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Gaming Legal & Regulatory

Bombay HC quashes gambling case against video game parlour

A division bench of the Bombay High Court (Aurangabad bench) quashed an FIR filed under Sections 4 and 5 of the Maharashtra Prevention of Gambling Act against two individuals, Kundalik Kovlekar and Virbhadra Swami, alleged to be operating  illegal gambling under the guise of running a video game parlour.

The bench, comprising of Justices Mangesh Patil and SS Shinde, noted that betting or wagering is an essential element for an offence of running or being found in a common gaming house to be attracted. The bench, while quoting previous decisions of the Bombay High Court in Jaywant Balkrishna Sail v. State of Maharashtra and KL Mansukhani v. Senior Inspector of Police and Others observed that the offence of gaming would only be attracted when it is alleged that prime facie, a game of chance or a mixed game of skill and chance is being played.

The court further noted that there is no evidence to show that the computers and other instruments seized by the police were being used for playing a game of chance.

“When there is absolutely no material in the matter in hand to even prima facie show or for that matter when there is absolutely no allegation that a game of chance and skill or a game of pure chance was being played or the instruments were being used for playing such games, even by accepting allegations in the FIR at their face value, it cannot be said that all the necessary concomitants for constituting offences punishable under Sections 4 and 5 of the said Act can be made out from the FIR,” the court said.

The court also noted there is no evidence to indicate that the duo disobeyed an order promulgated by public servant and therefore also quashed an additional charge under Section 188 of the Indian Penal Code that had been stated in the FIR.

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Legal & Regulatory

Kerala High Court directs payment of prize money to Mumbai lottery winner

In a recent order dated 29th May 2014 in Saroj Subash Nagori v. Director of State Lotteries & Others [Writ Petition (Civil) No. 13331 of 2014], the Kerala High Court single bench headed by Justice AM Shaffique directed payment of winning amount to Saroj Subash Nagori (petitioner), a winner of lottery draw based in Mumbai overruling the respondents contentions that winning amount cannot be granted to residents outside Kerala.

The petition related to winning of second prize in a lottery conducted by the state of Kerala and the petitioner submitted her winning ticket to the monitoring committee for claiming the prize money of Rs. 5,00,000/- in terms of Rule 9 of the Kerala Paper Lotteries (Regulation) Rules, 2005. However the monitoring committee rejected the claim stating that no travel documents were provided by the petitioner and since it is not permitted to sell lotteries outside the state of Kerala, the claim deserves to be rejected. Specific reference was made to Rule 6(4) of the Kerala Lottery Rules which states that lottery agents shall sell tickets outside the state of Kerala. Further the government claimed that appeal did not lie to the High Court by way of writ petition but the petitioner could have appealed the decision of the monitoring committee within 30 days.

The High Court rejected the contentions of the government stating that there was no statutory provision for barring non-residents of the state of Kerala from claiming lottery winnings either under the Lotteries (Regulation) Act, 1998 or Rules framed thereunder. The Court further noted that the restriction under Rule 6(4) is only for lottery agents and not for purchaser of lottery tickets. The Court also stated that the only inquiry that can be made is with regard to the genuineness of the lottery ticket under Rule 9 of the aforementioned lottery rules.

The list of documents to be submitted and procedure for claiming the prize are enshrined under Rule 9 and the authorities cannot go beyond the prescribed rules. The rules also provide for forensic inquiry of the lottery tickets to determine the legitimacy of the tickets. The Court also noted that not not disbursing the prize amount would amount to unlawful enrichment by the state and thus directed the state government to pay the prize amount to the petitioner.

