. Thus, it is not everything said by a Judge when giving judgment that constitutes a precedent. The only thing in a Judge's decision binding as a legal precedent is the principle upon which the case is decided and, for this reason, it is important to analyse a decision and isolate from it the obiter dicta. RMDC-1 This is an appeal by the State of Bombay from the judgment and order passed on January 12, 1955 by The court of appeal of the High Court of Judicature of Bombay confirming, though on somewhat different grounds, the judgment and order passed on April 22, 1954, by a Single Judge of the said High Court allowing with costs the present respondents' petition under Article 226 of the Cons....
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....rticulars. Thus, the words "but does not include a prize competition contained in a newspaper printed and published outside the Province of Bombay", which occurred in the definition of Prize Competition in Section 2(1)(d) of the 1948 Act, were deleted and the effect of this deletion was that the scope and the application of the 1948 Act so amended became enlarged and extended so as to cover prize competitions contained in newspapers printed and published outside the State of Bombay. After clause (d) of Section 2(1) the Amending Act inserted a new clause (dd) which defined the words "Promoter". A new section was substituted for the old Section 12 and another new section was inserted after Section 12 and numbered as Section 12-A. By this new Section 12-A provision was made for the levy in respect of every prize competition contained in a newspaper or a publication printed outside the State of Bombay for which a licence was obtained under the Act of a tax at such rates as might be specified not exceeding the rates specified in Section 12 or in a lump sum having regard to the circulation or distribution of the newspaper or publication in the State of Bombay. It is pointed out that the ....
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.... on the trade or business of the petitioners were not reasonable restrictions in the interests of the general public and, therefore, contravened the fundamental right of the petitioners, who were citizens of India, to carry on their trade or business under Article 19(1)(g) of the Constitution. (i) That Sections 10, 12 and 12-A of the said Act offended against Article 14 of the Constitution inasmuch as they empowered discrimination between prize competitions contained in newspapers or publications printed and published within the State and those printed and published outside the State. 10. The State of Bombay, which is now the appellant before us, on the other hand, maintained that (a) The prize competitions conducted by the petitioners were a lottery. (b) The provisions of the impugned Act were valid and competent legislation under Entries 33, 34 and 62 of the State List. (c) The impugned Act was not extra-territorial in its operation. (d) The prize competitions conducted by the petitioners were opposed to public policy and there could therefore be no trade or business of promoting such prize competitions. (e) As the pe....
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....te of Bombay, its servants and agents, do allow the petitioners to carry on their trade and business of running the Prize Competition mentioned in the petition and do forbear from demanding, collecting or recovering from the petitioners any tax as provided in the impugned Act or the said Rules in respect of the said Prize Competition and that the State of Bombay do pay to the petitioners their costs of the said applications. 11. Being aggrieved by the decision of the trial Judge, the State of Bombay preferred an appeal on June 8, 1954. The court of appeal dismissed the appeal and confirmed the order of the trial Judge, though on somewhat different grounds. It differed from the learned trial Judge on the view that he had taken that there was no legislative competence in the Legislature to enact the legislation. It held that the topic of legislation was "gambling" and the Legislature was competent to enact it under Entry 34 of the State List. It, however, agreed with the learned trial Judge that the tax levied under Section 12-A was not a tax on gambling but that it was a tax which fell under Entry 60. It held that there was legislative competence in the Legislature to impos....
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....l and to tax lotteries and prize competitions. It is not the purpose of the Act to prohibit either the lotteries or the prize competitions. They urge that the impugned Act deals alike with prize competitions which may partake of the nature of gambling and also prize competitions which call for knowledge and skill for winning success and in support of this contention reliance is placed on the definition of "prize competition" in Section 2(1)(d) of the impugned Act. We are pressed to hold that the impugned Act in its entirety or at any rate insofar as it covers legitimate and innocent prize competition is a law with respect to trade and commerce under Entry 26 and not with respect to betting and gambling under Entry 34. They also urge that in any event the taxing provisions, namely, Sections 12 and 12-A are taxes on the trade of running prize competitions under Entry 60 and not taxes on betting and gambling under Entry 62. We are unable to accept the correctness of the aforesaid contentions for reasons which we proceed immediately to state. 17. As it has already been mentioned, the impugned Act replaced the 1939 Act which dealt only with prize competitions. Section 2(2) of t....
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....of two parts separated from each other by the disjunctive word "or". Both parts of the qualifying clause indicated that each of the five kinds of prize competitions which they qualified were of a gambling nature. Thus a prize competition for which a solution was prepared before hand was clearly a gambling prize competition, for the competitors were only invited to guess what the solution prepared beforehand by the promoters might be, or in other words, as Lord Hewart, C.J., observed in Coles v. Odhams Press, Ltd. [LR (1936) 1 KB 416], "the competitors are invited to pay certain number of pence to have the opportunity of taking blind shots at a hidden target". Prize competitions to which the second part of the qualifying clause applied, that is to say, the prize competitions for which the solution was determined by lot, was necessarily a gambling adventure. On the language used in the definition section of the 1939 Act as well as in the 1948 Act, as originally enacted, there could be no doubt that each of the five kinds of prize competitions included in the first category to each of which the qualifying clause applied was of a gambling nature. Nor has it been questioned that the thi....
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....ccess in which does not depend to a substantial degree upon the exercise of skill;" It will be noticed that the concluding sentence "but does not include a prize competition contained in a newspaper printed and published outside the Province of Bombay" has been deleted. This deletion has very far reaching effect, for it has done away with the exclusion of prize competitions contained in a newspaper printed and published outside the State of Bombay from the scope of the definition. In the next place, it should be noted that the definition of prize competition still comprises three categories as before. The second and the third categories are couched in exactly the same language as were their counterparts in the earlier definitions. It is only in the first category that certain changes are noticeable. The five kinds of prize competitions that were included in the first category of the old definitions are still there but instead of their being set out one after another in a continuous sentence, they have been set out one below another with a separate number assigned to each of them. The qualifying clause has been amended by inserting the words "or is not" after the word "is" ....
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....ions included in the first category were of a gambling nature. We find no cogent reason-and none has been suggested-why the Legislature which treated lotteries and prize competitions on the same footing should suddenly enlarge the first category so as to include innocent prize competitions. To hold that the first category of prize competitions include innocent prize competitions will go against the obvious tenor of the impugned Act. The 1939 Act dealt with prize competitions only and the first category in the definition given there comprised only gambling competitions. The 1948 Act clubbed together lotteries and prize competitions and the first category of the prize competitions included in the definition as originally enacted was purely gambling as both parts of the qualifying clause clearly indicated. Section 3 of the Act declared all lotteries and all prize competitions unlawful. There could be no reason for declaring innocent prize competitions unlawful. The regulatory provisions for licensing and taxing apply to all prize competitions. If it were intended to include innocent prize competitions in the first category, one would have expected the Legislature to have made separate....
