Rolling Series

ANALYSING THE CONSTITUTIONALITY OF RECENT REGULATION OF ONLINE GAMES INVOLVING STAKES

The blog is authored by, Anshika Saini, and Shreyasi Singh, third-year law students at Dr. Ram Manohar Lohiya National Law University

Header Image Credits: Pexels Free Photo


Introduction

Recently, the Kerala High court quashed the notification, issued under section 14 A of the Kerala Gaming Act, 1960, banning the card game ‘Rummy’ played online. The court held that the notification was arbitrary, illegal, and violative of fundamental rights under Articles 14 and 19 (1) (g) of the Constitution of India. The primary thread was that the impugned legislation was apparently prohibiting games of skill, if played for any prize or stakes; which was in flagrant disregard of the law laid down by the Supreme Court that games of skill are business activities and, thus, protected under Article 19(1) (g) of the Constitution of India. Importantly, it is not the single instance where such notification was challenged. 

It raises a pertinent question about the test relied upon by the court to classify a game as a game of skill and distinguish it from the game of chance. This article intends to analyse the judicial pronouncements dealing with the question of what qualifies as a game of skill and the set of conditions relied upon by the courts to reach the legally tenable position and also takes into account the test of reasonable classification and arbitrariness as provided under Article 14 and 19 of the constitution.

List II of the Constitution of India authorizes the states to frame specific laws for betting and gambling. The Public Gambling Act enacted in 1867 has been adopted by many states and the rest have enacted their own legislations in this regard. Moreover, the majority of these legislations were enacted before the advent of online gaming and gambling and have still not incorporated specific provisions pertaining to online gambling.

STANDARD APPLIED TO GAME OF SKILL V. GAME OF CHANCE

The Supreme Court of India has provided a test of skill versus chance to determine whether a game would be covered under the ambit of gambling or not. In its opinion, if the game is of ‘mere skill’, it will be exempted from the restrictions of gambling legislations.

The landmark judgement in this regard is  K. Satyanarayana & Ors. In this case, the Apex court specifically ventured into the test of whether rummy is a game of skill or a game of chance. The court, while holding that rummy is not a game of pure chance, observed “…Rummy, on the other hand, requires a certain amount of skill because the fall of the cards has to be memorized and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot say that the game of rummy is entirely a game of chance. It is mainly and preponderantly a game of skill.”

The court placed reliance upon the preponderance of skill. Even if a game involves some aspects of chance, if it is preponderantly a game of skill, it will not be covered under gambling. In accordance with these principles, competitions in which success depends to a substantial extent on skill and competitions in which it does not so depend, form two distinct and separate categories.

The Supreme Court also made a similar observation in K.R. Lakshmanan  . Distinguishing between the terms ‘games of skill’ and ‘games of chance’, the Supreme Court stated: “[In a] game of skill […] although the element of chance necessarily cannot be entirely eliminated, is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player.”

Thus, competitions where success depends on a substantial degree of skill are not “gambling” and despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of “mere skill”. Another interesting contention that has been brought before courts is the ‘addictive’ quality of certain games. For example, it has been argued that online rummy is an addictive game and should be covered under gambling. But a simple response to this contention is the fact that just because a game is addictive, it does not become a game of chance. The fact that the game has a substantial degree of skill is enough to exempt it from restrictions of the gambling legislations. 

GAME OF SKILLS WHEN PLAYED ONLINE AND FOR STAKES

A very peculiar fact that came up in the case before Kerala High Court is that while physical rummy has been made permissible, online rummy was banned despite the fact that it does not in any manner differ from the game rummy which is played in a clubhouse except that it is played in a virtual court. Therefore, a ban on just the online version of the game does not in any way stand the test of ‘skill’ given by the court because the same set of skills are required whether you play it physically or virtually. And since, in the KR Lakshman case, the Supreme Court categorically held that rummy is a game of skill, the same is applicable on online rummy as well.

Moreover, another contention that came up was the fact that since the online rummy is being played for stakes, it would be covered under gambling but the court noted that just because a game is being played for stakes, it does not include the element of betting in it. Side betting and stakes are completely different concepts. It was clarified that in Satyanaryanana case, the Supreme Court did not hold that rummy played for innocent pastime alone is a game of skill and that if it is played for stakes, it becomes a game of chance. And thus, as such playing for stakes or playing not for stakes can never be a criterion to find out whether a game is a game of skill.

