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Legal & Regulatory

SC Issues Notice, Stays Bombay HC Order in Dream11 Betting & GST Evasion Case

A three-judge bench of the Supreme Court, comprising of Chief Justice SA Bobde and Justices BR Gavai and Surya Kant issued notice to Dream11, Union of India and social activist Gurdeep Singh Sachar in an appeal filed by the state of Maharashtra as per a report in ETPrime today.

While hearing the Special Leave Petition (SLP) filed by the Maharashtra government on 6th March, 2020, the 3-judge bench of the apex court noted that the High Court decision ruling Dream11 to be a game of skill and dismissing claims of GST evasion against it was given without hearing the central or state government or issuing notice to any of the parties to the matter.

Justice Gavai, on behalf of the bench, expressed displeasure at the haste and manner in which the judgment of the Bombay High Court was given, within a span of less than three working days, without hearing any of the other parties.

The bench also dismissed the argument of Senior Counsel and former Attorney General of India, Mukul Rohatgi, who stated that a lawyer had appeared on behalf of the state government on 30th April, 2019 in the Bombay High Court.

The 3-judge bench of the apex court will likely hear the matter in April 2020 and delve into the merits of twin issues of whether Dream11 is a game of skill or amounts to gambling/betting and whether the fantasy sports website has been paying GST in a correct manner or indulging in evasion by not paying tax at the rate of 28% on entry fees.

It may be noted that Mumbai-based lawyer and social activist Gurdeep Singh Sachar had filed a Public Interest Litigation in April, 2019 asking for a ban on Dream11 and probe against it for GST evasion.

On 30th April, 2019, a division bench of the court comprising of Justices Ranjit More and Bharati Dangre ruled that Dream11 and fantasy sports games involved use of skill and judgment and was consequently outside the ambit of anti-gambling legislation. It also stated that Dream11 correctly paid GST on the platform fee retained by it as against the entry fee of every contest that was claimed by the petitioner.

A Supreme Court division bench headed by Justice Rohinton Nariman had earlier dismissed all appeals and a clarification application against the Bombay High Court order filed by Advocate Varun Gumber, Sachar as well as the Union of India, while allowing the central government to file a limited review petition in the Bombay High Court on the issue of allegations of GST evasion against Dream11.

The 3-judge bench of the Supreme Court has however, while hearing the Maharashtra government’s plea, implicitly set aside the orders of the Justice Nariman-led division bench and is likely to give a decisive verdict on the legality of daily fantasy sports and online gaming in the country.

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Legal & Regulatory Poker

Gujarat HC Once Again Adjourns Poker Matter to 5th May

A division bench of the Gujarat High Court comprising of Chief Justice Vikram Nath and Justice AJ Shastri could once again not hear letters patent appeals on the legality of poker in the state and the skill element involved in the game . The new date when the matter is likely to be listed for hearing is 5th May, 2020, when the matter might be heard by a new division bench of the court.

Earlier, the High Court had adjourned were scheduled for arguments on 8th January, 2020 to 17th February, 2020 and observed that daily hearings would be conducted from that date to expedite hearings in the matter, and that the matter could be mentioned to be taken up for hearing.

Again, on 17th February, the matter could not be taken up and was adjourned to 9th March, when it was once again adjourned by two months to May 2020.

The hearings on letters patent appeals filed by Indian Poker Association Secretary KN Suresh, Dominance Games Private Limited, Aman Chhabra and Hotel Ramada, Ahmedabad against a December 2017 single judge bench’s order of the High Court, ruling poker to be a game of chance have been pending for over two and a half years, with little progress and lack of clarity as to by when any decision on the matter would be likely.

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Legal & Regulatory

Haryana Consumer Court Imposes Rs. 2 Lakhs Damages on Dream11, Holds it Guilty of Malpractice

The District Consumer Disputes Redressal Forum of Kaithal, Haryana held online fantasy sports website Dream11 liable for malpractice and imposed damages of Rs. 2 lakhs on it for non-fulfillment of its commitment of giving free contest tickets to the winner of the consumer.

The Kaithal Consumer forum passed the order on 25th February, 2020 while disposing a consumer complaint filed by one Balinder Rapria, resident of Balu village in Kaithal, who won a fantasy league contest of the Carribean Premier League T20 on Dream11.com in 2018.