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....ill as will enable them, by the application of their skill, to attain success. For most, if not all, of them the forecast is nothing better than a shot at a hidden target. Apart from the unlikelihood that the Legislature in enacting a statute tarring both lotteries and prize competitions with the same brush as indicated by Section 3 would squeeze in innocent prize competitions in between two categories of purely gambling varieties of them, all the considerations and difficulties we have adverted to in connection with the construction of the first category and the qualifying clause therein will apply mutatis mutandis to the interpretation of this second clause. 21. Reliance is placed on Section 26 of the English Betting and Lotteries Act, 1934 (24 & 25 Geo. 5 c. 58) in aid of the construction of the second category of prize competitions included in the definition given in the impugned Act. The relevant portion of Section 26 of the aforesaid Act runs thus: "26. (1) It shall be unlawful to conduct in or through any news paper, or in connection with any trade or business or the sale of any article to the public- (a) any competition in which prizes are offered....
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....mbling under Entry 34. It is not necessary for us in this case to consider whether the principle laid down by Sir Maurice Gwyer, C.J., in the Hindu Women's Right to Property Act case [(1941) FCR 12] can be called in aid to cut down the scope of a section by omitting one of two things when the section on a proper construction includes two things, for we are unable, with great respect, to agree with The court of appeal that on a proper construction the definition covers both gambling and innocent competitions. In our view, the section, on a true construction, covers only gambling prize competitions and the Act is a law with respect to betting and gambling under Entry 34. As, for the foregoing reasons, we have already arrived at the conclusion just stated, it is unnecessary for us to refer to the language used in the third category and to invoke the rule of construction which goes by the name of noscitur a sociis relied on by learned counsel for the appellant. 22. The next point urged is that although the Act may come under Entry 34, the taxing provisions of Section 12-A cannot be said to impose a tax on betting and gambling under Entry 62 but imposes a tax on trade under....
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.... of administration to collect the duty in respect of the gambling activities represented by each of the entries when the same reaches the hands of the promoters. The tax on gambling is a well recognised group of indirect taxes as stated by Findlay Shirras in his Science of Public Finance Vol. II p. 680. It is a kind of tax which, in the language of J.S. Mill quoted by Lord Hobhouse in Bank of Toronto v. Lambe [LR (1887) 12 AC 575] is demanded from the promoter in the expectation and intention that he shall indemnify himself at the expense of the gamblers who sent entrance fees to him. That, we think, is the general tendency of the tax according to the common understanding of men. It is not difficult for the promoters to pass on the tax to the gamblers, for they may charge the proportionate percentage on the amount of each entry as the seller of goods charges the sales tax or he may increase the entrance fee from 4 annas to 5 annas 6 pies to cover the tax. If in particular circumstances it is economically undesirable or practically impossible to pass on the tax to the gamblers, that circumstance is not a decisive or even a relevant consideration for ascertaining the true nature of t....
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....ling under Entry 62, for there is no constitutional limit to the quantum of tax which can be imposed by a law made under that Entry. For reasons stated above, we are satisfied that Section 12-A is supportable as a valid piece of legislation under Entry 62. In RMDC-1, it was held by the Apex Court that any game/competition that relies substantially upon exercise of skill cannot be classified as 'gambling'; it was also held that gambling or conducting the business of gambling is extra-commercium and hence not included within the meaning of 'trade, commerce or intercourse' and consequently, not protected by the fundamental right to trade and profession under Article 19(1)(g) or the freedom of trade, commerce and intercourse under Article 301. 2. The contention of the respondents that in RMDC-1, it was held that category (ii) i.e., "any competition in which prizes are offered for forecasts of the results either of a future event or of a past event the result of which is not yet ascertained or not yet generally known" may not be dependent on chance, but may include competitions, in which the exercise of knowledge and skill is present was rejected by the Apex Court, which that such....
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....f skill, where the person playing the rummy is clearly interested in winning, which is also a circumstance to rule out the possibility of it being called a wagering contract. The contention that it matters not whether the player or some third person is staking money is not apposite considering the fact that the person who stakes does so based on the confidence that he has on his skills and not his luck. 7. As rightly contended by the petitioners and intervenors, the contention of the respondents that in RMDC-1, it was held that any game whose result is based on a 'forecast' is a gambling activity is liable to be rejected. At paragraph 17, the tripartite categorisation of competitions by the Apex Court was in the context of Clauses (i), (ii) and (iii) of the definition of "prize competition" as defined under Section 2(1) (d) of the 1948 Act. Such prize competitions were offered through the medium of Newspapers. In the said paragraph-17, it was concluded that the competitions that fall under Category I & III were in the nature of gambling. Notably, paragraph-17 lays down a general principle which is that, "a competition success wherein does not depend to a substantial degree upon ....
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....made by conducting rigorous forensic or statistical study by persons who have the scientific or the technical or the super specialised knowledge to do so; it is when such games are offered to the general public, the forecast becomes a "shot at the hidden target". 10. The argument of the Respondents that placing of bets on games of skill amounts to forecasting of results on a future event, and consequently amounts to gambling, by placing reliance on RMDC-1 is entirely misplaced. The Apex Court in RMDC-1 has held that sub- clause (b) of the definition of 'prize competitions in Section 2 (1) (d) of the Bombay Lotteries and Prize Competition Control and Tax Act, 1948, should be read to mean as applying only to games that are gambling in nature and cannot take within its sweep innocent prize competitions. Thus, forecasting for the purposes of sub - clause (b) of Section 2 (1) (d) can only mean forecasting by a third party on an event, the outcome of which is not dependant on the skill of the player involved, such as the result of the rolling of a dice. This is an exclusion of games of skill and cannot be read to mean that all manner of forecasting is gambling. 11. That there is an....
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....prize or prizes (whether in cash or otherwise) to be offered in any month exceeds one thousand rupees; and in every prize competition, the number of entries shall not exceed two thousand. 5. Subject to the provisions of Section 4, no person shall promote any prize competition or competitions in which the total value of the prize or prizes (whether in cash or otherwise) to be offered in any month does not exceed one thousand rupees unless he has obtained in this behalf a licence granted in accordance with the provisions of this Act and the rules made thereunder." Then follow provisions as to licensing, maintaining of accounts and penalties for violation thereof. Section 20 confers power on the State Governments to frame rules for carrying out the purpose of the Act. In exercise of the powers conferred by this section, the Central Government has framed rules for Part C States, and they have been, in general, adopted by all the States. Two of these rules, namely, Rules 11 and 12 are impugned by the petitioners as unconstitutional, and they are as follows: "11. Entry fee.-(1) Where an entry fee is charged in respect of a prize competition, such fee shall be p....
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....rs before us cannot seek the protection of Article 19(1)(g), and that the question whether the restrictions enacted in Sections 4 and 5 and Rules 11 and 12 are reasonable and in the interests of the public within Article 19(6) does not therefore arise for consideration. 5. As regards competitions which involve substantial skill however, different considerations arise. They are business activities, the protection of which is guaranteed by Article 19(1)(g), and the question would have to be determined with reference to those competitions whether Sections 4 and 5 and Rules 11 and 12 are reasonable restrictions enacted in public interest. But Mr Seervai has fairly conceded before us that on the materials on record in these proceedings, he could not maintain that the restrictions contained in those provisions are saved by Article 19(6) as being reasonable and in the public interest. The ground being thus cleared, the only questions that survive for our decision are (1) whether, on the definition of "prize competition" in Section 2(d), the Act applies to competitions which involve substantial skill and are not in the nature of gambling; and (2) if it does, whether the provisions....
