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Betting and gambling: Rummy - Game of Skill or Chance

In the last few years there has been a huge debate on Online Gambling, and whether online gaming offered is game by skill or by chance, few concerned states made some rules banning Rummy considering games solely based on chance, in the list prominent are Kerala, Tamil Nadu and Karnataka.

It is but obvious that rules will be challenged and the same happened, honourable High Courts declared those rules violative of The Constitution of India and in some cases even of parent acts and provisions considering which states made rules.

In recent judgement came from the High Court of Karnataka, considering previous judgements of the Honourable Supreme Court of India and in the light of the Constitution of India.

All India Gaming Federation vs. State of Karnataka, 2022, Case No: WP 18703/2021

Case Background
  • The state amendment came after public interest litigation, which was filed in the High Court of Karnataka, seeking a ban on online gambling. It removed the distinction between the game of skill and the game of chance, thereby bringing skill-based gaming start-ups under its purview.
  • The amendment act came into force on October 5, 2021, it includes all forms of wagering or betting, including in the form of tokens valued in terms of money paid before or after the issue of it. It has banned electronic means and virtual currency, electronic transfer of funds in connection with any game of chance.
Facts of the Case:
  • The Karnataka Government has notified the Karnataka Police (Amendment) Act, 2021 banning all formats of online games involving wagering, betting and gambling of all nature and forms in the state.
  • The state government has taken the stand before the court that its amendments do not ban online "games of chance" or "game of skill", they restrain people from risking money "on the happening of an uncertain event" and online platforms are prohibited from inducing gullible public with the lure of unattainable prizes after that different gaming federations came and filed a writ petition against the State Government of Karnataka.

Grounds of Challenge:
  1. Lack of legislative competence since the Karnataka Police (Amendment) Act, 2021 does not fit into Entry 34, List II, and Schedule VII of the Constitution of India.
    2. Violation of Article 21 since playing games & sports falls within the umbrella of 'right to life & liberty' that has been stretching precedent by precedent and violation of the doctrine of privacy.
  2. Violation of the fundamental right to freedom of speech & expression guaranteed under Article 19(1)(a) since playing games & sports of skill is a facet of speech & expression and that criminalizing apart from amounting to unreasonable restriction, is incompetent under Article 19(2).
  3. Violation of the fundamental right to profession/business guaranteed under Article 19(1)(g) read with Article 301 i.e., incompetent & unreasonable restriction.
  4. Manifest arbitrariness Shayara Bano v/s Union Of India 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 decades.

Grounds of Judgement
The online gaming activities played with a stake or not do fall within the ambit of Entry 34 of the State List i.e., 'Betting and gambling', if they predominantly involve skill, judgment or knowledge. They partake in the character of business activities and therefore, they have protection under Article 19(1(g). The games of skill played online or offline with or without stakes are susceptible to reasonable restrictions under Article 19(6). The Amendment Act brings in a blanket prohibition with regard to playing games of skill.

The version & counter version as to the nature & reasonableness of the restrictions need to be examined in the light of norms laid down by the Apex Court. In a challenge laid to the validity of any legislation on the ground of violation of Fundamental Rights inter alia guaranteed under Article 19(1), on a prima facie case of such violation being made out, the onus would shift to the State to demonstrate that the legislation in question comes within the permissible limits of the most relevant out of clauses (2) to (6).

When the exercise of Fundamental Right is absolutely prohibited, the burden of proving that such a total prohibition on the exercise of right alone would ensure the maintenance of general public interest lies heavily upon the State. While adjudging a case of infringement of fundamental rights, what is determinative is not the intent of the legislature but the effect of the legislation. Legislative action that is too disproportionate or excessive, may suffer invalidation on the ground of 'manifest arbitrariness under Article 14 as discussed.

Judgement / Held by the Court:
The Karnataka High Court struck down provisions of the Karnataka Police (Amendment) Act, 2021, which prohibits and criminalises betting on and playing games of skill including online games, which had barred and criminalised betting on playing games of chance and skill which involved money.

What has been Supreme Courts Take On The Issue Of Gambling:

In the Chamarbaugwala Cases decided in the year 1957, the Apex Court was considering whether declining the renewal of a licence to conduct a prize competition, which is contended to be a business, would amount to a violation of the rights under Article 19(1)(g) of the Constitution. The Court held that competition in order to avoid the stigma of gambling must depend to a substantial degree upon the exercise of skill.

The Court held that Article 19(1)(g) only protects those activities which can be regarded as lawful trading activities and that gambling is not a trade but "res extra commercium". It was held that the enactment by which the control and regulation of the prize competition can only have an application with regard to competitions in which success does not depend on any substantial degree of skill.

The question of whether the game 'Rummy' is a game of chance or of skill, came to be considered by the Hon'ble Supreme Court, in Satyanarayana. The question that was considered was whether the premises of a club known as the "Crescent Recreation Club" situated in Secunderabad was being used as a common gambling house and whether the persons who were found to be playing the game Rummy for stakes, at the time of a raid by the police could be said to be gambling therein.

The Magistrate convicted the accused. On a revision petition filed by the accused, the Sessions Court referred the issue to the High Court under Section 438 of the Code of Criminal Procedure, recommending the quashing of the conviction and the setting aside of the sentences. A learned Single Judge of the High Court accepted the recommendation, against which the State had approached the Hon'ble Supreme Court. The statutory provision which was considered by the Apex Court was Section 14 of the Public Gambling Act, 1867, which is similar to Section 14 of the Kerala Act.

In K.R. Lakshmanan supra, It can be seen that the Hon'ble Supreme Court has clearly laid down that in order to come within the meaning of gaming, there should be gambling on a game of chance. Gambling on the game of skill will not come within the purview of gaming going by the judgment, wherein the Hon'ble Supreme Court was considering the game of horse racing. (paragraph 33)

In M.J. Sivani, the Apex Court observed that no one has inherent right to carry on a business that is injurious to the public interest and that trade and business attended with danger to the community may be prohibited or be permitted subject to such conditions or restrictions as would prevent the evils to the utmost. (paragraph � 18)

As of now the jurisprudential aspect of online gaming involving aspects of betting seems to be well established. In light of the judgement of Supreme Courts, it is evident that games that will solely be based on luck fall under the ambit of gambling and if those games are being played online those will be considered as online gambling but if those games are involving substantial aspect of the element of skill those games will have constitutional protection under Article - 19 and 14 of the Constitution of India.

Written By:
  1. Pranjal Chaturvedi, student of B.A.LL.B - 4th Year from School of Law, Sharda University.
  2. Aishwarya, student of B.A.LL.B - 4th Year from School of Law, Sharda University.

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