BREAKING : Karnataka High Court Strikes Down Law Banning Online Gaming With Stakes

The hearing of the petitions before the division bench began on November 12, 2021. Initially, the matter was being heard for grant of interim relief but on consent of all the counsels, the matter was finally heard by the court.

Dr Abhishek Manu Singhvi appearing for one of the petitioners had argued that there is a distinction between Game of chance and game of skill. "Game of chance alone can be regulated to the point of banning by state authorities. Conversely to this, state governments have no jurisdiction to ban games of skill. This distinction has been in existence for years," he said.

Reliance was placed on Supreme Court judgements in the case of R. M. D. Chamarbaugwalla vs The Union Of India, Dr. K.R. Lakshmanan vs State Of Tamil Nadu And Anr and others.

Senior Advocate Mukul Rohatgi, appearing for another petitioner, argued that the object of the Amendment Act was to stop game of chance and gambling. However, in that process, treating a game of skill under the same head is arbitrary and the legislature is in overreach of the judgments of the Supreme Court, which have allowed games of skill.

He also contended that, "If I take this Amendment Act as it stands today, if I am playing a game of chess online and we say the winner will take away an amount, it will amount to an offence. The Act takes into its compass acts which are not gambling."

Senior Advocate C Aryama Sundaram appearing for the All India Gaming Federation contended that, "All my members do not offer third party viewership. These online games are only available to the actual players. He (player) is not wagering on somebody else's skill. I (player) have to personally participate in a game which is a game of skill and then wagering thereon. The question is whether this will amount to gambling and fall under Entry 34 of List 2 of the Constitution."

Relying on Supreme Court judgments and that of Madras High Court and Kerala High Court which have struck down similar laws, he argued, "The status quo which has been in force for 40 years and has not been altered in respect to game of skills, especially when the games are regulated by the Federation itself should continue." Further, "Prima facie case of balance of convenience is made out and in the absence of stay, all these people (companies) are going to go out of business. It is not that we are in an irreversible condition, if the court holds that act is valid then let the ban take effect from that day."

Senior Advocate DLN Rao appearing for another petitioner also attacked the Amendment Act on the grounds of legislative competence and it being in violation of Article 19(1)(g) of the Constitution. He said, "Prima facie case is made out and the whole amendment is without authority of law."

Senior Advocate Sajan Poovayya appearing for three petitioners had submitted that when the legislative competence is challenged, presumption of constitutionality will not come in way.

State Government Opposed the petitions:

Advocate General Prabhuling K Navadgi appearing for the state government had opposed the pleas saying that the Amendment act is a social legislation whose object is to prohibit activity which is injurious to public health and order.

Urging the court to bifurcate between game of skill and chance, it was said that skill games are not banned. Navadgi contended that the state government has the legislative competence to enact the law. "This is not a disproportionate legislation," he said. Citing the number of criminal cases registered across the state it was said, "This legislation cannot be thrown out on the ground of legislative competence. Because it comes under Public order."

Navadgi also submitted that, "Ultimately what we are regulating is betting or organised betting and to say that if I bet on a gameof skill is not gambling, has no foundation." He had added that, "We treat this (online gambling) much more pernicious than alcohol."

Navadgi also referred to section 78 of the Act and said that, "Wagering or betting, to put it in simple words, is collection or soliciting bet from someone or I receive or distribute the prices either in money or otherwise, then wagering and betting is done. If anybody risks their money by soliciting or betting on an unknown result of an event, either in money or otherwise amounts to wagering and betting. Unknown result can be a game of chance or game of skill."

In regards to the Fantasy Games it was contended that "Fantasy games are nothing but betting."

Case Background:

The Amendment Act came into force on October 5, it includes all forms of wagering or betting, including in the form of tokens valued in terms of money paid before or after the issue of it. It has banned electronic means and virtual currency, electronic transfer of funds in connection with any game of 'chance'. However, there is no ban on lottery, or betting on horse races on any racecourse within or outside Karnataka.

The statement of objects and reasons states: "It is considered necessary further to amend the Karnataka Police Act, 1961 Karnataka Act 4 of 1964, to provide for effective enforcement of the provisions of this Act by making offences under Chapter VII and under section 90, 98, 108, 113,114 and 123, as cognizable offence and non-bailable except section 87, which is made cognizable and bailable."

Further, "Include the use of cyberspace including computer resources or any communication device as defined in the Information Technology Act, 2000 in the process of gaming, to curb the menace of gaming through internet, mobile app, to enhance the punishment for gaming for the orderly conduct of citizens and to wean them away from the vice of gambling."

Case Title: All India Gaming Federation v. State Of Karnataka

Case No: WP 18703/2021

Citation: 2022 LiveLaw (Kar) 47