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....ions of the statute, and construe the language of Section 2(d) in the light of the indications furnished by them. 9. Having regard to the circumstances under which the resolutions came to be passed, there cannot be any reasonable doubt that the law which the State legislatures moved Parliament to enact under Article 252(1) was one to control and regulate prize competitions of a gambling character. Competitions in which success depended substantially on skill could not have been in the minds of the legislatures which passed those resolutions. Those competitions had not been the subject of any controversy in court. They had done no harm to the public and had presented no problems to the States, and at no time had there been any legislation directed to regulating them. And if the State legislatures felt that there was any need to regulate even those competitions, they could have themselves effectively done so without resort to the special jurisdiction under Article 252(1). It should further be observed that the language of the resolutions is that it is desirable to control competitions. If it was intended that Parliament should legislate also on competitions involving skill, ....
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.... under the one or the other. The distinction between the two classes of competitions has long been recognised in the legislative practice of both the United Kingdom and this country, and the courts have, time and again, pointed out the characteristic features which differentiate them. And if we are now to ask ourselves the question, would Parliament have enacted the law in question if it had known that it would fail as regards competitions involving skill, there can be no doubt, having regard to the history of the legislation, as to what our answer would be. Nor does the restriction of the impugned provisions to competitions of a gambling character affect either the texture or the colour of the Act; nor do the provisions require to be touched and re-written before they could be applied to them. They will squarely apply to them on their own terms and in their true spirit, and form a code complete in themselves with reference to the subject. The conclusion is therefore inescapable that the impugned provisions, assuming that they apply by virtue of the definition in Section 2(d) to all kinds of competitions, are severable in their application to competitions in which success does not ....
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....nce, the Apex Court stated that it may be difficult to discern, whether a given competition belongs in one of the categories or not, but once the true nature of the competition is determined, it will fall into one of the categories. 6. The challenged provisions were presumed to apply to all types of competitions by virtue of the definition in Section 2 (d), and that they were severable in their application to competitions, in which accomplishment is not dependent on skill to any significant amount. 7. As it was in dispute whether Section 4 and Section 5 and also Rules 11 and 12 of the Act is void in its application to those competitions in which success did not depend on any skill, it was to be decided by the Apex Court with reference to application of doctrine of severability that a statute which is void in part will be treated as void in overall or whether the valid part is capable of enforcement. 8. The Apex Court decided the interpretation of Section 2(d) by referring to the circumstances that led to the making of this legislation. Moreover, the Apex court applied the severability principle as to the application of Section 4 and Section 5 and Rules 11 and 12 of the Act....
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....severed for separate treatment. 12. Thus a careful scrutiny of the ratio laid down in RMDC-1 and RMDC-2 is sufficient to indicate that the same completely support the case of the petitioners and intervenors and consequently, the various contentions urged by the respondents in this regard cannot be accepted. SATYANARAYANA'S CASE The State of Andhra Pradesh appeals by special leave against the judgment of the High Court of Andhra Pradesh in which, accepting a reference by the Sessions Judge, the conviction of the respondents under Sections 4 and 5 of the Hyderabad Gambling Act (2 of 1305-F) ordered by the 5th City Magistrate at Secunderabad has been set aside. 2. The short question in this case is whether the premises of a club known as the "Crescent Recreation Club" situated in Secunderabad were being used as a common gambling house and whether the several respondents who were present at the time of the raid by the police could be said to be gambling therein. The facts of the case are as follows: 3. On May 4, 1963, the police headed by Circle Inspector Krishnaswami raided the premises of the club. They found Respondents 1-5 playing a card game ....
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....closure; room or place, whether by way of charge for the use of the instruments of gaming, or of the house enclosure, room or place, or otherwise howsoever. Explanation.- The word 'house' includes a tent and all enclosed space". The contention in regard to this definition is that the evidence clearly disclosed that the club was being used as a common gambling house and therefore the penal provisions of the Act were clearly attracted. We are concerned additionally with several sections from the Gambling Act which need to be seen. Section 4, which follows in outline the corresponding section in the Public Gambling Act, provides for penalty for an owner, occupier or person using common gambling house and includes within the reach of the section persons who have the care or the management of or in any manner assist in conducting, the business of, any such house, enclosure or open space. The members of the club which is a ("Members'Club") would prima facie be liable but as they are not before us, we need not consider the question whether they should also have been arraigned in the case or not. The Secretary and the Treasurer, who were respectively Accused 7 and 6 w....
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.... 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. Of course, 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. In this case, these elements are missing and therefore we think that the High Court was right in accepting the reference it did. 13. The appeal fails and is dismissed. Both sides are ad-idem as regards the ratio laid down by the Apex Court in Satyanarayana's case that Rummy preponderantly was a game of skill and that from this alone, it cannot be said that Rummy is a game of chance and there is no skill involved in it. 2. This decision was heavily relied upon by the Respondents to submit that playing a game ....
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....y other game played for stakes, the offence of operating a "common gaming house" may be attracted. There is no inference, therefore, to suggest that games of rummy when played for stakes would take it into the realm of gambling and such an inference cannot be accepted. 5. It is true that in Satyanarayana's case, Rummy was in fact being played for stakes. Even so, the Court held that rummy is a game of skill and outside the purview of betting and gambling. Further, it was held that recovery of small costs such as sitting fees, etc. is not profit in the context of the definition of "common gaming house". Further, the reference to "gambling in some other way" is regarding side betting, where third parties or the club itself may be staking on the outcome of a game being played by players. 6. It is also relevant to note that the Club in question in the said case was a "Members Club" and what was held to be possibly illegal was charging a "heavy charge" on the members for playing in card room for the purposes of making a profit or gain i.e., 5 points per game and the said scenario cannot be extended to the Petitioner Company's platform. 7. As rightly contended by the petitioners....
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....o the question of profits only because this was the only point considered by the High Court in the impugned order therein, as the High Court did not consider whether rummy was a game of skill or not. The Hon'ble Supreme Court subsequently holds in paragraph -12 that even otherwise, Rummy is a game of skill and that therefore the Hyderabad Gaming Act is question is not attracted. This is the ratio that emerges from Satyanarayana's case and not what is sought to be contended by the respondents. 10. The last portion of paragraph - 12 in Satyanarayana's case relied on by the Respondents says that the offence of being a "common gambling house" is attracted when the club itself is concerned with the outcome of the game (or if there is side betting), as recognised by the Kerala High Court in Head Digital's case. It is no one's case that the Petitioner herein is interested on the outcome of a game played by players on its platform. Irrespective of who wins, the Petitioners, in terms of its contract with the players, collects a percentage of the amounts staked as its platform fees / commission for providing its services as an intermediary. Thus, the Respondents cannot be permitted to sup....
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....ummy is not a game entirely of chance like the 'three- card' game .... 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. ... 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." 13. The primary questions that emerge are whether video game is a game and whether it is a game of skill or chance and liable to be regulated under the relevant Act, notification or regulations or orders issued there under. The word 'gaming' defined under the Acts is an inclusive definition to bring within its ambit diverse games as held earlier. 14. Some of the video games are operated with twoway or four-way joysticks, push buttons, a volume control with a steering wheel and accelerator, guntrigger control or potentiometer etc......Video gaming, therefore, is associated with stakes or money or money's wort....