The contest entailed Rapria and one of his family member/friend to an all expense paid trip to watch the ICC Women’s World T20 final in Antigua and Barbuda in November, 2018.

However, it was alleged by the complainant Rapria that Dream11 failed to comply with the terms and conditions of the contest and did not provide the free all expenses trip as promised.

Dream11 however challenged the averment and stated that it was ready and willing to provide the all expenses trip, but the visa had to be procured by the complainant, although the company was ready to provide assistance with respect to the same and that there were calls and discussions with the complainant regarding the same.

It also stated that it had offered an all expenses trip to the complainant at an alternate venue in Australia in lieu of the trip to Antigua.

The Consumer Forum however, after going through email records noted that there was no email record or correspondence by Dream11 stating that the complainant was bound to obtain the visa on his own and in fact, the fantasy sports company apologised in emails to the complainant regarding its guilt and offered a trip to an upcoming match in another country.

Ruling that the failure to fulfill the trip amounted to deficiency of service and malpractice under Section 2 of the Consumer Protection Act, 1986, the 3-member bench of the district consumer forum directed Dream11 to pay Rs. 2 lakhs to the complainant as damages along with 9% interest from the day of filing of complaint and Rs. 5,000/- as litigation costs.

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Legal & Regulatory

Puducherry Casino Proposal Referred to Home Ministry by Kiran Bedi

Union Territory (UT) Puducherry’s Lieutenant Governor (LG) Kiran Bedi has sought opinion of the central Home Ministry on the proposal of the UT’s Congress government to open casinos in the area to generate revenues for the territory.

Chief Minister of the Union Territory (UT) of Puducherry, V. Narayanasamy has been, since 2016, mooting the idea of opening offshore casinos in the region, in line with Goa casinos, to boost tourism and attract visitors from other states. The minister has earlier stated that permission to allow casinos, lotteries and breweries will help the union territory earn much needed funds.

Despite the UT’s government being fully ready to allow casinos in the area, there is opposition to the proposal from the UT’s  Lieutenant Governor (LG) Kiran Bedi who thinks that allowing casinos in the area will affect its quality of domestic and international tourists and cause social problems.

When there’s a disagreement between the UT’s Lt Governor representing the centre and the elected government of the territory, the matter ought to be sent to the Home Ministry for their opinion. Therefore, the proposal of opening casinos in Puducherry and the proposed amendments to the Puducherry Gaming Act, 1965 have been referred by Bedi to the Home Ministry.

As per a report in Deccan Herald, in a Whatsapp to the media on Sunday, the former IPS officer said that 73 files related to various subjects were cleared last week and one file relating to the casino proposal has been forwarded to the Home Ministry for its consideration and opinion. This Whatsapp message also debunked criticism from the Chief Minister that Bedi had been sitting on the government files for months altogether.

Bedi said that she uploaded the details of the files on Whatsapp in the spirit of maintaining transparency by her office and for officers to be updated about the status of the files.

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Legal & Regulatory

Rajasthan HC Reiterates that Dream11 is a Game of Skill

A division bench of the Rajasthan High Court in an order given last week, reiterated the earlier pronouncements of the Punjab & Haryana and Bombay High Courts that ruled fantasy sports to be games of skill and consequently falling outside the ambit of gambling/betting legislations.

The division bench comprising of Chief Justice Indrajit Mohanty and Justice Ashok Kumar Gaur after hearing arguments over several hearings and giving opportunity to the respondents to file replies and the petitioner to file a rejoinder, pronounced the order on 14th February, 2020 in the Public Interest Litigation (PIL) filed by one Chandresh Sankla, a resident of Ajmer.

The petitioner in his PIL claimed that online fantasy sports website Dream11 was involved in betting activities and gambling activities and asked that the state government stop such activities, initiate criminal proceedings against the company and ensure that the crimes committed by Dream11 are not carried out anywhere across India.

Sankla in his petition impleaded the Home Secretary, Government of Rajasthan, State of Rajasthan as well as Dream11 founders Harsh Jain and Bhavit Sheth as respondents.

