2022 (2) TMI 1368 - HC - Indian Laws

Betting/Gambling - wager on a horse-race - constitutional validity of the Karnataka Act No. 28 of 2021 (amendment act) - it is contended that the cumulative effect of these amendments, according to them, is the criminalization of playing or facilitating online games - Violation of Article 21 since playing games sports falls within the umbrella of 'right to life liberty' - Violation of fundamental right to freedom of speech expression guaranteed under Article 19(1)(a) since playing games sports of skill is a facet of speech expression and that criminalizing apart from amounting to unreasonable restriction, is incompetent under Article 19(2) - Violation of fundamental right to profession/business guaranteed under Article 19(1)(g) read with Article 301 - Manifest arbitrariness since the Amendment Act fails to recognize the blatant normative difference between a 'game of skill' and a game of chance - excessive paternalism populism. Constituent Assembly debates on Betting gambling - HELD THAT - Part III of our Constitution outlaws untouchability (Article 17), human trafficking and begar (Article 23), child employment (Article 24). Part IV enacts Directive Principles of State Policy which Dr. Ambedkar called as the 'instrument of instructions'. It specifies a list of do's don'ts that address the making of government policies. Article 47 directs prohibition of liquors injurious drugs - there is no such prohibition expressly or impliedly suggested in respect of gambling although power to legislate concerning the same avails to the State vide Entry 34, List II, Schedule VII of the Constitution. As to legislative competence and wider interpretation of legislative entries - HELD THAT - It has long been settled that the legislative power emanates inter alia from Articles 245 246 (now additionally Article 246A) of the Constitution and that the Legislative Entries are only the fields of law making. These Entries are mere legislative heads of enabling character designed to define and delimit the respective areas of legislative competence of the Union and the States. The legislative Entries in whichever List they occur should be interpreted with the 'widest amplitude' - When a word or an expression acquires a special connotation in law, it can be safely assumed that the legislature has used such word or expression in its legal sense as distinguished from its common parlance or the dictionary meaning. These legal concepts employed in a Constitution if construed by the Courts as such, acquire the constitutional spirit. Further when such terms are construed by the Apex Court to mean a particular thing, other Courts cannot venture to interpret the same to mean something else. What we are construing is a constitutional concept, i.e., 'Betting gambling' and not just two English words. Learned Advocate General's argument of 'widest amplitude' therefore cannot stretch the contours of a constitutional concept like this to the point of diluting its identity. Scope of Entry 34 in State List; CHAMARBAUGWALA Jurisprudence (STATE OF BOMBAY VERSUS RMD. CHAMARBAUGWALA ANR. ADVOCATE-GENERAL OF MYSORE 1957 (4) TMI 55 - SUPREME COURT ) - Games of Skill vs. Games of Chance - HELD THAT - The two words namely Betting and gambling as employed in Entry 34, List II have to be read conjunctively to mean only betting on gambling activities that fall within the legislative competence of the State. To put it in a different way, the word betting employed in this Entry takes its colour from the companion word gambling . Thus, 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 expression gambling by its very nature excludes skill. It is chance that pervasively animates it. This interpretation of the said Entry gains support from the six decade old CHAMARBAUGWALA jurisprudence. View of Foreign Jurisdictions about games of skill - HELD THAT - In UNITED STATES OF AMERICA vs. LAWRENCE DICRISTINA, the Second US Circuit of Appeal, New York, tossed out the conviction and vacated the indictment of Mr. Lawrence who ran the warehouse wherein the poker game Texas Hold' Em was played. He was taking 5 % of each nights earning to cover the cost of his staff profit for himself. In this game, the pot went not to the luckiest among the participants, but to the most deft i.e., the player who could guess his opponents' intentions and disguise his own, make calculated decisions on when to hold fold, and quickly decide how much to wager. A waitress floated around with food drinks and play lasted until breakfast. Judge Jack B. Weinstein held that poker is more a game of skill than a game of chance and therefore, game operators cannot be prosecuted under vague federal law that prohibits running an illegal gambling business. Although this decision was reversed in appeal, the finding that poker is a game of skill, is left undisturbed. As to between Actual Games and Virtual Games, and if all online Games are online games are Games of Chance - HELD THAT - The vehement contention of Learned Advocate General that gaming includes both a 'game of chance' and a 'game of skill', and sometimes also a combination of both, is