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....here is absolutely no skill at all involved in the game and the chances of a player maintaining the game depends purely upon his luck and not upon his skill. Further, on opening one such machine, it is noticed by the Technical Officer, Control Room, that there is a provision for making adjustments in such a way that a player can never succeed in winning the points required for a success at the time. The player appears to have absolutely no idea as to how the cards got reversed or rearranged. There can, therefore, be no doubt, that this game is purely a game of chance wholly unrelated to the skill of the player. In respect of this particular game, the minimum amount fixed for a play is Rs. 20." 17. The report further disclosed that one player by name Ramesh lost rupees one lakh in video games who was also examined by the committee. The machines are not freely accessible or easily visible to a casual visitor. At some places, they were installed behind partition and the players are conducted into such places with a view to ensuring that such games are not visible from outside. There is no scope for using one's skill to arrive at a desired result in the games like Royal Ca....
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.... to gambling. In this case, the Apex Court was concerned with the questions as to whether a video game is a game and whether it is a game of skill or chance and liable to be regulated under the Mysore Police Act, 1963 and the notifications issued thereunder and the Madras City Police Act, 1888 and the orders of the Tamil Nadu Government in GOMs No. 166-0 dated 18.1.1993, etc. 2. The paragraphs extracted supra clearly shows that the Apex Court was considering the fact that several persons lose their livelihood in video gaming which on facts could be mixed game of skill and chance and that these activities could be subjected to licensing. This decision does not aid the Respondents' submission that playing a game predominantly of skill for stakes amounts to gambling. 3. It is significant to note that this very contention of the respondents was also urged in All India Gaming Federation's case and was repelled by the Hon'ble Division Bench of this Court by holding as under: "The vehement contention of Learned Advocate General that gaming includes both a 'game of chance' and a 'game of skill', and sometimes also a combination of both, is not supported by his reliance on M.....
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....take or wager also amounts to 'gaming' or 'gambling'. Though reliance is placed upon paragraph - 14, the true meaning of the said para becomes clear from the nature of games that were in question viz. video games such as Super Continental, High Low, Black Jack, etc. all of which are pure games of chance. These are single mode player games which are played between the user and computer system and not between two real players and the true meaning of the last line of paragraph - 14 is to be construed in this factual context alone. Notably, the Apex Court does not hold that "Video Gaming" is akin to Gambling. In fact, at paragraphs 13 and 18, the Apex Court acknowledges that offering video games is protected under Article 19 (1) (g) and 21 of the Constitution and in other words, implicitly holds that such activities are not res extra commercium. In fact, nowhere in the judgment does the Apex Court hold that playing a game "predominantly of skill" played with money or money's worth or for stakes amount to 'gaming' or that such an activity amounts to 'gambling'. Thus M.J.Sivani's case cannot be construed to mean that playing a game which is preponderantly of skill played with either mone....
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....n and Transfer of Undertaking) Act, 1986 (the 1986 Act) gives effect to the policy under Article 39(b) and (c) of the Constitution of India (the Constitution) and as such is protected under Article 31-C of the Constitution. If not, whether the 1986 Act is liable to be struck down as violative of Articles 14 and 19(1)(g) of the Constitution. 3. The New Encyclopaedia Britannica defines gambling 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". According to Black's Law Dictionary (6th Edn.) "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". Gambling in a nutshell is payment of a price for a chance to win a prize. Games may be of chance or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the car....
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....ood. 10. The gambler's wife is left forlorn and wretched: the mother mourns the son who wanders homeless. In constant fear, in debt, and seeking riches, he goes by night unto the home of others. 11. Play not with dice: no, cultivate thy cornland. Enjoy the gain, and deem that wealth sufficient. There are thy cattle, there thy wife. O gambler, so this good Savitar himself hath told me.' The Mahabharata deprecates gambling by depicting the woeful conditions of the Pandavas who had gambled away their kingdom. *** While Manu condemned gambling outright, Yajnavalkya sought to bring it under State control but he too in Verse 202(2) provided that persons gambling with false dice or other instruments should be branded and punished by the king. Kautilya also advocated State control of gambling and, as a practical person that he was, was not averse to the State earning some revenue therefrom. Vrihaspati dealing with gambling in Chap. XXVI, Verse 199, recognises that gambling had been totally prohibited by Manu because it destroyed truth, honesty and wealth, while other law-givers permitted it when conducted under the control of the State so....
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.... us in deciding this case to attempt an exhaustive definition of the word 'trade', 'business' or 'intercourse'. We are, however, clearly of opinion that whatever else may or may not be regarded as falling within the meaning of these words, gambling cannot certainly be taken as one of them. We are convinced and satisfied that the real purpose of Articles 19(1)(g) and 301 could not possibly have been to guarantee or declare the freedom of gambling. Gambling activities from their very nature and in essence are extra-commercium although the external forms, formalities and instruments of trade may be employed and they are not protected either by Article 19(1)(g) or Article 301 of our Constitution." 8. On the crucial question whether the games which depend to a substantial degree upon the exercise of skill come within the stigma of 'gambling', S.R. Das, Chief Justice, in Chamarbaugwala case [AIR 1957 SC 699 : 1957 SCR 874 : 59 Bom LR 945] held as under: "Thus a prize competition for which a solution was prepared beforehand was clearly a gambling prize competition, for the competitors were only invited to guess what the solution prepared beforehand by the promot....
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....pends on chance but also those in which it would depend to a substantial degree on skill; ... that even if the provisions could be regarded as reasonable restrictions as regards competitions which are in the nature of gambling, they could not be supported as regards competitions wherein success depended to a substantial extent on skill, and that as the impugned law constituted a single inseverable enactment, it must fail in its entirety in respect of both classes of competitions. Mr Seervai who appeared for the respondent, disputes the correctness of these contentions. He argues that 'prize competition' as defined in Section 2(d) of the Act, properly construed, means and includes only competitions in which success does not depend to any substantial degree on skill and are essentially gambling in their character; that gambling activities are not trade or business within the meaning of that expression in Article 19(1)(g), and that accordingly the petitioners are not entitled to invoke the protection of Article 19(6); and that even if the definition of 'prize competition' in Section 2(d) is wide enough to include competitions in which success depends to a substantial degree on skill a....
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....titution. It has further been authoritatively held that the competitions which involve substantial skill are not gambling activities. Such competitions are business activities, the protection of which is guaranteed by Article 19(1)(g) of the Constitution. It is in this background that we have to examine the question whether horse-racing is a game of chance or a game involving substantial skill. 10. The Police Act extends to the whole of the city of Madras, as defined in Section 3 of the said Act. Section 3 of the Police Act defines "common gaming-house", 'gaming' and "instruments of gaming" in the following words: " 'Common gaming-house' means any house, room, tent, enclosure, vehicle, vessel or any place whatsoever in which cards, dice, tables or other instruments of gaming are kept or used for the profit or gain of the person owning, occupying, using, or keeping such house, room, tent, enclosure, vehicle, vessel or place, whether by way of charge for the use of instruments of gaming or of the house, room, tent, enclosure, vehicle, vessel or place, or otherwise howsoever; and includes any house, room, tent, enclosure, vehicle, vessel or place opened, kept or used....