Justice Gaur, while speaking for the court in Chandresh Sankla v. State of Rajasthan & Others reproduced the relevant portion of the 2017 order of the Punjab & Haryana High Court Varun Gumber v. Union Territory of Chandigarh & Others wherein it was decided: “The respondent company’s website and success in Dream 11’s fantasy sports basically arises out of users exercise, superior knowledge, judgment and attention…. Equally so, before I conclude, I must express that gambling is not a trade and thus, is not protected by Article 19(1)(g) of Constitution of India and thus, the fantasy games of the respondent-company cannot said to be falling within the gambling activities as the same involves the substantial skills which is nothing but is a business activity” 

The Court also extracted the relevant portion of the Bombay High Court’s judgment in Gurdeep Singh Sachar v. Union of India & Others which reiterated the conclusion of fantasy sports involving substantial degree of skill: “Only if the result of the game/contest is determined merely by chance or accident, any money put on stake with consciousness of risk and hope to gain, would be ‘gambling’ or ‘betting’. There is no merit in the submission that the result of their fantasy game/contest shall be considered as merely by chance or accident notwithstanding involvement of substantial skill.”

The Rajasthan High Court in its judgment also noted that both Gumber’s and Sachar’s Special Leave Petitions (SLPs) in the Supreme Court where dismissed.

It further noted that the Supreme Court while recently dismissing Sachar’s SLP as well as subsequent clarification application had noted that the issue of whether gambling is or is not involved in the Dream11 matter cannot be revisited by the Bombay High Court while hearing the review petition filed by the union government and that only the GST issue can be re-heard by the Bombay High Court.

The court ultimately while ultimately dismissing the petition concluded that ‘the issue of treating the game “Dream 11” as having any element of betting/gambling is no more res integra in view of the pronouncements by the Punjab and Haryana High Court and Bombay High Court and further the SLPs have also been dismissed against the orders of these High Courts.’

Categories
Legal & Regulatory

Dhaka High Court Declares Gambling Illegal Across the Country

Dhaka High Court recently (Monday, February 10th) declared all forms of gambling illegal in Bangladesh. The court also observed that Public Gambling Act, 1867 should be updated and punishment for gambling should be increased.

The order was passed by a bench comprising Justice Sheikh Hassan Arif and Justice Md Mahmudul Hasan Talukdar. The order followed hearing of a writ petition filed by two Supreme Court lawyers, Samiul Huq and Rokonuddin Md Faruk.

The High Court asked law enforcement agencies to immediately seize any equipment used for gambling and take actions against gamblers and organizers of gambling. The games banned in the ambit of this order include indoor games such as housie, dice, flash, one-ten, and chorchori, as playing these games largely involves luck rather than skills.

Under the Public Gambling Act, 1857, the maximum punishment is three months jail and a fine of Tk200. The law is applicable outside metropolitan areas, but it wasn’t enforced in Dhaka city, so far.

In its observation, the High Court applauded the anti-gambling steps taken by the Bangladesh government. “The main purpose of the government’s drive against casinos is to discourage gambling,” observed the High Court, as reported by The Business Standard.

In the year 2016, a writ petition was filed in the High Court by two Supreme Court lawyers, to stop gambling at 13 clubs in Dhaka and four in other districts of Bangladesh. 

The 13 upscale clubs accused of organising gambling for their members are Dhaka Club, Uttara Club, Gulshan Club, Dhanmondi Club, Banani Club, Officers’ Club, Dhaka Ladies’ Club, Cadet College Club, Chittagong Club, Chittagong Seniors’ Club, Narayanaganj Club, Sylhet Club, and Khulna Club.

Following the petition, the High Court on December 4, 2016, issued a rule, asking the concerned authorities to explain why directives should not be given to take action to stop unlawful gambling. It also ordered banning of card and dice games and housie for money at the clubs. Dhaka Club later secured a freeze on the interim order that forbade gambling at clubs, by filing a pea at the Appellate Division.

On January 23rd this year, the High Court concluded a hearing in this matter and finally gave the order on Monday, February 10th.

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Legal & Regulatory

Legal Heavyweights Battle it out in Dream11 GST Evasion case

The Bombay High Court has adjourned the hearing in a review petition filed by the central government on the manner of payment of Goods and Services Tax (GST) by Dream11 to 19th March, 2020.

A division bench of the Bombay High Court comprising of Justices Ranjit More and Bharati Dangre was earlier supposed to hear the review petition filed by the Union of India in the Public Interest Litigation (PIL) filed by advocate and social activist Gurdeep Singh Sachar in-chamber on 11th February, but on the hearing date decided to adjourn the matter by more than a month.