TEST OF ARTICLE 14 AND 19

There can be two possible conditions to justify the prohibition imposed on online games played for stakes:  

  1. If online gaming played for stakes is not an occupation, trade, or business for the purposes of Article 19(1) (g) of the Constitution of India. 
  2. Even if it falls within the ambit of Article 19(1) (g), it would be covered by restrictions provided under Article 19(6).

As far as the first contention goes, observations of the Supreme Court in the Lakshmanan Case clarifies that rummy being a game of skill is protected under Article 19(1) (g) of the Constitution of India. Further, since Rummy involves a predominant element of skill, as per precedents of KR Lakshamanan and Rmd Chamarbaugwala  case, the state government under Entry 34 List II doesn’t have the competence to propose such a ban. 

The only option to derive legislative competence for enactment is to regulate games of skill under the alternative entries of Public Order, Trade and Commerce, or Entertainment and Amusements, subject to such regulations/restrictions being proportionate to their objects. The doctrine of proportionality has four facets: 

(i) It is designated for a proper purpose

In the case of the Indian Hotel and Restaurant Association, the court recognized the importance of changing social norms. In the present circumstances, considering the importance of the virtual working system due to the complete shift to an online system for work/leisure in the pandemic, any legislation by which the State seeks to impose restrictions must take into account these circumstances. 

(ii) The measures undertaken to effectuate such a limitation are rationally connected to the fulfilment of that purpose;

In the case of B.P. Sharma , the Supreme Court observed that the State may, in the interest of the general public, impose reasonable restrictions which may be thought necessary. In the present case, a ban on online gaming simply because it involves stakes has no rational nexus because the aim is to prevent gambling, not gaming.  Thus, Kerala HC and the Madras HC held that by imposing a restriction on online rummy, while recognizing the exemption for physical rummy, makes it clear that the ban on rummy has no rationale to the state’s objective of preventing gambling. Therefore, these prohibitions were unreasonable and grossly disproportionate. 

(iii) The measures undertaken are necessary for that there are no alternative measures that may similarly achieve that same purpose with a lesser degree of limitation

Shayara Bano v. Union of India emphasised the concept of manifest arbitrariness and held that what is manifestly arbitrary is obviously unreasonable and being contrary to the rule of law, would violate Article 14. The court in the Kerala HC case has reiterated that addiction cannot be a basis for imposing restrictions. The State had failed to justify the need for such a sweeping ban. Accordingly, a ban on online rummy was arbitrary and disproportionate and can lead to dangerous precedent to be set for the purposes of all online games played for stakes. 

(iv)There needs to be a proper relation between the importance of achieving the proper purpose and the social importance of preventing the limitation on the constitutional right.

In KS Puttaswamy v Union of India, the court held that any restriction sought to be imposed by law, on a right guaranteed under the Constitution, must satisfy the test of ‘proportionality,’ i.e., must be proportionate to the object of the law. The object of gambling legislations is to protect the public from gambling and betting, thus it is unreasonable and disproportionate to specifically prohibit games of skill when played in cyberspace and for any prize/stake. 

CONCLUSION

In recent years, the ambiguous definitions and use of inconsistent and interchangeable terms regarding gaming and gambling has led to confusion.  As a result, the same game has been declared as a game of skill in one state and that of chance in another. This is specifically in cases involving online gaming for stakes. Recently, in a number of instances, different states have banned online gaming which involves real money stakes, regardless of the factor of skill or chance. For instance, recently Kerala and Tamil Nadu have carved out different notifications banning online rummy. While the above notification has been nullified by the courts, other states have signalled similar intentions.  To avoid these issues, online gaming should be governed through a central law. This has been suggested by the Sports (Online Gaming and Prevention of Fraud) Bill 2018 and has also been recommended by the Law Commission of India. A central framework will bring clarity and avoid conflicting statuses of games across India.  Further, it is to be noted that there exists a positive correlation between stress relief and the number of hours spent gaming each week. In fact, during the pandemic, WHO recommended that digital games be allowed to combat social isolation. Thus, as mentioned above, any ban on an online game should consider the totality of these circumstances instead of focusing just on the stakes.

Views expressed are personal.

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