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....ccupier or having the use of any house, room, tent, enclosure, vehicle, vessel or place, opens, keeps or uses the same for the purpose of gaming- (i) on a horse-race, or (ii)-(vi)*** (b)-(d)*** shall be punishable with imprisonment for a term which may extend to two years and with fine which may extend to five thousand rupees, but in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of this Court- (i) such imprisonment shall not be less than three months and such fine shall not be less than five hundred rupees for the first offence. (ii) such imprisonment shall not be less than six months and such fine shall not be less than seven hundred and fifty rupees for the second offence; and (iii) such imprisonment shall not be less than one year and such fine shall not be less than one thousand rupees for the third or any subsequent offence." Section 49-A of the Police Act was substituted for the original section by Section 2(iii) of the Madras City Police and Gaming (Amendment) Act, 1955 (the 1955 Act). 12. The Gaming Act extends to the whole of the State of Tamil Nadu, with the ....
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....includes wagering or betting. Explanation.- For the purposes of this definition wagering or betting shall be deemed to comprise the collection or soliciting of bets, the receipt or distribution of winnings or prizes, in money or otherwise, in respect of any wager or bet, or any act which is intended to aid or facilitate wagering or betting or such collection, soliciting, receipt or distribution." 14. It is obvious from the 1949 Act that the words "except wagering or betting on a horse-race when such wagering or betting takes place - (i) on the date on which such race is to be run; and (ii) in a place or places within the race enclosure which the authority controlling such race has with the sanction of the State Government set apart for the purpose" have been omitted from the definition of 'gaming' in the two Acts. The State Government, however, did not enforce Sections 2 and 4 of the 1949 Act till 1975. Although no notification enforcing Sections 2 and 4 of the 1949 Act was ever issued by the State Government, but the said provisions have been brought into existence and enforced by an Act of Legislature called the Tamil Nadu Horse Races (Abolitio....
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....ability come out successful in a race. Even so, if any skill is involved in the process, it is not the skill of the horse but of the one who bets on it and, based on such skill, the better cannot say with any certainty that a horse without fail will in any case come out successful. It may be that the knowledge and experience one would have or skill of one who bets on a horse may with their use eliminate as far as possible, the odd chance of failure and ensure to a degree so to speak, a probability of success; but the most astute better by using his substantial skill may still fail to be successful in his stake. The element of chance is not outweighed by any skill of the better or the horse. The figures we were shown would only show that successful betting on horses sometimes, not necessarily every time, goes with substantial skill of the one who stakes. But we are not persuaded that betting on horses is a game of substantial skill. Horse-racing is a competition in speed which will depend on a variety of changing and uncertain factors which, with the best of knowledge and skill of the better, cannot be reduced to a certainty, though of course by such knowledge and skill the probabil....
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....he 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 Chamarbaugwala 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' and (ii) despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of "mere skill". We, therefore, hold that the expression "mere skill" would mean substantial degree....
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....orse-racing or athletic contests involves the assessment of a contestant's physical capacity and the use of other evaluative skills." 23. Vol. 6 of the Encyclopaedia at p. 68 onwards deals with the subject of horse-racing. Thoroughbred horses with pedigree are selected and trained for races. Horse-racing is a systematic sport where a participant is supposed to have full knowledge about the horse, jockey, trainer, owner, turf and the composition of the race. It would be useful to quote an extract from the Encyclopaedia: "Horse-racing, sport of running horses at speed, mainly, thoroughbreds with a rider astride or Standardbreds with the horse pulling a conveyance with a driver. These two kinds of racing are called racing on the flat and harness-racing. Some races on the flat involve jumping.... Knowledge of the first horse-race is probably lost in prehistory. Both four-hitch chariot and mounted (bareback) races were held in the Olympic Games of 700-40 BC. Other history of organized racing is not very firmly established. Presumably, organized racing began in such countries as China, Persia, Arabia, and other countries of the Middle East and of North Africa, where....
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....ded as public holidays. Derby day at Epsom where the public is admitted on two parts of the grounds at no fee has drawn as many as 5,00,000 spectators. Attendance at horse-races in many countries is the highest or among the highest of all sports. The horses which participate in the races are a class by themselves. They have a history of their own. The breed of the horse is an important factor. The experts select the horses which are to be inducted into the racing profession. The selected horses are given extensive training by professional trainers. Breed, upbringing, training and the past record of the race-horses are prominently published and circulated for the benefit of prospective bettors. Jockeys are experts in horse-riding and are extensively trained in various aspects of horse-racing. They are supposed to know the horse they are riding and the turf on which the horse is to run. 25. Judicial pronouncements on the subject are primarily of American courts. In People of Monroe [85 ALR 605] , it was held that the pari-mutuel betting on the result of horse-races, did not violate a provision of the State Constitution prohibiting lotteries. The Court observed as under: "....
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....ing odds on the horses entered can be calculated and determined from time to time during the process of betting. The recording and tabulating of bets could be done manually by individuals, but the pari-mutuel machine is a more convenient and faster method. The fact that a better cannot determine the exact amount he may win at the time he places his bet, because the odds may change during the course of betting on a race, does not make the betting a mere game of chance, since the better can exercise his reason, judgment, and discretion in selecting the horse he thinks will win. Horse-racing, like foot racing, boat racing, football, and baseball, is a game of skill and judgment and not a game of chance. Utah State Fair Assn. v. Green [(1926) 68 Utah 251 : 249 P 1016]. Therefore, we conclude that Act No. 199, Pub. Acts 1933, authorising pari-mutuel betting on horseraces, does not violate the constitutional prohibition against lotteries." 27. In Harless v. United States [(1843) Morris (Iowa) 169] , the Court while holding that horse-racing was not a game of chance observed as under: "The word game does not embrace all uncertain events, nor does the expression ....
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.... , horse-racing was held to be a game of skill and not of chance on the following reasoning: "There is some conflict perhaps in the cases as to whether horse-racing be in itself a game of chance, but we think the decided weight of authority and reason is that it is not. In any game there is a possibility that some oversight or unexpected incident may affect the result, and if these incidents are sufficient to make a game in which it may occur one of chance, there is no such thing as a game of skill. In Utah State Fair Assn. v. Green [(1926) 68 Utah 251 : 249 P 1016], a horse-race was held not to be a game of chance within the prohibition of a State Constitution, which provided that the legislature should not authorize any game of chance, lottery, or gift enterprise, since in respect thereto the elements of judgment, learning, experience, and skill predominate over the element of chance." 29. Russell, L.J. in Earl of Ellesmere v. Wallace [(1929) 2 Ch 1 : 1929 All ER Rep Ext 751] , while dealing with the question whether there was a contract by way of wagering between the jockey club and the horse-owners observed as under: "To the unsophisticated r....
