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.

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.

Gaming Legal & Regulatory

TRS MP raises question on fantasy sports legality; central govt says states can decide

Exclusive The central government did not give a clear answer on the legality of fantasy sports and proposal to regulate it, in response to an unstarred question raised in the Lok Sabha by Telangana Rashtriya Samiti (TRS) MP AP Jithender Reddy.

Reddy, in an unstarred question dated 8th February, 2019 sought to know whether the central government proposes to regulate fantasy sports; the number of cases pending in consumer courts relating to fantasy sports and whether fantasy sports is a ‘game of skill’ or gambling/betting as per Supreme Court’s decision.

Reddy also sought to know whether the activity falls within the ambit of ‘gambling and betting’ under the state list (List II of the Seventh Schedule) of the Indian constitution and also if the central government intends to enact laws to govern financial transactions relating to the fantasy sports industry.

Union Minister of State for Finance, Pon Radhakrishnan, while replying to the queries stated that betting and gambling comes under Entry 34 of List II of the Seventh Schedule of the Indian constitution and that the state governments are competent to enact laws on the issue.

The central government did not provide specific data on the cases pending in consumer courts relating to fantasy gaming. The finance ministry also did not state whether it intends to bring any law to regulate financial transactions relating to fantasy sports or gaming.

Interestingly, the Telangana state government headed by Reddy’s party, the TRS, had passed an ordinance (later converted into an Act) in 2017, amending the Telangana Gaming Act, 1974. The amendment effectively bans all kinds of games of skill, whether played online or offline within the state of Telangana. Writ petitions challenging this law have been filed by online rummy companies and are pending further hearing in the Telangana High Court.

Legal & Regulatory

Law commission recommends regulation of betting and gambling; one member gives dissenting opinion

After more than one year of deliberations and research, the Law Commission of India led by its Chairman, Justice (retd.) BS Chauhan, has finally submitted its 276th Report titled ‘Legal Framework: Gambling and Sports Betting including in Cricket in India’ to Union Law Minister Ravi Shankar Prasad.

The Commission in its 145 page report, goes into lengthy detail on the history of gambling in India as well as other ancient civilisations like Greece and Rome. The report also traces the current laws and constitutional provisions relating to gambling.

Further, the report states that legalising gambling and betting is not desirable in India in the present scenario. It recommends that state authorities should ensure enforcement of a complete ban on unlawful betting and gambling.

However, the commission goes on to mention that since it is impossible to completely prevent gambling/betting activities, regulation is the only viable option and regulating betting is also beneficial for generating revenues and employment.

The commission therefore recommended that parliament should pass a law to regulate gambling and betting, either using its powers to regulate media and electronic communication or pass a model law that may be adopted by state governments.

The report further suggested that  Aadhaar or PAN cards of an individual indulging in betting and gambling should be linked to avoid money-laundering and fraud. It further stated that two types of betting should be allowed, i.e. ‘proper gambling’  and ‘small gambling’.

Proper gambling of high stakes can only be indulged in by persons of higher income levels while persons of lower income groups can only place bets of small stakes. The number of bets to be placed in a particular month or year also ought to be capped, according the law panel.

The commission also suggested many other safeguards like preventing those below poverty line and minors from accessing betting and gambling avenues, using only electronic means for payment for gambling transactions etc.

Notably, the commission also suggested that Foreign Direct Investment (FDI) should be allowed in the gambling and betting sector, including for online gaming and casinos.

However, in an unusual step, one of the members of the Law Commission, Prof (Dr.) S. Sivakumar, disagreed with the commission’s report and criticised the approach taken by the law panel in strong terms.

Sivakumar in his dissenting note stated that the issue of gambling legalisation was not referred to it in the first place and the Supreme Court had only asked the commission to look into the matter of cricket betting legalisation as recommended by the Lodha committee.

He further stated that the socio-economic and cultural circumstances of the country are not pragmatic to accept legalised gambling activities, as it is still treated as a social stigma.

He further stated that the time is not ripe for legalising gambling due to widespread poverty prevalent in the country.

Sivkaumar opined that no form of gambling can be permitted from the soil of the country.