While the decision is a first decision of a High Court to direct disbursement of winning amount, the latest decision may be in conflict with some previous case laws which were not referred in the decision. For instance in PA Peter v. State of Kerala [Writ Petition (Civil) No. 2913 of 2007], the Kerala High Court noted that it was not possible to direct the government to guarantee the stipulated prize amount and the government is justified in reducing the prize amount or postponing the draw of lotteries.The Court noted that wagering contracts are not enforceable in courts of law as per Section 30 of the Indian Contract Act, 1872 and hence prize amount cannot be guaranteed by the state. The court further held any guaranteeing of prize amounts to be against public policy and struck down Rule 9 (1) of the  Kerala Paper Lotteries (Regulation) Rules, 2005 which made such a guarantee as unconstitutional.

In Subhash Kumar Manwani v. State of Madhya Pradesh [AIR 2000 MP 109] the Madhya Pradesh High Court also refused to entertain an appeal for recovery of prize won by lottery as wagering agreements were void under Section 30 of the Contract Act and no suit could be entertained for recovery of such prize amounts in courts.

While it could be argued that the recent Nagori decision is different on facts from the other two precedents as it relates to procedural matters of disbursement of prize winnings under the Kerala Lottery Rules, it is surprising that there was no reference to Section 30 of the Contract Act by either parties or the Courts to bar the claim. Further the Court also did not cite the two High Court decisions making it unclear whether further petitions to claim lottery winnings would be entertained by High Courts in exercise of its writ jurisdiction, since civil suits for recovery of lottery prizes are clearly barred by the Contract Act.

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Legal & Regulatory

Gamblers on police radar this Diwali, but private gambling not illegal as per numerous Court rulings

Every Diwali there are numerous news reports of police keeping a strict vigil on gambling activities and raids on gambling activities even in residential apartments. Thus the legitimate question that arises is whether private gambling on festive occasions  is illegal under the Public Gambling Act, 1867 and other laws.

The clear answer to this doubt is that gambling in a private enclosure where there is no invitation to members of the public at large and where there is no element of ‘profit or gain’ for the owners, organisers or managers of the premises is not illegal. Gambling is only prohibited in a ‘common gaming house’ or in a public place when there is an element of commercial motive for the organisers.

Various Courts in India have made similar observations legitimising gambling during festivities and accepting this practice ofgaming during auspicious occasions for ‘shagun’ or good fortune. In Mani Ram v. State, AIR 1954 P & H 154, the Punjab & Haryana High Court recognised this in the following terms:  “In the present case we find that the occasion was two days before Diwali and it is a matter of common knowledge that in these days Hindus indulge in a great deal of gambling because it is considered auspicious. Again Mani Ram is a Municipal employee and it is not been shown that he has derived any profit or gain from gambling either on this occasion or any other occasion. The presence of a pot containing some money near his knee is scarcely evidence of the fact that he was taking a share of the winnings of the other persons…”

Gambling in Diwali not illegal
Gambling in Diwali not illegal

Similarly in In Re: Nimmagadda Raghavalu & Others, AIR 1953 Mad 243, the Madras High Court noted,Gambling is not an offence and it becomes one only when it takes place in a common gaming house or a public place…The mere fact that  occasionally people used to play cards and perhaps for money does not necessarily make it a common gaming house…The presumption of gambling on Diwali is not so strong as the gambling at other times...A person simply allowing the use of his house to gamblers during Diwali festival without any idea of demanding rent, etc., cannot be said to be keeping a common gaming house…Gambling on Diwali day should not be considered to be an offence…”

Again in Subba Rao v. The King, AIR 1951 Pat 405, the Patna High Court observed, “It is only an offence to gamble in a common gaming house…It appears that the accused merely met on the Diwali night for a friendly game of cards in the house of one of them…That does not constitute as an offence under the Gambling Act…”

Thus, only if one is gambling in an establishment where gambling is organised for a commercial motive would the activity be termed as illegal. Again Section 5 of the Public Gambling Act and other similar provisions in state laws requires an authorised police officer to issue a search warrant only if there is a suspicion that a premise is used as a ‘common gaming house’ and these powers have to be used sparingly and only on reasonable grounds.