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.... - the skill dominates. In any case an occasional handicap race in a race-club cannot change the natural horseracing from a game of skill to that of chance. 33. The expression 'gaming' in the two Acts has to be interpreted in the light of the law laid down by this Court in the two Chamarbaugwala cases, wherein it has been authoritatively held that a competition which substantially depends on skill is not gambling. Gaming is the act or practice of gambling on a game of chance. It is staking on chance where chance is the controlling factor. 'Gaming' in the two Acts would, therefore, mean wagering or betting on games of chance. It would not include games of skill like horse-racing. In any case, Section 49 of the Police Act and Section 11 of the Gaming Act specifically save the games of mere skill from the penal provisions of the two Acts. We, therefore, hold that wagering or betting on horse-racing - a game of skill - does not come within the definition of 'gaming' under the two Acts. 34. Mr Parasaran has relied on the judgment of the House of Lords in Attorney General v. Luncheon and Sports Club Ltd. [1929 AC 400 : 1929 All ER Rep Ext 780], and the judgment of the C....
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....eful to have a look at the Statement of Objects and Reasons of the 1955 Act, which is as under: "STATEMENT OF OBJECTS AND REASONS The Madras City Police Act, 1888, and the Madras Gaming Act, 1930, provide for punishment for opening or keeping or conducting, etc., any common gaming-house and for being found gaming in a common gaming-house. A situation has arisen particularly in the city of Madras where gambling in public streets on the figures in the prices of New York Cotton, bullion, etc., and in the registration number of motor vehicles has become very widespread. In order to put down this evil it is considered necessary that the offence of betting on cotton prices figures and bullion price figures, etc., in the open streets should also be made punishable and that the punishment, which is at present very inadequate, should be made more deterrent. It is also considered desirable to bring the language of the provisions relating to gaming in the City Police Act in line with that in the Gaming Act and also to combine the sections relating to gaming on horserace and on other forms of gaming which are separate in the respective Acts at present. Opportunity has also....
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..... It involves a special skill to win a match which is not based on betting or gambling. It depends upon the pedigree of the horse, the ability of the horse and the rider, nature of the race, its current form etc. Out of the amount collected 75% goes to the winner as prize money, whereas 20% is paid as tax to the State government and only 5% goes to the Club as commission. The petitioners relied upon Satyanarayana's case, where the Apex Court declared that the game of Rummy required a special skill and cannot be called as gambling or betting. They also placed reliance upon RMDC-1 and RMDC-2, wherein the Apex Court held that, a business or trade will not be gambling or betting and will be provided protection under Article 19(1)(g), provided it involves "predominantly and substantially skill" without which its performance would be impossible. 2. The State contended that Horse riding is a form of betting which involves a skill neither from the horse nor from the rider but from the better who has to keep a keen check over the horses to determine its capability by observing various matches, which is a pure skill that any better should possess. Further the State legislature reserves it....
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....ey on horseracing (a game of skill) amounts to betting and gambling. However, it was specifically exempt under the definition of "gaming" under the Police Act and the Gaming Act. It is the Respondents' submission that but for such exemption, staking of money on horseracing would have been covered within the definition of "gaming"; and once it is within the ambit of the term "gaming", it amounts to betting and gambling. In that case, under the Police Act and the Gaming Act, the term "gaming" excluded wagering or betting on a horse-race when such wagering or betting takes place - (i) on the date on which such race is to be run; and (ii) in a place or places within the race enclosure which the authority controlling such race has with the sanction of the State Government, set apart for the purpose. 7. Section 49 of the Police Act and Section 11 of the Gaming Act specifically provided that the provisions of those Acts do not apply to games of "mere skill wherever played". The exclusion of horse racing from the definition of "gaming" was omitted by the Tamil Nadu Horce Races (Abolition and Wagering or Betting) Act, 1974. This 1974 Act was challenged before the Madras....
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....skill, amounts to betting and gambling. The relevant extract of the decision is as follows: "The expression `gaming' in the two Acts has to be interpreted in the light of the law laid-down by this Court in the two Chamarbaugwala cases, wherein it has been authoritatively held that a competition which substantially depends on skill is not gambling. Gaming is the act or practice of gambling on a game of chance. It is staking on chance where chance is the controlling factor. `Gaming' in the two Acts would, therefore, mean wagering or betting on games of chance. It would not include games of skill like horseracing. In any case, Section 49 of the Police Act and Section 11 of the Gaming Act specifically save the games of mere skill from the penal provisions of the two Acts. We, therefore, hold that wagering or betting on horse-racing - a game of skill - does not come within the definition of `gaming' under the two Acts. 10. The activity of horse-racing is a game of skill and staking on horse-racing has been held to not be gambling. The Respondents, however, seeks to infer a second game i.e., predicting the winner of a horserace for stakes, by suggesting that the d....
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....n to find out whether a game is a game of skill. Online rummy played with or without stakes remains to be a 'game of skill'. It was held that since the game does not come within the meaning of 'gambling' or 'gaming', providing a platform for playing the game, which is in the nature of the business cannot be curtailed. Junglee Games case - Madras High Court In this case, the Madras High Court held that Gambling and gaming have attained secondary meanings in judicial parlance and that the principle of nomen juris cannot be shrugged off to understand such words to mean or imply anything other than how they have been judicially interpreted. Irrespective of what meanings are ascribed to these words in dictionaries, gambling is equated with gaming and the activity involves chance to such a predominant extent that the element of skill that may also be involved cannot control the outcome. 2. It was held that a game of skill may not necessarily be such an activity where skill must always prevail. According to the Court, it would suffice for an activity to be regarded as a game of skill if, ordinarily, the exercise of skill can control the chance element involved in the activity suc....
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....ine games..... III. GROUNDS OF CHALLENGE BRIEFLY STATED: The challenge to the Amendment Act is structured inter alia on the following grounds: (i) Lack of legislative competence since the Amendment Act does not fit into Entry 34, List II, Schedule VII of the Constitution of India vide CHAMARBAUGWALA-I AIR 1957 SC 628, CHAMARBAUGWALA-II AIR 1957 SC 874, K. SATYANARAYANA vs. STATE OF ANDRHA PRADESH AIR 1968 SC 825. & K.R. LAKSHMANAN vs. STATE OF TAMIL NADU (1996) 2 SCC 226. (ii) ........ (iv) Violation of fundamental right to profession/business guaranteed under Article 19(1)(g) read with Article 301 i.e., incompetent & unreasonable restriction vide CHINTAMAN RAO vs. STATE OF MADHYA PRADESH (1950) SCR 759, MOHD. FAROOQ vs. STATE OF MADHYA PRADESH (1969) 1 SCC 853, game of skill not being a res extra commercium (CHAMARBAUGWALA-II, supra) and embargo being de hors Article 19 (6). (v) Manifest arbitrariness SHAYARA BANO vs. UNION OF INDIA (2017) 9 SCC 1 since the Amendment Act fails to recognize the blatant normative difference between a 'game of skill' and a 'game of chance', in gross derogation of Chamarbaugwala Jurisprudence of more than six ....
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....by the State Legislature for the regulation of police force, the maintenance of public order and for the prevention of gambling. It received the assent of the President of India on 18.01.1964 and came to be gazetted on 13.02.1964. This Act came into force with effect from 02.04.1965 as notified. The Act has been amended as many as a dozen times between 1965 and 2021. Except the 2021 amendment, the rest are not put in challenge. The Amendment Act i.e., the Karnataka Act No.28 of 2021 which has brought about a substantial & sweeping change to the Principal Act, received the assent of the Governor of Karnataka on 4.10.2021. It came into force on being published in the official gazette on 5.10.2021. The Amendment Act introduces an expansive definition of 'gaming' under Section 2(7) by including all online games which involve all forms of wagering or betting. The definition of the term 'wagering or betting' itself is widened to engulf even a game of skill involving money or otherwise, however, excluding horse racing subject to certain conditions. Similarly, it expansively alters the definitions of 'common gaming house' under Section 2(3), 'wagering or betting....