Legal & Regulatory

US Supreme Court allows states to regulate sports betting, will this decision have a ripple effect in India?

On 14th May, 2018, the US Supreme Court in a majority verdict in Murphy (Governor of New Jersey) v. National Collegiate Athletic Association invalidated the Professional and Amateur Sports Protection Act, 1992 (PASPA), a federal legislation that disallowed states to promote, operate, license, authorise or sponsor sports betting.

The law barred all states from permitting sports betting, but granted exemptions to four states that already permitted some form of sports betting before passage of the law to continue those offerings, was invalidated by the Supreme Court on the grounds that it violated the ‘anti-commandeering’ principle, that prevents the Congress from issuing direct orders to the states.

The invalidation of PASPA after years of litigation, on the grounds of violation of principles of the federal structure envisaged by the American constitution has generated considerable excitement in the gaming industry. In fact, it would not be incorrect to say that the historic decision will have a major impact on the global gaming industry.

News reports indicate that apart from the state of New Jersey (which was the petitioner in this case), ten or more other states are looking to immediately pass legislations to regulate, license and tax sports betting. Experts believe that more than thirty states could regulate and license the activity in the next four or five years.

While it is best to leave the those having expertise in American constitutional law and jurisprudence to analyse the judgment and its implications in detail, it would be worthwhile to examine whether the order would have any implications on the move to get sports betting legalised in India.

The Indian constitution is a quasi-federal one, with the centre enjoying a stronger role vis-a-vis states. The Indian constitution does not follow the strict federal model envisaged by the founding fathers of the United States of America and thus the anti-commandeering principle may not have much relevance here. Further, unlike the American constitution, the subjects which the parliament and state legislatures can regulate are well enumerated in the seventh schedule of the Indian constitution.

Under entry 34 of the state list, it is clear that state legislatures have the power to regulate gambling and betting activities.  However, parliament is given the power to legislate on state subjects in certain circumstances, i.e. if two or more state legislatures specifically request it to do so or in pursuance of an International treaties or if it is required to be done for a limited period of time in national interest.

Arguably, the centre could use its powers to legislate on inter-state trade and commerce (entry 42) or communication (entry 31) to at least regulate or ban online sports betting. The Law Commission of India has been examining the issue for over a year and a half now, and it is unclear whether and when it will come out with its recommendations.

The Supreme Court has also admitted a petition filed by one Geeta Rani more than a year ago, which urges the court to issue directions to the central and state governments to regulate sports betting.

Despite all the brouhaha over legalisation of sports betting, the decision of the US Supreme Court may just bolster the case for the Law Commission and the central government to shy away from taking any decision on the contentious issue and leave it to individual states to decide their policy.

Given the complex socio-economic conditions and various other challenges in governance, state governments in India would not be in a hurry to emulate their US counterparts by rushing to pass legislation on sports betting.  In spite of the path-breaking US Supreme Court judgment and move by various American states to legalise betting, the debate on sports betting legalisation is unlikely to gain momentum in India just yet.

Gaming Legal & Regulatory

SC rejects appeal to initiate criminal action against Dream11, does this end the debate on fantasy sports legality?

In April 2017, a single judge bench of the Punjab & Haryana High Court rejected a complaint by an advocate, Varun Gumber, to initiate criminal proceedings against online fantasy sports website Dream11.

The court while passing the order noted that playing fantasy sports online does not amount to gambling and involves a substantial degree of skill. Justice Amit Rawal in his order also stated that the user has to be adroit and skillful in continuously monitor the sporting event, statistical performance of the players and previous track record, weather conditions etc.

The order of the Punjab and Haryana High Court was seen as a significant boost to the nascent and burgeoning fantasy sports industry, since it was the first order of any High Court in the country that had analysed the format of daily fantasy sports and passed observations ruling daily fantasy sports to be a game of skill and holding it to be completely legal, even if there was stakes or money involved. The court in its order clearly and unequivocally rejected the plea of initiating criminal charges against Dream11.

It now turns out that the complainant, Varun Gumber, being dissatisfied with the order of the High Court, had approached the Supreme Court through a Special Leave Petition in August 2017.

