India: Legal Gambling: Where Skill Wins Over Dice And Chance

(An overview of Gambling laws in India)
Last Updated: 9 December 2016
Article by Vikrant Rana and Rupin Chopra

Introduction:

Vegas as a pilgrimage of Gambling seems to have overflowed... Gambling is today a prevalent activity not only in the West but also in India. One of the major tourist attractions in Goa is popularly known to be gambling upon oceanic waters in the middle of nowhere!! In the recent times gambling has become a talk in the legal fraternity as well. With so many recent judgements depicting a collective opinion of the society towards segregating illegal gambling from its legal forms and protecting games like Rummy and others we review the laws related to gambling in different states in India.

Gone are the days when the society considered gambling and betting as a taboo. In today's modern times gambling is a major tourist attraction. However, on a cautious note, any practice in the society, whether good or bad, if not regulated by the State will soon find itself spiraling down towards becoming a taboo. Gambling is no exception to this. Gambling is the wagering of money or any other valuables upon the contingency of an uncertain event. According to Black's Law Dictionary1 "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".

There is hardly any form of society in the world which was able to rid itself of gambling and its vices as there will always be someone or the other yearning for easy money! Gambling in itself is not the problem, the problem lies with its addictiveness and ancillary practices and lack of holistic legislations regulating it.

Legality- Skill v. Chance:

Gambling is a generic term. There are numerous different forms of gambling. As far as legality is concerned, not all of them are illegal. The Supreme Court has held that unless it is purely a game of chance, it is not illegal. The whole essence of gambling is playing by "chance". However, according to the Supreme Court, even though the most important aspect of gambling is chance it does not mean that it is completely devoid of skill. Games which require skill up to a certain degree, and such games will not be illegal.

In K.R. Lakshmanan v. State of Tamil Nadu2, the Supreme Court defined a 'game of skill' to mean "one in which success primarily depends on the superior knowledge, training, attention, experience, and adroitness of the player". Games like golf, horse race betting and chess are considered to be "games of skill". It is interesting to note that even if horse race betting is assumed to require skill, betting in Cricket is prohibited even though the required skill set is substantially similar. 'Rummy' was held to be a game of skill as considerable skill was required in "fall of the cards had to be memorized", and "holding and discarding cards".3

Gambling: a subject for State Legislation

In India, the central law governing gambling is the Public Gambling Act, 1867. It is one of the oldest Acts, as the name suggests. Hence new forms of gambling such as online gambling, international gambling are not covered under the Act. Moreover, gambling and betting are covered under Entry 34 of the State List in the Constitution. Hence, every state has the power to legislate its own laws. The States where gambling is extensively practiced are Sikkim and Goa. In fact, Goa and Sikkim together make up for almost 90% of all the legal gambling that takes place in the country.

States allowing gambling for games of skill:

Some states have gone ahead and regulated the laws relating to gambling, betting, fixing etc. Goa makes gambling legal on land and even off-shore, but only for Five Star establishments which have a government permit/license. Such license may be obtained at a very substantial fees under the Goa, Daman and Diu Public Gambling Act, 1976.

The Sikkim Regulation of Gambling (Amendment) Act, 2005 gives the Sikkim Government the authority to authorise gambling with prescribed regulating conditions. This has made Sikkim the second state to facilitate gambling after Goa. It has become a great tourist attraction.

In Delhi, under the Delhi Gambling Act, 1955 'gaming' includes all types of wagering or betting except on horserace when such wagering or betting takes place on the day on which such race is to be run and in an enclosure which the stewards controlling such race have with the sanction of the State Government set apart for the purpose, and also does not include a lottery. Where even if a setup for gaming including things like cards, dice, counters, money or other instruments of gaming are found, there will be presumption of gambling until otherwise is proven. Such person shall be liable to imprisonment up to three months and shall also be liable to fine up to hundred rupees.

In West Bengal their Act4 specifically excludes 'games of cards like Bridge, Poker, Rummy or Nap' from its definition of "gaming and gambling" and allows the organization of such games on procuring a permit from the Commissioner of Police in Calcutta or the District Magistrate or the Sub-divisional magistrate when such game is played in any public place.

States prohibiting gambling in any form:

In different states like Assam and Orissa, however, have prohibited any form of betting or gambling. When a license is issued, it is given to a certain entity organizing activity including its organization, management or promotion or negotiation or receipt of bets. As far as licensing in gambling is concerned, there are no separate personal and premises licenses in India.

Online Gambling:

Placing bets through online medium is a flourishing practice amongst gamblers in recent times. Gambling laws however do not cover online gambling. The problem arises when a server in a place where gambling is legal, makes dealing with users at places where it is illegal. It becomes difficult to trace extra territorial servers and penalize offenders. Moreover, the basic laws about online gambling itself are not legislated by the states. As of now there is no specific law in India which bans an individual customer from placing an online bet with a bookmaker based outside India even though the Acts such as Payment and Settlement Systems Act, 2007 and FEMA regulate payments made for participating in online betting. It is pertinent to note that Sikkim is the first State to legislate on online gambling vide Sikkim Online Gaming (Regulation) Act, 2008.