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....n in Rig Veda (10.34) which is titled "The Gambler's Lament". It comprises monologue of a repentant gambler who grieves the ruin brought on him because of addiction to the game of dice; this Veda (10.34) has a hymn which nearly translates to: a gambler's wife is left forlorn and wretched; the mother mourns the son who wanders homeless, in constant fear, in debt and seeking money by theft in the dark of night. In raajsooya yaag, of middle Vedic period, a ritual game of dice used to be played in which the game was rigged so that the king-to-be, would win. (c) In Indian epic 'Mahaabhaarat', King Yudhistira the eldest brother of Paandavaas gambles away his kingdom, brothers, wife Draupadi and lastly himself to his cousins i.e., Kauravaas and all they as stipulated go to woods. Yaajnavalkya Smriti has a verse which states that son should not pay the paternal debt that was contracted for the purpose of liquor, lust or gambling. Kaatyaayana Smriti states that gambling, if cannot be stopped in the kingdom, should be discouraged by imposing tax. Manusmriti injuncts that gambling & betting, the king shall exclude from his realm since those two vices may cause the destruction of kingdo....
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....ere should be no betting and gambling, then proper thing would be to introduce an article in the Constitution itself making betting and gambling a crime, not to be tolerated by the State. As it is, it is a preventive thing and the State will have full power to prohibit gambling". CAD of 02.09.1949, Volume IX. (b) The first ground vehemently canvassed by petitioners is that the subject amendment could not have been enacted for want of legislative power. Drawing the attention of Court to Entry 34 of State List which employs the term 'Betting and gambling' they contended that this term has acquired a constitutional significance having been so treated by the Apex Court in two CHAMARBAUGWALLA cases, K.SATYANARAYANA and K.R.LAKSHMANAN, supra. Learned Advocate General appearing for the respondents per contra contended that the legislative competence of the State extends to and beyond Entry 34. He points out Entry 1 (Public order), Entry 2 (Police), Entry 6 (Public health and sanitation) and Entry 26 (Trade and commerce) in the same List. According to respondents, the Amendment Act is a piece of 'ragbag legislation', to borrow the words of Hon'ble M.N.Venkatachalaiah,J. in U....
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....ds to be consistent with the relevant decisions of several High Courts in the country. They also notified that some of these have been affirmed by the Apex Court on challenge. Justice Oliver Wendell Holmes in TOWNE vs. EISNER, had said "A word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in colour and content according to the circumstances and time in which it is used...". The two words namely "Betting" and "gambling" as employed in Entry 34, List II have to be read conjunctively to mean only betting on gambling activities that fall within the legislative competence of the State. To put it in a different way, the word "betting" employed in this Entry takes its colour from the companion word "gambling". Thus, it is betting in relation to gambling as distinguished from betting that does not depend on skill that can be regulated by State legislation; the expression "gambling" by its very nature excludes skill. It is chance that pervasively animates it. This interpretation of the said Entry gains support from the six decade old CHAMARBAUGWALA jurisprudence, as discussed below: (i) In CHAMARBAUGWALA-I, supra the Apex Court....
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....also those wherein success depended to a substantial extent on the skill of player. What is observed in CHAMARBAUGWALA-I becomes further clear by the following observations in this case: "... If the question whether the Act applies also to prize competitions in which success depends to a substantial degree on skill is to be answered solely on a literal construction of s.2 (d), it will be difficult to resist the contention of the petitioners that it does. The definition of 'prize competition' in s. 2(d) is wide and unqualified in its terms. There is nothing in the working of it, which limits it to competitions in which success does not depend to any substantial extent on skill but on chance...that competitions in which success depends to a substantial extent on skill and competitions in which it does not so depend, form two distinct and separate categories ... The distinction between the two classes of competitions has long been recognised in the legislative practice of both the United Kingdom and this country, and the Courts have, time and again, pointed out the characteristic features which differentiate them. And if we are now to ask ourselves the question, would Parliam....
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.... notable decisions of foreign jurisdictions, the Court succinctly stated the difference between a game of chance and a game of skill, as under: "3. The new Encyclopedia Britannica defines gambling 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". According to Black's Law Dictionary (Sixth Edition) "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... Gambling in a nut-shell is payment of a price for a chance to win a prize. Games may be of chance, or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revoluti....
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....nch of Hon'ble High Court of Madras in JUNGLEE GAMES INDIA PRIVATE LIMITED vs. STATE OF T.N, having extensively discussed the two CHAMARBAUGWALAS and K.SATYANARAYANA as further developed in K.R. LAKSHMANAN, has invalidated Act 1 of 2021 which had amended the Tamil Nadu Gaming Act, 1930, as being ultra vires the Constitution. The observations at paragraph 125 of the judgment are profitably reproduced below: "It is in such light that "Betting and gambling" in Entry 34 of the State List has to be seen, where betting cannot be divorced from gambling and treated as an additional field for the State to legislate on, apart from the betting involved in gambling. Since gambling is judicially defined, the betting that the State can legislate on has to be the betting pertaining to gambling; ergo, betting only on games of chance. At any rate, even otherwise, the judgments in the two Chamarbaugwala cases and in K.R.Lakshmanan also instruct that the concept of betting in the Entry cannot cover games of skill..." (iv) Following the Apex Court Rulings and the above Madras decision, a learned Single Judge of Hon'ble Kerala High Court in HEAD DIGITAL WORKS PRIVATE LIMITED vs. STATE OF KE....
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....XI. AS TO THE VIEW OF FOREIGN JURISDICTIONS ABOUT GAMES OF SKILL: (i) In UNITED STATES OF AMERICA vs. LAWRENCE DICRISTINA, the Second US Circuit of Appeal, New York, tossed out the conviction and vacated the indictment of Mr. Lawrence who ran the warehouse wherein the poker game Texas Hold' Em was played........... XII. AS TO DIFFERENCE BETWEEN ACTUAL GAMES & VIRTUAL GAMES, AND IF ALL ONLINE GAMES ARE GAMES OF CHANCE: The vehement contention of Learned Advocate General that gaming includes both a 'game of chance' and a 'game of skill', and sometimes also a combination of both, is not supported by his reliance on M.J SIVANI vs. STATE OF KARNATAKA. We are not convinced that M.J. SIVANI recognises a functional difference between actual games and virtual games. This case was decided on the basis of a wider interpretation of the definition of 'gaming' in the context of a legislation which was enacted to regulate the running of video parlours and not banning of video games; true it is that the Apex Court treated certain video games as falling within the class of 'games of chance' and not of 'games of skill'. However, such a conclusio....