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Gaming Legal & Regulatory

Exclusive: Government fails to notify landmark Maharashtra Casino Act even 37 years after passage, as clamour for regulated gaming grows; court can compel govt to enforce the Act

Exclusive After I had written an exclusive story on how the Maharashtra legislative assembly passed the historic Maharashtra Casino (Control & Tax) Act, 1976 but failed to enforce and notify application of the Act till date, the clamour for regulated gambling has increased over the past few days with almost all media sources, experts, government officials etc. approving the consistent stand taken by this website in the last couple of years.

However, the question is why has no organisation, individual or the press taken up the issue and urged the government to forthwith notify this Act and frame Rules therein to give effect to the will of the legislature? Clearly organisations and experts who have been lobbying to get legislation passed have failed in their efforts to convince the government. However the inaction of the Maharashtra government has been exposed by the inordinate and unreasonable delay in taking any decision on the Act and judicial recourse may be available to compel the government to take a stand on the issue and pass the appropriate notifications.

A writ of mandamus can be filed in the Bombay High Court seeking directions to the state government to forthwith notify the Act or explain its appropriate stand on not notifying the Act. The Supreme Court and Delhi High Court have set an important precedent and allowed judicial action in cases of inordinate and unreasonable delay on part of the executive in issuing notifications. While in AK Roy v. Union of India AIR 1982 SC 710; a five-judge bench of the Supreme Court refused to allow a writ 0f mandamus to compel the Central government to notify provisions of the 44th Constitutional amendment Act and held that th power of issuing such notifications is the prerogative of the executive government.

However, a subsequent division-judge bench decision of the Supreme Court in Aeltemesh Rein v. Union of India AIR 1988 SC 1768 held in the context of pending notification under Section 30 of the Advocates Act, 1961 that there cannot be a blanket ban on issuing directions to the government to issue notifications when a statute has already been passed. Accordingly the judges ordered the government to consider whether the time is appropriate to issue a notification under the Act and asked the government to take a stand. The government however failed to notify Section 30 despite strictures in the decision and various recommendations of experts; only issuing the notification in 2011.

However, both these decisions have been differently interpreted by the Delhi High Court in Common Cause v. Union of India (Delhi Rent Control case 1999) where the court directed the central government to issue notification under the Delhi Rent Control Act within six weeks of the order. The court in the decision reasoned that both the AK Roy and Aeltemesh Rein cases did not put a blanket ban on such directions to issue notifications when there is unreasonable delay in taking such a decision.

Thus, the Maharashtra government will have to answer a lot of questions and take a stand on the Casino Act very soon- either before the courts of law or before the media. One only hopes that effect is given to the 37-year old Act to enforce the legislative will and constant recommendations of experts and jurists.

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Gaming Legal & Regulatory

Exclusive: How Maharashtra tried opening casinos two decades before any other state and passed historic legislation during emergency

Exclusive Digging through the archives in the Maharashtra Law & Judiciary Department it has been found out that the state legislative assembly of Maharashtra passed a historic and visionary piece of legislation in 1976; during the height of national emergency. The Maharashtra legislative assembly had passed The Maharashtra Casinos (Control & Tax) Act, 1976 receiving the assent of the Governor on 19th July of that year as per a gazetted copy available through the government.

While it is unclear as to what prompted the state government to pass such a landmark and progressive Bill in 1976 (one possible reason could be to curb criminal activities and black money associated with gambling dens run by the underworld)  when the country was in a state of national emergency and civil liberties were severely curtailed (probably without any political, social or religious opposition due to the clampdown imposed during the period); but it has been confirmed that Maharashtra Congress-led government under the leadership of Chief Minister Shankarrao Chavan enabled passage of this historic legislation that allowed state government to grant licenses for all casinos in specified areas on payment of fees.

Casino games have been defined to mean any games of chance including betting activities. Further, the state government has been authorised to tax up to twenty-five percent (25% ) of the amount wagered in casinos as tax from the owners and the Act was to override provisions of the Bombay Prevention of Gambling Act, 1887 (which imposes a blanket ban on gambling and betting except lotteries and betting on horse-races).