not supported by his reliance on MJ. SIVANI VERSUS STATE OF KARNATAKA 1995 (4) TMI 284 - SUPREME COURT . We are not convinced that M.J. SIVANI recognises a functional difference between actual games and virtual games. This case was decided on the basis of a wider interpretation of the definition of 'gaming' in the context of a legislation which was enacted to regulate the running of video parlours and not banning of video games; true it is that the Apex Court treated certain video games as falling within the class of 'games of chance' and not of 'games of skill' - the games of skill do not metamorphise into games of chance merely because they are played online, ceteris paribus. Thus, SIVANI is not the best vehicle for drawing a distinction between actual games and virtual games. What heavily weighed with the Court in the said decision was the adverse police report. As to Entry 1 (Public Order), Entry 2 (Police) Entry 26 (Trade and commerce) in the State List being the fields of Legislative Power - HELD THAT - The expression Public order in the State List implies an activity which affects the public at large and therefore, individual instances that do not generate public disorder may not fit into the same. The Apex Court in BANKA SNEHA SHEELA VERSUS THE STATE OF TELANGANA ORS. 2021 (8) TMI 1303 - SUPREME COURT at para 13 observed There can be no doubt that for 'public order' to be disturbed, there must in turn be public disorder. Mere contravention of law such as indulging in cheating or criminal breach of trust certainly affects 'law and order' but before it can be said to affect 'public order', it must affect the community or the public at large. Added, the cases registered by the police are for the games that have eventually become offences after the amendment which is put in challenge and therefore, much cannot be derived from the factum of such registration. As to Entry 6 (Public health and sanitation) In State List - HELD THAT - A law passed by Parliament to give effect to an international convention shall not be invalidated on the ground that it contained provisions relating to the State subjects. In view of all this, the meaning and scope of the Entry in question cannot be widened, when the contours of law in this regard have already been earmarked in a catena of decisions of the Apex Court. As to Right to SPEECH EXPRESSION under ARTICLE 19(1)(a) AND RIGHT TO LIFE PERSONAL LIBERTY UNDER ARTICLE 21 - HELD THAT - The freedoms guaranteed inter alia under Articles 19 21 have been broadening from precedent to precedent, needs no elaboration. The right to speech expression has expanded to include even a right to vote vide UNION OF INDIA VERSUS ASSOCIATION FOR DEMOCRATIC REFORMS ANR. 2002 (5) TMI 820 - SUPREME COURT . Similarly, the march of law from AK. GOPALAN VERSUS STATE OF MADRAS 1950 (5) TMI 24 - SUPREME COURT and JUSTICE K.S. PUTTASWAMY (RETD.) AND ANOTHER VERSUS UNION OF INDIA AND OTHERS 2018 (9) TMI 1733 - SUPREME COURT has broadened the contours of right to life personal liberty, exponentially. Several rights guaranteed in Part III of the Constitution are no longer treated as water tight compartments, since they have correlative content and each illuminates the penumbra of other by interplay. Political, social economic changes have entailed the recognition of new rights such as right to privacy. Virtual Games and elements of Expression as US Courts view them - HELD THAT - The US Supreme Court in BROWN vs. ENTERTAINMENT MERCHANTS ASSOCIATION, was considering the challenge to a California law that restricted the sale or rental of violent video-games to minors. Justice Antonin Scalia reasoned that such a law does not comport with the First Amendment inasmuch as these games too, qualify for protection under the shadow of Amendment on par with books, plays movies, although they communicate ideas through familiar literal devices and features distinctive to the medium. The Court inter alia observed that the basic principles of freedom of speech do not vary with a new and different communication medium. As to Reasonable Restriction under Article 19(2) on Right to Speech and Expression under Article 19(1)(a) and Regulation of Personal Liberty under Article 21 - HELD THAT - The predicate for Article 19(1)(a) is poised to include not only artistic expression having an outward effect upon socio political thought but also inarticulate expression having a predominantly inward effect. As to 'Scare Argument' of the State vs. Research Studies and Empirical Data - HELD THAT - Science technology are indisputably intertwined with the social and private lives of the citizenry world over. Online gaming too is a product of technological advancement. Online games as contra-distinguished from gambling are also a form of expression and partake the character of business. It may be also a pursuit of happiness that falls within the contours of liberty privacy of an individual. As already stated above, placing an absolute embargo on this may take away any positive development and benefit that the State may be able to achieve by otherwise balancing the competing interests of the society and the