[From the Editors’ Desk]
The Hon’ble High Court of Karnataka, recently in the case of All India Gaming Federation v. State of Karnataka and Ors. [W.P No. 18703/2021] has struck down certain provisions of the Karnataka Police (Amendment) Act, 2021 (hereinafter referred to as ‘the Amendment Act’). The Amendment Act essentially prohibited as well as criminalized betting on and playing of all forms of games, including games of skill and online games for stake. The Court found the blanket prohibition on participation in any game of skill for stakes to be disproportionate, excessive, and lacking in any research or empirical basis for the proposition that the prohibition is necessary for public good. Furthermore, the Court weighed up the legislation against the constitutional rights guaranteed under Article 19, 14, and 21 of the Indian Constitution and found it to be ultra vires. Pursuant to this judgment, the exemption granted to games of mere skill under the Indian gaming jurisprudence stands restored, and games of skill may once again be offered for stakes in the state of Karnataka.
This judgment beautifully captures the balance to be struck between the right to carry on business as guaranteed under Article 19 of the Constitution vis-à-vis reasonable restriction on the same, and gives due recognition to legality of games of skill, irrespective of the platform they are played on. The various considerations discussed in this judgment have been analysed as follows:
Difference between (1) gambling and betting on one hand and (2) games of chance and skill on the other
The mention of ‘Betting and Gambling’ could be found in Entry 34 of the State List, i.e., List II of the Seventh Schedule, which necessarily means that the state legislature has the power to make laws pertaining to ‘Betting and Gambling’. In this regard, the question concerning the differentiation between the terms ‘betting’ and ‘gambling’ arises, since these terms are not just any other words of the English language which can be interpreted as per their dictionary meaning, but have to be construed in a constitutional sense, as per the meaning rendered upon them by constitutional courts. To understand the differentiation and the interrelation of these terms as mentioned in the Constitution, the Court in this recent judgment, on Page 47 para IX, has explained that these two words should be read conjunctively to mean only betting on gambling activities. Ergo, it is betting in relation to gambling as distinguished from betting that does not depend on skill that can be regulated by state legislation. The Court in the same paragraph went on to observe that gambling by its very nature excludes skill.
The Skill v. Chance Test as laid down in the case of R.M.D. Chamarbaugwala v. Union of India was relied upon, which propounds that an activity, in order to avoid the stigma of gambling is dependent upon the exercise of skill. Furthermore, the case of State of Andhra Pradesh v. K. Satyanaraya was mentioned, wherein the Court observed that it cannot be said that Rummy is a game of chance and that there is no skill involved in it. On the basis of dicta given in Satyanaraya, as well as in K. R. Lakshmanan v. State of Tamil Nadu, rummy was held to be a game of skill. These judgments weighed the wording in the gaming statutes and the exclusion of a game of skill, and a mere game of skill was accorded to be one where the success predominantly depends on skill though it might not depend only on skill. The position of law as declared by the Supreme Court in the aforementioned case of R.M.D. Chamarbaugwala and also reiterated in the case of K. R. Lakshmanan and numerous other landmark decisionsis that playing for stake in a game of skill is not illegal.
Equating games of skill with games of chance is a violation of Article 14
A major point of consideration with respect to state intervention in this regard pertains to the extent to which a degree of paternalism could be exercised by the State, including the sense of morality that may be enforced in enacting a statute. As was held in the case of Anuj Garg v. Hotel Association of India, the legislative interference should be justified in principle and should also be proportionate in measure. The test of reasonableness as developed under jurisprudence relating to Article 14 takes within its purview the tests of proportionality as well as arbitrariness insofar as arbitrariness is anathema to equality and an unproportionate action would be nothing but arbitrary. In the case of Modern Dental College and Research Centre v. State of Madhya Pradesh, the expression ‘in the interest of general public’ as used in Article 19(6) of the Constitution, was interpreted in light of a balance to be achieved between the fundamental right to carry on an occupation under Article 19 vis-à-vis the restriction imposed on the same. Furthermore, in the infamous judgment of Internet and Mobile Association of India v. Reserve Bank of India, relating to the removal on the ban of cryptocurrency in India, the Supreme Court held that that the imposition of any restriction on the exercise of a fundamental right may be in the form of control or prohibition – but when the exercise of a fundamental right is prohibited, the burden of proving that a total ban on the exercise of the right alone may be in public interest lies heavily upon the State.
The principle of reasonableness and rationality is legally as well as philosophically an essential element of equality or non-arbitrariness and it must characterize every State action. The expression of ‘arbitrariness’ encompasses acts without adequate determining principle and acts which are non-rational. The statute should also confirm to norms which are informed with reasons and guided by public interest. The Court, on Page 75 has also observed that the games of skill fall within the protective contours of Article 19(1)(a) and Article 21, subject to reasonable restriction by law. On Page 110, Para 21(a), the Court has explicitly observed that the Amendment Act is violative of the Constitution inasmuch as it does not recognize the long-standing difference between a ‘game of skill’ and a ‘game of chance’.
The same principles apply to online games – not all of them are games of chance just because they are played on the internet
On Page 62 Para XII, the Court observed that games of skill do not metamorphize into games of chance merely because they are played online, ceteris paribus. On Page 96 para 19(d), it has been observed that online gaming activities played with stake or not do not fall within the ambit of Entry 34 of the State List if they predominantly involve skill, judgement or knowledge. It has been further stated that these online games do partake the character of business activities and enjoy protection under Article 19(1)(g). Moreover, on Page 113 para 21(c), the Court rejected the argument of the respondents concerning differentiating between offline and online games on the basis of an ‘intelligible differentia’.
The need for empirical evidence to institute a prohibition
The respondents stressed upon the imminent need to bring in such an amendment due to the increasing tendency of online gaming activities, further resulting in financial losses.
On Page 84 para 18(a), the Court has observed that the ‘scare argument’ of deleterious effect is not supported by the empirical data loaded to the record of the case and also by the research material available in the public domain. Various authorities have been cited by the Court on Pages 85-88 to hold that the gaming industry currently is in a premature state and therefore, this deleterious effect as contended by the State cannot be supported by sufficient and reliable data for understanding the incidental problems of the gaming industry.
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PREFERRED CITATION: Aakash Batra and Ria Mishra, Analysis of Karnataka High Court’s Decision to Strike Down the Ban on Online Gaming, SLPRR <https://sportslawandpolicyreviewreporter.com/?p=1834> March 18, 2022.