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....arned Advocate General appearing for the State contends that: the games of chance being res extra commercium, the games of skill fall within the field of 'Trade & commerce' under Entry 26 of State List. The fundamental right inter alia of trade & business is guaranteed under Article 19(1) (g) and therefore, the same is subject to reasonable restrictions imposed under Article 19(6). A reasonable restriction may also include an absolute embargo. Regard being had to enormous adverse implications of online gaming on the society in general and the younger generation in particular, the Amendment Act is made criminalizing the cyber games. In support of his contention, he banks upon CHAMARBAUGWALAS, K.R.LAKSHMANAN & M.J. SIVANI, supra. He draws attention of the Court to a spate of suicides in the State, a plethora of criminal cases registered by the police and to the debates in the Legislative Assembly that culminated into the Amendment Act. He contends that the policy of proscribing cyber games is a matter left to the legislative wisdom and the writ Court should loathe to interfere. (c) Learned advocates appearing for the petitioners do not much dispute that the State has power....
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....for invoking the said test at all. This amounts to throwing the baby with bath water. (h) In a progressive society like ours, imposing an absolute embargo, by any yardstick appears to be too excessive a restriction. In such cases, a heavy burden rests on the State to justify such an extreme measure, as rightly contended by the petitioners. There is no material placed on record to demonstrate that State whilst enacting such an extreme measure, has considered the feasibility of regulating wagering on games of skill. If the objective is to curb the menace of gambling, the State should prohibit activities which amount to gambling as such and not the games of skill which are distinct, in terms of content and produce. The State action suffers from the vice of paternalism since there is excessive restriction on the citizens freedom of contract. However, the ground of legislative populism does not avail against the plenary power of legislation. It has long been settled that the motive of the legislature in passing a legislation is beyond the scrutiny of courts vide a Five Judge Bench decision of the Apex Court T VENKATA REDDY vs. STATE OF ANDHRA PRADESH. (i) A mere likelihood or prop....
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....s of "mere skill" from the application of the statute and its substitution by including games of mere skill also within the fold of offences under the statute, if such games are played for wager, bet, money or other stake." XX. AS TO WHETHER CHAMARBAUGWALA JURISPRUDENCE HAS LOST RELEVANCE DUE TO ADVANCEMENT OF SCIENCE & TECHNOLOGY: (a) Learned Advocate General appearing for the State in his imitable style and vociferously contended that: the provisions of an organic Constitution like ours have to be construed keeping in view contemporary socio-economic developments and the new challenges associated with the same. There has been a paradigm shift in the whole lot of activities in the society owing to advancement of science & technology. New implications and difficulties are cropping up in the society justifying innovative ventures on the part of the State to effectively manage them. A greater leverage needs to be conceded to the State in devising appropriate measures for curbing the menace of online gaming. He passionately submitted that what was true of things that happened in the bygone decades i.e., when CHAMARBAUGWALAS were decided, need to be examined afresh. In support of....
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....9;game of mere skill' and therefore, it is 'neither gaming nor gambling'. If the legislative policy is to protect the games of skill from being treated as proscribed, the Amendment Act being unjustifiably selective in that suffers from a grave constitutional infirmity. It offends the clause of 'equal protection of the laws' enacted in Article 14, since protection is unreasonably sectarian. The equal protection clause would be diluted into a mild constitutional injunction that the State shall treat as equal in law only the horse-racers who are equal in fact with other players of games of skill. For saving such a blatant discrimination, the respondents have failed to establish the reasonable basis on which such a classification is founded and the rational nexus identifiable between the differentia of and the object sought to be achieved by such a classification vide STATE OF WEST BENGAL vs. ANWAR ALI SARKAR. (c) Learned Advocate General pressed into service the decision in SHREYA SINGHAL, supra to justify classification between 'actual games' and 'virtual games' and that the Amendment Act that would focus the latter would not suffer any infir....
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....r the substantive part of the section. They are there for guidance. Therefore, they cannot be ignored. Due significance has to be attached to the heading of a section in a statute. The substantive text of Section 176 makes the penal provisions enacted in Sections 79 & 80 inapplicable to 'any pure game of skill' i.e., a game predominantly involving skill. However, the Amendment Act deletes the term "and to wagering by person taking part in such games of skill" from the text of this section. Thus the amended definition of 'gaming' under Section 2(7) to the extent it does not admit the difference between skill games and chance games, is in direct contradiction to the amended Section 176 which intends to maintain such a difference. The very definition of 'gaming' as amended, suffers from the vice of overinclusiveness/over-broadness of the idea of gaming as enacted in the charging provisions of the Act that are animated by CHAMARBAUGWALA Jurisprudence. The content of 'gaming' as capsuled under Section 2(7) thus bruises the legislative intent enacted in Section 176 ab inceptio and continued post-amendment, for protecting a class of citizens who plays the games....
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....of Mandamus is issued restraining the respondents from interfering with the online gaming business and allied activities of the petitioners. No order as to costs. 2. A careful perusal of the ratio laid down by this Court in All India Gaming Federation's case supra, bearing in mind the well settled principles pertaining to 'ratio decidendi' and the inversion test as held in Career Institutes' case supra, will indicate that the judgment of the Hon'ble Division Bench of this Court is neither per incuriam nor sub-silentio as contended by the respondents. Only because a specific paragraph in a precedent has not been excerpted by a Court does not mean that a precedent has not been considered in its entirety. By that logic, if the entirety of a precedent-judgment is not excerpted in a subsequent judgment, the subsequent judgment will become automatically sub silentio and perincuriam which is a completely absurd proposition. Thus, it cannot be said that the decision of the Division Bench of this Court in All India Gaming Federation is either per incuriam (as it refers to and considers all the judgments of the Hon'ble Supreme Court) or sub-silentio (as it specifically holds that....
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....amended and the expression "betting and gambling" was omitted. The purpose of this omission was to subsume taxation on betting and gambling under the GST regime. Consequently, the same expression "betting and gambling" now features in Entry 6 of Schedule III of the CGST Act. In the case of State of Karnataka vs. State of Meghalaya -2022 SCC Online SC 350, the Apex Court held that the interpretation of the expression "betting and gambling" in the context of Entry 34 of List II shall apply to the expression "betting and gambling" under Entry 62 of List II. As the expression "betting and gambling" was omitted from Entry 62 to give way for taxation on "betting and gambling" to be subsumed under the GST regime, the expression "betting and gambling" in Entry 6 of Schedule III of the CGST Act must also be interpreted in the same manner. 2. Further, the decisions referred to above, in the context of "betting" and "gambling" have been interpreted in the context of Entry 34 of List II of the Seventh Schedule to the Constitution and the Public Gambling Act, 1867. When words acquire a technical meaning because of their authoritative construction by superior courts, they must be understood i....
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.... of a vain and futile attempt on the part of the respondents to cherry pick stray sentences from the judgments of various Courts including the Apex Court, this Court and other High Courts and try to build up a non-existent case out of nothing which clearly amounts to splitting hairs and clutching at straws which cannot be countenanced and is impermissible in law. X. CONCLUSIONS • There is a distinct difference between games of skill and games of chance; games such as rummy, etc. as was discussed in several decisions above and particularized in the Division Bench decision of this Court in All India Gaming Federation's case supra, whether played online or physical, with or without stakes would be games of skill and test of predominance would apply; the said judgment is a total and complete answer not only to the various contentions urged by the respondents but also covers the issues / questions that arise for consideration in the instant petitions. • Though Section 2(17) of the CGST Act recognises even wagering contracts as included in the term business, but that in itself would not mean that lottery, betting and gambling are the same as games of skill. ....