The Sikkim Online Gambling Rules, 2009 provide under Rule 3 for 13 games which may be played online in the manner provided under these Rules. These are, Roulette, Black Jack, Pontoon, Punto Banco, Bingo, Casino Brag, Poker, Poker Dice, Baccarat, Chemin-de-for, Backgammon, Keno, Super Pan 9. Rule 5(2) provides that the license granted shall be valid for a period of one year which may be renewed for a further period of one year on payment of a renewal fee of one lakh rupees. The rules deal with different aspects such as applications for operating gambling website and advertisement which can be put up on the website.

The most recent legislation on gambling came out this year in the State of Nagaland. The Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Act, 2016 (Gaming Act) issues a license to conduct "games of skill" (on websites, mobile platforms, television or any other online media) to a person, firm, company or limited liability company (LLC) incorporated in India which is substantially held and controlled in India. This Act also exhaustively defines 'a game of skill' as inter alia that "having preponderance of skill over chance."

Gaussian Network Private Limited v. Monica Lakhanpal and Another:

The petitioner company proposed to launch a website offering 6 games viz. Chess, Billiards, Texas Holdem Poker, Bridge, and Snooker. Vide the petition filed before the Delhi District Court under Order 36 of the Code of Civil Procedure, 1908, the petitioner sought the Court's opinion so as to ensure that they were not violating any laws by operating games which may amount to betting or gambling.

Amongst other contentions made by the parties, it was argued that there are World Championships organised for the games of Rummy, Chess, Poker, Billiards and Bridge which fortifies their claim that these are games of skills. It was further brought to the notice of this court5 that some of the top Management and Technology universities have recognized Poker as an accredited academic subject. The Massachusetts Institute of Technology (MIT), University of Maryland etc. are amongst the top ranking world universities, offer poker as an academic course.

The Court opined that when skill based games are played for money in virtual space, the same would be illegal and observed that the degree of skill in games played in a physical form cannot be equated with those played online as the degree of chance substantially increases because various manipulations including the randomness, inside cheating, collusion cannot be ruled out, when the same games are played in the virtual space.

It is pertinent to note that this decision of the District Court, was challenged before Delhi High Court. As part of the Appeal a copy of the RTI information has also been placed on record, obtained from the Government of Nagaland, Department of Justice and Law wherein the answer to the query was that the games of poker, rummy and bridge involve skill and are not gambling as per the provisions of the Gambling Act, 1867. However, on April 21, 2016 the appeal was withdrawn by the plaintiffs and accordingly the High Court noted that the District Court's above judgement would not survive.

RBI Regulating Online Gambling:

A very important legal aspect to be noted is that even though gambling/betting is a state subject, the regulations of websites, electronic modes of payment are subjects covered by the Centre. To curb online payments to illegal websites or unwarranted websites even outside the prescribed territories, the Information Technology Act, 2000 instructs Internet Service Providers to restrict and block access to certain websites. Intermediaries (such as Internet Service Providers/ISPs) must comply with intermediary compliance and due diligence requirements. This requires them not to host, display, upload, modify, publish, transmit, update or share any information related to, inter alia gambling or money laundering upon their computer resource.6

In 2008 the Payment and Settlement Systems Act, 2007 was enforced which gives authority to the Reserve Bank of India (RBI) to regulate all forms of electronic payment. Section 4 states that Payment system cannot operate without authorization provided by the Reserve Bank So in short, RBI has the full right to instruct banks to decline or refuse and payments or deposits involving any particular payment processor, e-wallet or clearing house. This will help in not only catching tax evaders but also should they in the future decide to going after gambling processors.

Conclusion:

Gambling cannot be completely done away with as it generates a substantial amount of revenue for the State and a major attraction for tourists in places like Goa and Sikkim. Now the major actionable for states is to provide exhaustive laws to make sure that all aspects related to gambling such as different types of games, online, offline, offshore and international gambling. Also ancillary aspects such as taxing income generated through gambling, creating rehabilitation centers for those addicted to gambling, and such others must be legislated urgently. Just as the Justice Lodha Committee in its report, stated that it believes legalizing betting will help curtail the influence of unethical elements on the sport and its participants, including players and officials.

The Committee also suggested numerous structural reforms for BCCI. The Committee's recommendations are a most recent instance that when the laws are extensively clear on all aspects of a subject, the vices created or to be created in future will have a reduced damage to the society.

Footnotes

1 (Sixth Edition)

2 1996 AIR 1153, 1996 SCC (2) 226

3 State Of Andhra Pradesh v K. Satyanarayana & Ors 1968 AIR 825

4 THE WEST BENGAL GAMBLING AND PRIZE COMPETITIONS ACT, 1957

5 District Court in Gaussian Network Private Limited v. Monica Lakhanpal and Another (Suit No 32/2012, Delhi District Court

6 The Intermediary Guidelines (Rules) 2011

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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