A division bench of the Andhra Pradesh and Telangana High Court heard the petitions filed by Head Infotech Pvt. Ltd (Ace2Three)., Play Games 24×7 Pvt. Ltd (Rummycircle). and Junglee Games Pvt. Ltd (Junglee Rummy). on Tuesday and Wednesday.
AK Ganguly, the senior counsel appearing for the rummy companies submitted that the Telangana State Gaming (Amendment) Ordinance, promulgated by the government was unconstitutional and violated the rummy companies’ fundamental right to carry out trade and commerce.
The counsel for the petitioners further stated that rummy has been held to be a game of skill by the Supreme Court and the ordinance issued by the government classifying it as a game of chance, was impermissible and outside the state’s legislative competence.
The division bench of the High Court comprising of Acting Chief Justice Ramesh Ranganathan and Justice T. Rajani observed that rummy companies based in Telangana could service customers based outside the state and that would not amount to an offence under the new ordinance.
The Advocate General agreed to the suggestion of the bench while reserving his right to fully respond to the contentions raised by the rummy. Accordingly, the bench directed that rummy companies based in Telangana like Ace2Three can accept customers from outside the state while continuing to prohibit players from within Telangana.
Companies like Rummycircle and Jungleerummy that are based outside Telangana had not shut down their all-India operations but had only barred players from Telangana. These companies have not yet got any relief from the court and will have to continue to prohibit players from Telangana.
Ace2Three consequently has resumed games for players outside Telangana, Assam and Odisha. It is understood that around 40% of Ace2Three’s players come from the state of Telangana.
The High Court is expected to hear the submissions of the Advocate General of Telangana on 3rd July.
Meanwhile, Canada-based Clairvest Group, which is now a major shareholder in Head Infotech, the company that operates Ace2Three issued the following update to the Toronto stock exchange:
Clairvest Group Inc. (TSX:CVG) (“Clairvest”) is providing an update on the previously announced regulatory issues with respect to its investment in Head InfoTech India Pvt. Ltd. (“Head InfoTech”). On June 17, 2017, the Telangana (India) state government issued an ordinance which, among other things, made it illegal to operate an online gaming platform within the state (providing services to customers within the state and operating such a business within the state serving customers outside the state) (the “Ordinance”). Head InfoTech, which operates an online skill based gaming platform, immediately shut down its operations in response to the Ordinance.
Head InfoTech, along with other online rummy companies in India, are challenging the validity of the Ordinance in the Indian courts. While final resolution of the court challenge is pending, on June 28, 2017 the High Court for the State of Telangana made an oral observation that serving customers outside Telangana should not entail any violation of the Ordinance to which the advocate general representing the state government was agreeable while reserving the right to respond fully in arguments scheduled for next week. Accordingly, Head InfoTech has resumed operations for customers outside of Telangana. Revenue from customers outside of Telangana represented approximately 60% of Head InfoTech’s overall revenue.
There is no assurance that Head InfoTech will ultimately be successful in its court challenge or that interim relief (consistent with the above mentioned oral observation) will be granted following next week’s court proceedings.