A Supreme Court division bench comprising of Justices Rohinton F. Nariman and Sanjay Kishan Kaul, through a terse order dated 15th September, 2017, had summarily dismissed Gumber’s petition.

This order is seen as a major victory for getting clarity on the legality of daily fantasy sports and one that puts to rest questions about the element of skill involved in fantasy sports.

However, the question that needs to asked is whether the non-reasoned and summary dismissal of the petition, which does not go into the facts and legal issues involved, is an unequivocal carte blanche from the apex court to fantasy sports operators and gives them a go ahead to run operations pan India?

The answer to this question would be in the negative. A summary dismissal by the Supreme Court without going into the facts and legal arguments of the matter cannot create a binding precedent. It can certainly be argued that the dichotomy in the 1967 Supreme Court judgment on rummy that rules that profit or gain made by the clubs in a game of skill could possibly be construed as an offence under the Gaming Acts has not been addressed in either by the High Court or by the Supreme Court.

Further, it is within the realm of possibility that just like Telangana, other states can also amend their Gaming Acts to remove the exemption given to games of skill and bring even games like fantasy sports within the ambit of gambling.

In conclusion, it can be said that while the Supreme Court order dismissing the complaint against Dream11 indicates that the findings and conclusions of the Punjab and Haryana High Court ruling hold good, the entire issue of the model adopted by fantasy sports websites could possibly be revisited by the apex court, should any matter come up before it in future.

Legal & Regulatory

PIL in Supreme Court asks for SIT probe into match-fixing and betting in cricket matches

A Public Interest Litigation (PIL) has been filed in the Supreme Court by retired bureaucrat Atul Kumar and journalist Shantanu Guha Ray seeking a probe into match-fixing and manipulation of cricket matches and rampant illegal betting, as per a report in legal news website Bar & Bench.

The petition, placing reliance on various news reports, statements by former cricketers, administrators and journalists alleges that the outcomes of most cricket matches are manipulated and fixed to benefit the massive illegal betting industry, the annual turnover of which they peg to be in the range of Rs. 7-8 lakh crore.

The petition contends that the illegal betting racket in India is controlled by the underworld mafia and fugitive mafia don Dawood Ibrahim. It further states that the massive transfer of funds for illegal betting is a risk to national and economic security.

The petitioners in their pray ask for a comprehensive Special Investigation Team (SIT) probe into the alleged ‘public fraud in the name of cricket’. The petition also asks for staying IPL and other domestic and international cricket matches until the fraud and illegalities plaguing the game of cricket (including the alleged match-fixing and betting rackets) are unearthed and those perpetrating criminal activities are brought to book.

A 3-judge bench comprising of Chief Justice Dipak Misra and Justices DY Chandrachud and AM Khanwilkar heard the matter on 2nd February and ordered a copy of the petition to be served to the central government so that the appropriate central agency can assist the court. The matter is now slated to be listed for hearing on 16th February, 2018.

Interestingly, a PIL to legalise and regulate cricket betting filed by Delhi resident Geeta Rani is pending before the same three judge bench of the Supreme Court since April last year. The Supreme Court had on 28th April, 2017 asked that the matter be tagged with the ongoing petition concerning various wide-ranging reforms in the Board of Control for Cricket in India (BCCI).

Industry body All India Gaming Federation (AIGF) has also filed an intervention application in Geeta Rani’s petition, endorsing the demand that cricket betting be regulated and permitted as a game of skill. However, the Supreme Court has not heard the matter yet and has not passed any specific order on the issue. The Supreme Court is expected to hear the PIL and AIGF’s intervention application on 23rd February, 2018.

Legal & Regulatory

SC dismisses rummy petition filed by Krida Sports, asks company to approach High Court first

A full bench of the Supreme Court comprising of Justices Madan Lokur, Abdul Nazeer and Deepak Gupta dismissed a writ petition filed by Chennai-based Krida Sports and Games Private Limited that wanted to run rummy clubs in Andhra Pradesh, Telangana and Tamil Nadu and sought directions from the apex court to the police to refrain from interfering in rummy games.

The bench while disposing off the petition stated that the company was at liberty to approach the relevant state High Courts to seek appropriate relief if they so desired.

