Madras High Court on Regulating Online Gaming

[Prakshal Jain is a 2018 graduate of National Law School of India University, Bangalore and is working with the dispute resolution practice group of a law firm in Mumbai]

The Madurai bench of the Madras High Court in D Siluvai Venance v. State noted that the increasing popularity of online gaming has created an alarming situation in the state of Tamil Nadu, especially among the youth. The Court has placed trust on the state government to take note of the situation and pass a suitable legislation regulating and controlling online gaming.

Background

The Madras High Court was dealing with a case under section 482 of the Criminal Procedure Code for quashing a first information report (“FIR”) filed against the petitioner who was alleged to have participated in gambling by playing cards in a public place. The Court went on to quash the FIR on the grounds that the petitioner was playing in a private area, and that the same could not be termed as playing in a ‘common gaming house’ to fall within the purview of the offence under the Tamil Nadu Gaming Act, 1930 (the “TN Act”).

On a separate note, the Court questioned the police as to why they were so particular in implementing the TN Act even though the petitioner was merely playing cards in a secluded area, when online rummy was being freely played in the State. The Court noted that several online games are mushrooming throughout the country, and are inducing unemployed youth on the pretext of earning money. In response to the query, the police submitted a report where it admitted that Tamil Nadu has no law to regulate and license online games such as rummy, fantasy sports and the like.

Having quashed the FIR, the Court went on to discuss the issue of regulation of online gaming. The Court analysed in detail the legal framework governing gambling in India and the developments in relation to online gaming and gambling.

Law applicable to gambling in India

In India, ‘betting/gambling’ is a state subject and each state has its own legislation to regulate the same. While some states like have adopted the central legislation, i.e., the Public Gaming Act, 1967, other states have enacted their own legislation.

One of the common features across these legislation is the differentiation between ‘game of chance’ and ‘game of mere skill’.The restrictions provided by the legislation do not apply to the latter. The Supreme Court has held that a competition that depends to a substantial degree on the exercise of skill would not fall within the category of gambling. Accordingly, the game of rummy involves preponderance of skill rather than chance and the game of horse racing also involves substantial degree of preponderance of skill and, hence, both do not amount to gambling.

Legal developments surrounding online gaming

Judicial developments

The Supreme Court was presented with an opportunity to decide on the legality of online rummy in Mahalakshmi Cultural Association v. Dir. Inspector Gen. of Police.[1] The Madras High Court had held that playing rummy with stakes amounts to gambling. The matter went to the Supreme Court and certain online gaming websites filed intervention applications citing hindrances in business and apprehension of criminal prosecution as a result of the Madras High Court judgment. However, the Supreme Court, by way of its order dated 13 August 2015, refrained from discussing whether online gaming such as rummy amounts to gambling. Instead, the Court observed that neither the impugned Madras High Court judgment deals with online gaming and nor have the states taken a view on legality the same. Hence, the Court did not deem it necessary to entertain the issue of legality of online gaming at that point. Notably, the Supreme Court has not yet conclusively dealt with the legality of online gaming.

However, in 2017, the Punjab and Haryana High Court held that the online fantasy sport Dream 11 is skill based and playing the sport does not amount to gambling. The High Court observed that playing fantasy sports required considerable skill, judgment and discretion and, since there was a preponderance of element of skill affecting the outcome, it could not amount to gambling.

Subsequently, a division bench of the Bombay High Court has also concurred with the decision of the Punjab and Haryana High Court. While doing so, the Bombay High Court also noted that the Supreme Court had also dismissed a special leave petition (“SLP”) filed against the judgment of Punjab and Haryana High Court in Varun Gumber v Union Territory.

Thereafter, the Rajasthan High Court in Chandresh Sankhla v State of Rajasthanhas upheld the Gurdeep Singh decision and the judgment of the Punjab and Haryana High Court in Varun Gumber. While concurring with the judgment of the Bombay High Court, the Rajasthan High Court also noted that the Supreme Court has already dismissed an SLP filed against the Gurdeep Singh judgment.[2]

Notably, the Union of India[3] and Gurdeep Singh Sachar[4] had also filed SLPs against the Gurdeep Singh judgment, both of which were dismissed by a common order dated 13 December 2019. However, most recently, the State of Maharashtra filed another SLP against the Gurdeep Singh judgment.[5] Interestingly, by way of order dated 6 March 2020 in the said SLP, a three-judge bench of the Supreme Court led by the Chief Justice stayed the operation of the Gurdeep Singh judgment. While the order does not discuss the reasons behind the stay and the scope of its operation, it certainly opens up the possibility of the Supreme Court deciding on the legality of online gaming, specifically fantasy sports.

Legislative Developments

Most of the gambling legislation in India were enacted before the advent of internet and popularity of online gaming. Thus, it is no surprise that most of these legislations do not deal with online gaming. Nonetheless, the states of Sikkim and Nagaland have enacted legislation permitting and regulating online gaming. For instance, The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015 (“Nagaland Act”) contemplates the issuance of online gaming licenses for a game of skill, which includes all games where there is preponderance of skill over chance. The Nagaland Act also contains a schedule of games and sports have been designated as game of skill such as chess, fantasy sports and card games like bridge, poker rummy, and the like. The schedule is flexible and can be updated by the Government at any time.

On the other hand, the state of Telangana amended the definition of gaming in its gaming legislation to provide that games (including online games) when played with stakes would amount to gaming and fall within the purview of offence under the Telangana Gaming Act, 1974. Thus, the Telangana Gaming Act prohibits all kinds of gaming for stakes, including game of skill or game of chance, whether online of offline.

Conclusion

Except for the above-mentioned legislation, none of the other states have any legislation governing the different forms of online gaming that have become prevalent these days. With the increased popularity of online games, the Madras High Court has rightly stressed on the urgent need of filling this void and introducing a comprehensive regulatory framework by a regulatory body to govern online gaming. Such a framework would not only streamline the sector and reduce illegal activities but also make it more conducive to investment, thereby bringing in more employment and revenue generation opportunities.

Prakshal Jain




[1] Special Leave Petition (C) No. 15371 of 2012.

[2] Varun Gumber v. Union of India, SLP (Crl) No. 9295 of 2019/ Diary No. 35191 of 2019.

[3] Union of India v Dream 11 Fantasy Pvt. Ltd., SLP (Crl) No. 11445/2019/ Diary No. 41632 of 2019.

[4] Gurdeep Singh Sachar v. Union of India, SLP (Crl) No. 11444/2019/Diary No 43346 of 2019.

[5] State of Maharashtra v. Gurdeep Singh Sachar, SLP (Crl) No. 2213 of 2020/Diary No. 42282 of 2019.

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