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Last Updated: 30 October 2014Article by Vinay Vaish, Partner, Vaish Associates AdvocatesVaish Associates Advocates

India: Online Gaming And Gambling Laws In India

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At present gambling in India is regulated amongst others, by the Public Gambling Act ("Gambling Act") constituted in the year1867, which extends to the United Provinces, East Punjab, Delhi and the Central Provinces and specifically prohibits publicgambling and running or being in charge of a common gaming house.

In addition to the aforesaid, the state legislators are, vide Entry No. 34 of List II (State List) of the Seventh Schedule of theConstitution of India, 1950 ("Constitution"), given exclusive power to make laws relating to betting and gambling. Theapplicability of the Gambling Act, for the purpose of any particular state stands repealed by virtue of the specific stateenactment so promulgated in respect of the subject matter of betting and gambling, by virtue of the aforementioned provisionsof the Constitution.

As a consequence of the aforementioned state legislations, any individual/entity intending to engage in any gaming activities,with or without stakes would have to comply with the provisions of the enactment/ legislation in force across India in variousstates.

At present the state legislature of Delhi has enacted the Delhi Public Gambling Act, 1955 ("Delhi Gambling Act") whichprohibits gaming in the union territory of Delhi, but excludes from its purview the "games of mere skill" wherever played1. Byvirtue of the provisions of the Delhi Gambling Act, the applicability of the Gambling Act to the union territory of Delhi standsrepealed2.

GAME OF SKILL V. GAME OF CHANCE

Similarly, as in the State of Delhi, the State of Goa has made special enactments for the purpose of allowing gambling. Theonly State to allow on-line Gaming is the State of Sikkim. However, there are certain restrictions. In India, the enactmentsessentially allow such Games to be played on line, which are games of skill.

Various courts in India have examined the difference between the game of skill and game of chance and in order to determinewhat constitutes gaming as defined in various state enactments (i.e. gambling); it is imperative to understand the differencebetween a "game of skill" and a "game of chance". For this purpose, it will be interesting to examine the following Indianjudicial pronouncements:

In State of Bombay v. R. M. D. Chamarbaugwalal3, the Supreme Court of India ("Apex Court") held that competitions(games) where success depends on a substantial degree of skill will not fall into category of 'gambling' (i.e. gaming asdefined under state enactments); and despite there being an element of chance, if a game is predominantly a game of skill,it would nevertheless be a game of "mere skill".

In State of Andhra Pradesh v. K. Satyanarayana & Ors4, the Apex Court while holding that the card game – "Rummy" isnot a gambling activity stated that "Rummy requires certain amount of skill because the fall of the cards has to bememorised 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."

In M.J. Sivani & Ors. v. State of Karnataka5, the Apex Court observed, "Even a skilled player in a game of mere skill may

be lucky or unlucky, so that even in a game of mere skill chance must play its part. But it is not necessary to decide interms of mathematical precision the relative proportion of chance or skill when deciding whether a game is a game of mereskill. When in a game the element of chance strongly preponderates, it cannot be game of mere skill. Therefore, it isnot practicable to decide whether particular video game is a game of skill or of mixed skill and chance. It depends upon thefacts, in each case."

The Apex Court again delved into the aspect pertaining to what constitutes a game of skill in Dr. K.R. Lakshmanan v.State of Tamil Nadu6, where it stated "Games may be of chance, or of skill or of skill and chance combined. A game ofchance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling ofthe cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows orcan know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. Agame of skill, on the other hand - although the element of chance necessarily cannot be entirely eliminated - isone in which success depends principally upon the superior knowledge, training, attention, experience andadroitness of the player. Golf, chess and even Rummy are considered to be games of skill. The courts have reasonedthat there are few games, if any, which consist purely of chance or skill, and as such a game of chance is one in which theelement of chance predominates over the element of skill, and a game of skill is one in which the element of skillpredominates over the element of chance. It is the dominant element - "skill" or "chance" - which determines the characterof the game."