Krida Sports had filed a writ petition in the Supreme Court in May 2017 praying that rummy should be allowed to be played for stakes without any interference from the police.

The company, represented by Senior Advocate and eminent jurist Soli Sorabjee, had made the states of Telangana, Andhra Pradesh and Tamil Nadu and the Director General of Police of the three states respondents in its petition.

In July and August 2017, the company had approached the Supreme Court seeking leave to amend its petition to challenge the two ordinances issued by the Telangana government that banned playing rummy and other games of skill for stakes by removing the exemption granted to games of skill and specifically making betting or wagering on games of skill illegal.

On 1st September, the Supreme Court had in its order recorded that the proceedings in the Supreme Court would not impact the ongoing writ petitions filed by online rummy companies in the Andhra Pradesh and Telangana High Court challenging the two Telangana Gaming ordinances.

Meanwhile, the online rummy companies’ petitions in the Andhra Pradesh and Telangana High Court may come up for hearing in the next week. The court had earlier extended the interim relief granted to the rummy websites until 15th October allowing them to offer services to customers residing outside Telangana, even if the company offering the service is registered or located within the state.

Legal & Regulatory

SC to hear challenge to Telangana ordinance, simultaneous hearing to continue in HC

The Supreme Court on Friday said that it will continue to hear the writ petition filed by Krida Sports and Games Pvt. Ltd. on whether it is legal to play rummy for stakes.

Krida Sports had filed a petition in the Supreme Court in May 2017 and amended the its plea in July and August to challenge the constitutional validity of the two Telangana ordinances that banned rummy and all other games of skill played for stakes.

A division bench comprising of Justices Madan Lokur and Deepak Gupta gave two weeks to the parties to complete their pleadings. The bench also stated that the petition will not impact the cases filed by online rummy companies in the Andhra Pradesh and Telangana High Court.

The order passed by the court also notes that there will not be any stay in the proceedings pending in the High Court.  The tentative date for the next hearing as per the Supreme Court website is 18th September.

In the meanwhile, the Andhra Pradesh and Telangana High Court has continued the partial interim relief granted to Ace2Three and other Hyderabad-based rummy websites that enables them to continue offering services to customers located outside the state.

The court has extended the interim relief granted to the rummy websites until 15th October. The matter is slated to be taken up again on 3rd October.

Interestingly however, certain women’s groups have intervened in the rummy matter in the High Court and supported the move by the Telangana government to ban online rummy. The women’s organisations claimed that online rummy had destroyed many families and their husbands had lost their earnings while playing on rummy websites.

The division bench comprising of Acting Chief Justice Ramesh Ranganathan and Justice J. Uma Devi adjourned the matter and stated that the concerns of the women’s organisations would be taken into consideration in subsequent hearings.

Legal & Regulatory

Petition in Supreme Court challenges Telangana gaming ordinances, police interference in rummy games in 3 states

Krida Sports and Games Pvt. Ltd., a Chennai-based company that wants to start rummy operations in Tamil Nadu, Telangana and Andhra Pradesh has filed a civil writ petition in the Supreme Court. The petition states that rummy should be allowed to be played for stakes without any interference from the police.

As per records available on the Supreme Court website, a total of 19 parties have been made respondents by Krida Sports including the states of Telangana, Andhra Pradesh and Tamil Nadu and the Director General of Police of the three states.

The writ petition, filed in May 2017, came up for hearing before a bench of Justices Madan Lokur and Deepak Gupta, twice, on 3rd July and again on 8th August. While the petition was filed before the Telangana government passed two ordinances to amend the Gaming Act which made playing rummy for stakes illegal, the court allowed the company to amend their petition to challenge the constitutional validity of the two ordinances.

The Supreme Court has also issued notice to the respondents and will hear the contentions of the three state governments. Eminent jurist and former Attorney General of India, Soli Sorabjee, appeared for Krida Sports in both the hearings. The matter is likely to come up for hearing again on 1st September.

Saravanan Subramanian, Director of Krida Sports and Games confirmed over phone that his company had indeed filed the petition but refused to give further details of the points raised in the petition and the reasons why his company took the extraordinary measure of filing a petition directly in the Supreme Court, instead of approaching state high courts separately.