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Evolution Of Jurisprudence On Online Games

The online skill-based gaming industry has had to contend with legal battles for decades, resulting in a long history of precedents from both the Supreme Court and various High Courts. It has all come down to one thing - real-money games of skill, such as rummy, fantasy, poker, and bridge, cannot be considered gambling or betting.

The question that the judiciary has been predominantly concerned with is whether online gaming falls under the realm of games of chance - which puts it in the betting bracket - or a perfectly legitimate game of skill. This difference is critical; whereas betting on games that involve luck alone are illegal, games where one can hone their talent or skill to improve their success outcomes are legitimate.

In State of Andhra Pradesh v. K. Satyanarayana (1968), the Supreme Court while dealing with Section 14 of the Public Gambling Act, 1867 which is similar to Section 14 of KGA had observed that the game of rummy is not entirely based on chance. This is because building up rummy requires considerable skill and skill is also required for memorising the fall of cards, holding and discarding cards etc. In light of the above observations, the court held that the game of rummy is predominantly a skill-based game and cannot be categorised as a game of chance and protection under Section 14 will be available to the game of rummy.

In Dr. K.R. Lakshmanan v. State of Tamil Nadu (1996), the Supreme Court looked into the aspect of gambling in a game of skill. It observed that a competition wherein a substantial degree of skill is involved and the results of the competition are based on the application of such skill, even if there is an element of chance, the competition would not be deemed to be gambling. It further went on to define the term mere skill as an application of a substantial degree or

preponderance of skill. It also held that in order to come within the meaning of gaming, there should be gambling on a game of chance and that playing rummy for stakes is not an offence.

In August 2021, the Madras High Court, in Junglee Games India Private Limited and Others vs State of Tamil Nadu, held that a complete ban on online gaming is unconstitutional as it was not a reasonable restriction imposed on the fundamental right given under Article 19(1)(g) of the Constitution. The court held that an online version of a game of skill played for real money does not turn into a game of chance, challenging the Tamil Nadu Gaming and Police Laws (Amendment) Act 2021.

It was also held that a ban on online games of skill is akin to the prohibition of both the user and platform's fundamental rights and that a blanket ban is excessive and amounting to paternalistic behaviour. Further, it said the state cannot legislate on games of skill under the ambit of Entry 34 of the State list, as it is only concerned with betting and gambling, which, by their very nature, exclude any sort of skill.

In September 2021, the Kerala High Court, in Head Digital Works (P) Ltd. v. State of Kerala, held that a complete ban on online gaming is unconstitutional as it was not a reasonable restriction imposed on the fundamental right given under Article 19(1)(g) of the Constitution. The HC said that the Supreme Court has already held that rummy was "a game of mere skill" and "playing for stakes or not can never be a criterion to find out whether a game is a game of skill".

Therefore, for the same reasons that rummy was held to be a game of skill, online rummy was also a game of skill, the high court said. "Online rummy played either with stakes or without stakes remains to be a 'game of skill'," it said and added that even without a notification the game will come within the purview of the Kerala Gaming Act and will enjoy the exemptions provided under it for games of skill. The Kerala High Court lifted the ban imposed by the state government on online rummy and observed that it is a game of skill.

The high court quashed the notification issued by the Kerala government which had imposed a ban under the Kerala Gaming Act, 1960. The bench of Justice TR Ravi held that the notification issued by the government was unconstitutional and in violation of the fundamental rights to trade and commerce under Article 19(1)(g) and the right to equality under Article 14 of the Constitution of India.

In February 2022, the Karnataka High Court in the case All India Gaming Federation vs State of Karnataka was posed with a similar question. The constitutional validity of the amendment to the Karnataka Police Act 1963, which would have led to the criminalisation of playing and facilitating online games, was challenged.

Quashing unconstitutional sections of the amendment, the court said:
"In any organised society, knowledge, wisdom, talent, and skill are invaluable tools for wealth generation" and are the "unseeming ingredients of economic rights such as rights to profession, property."

This decision of the Karnataka High Court comes in the aftermath of two comprehensive decisions of the High Courts of Madras (delivered on August 3, 2021) and Kerala (delivered on September 27, 2021), in which similar state-led interventions were struck down. The subject matter in these litigations was the legality of "online gaming," in particular "online games of skill" such as 'rummy' and 'poker.'

In May 2023, the Bombay High Court quashed a First Information Report (FIR) lodged against Wingame Enterprises proprietor booked for gambling' under the Maharashtra Prevention of Gambling Act, 1887 vide Akshay Anant Matkar vs State of Maharashtra. A division bench of Justices Sunil Shukre and MM Sathaye quashed the FIR lodged against Akshay Matkar observing that the game is one of skill and not chance and thus does not come within the ambit of 'gambling'.

The court held:
"We are of the considered opinion that this online game is not game of chance but there is mathematical skill involved. Apart from said skill, observation and ability to solve mathematical equations within time bound manner is also required, which definitely requires skills. In our view, the present online game stands on better footing and the it is definitely preponderantly a game of skill and therefore, it cannot be said from mere averments in the FIR that any offence was committed under the said Act.

Therefore, in our view with the allegations in the FIR as they stand, if the Petitioners are made to face trial, it will be an abuse of process of law, since no offence is made out as alleged in the facts and circumstances of the case."

In May 2023, the Karnatka High Court, in Gameskraft Technologies (P) Ltd. v. Directorate General of Goods Services Tax Intelligence, 2023 SCC OnLine Kar 18, decided the issue in question. The proceedings dealt with whether online games under the platform would be considered games of skill or chance, as the latter attracts 28 per cent GST but the former only 18.

According to Gameskraft, the majority of these games were rummy, which they argued had been previously held to be a game of skill. The GST department had argued that rummy was a game of chance and hence liable to taxation at 28 per cent. In a decisive order, the court on May 12 struck down the notice claiming Rs 21,000 crore GST payment, referring to the GST department's argument as 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 and build up a non-existent case out of nothing which clearly amounts to splitting hairs and clutching at straws�".

The bench also noted that rummy being substantially a game of skill and not chance, it would not be considered gambling even if the players are playing for a stake. The same would apply in online and offline modes of the game alike, it added. It was held that the impugned notice issued on 23-09-2022 issued by the DGGSTI is illegal, arbitrary and without jurisdiction or authority of law.

These legal precedents depicts that Indian Judiciary have taken progressive steps in order to provide an inclusive environment to the Gaming Industry. However there are many loopholes and scepticism in the present gaming regulations. Recently the Central Governement passed the Gaming Regulation Rule, 2023 to provide clarity in the previous rules. Its a positive step by the legislature still there is a long way to go to provide freedom to our sharp minds so that they could showcase their potential. This will further make India a hub of Gaming Industry which has a huge potential in the coming years.

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