According to the order of the court, senior advocate and former Attorney General of India Mukul Rohatgi (who has also represented the fantasy company in several earlier hearings in the Supreme Court on related matters) along with senior counsel Vikram Nankani appeared for Dream11, while Additional Solicitor General of India Anil C. Singh appeared for the central government and counsels Yogesh Naidu and Sarosh Damania appeared for Sachar.

It may be noted that Sachar had originally filed a PIL in the Bombay High Court in April 2019 alleging that online fantasy sports operator Dream11 conducts gambling operations and wrongly pays Goods and Services Tax (GST) only at the rate of 18% on the margin retained by the company, instead of 28% on the face value of bets under Rule 31A of the Central GST Rules.

A division bench of the Bombay High Court comprising of Justices Ranjit More and Bharati Dangre had dismissed Sachar’s petition and ruled in Dream11’s favour on 30th April, 2019.

Sachar as well as the Union of India, State of Maharashtra and activists Varun Gumber and Avinash Mehtrotra had filed appeals/applications against the order of the Bombay High Court in the Supreme Court.

However, through separate orders, the Supreme Court dismissed Gumber’s petition as well as the central government, Sachar and Mehrotra’s pleas, but allowed the government to file a limited review on the GST issue in the Bombay High Court.

On 31st January, 2020 a Supreme Court bench comprising Justices Rohinton F. Nariman and S. Ravindra Bhat also dismissed a clarification application filed by Sachar and noted that the issue of whether gambling is or is not involved in Dream11 cannot be revisited by the Bombay High Court.

Notwithstanding the Supreme Court order restricting arguments on the gambling/betting issue, the central government in its review petition contended that gambling/betting is involved in Dream11 and has claimed revenue implications of over Rs. 2100 crores in the matter.

The government in its petition has also relied on judgments of the Kerala, Madras and Gujarat High Courts ruling rummy and poker when played for stakes to be gambling.

The central government has also claimed that there is collusive behaviour between the PIL petitioner Sachar and Dream11 as well as violation of principles of natural justice since the original order was passed by the High Court without hearing it.

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Legal & Regulatory

Vijay Goel Raises Questions About Regulating Online Lotteries, Govt to Amend Rules, Introduce RNG Certification

Rajya Sabha Member of Parliament (MP) and former Minister Vijay Goel, on Wednesday, raised unstarred questions in the upper house of parliament in respect to committees formed by the government on banning or regulating lottery, recommendations made by such committees on online lottery, details of any plans of the government to formulate guidelines or regulation for online lotteries, and the taxes collected by the state and central government from sales of both paper and online lotteries.

In June 2019, Goel demanded a nation-wide ban on all forms of lotteries, in Rajya Sabha, stating that lottery results in loss of hard earned income and savings of the poor. He raised a question on the same line again on 5th February 2020, asking if the government has been contemplating to ban all kinds of lotteries pan India.

This time, in reply to Goel’s questions, Nityanand Rai, Union Minister of State for Home Affairs responded that there is no proposal under consideration by the government to ban all kinds of lotteries pan India. However, the sale of lottery tickets is not allowed in Union Territories. He mentioned that a committee comprising the Union Home Secretary and Finance Secretaries of the state governments was constituted on 24th February 2006, to formulate regulatory framework for lotteries. The committee recommended the formation of an Expert group, which was set up in November of the same year. The Study group made recommendations that led to framing of the Lotteries (Regulation) Rules, 2010.

The home ministry also stated that two study groups were formed in 2010 and 2018 to study the online lottery system. Rai said that the latter group had inter alia recommended in January 2019, ‘for testing of application software, mobile apps if any, and random number generators (RNG) used for online lotteries, provision for integrity verification in application software and disaster recovery server.’ He also stated that amendments to the Lotteries (Regulation) Rules, 2010 are under consideration, and these amendments would include regulatory provisions for online lotteries, as well.

At present, both paper and online lotteries are organized by four states including Arunachal Pradesh, Mizoram, Nagaland and Sikkim and an autonomous region of Bodoland Territorial Council (BTC). Only paper lotteries are organised by Kerala, Maharashtra, Punjab and West Bengal. 

Punjab recently banned all kinds of online lottery schemes, and Maharashtra also decided to ban online lotteries, in January 2020. Both the states cited loss of revenue due to online lotteries as a reason for the action.