All endeavours are being made to obtain more information on the Act and any plans/proposals after that but a 1976 judgment of the Gujarat High Court in Balubhai Amidas Khrishti v. State of Gujarat, (1978) 19 GLR 535 (the decision was on disciplinary action for offences of moral turpitude)  indicates that the legislative assembly has passed the Act after deliberation and was in the process of allowing casinos. Following was the observation of the court:

“Latest development in this behalf was brought to the notice of the Court by Mr. Abichandani who has brought daily issue of time of india (sic) dated 2nd July 1976 which carries a news item that the Maharashtra Government has decided to license casinos in the State and impose tax on the money staked on the games in casinos. Now, gambling is permitted in casinos.

Maharashtra Government has not only gone to set up casinos but it is being done with a view to channelising gambling instinct of the human being so that they may not be victims of some perfidious element. That is however, neither here nor there because even if the casino is set up by the Maharashtra Government it permits gambling none-the-less. In fact I was informed that a regular bill for licensing casinos is already introduced in the Maharashtra State Assembly. I am not merely relying upon the newspaper item. I am on much firmer ground when I say that Maharasthra Government which is described as forward looking progressive Government which has completely relaxed prohibition and is now going to permit gambling by licensing casinos under its aegis…”

Should Matheran have casinos?

It is unclear what later transpired after which no casino has opened in Maharashtra and Goa was the first Indian state to amend their legislation to allow casinos in the year 1996.

The one essential requirement under the Maharashtra Casinos (Control & Tax) Act, 1976 has somehow not yet been fulfilled though records indicate that the Act has been passed and is in force in the state as of now. Section 1(3) of the Act states that “it (the Act) shall come into force such date as the State government may by notification in the Official Gazette appoint.”

No such notification has been issued by the government till date and hence this Act remains buried in the archives and will remain infructuous and of academic importance till there is enough political will and the executive government of the day summons the courage to pass an appropriate notification and draft rules giving effect to provisions of the Act. It is not easy to speculate reasons for not issuing the notification and efforts are on to procure necessary information from the government departments.

However there were various proposals in the past 37-odd years after passage of this landmark legislation to open casinos in the state. In 2003, entrepreneur Vikram Mittal of Lotelier Group discussed a proposal with government officials to start a casino in Raigad district of Maharashtra but there was no progress in the matter, possibly due to political and other opposition.

Further, in 2012, the Maharashtra Tourism Development Corporation (MTDC) and other government bodies brought forward a proposal to allow casinos in the hill-station of Matheran to give a boost to tourism in the region. However, later MTDC officials backtracked from the proposal citing ecological roadblocks and possible denial of permission by the Union Ministry of Environment & Forests (MoEF). 

There is news through media sources that Maharashtra government may again consider proposals to allow casinos in the state- which can either be done through a notification under The Maharashtra Casinos (Control & Tax) Act, 1976 or for promotion of a tribal area under Schedule V of the Constitution. However, the decision to allow casinos is entirely political and will only be done when appropriate pressure is applied to the government and strong reasons are given for notifying the Act or passing suitable amendments. One only hopes that the 37-year old Casino Act is notified and cash-starved Maharashtra does not miss an opportunity to earn valuable revenue and grow as a tourist destination like neighbouring Goa.

Note: A copy of The Maharashtra Casinos (Control & Tax) Act, 1976 is available on the Bombay High Court website here.

Update: The records in the Law and Home Departments of the government of Maharashtra indicate that the Act is still in force but no notification giving effect to the Act has been issued. The Statement of Objects and Reasons of the Act indicate that it was passed to earn revenues from casinos and promote Maharashtra as a tourism destination especially for foreign tourists.

Records of legislative proceedings also indicate that there was opposition to the Bill from the Muslim league leader and MLA GM Banatwala who opposed allowing casinos and betting, moved various amendments (which were negatived) and termed gambling as an inevitable vice which should be strictly regulated.