From the aforesaid, judgments, it can be concluded, that what is allowed in India is only a game of skill and for a game to beconsidered as a game of skill, the mechanics (nature of the game, mode of playing, rules etc.) of the game should clearlyreflect that the requirement of skill preponderates the element of chance and wherein success depends principally uponsuperior knowledge, training, attention, experience and adroitness of the player. In addition to which, it can be concluded that"games of skill" do not come within the purview of a majority of state gambling enactments, thereby meaning, that playinggames of skill for stakes in the physical form, would not be treated as an act of gaming (as defined in such enactments).

ONLINE GAMING

Sikkim is so far the only state in India which has enacted a statute pertaining to online gaming i.e. Sikkim Online Gaming(Regulation) Act, 2008 ("Sikkim Gaming Act"). In terms of the Sikkim Gaming Act, an interested person can obtain a "license"for the purpose of conducting online games such as Roulette, Black-jack, Pontoon, Puntobanco, Bingo, Casino Brag,Poker, Poker dice, Baccarat, Chemin-de-for, Backgammon, Keno and Super Pan 9.

As concluded above, games of skill played for stakes in the physical form, do not come within the ambit of gaming (asdefined in various state enactments); however to ascertain whether the same status is accorded to games of skill playedonline, it has to be seen whether there is a distinction between a game of skill and a game of chance. The expression'skill' has been defined by the Courts as an exercise upon known rules and fixed probabilities of sagacity, which involvesfive parameters:

learned or a developed ability,

strategy,

physical co-ordination,

technical expertise, and

knowledge.

Games like Rummy, Chess, Bridge, Billiards and Golf have been recognised by the courts in India as games of skill.

The courts have held that Poker cannot be accepted as a game of skill; however it was stated that it would be legal toplay poker within the states which do not hold it as illegal.

The Courts have also opined that that the degree of skill required in games played in a physical form cannot be equatedwith those played online, as the degree of chance increases in case of online games and the degree of skill used inplaying these games online is questionable. Hence, online games, even those requiring a high degree of skill, conductedby gaming sites offering prize money and partaking a slice of the winning hand are illegal in states which prohibitgambling.

Courts in India have also stated that such online gaming portals are essentially a substitute for traditional casinos sincewebsites operate as common gaming houses7 where members interact and place bets. Thus the company and itsdirectors, agents, players are liable to penal consequences.

It has been also held that conducting online games for profit cannot be included in the scope of trade, business orcommerce as envisaged under Article 19 (1) (g)8 of the Constitution. Further, sports' betting is an offence in India and

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individuals earning money from bets laid on games of skill do not have the constitutional protection of Article 19(1) (g).

In view of the aforesaid, it is clear that only Games of skill and that too played in physical form have been held by the courts tobe valid and falling within the ambit of various enactments, dealing with Gaming, in India. However, as far as, on-line Gaming isconcerned, the courts are of the view that on-line Gaming could not be compared to real game being played and would,therefore, not be allowed until 'skill' test is passed by it.

Footnotes

1 Section 13 of the Delhi Public Gambling Act, 1955

2 Section 18 of the Delhi Public Gambling Act, 1955

3 AIR 1957 SC 699

4 AIR 1968 SC 825

5 1995 6 SCC 289

6 AIR 1996 SC 1153

7 The court placed reliance on the definition of "gaming house" in the Bombay Gambling Act as "any house, room or place whatsoever, in which anyinstrument of gaming is kept or used for profit or gain of the person owning, occupying using such house, room or place by way of charge for the use ofsuch house, room or place or otherwise howsoever."

8 Article 19(1)(g) of the Constitution provides to every Indian citizen the right of freedom to carry on any occupation, trade or business, subject toreasonable restrictions.

© 2014, Vaish Associates, Advocates,All rights reserved with Vaish Associates, Advocates, 10, Hailey Road, Flat No. 5-7, New Delhi-110001, India.

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should besought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

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