In regards to Goel’s question regarding tax collections from lotteries by the central and state government, Rai replied that the Service Tax collected in the year 2016-2017 from lottery distributors and selling agents was approximately Rs. 260 crores. While the GST payable, as per information provided by lottery-running states, for the years 2017-18 and 2018-19 is as follows:

gst collection on lottery

GST Table Source: Annexure 1, R.S.US.Q.NO.392 FOR 05.02.2020

Categories
Legal & Regulatory

Online Lottery Schemes Banned by Punjab Government

The state of Punjab has banned all types of online lottery schemes operated by Indian or foreign lottery sellers in the state, as per an official spokesperson.

On 31st January 2020, the government of Punjab took the decision of banning online lottery schemes under Section 5 of the Lotteries (Regulation) Act 1998.

As per a report by the New Indian Express, a spokesperson, after a cabinet meeting in Punjab, said that this step to ban online lottery schemes in Punjab will not only help in curbing the sale of illegit lotteries in the state but will also help in boosting Punjab’s revenue and non-revenue collections from lottery sales.

The spokesperson also said that the cabinet of the state has also given approval to prohibit the sale of computerised and online lotteries promoted and sold through modes like vending and electronic machines and terminals. These modes, in addition to all types of online lotteries sold, organised or marketed through the internet by any operator in or outside India, are to be banned in Punjab.

With this decision, the Punjab government will only allow sale of paper lottery tickets within its territory.

In 2015, the Punjab government then announced its intention to start online lottery schemes in a bid to generate revenue for various welfare schemes. Almost six years hence, the state has decided to go back on its decision by banning all types of online lottery schemes.

Recently, the state of Maharashtra had also announced that it was contemplating a ban on online lotteries as there is no defined way to track online sales of lotteries, which leads to loss of revenue for the state.

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Legal & Regulatory

SC Dismisses Gurdeep Sachar’s Clarification Application in Dream11 GST matter

A Supreme Court bench of Justices Rohinton F. Nariman and S. Ravindra Bhat on Friday dismissed a clarification application filed by advocate Gurdeep Singh Sachar, which had urged the apex court to allow the issue of whether the fantasy games offered by Dream11 amounts to gambling/betting can be reviewed in the Bombay High Court for the purposes of determining whether there is any GST evasion on Dream11’s part.

Sachar’s counsel, senior advocate Mahabir Singh, contended that the application for clarification be allowed as the issue of gambling/betting is connected to determination of the manner of payment of GST, while former Attorney General of India and Senior Counsel Mukul Rohatgi, appearing for Dream11 strongly opposed the application.

Senior Advocate K. Radhakrishnan appeared on behalf of the central government.

The Supreme Court bench while dismissing Sachar’s interlocutory application, noted, ‘It is reiterated that in accordance with our order dated 13.12.2019, the only scope of the review filed in the Bombay High Court is with respect to GST and not to revisit the issue as to whether gambling is or is not involved.’

Sachar had originally filed a PIL in the Bombay High Court in April 2019 alleging that Dream11 conducts gambling operations and wrongly pays Goods and Services Tax (GST) only at the rate of 18% on the margin retained by the company, instead of 28% on the face value of bets under Rule 31A of the Central Goods and Service Tax Rules, 2017.

A division bench of the Bombay High Court comprising of Justices Ranjit More and Bharati Dangre had dismissed Sachar’s petition and ruled in Dream11’s favour on 30th April, 2019.

Sachar as well as the Union of India, State of Maharashtra and activists Varun Gumber and Avinash Mehtrotra had filed appeals/applications against the order of the Bombay High Court.

However, through separate orders, the Supreme Court dismissed Gumber’s petition as well as the central government, Sachar and Mehrotra’s pleas.

While jointly dismissing the central government, Sachar and Mehrotra’s pleas on 13th December, the Supreme Court bench comprising of Justices Nariman and Bhat had allowed the Union of India to file a Review Petition before the Bombay High Court on the limited issue of GST evasion by Dream11 within four weeks.

The central government’s review petition came up for hearing on 28th January, but its contentions on the GST issue did not find much favour with the bench comprising of Justices Ranjit More and SP Tavade.

The matter is now scheduled to come up for hearing on 11th February, 2020, with the Additional Solicitor General of India expected to lead submissions on behalf of the central government.

Importantly however, with the Supreme Court’s dismissal of Sachar’s application and its categorical assertion in the order that the issue of gambling with respect to Dream11 cannot be revisited, there remains little doubt about the legality of fantasy sports in India.