individual. It may be said that while the State has a vested and legitimate interest in the protection of its citizenry, the individual too has a vested right to partake in the recreation of gaming in exhibition of individual skills albeit responsibly. Therefore, a regulation in this regard ought to include technological solutions in the field, in order to better enable a safe and responsible gaming behavior environment. The integration of data science governance, corporate social responsibility and individualized responsible gaming programs and/or other regulations may allow legal development to keep pace with technological advancement. As to Article 19(1)(g) and Entry 26 (TRADE AND COMMERCE) in STATE LIST - HELD THAT - The games of skill as we have reasoned out above involve elements of expression and therefore enjoy regulatable protection under Article 19(1)(a); it has long been settled that these games apparently having business characteristics are protected under Article 19(1)(g). Therefore the above observations in Indian Express equally apply to the case of petitioners. However, the Amendment Act does not critically adjust the boundaries of existing category of protected activities i.e., games of skill with the unprotected acts of gambling. Instead, State has created a wholly new category of medium-based-regulation when change of medium per se does not alter the true nature content of the games. The permissible limits of restriction recognized by Chamarbaugwalas are thus trampled, by proscribing the online games by lock, stock barrel. To scuttle the ship is not to save the cargo to jettison may be. As to whether CHAMARBAUGWALA JURISPRUDENCE has lost relevance due to Advancement of Science and Technology - HELD THAT - Constitution is intended to enure for ages to come and consequently, to be adapted to the various crises of human affairs. It is unwise to insist that what the provisions of the constitution meant to the vision of its makers must mean to the vision of our time. They should be interpreted to meet and cover changing conditions of social and economic life. A Constitution states not rules for the passing hour but the principles for an expanding future. At the same time, the meaning of the Constitution does not change with every ebb and flow of economic events. A constitution is not a storehouse of fossilized principles. It is a living law of the people and accordingly its provisions need to be construed by all the organs of the State. As to Discrimination and Violation of Equality under Article 14 - HELD THAT - Whilst there are multiple layers of prior editorial control in case of publication through traditional media, such layers may not exist in the case of publication of information through online media, as information in the case of latter travels like lightning . It hardly needs to be stated that the cases at hand are not one of unregulated information travelling at the speed of lightening. We are at loss to know how the observations made in the decision would advance the case of respondents, when its contextual substratum is miles away from that of these petitions. As to Manifest Arbitrariness and voiding of plenary legislations - HELD THAT - The very definition of 'gaming' as amended, suffers from the vice of over-inclusiveness/over-broadness of the idea of gaming as enacted in the charging provisions of the Act that are animated by CHAMARBAUGWALA Jurisprudence. The content of 'gaming' as capsuled under Section 2(7) thus bruises the legislative intent enacted in Section 176 ab inceptio and continued post-amendment, for protecting a class of citizens who plays the games of skill and therefore, fits into the text context of this provision. As to INCHOATE CAUSE OF ACTION Rights under ARTICLE 19(1)(a) (g) not availing to Juristic persons - HELD THAT - The contention of the learned Advocate General that the Fundamental Rights under Article 19 do not avail to the non-citizens and therefore, petitions are misconceived, cannot be countenanced inasmuch as there are several citizens before this Court who have laid a challenge to the legislations. These writ petitions succeed 1. The provisions of Sections 2, 3, 6, 8 9 of the Karnataka Police (Amendment) Act 2021 i.e., Karnataka Act No. 28 of 2021 are declared to be ultra vires the Constitution of India in their entirety and accordingly are struck down. 2. The consequences of striking down of the subject provisions of the Karnataka Police (Amendment) Act 2021 i.e., Karnataka Act No. 28 of 2021 shall follow. However, nothing in this judgment shall be construed to prevent an appropriate legislation being brought about concerning the subject i.e., 'Betting gambling' in accordance with provisions of the Constitution. 3. A Writ of Mandamus is issued restraining the respondents from interfering with the online gaming business and allied activities of the petitioners.

Summary

Issues Involved:
1. Legislative competence under Entry 34, List II, Schedule VII of the Constitution of India.
2. Violation of Article 21 concerning the right to life and liberty.
3. Violation of Article 19(1)(a) regarding the freedom of speech and expression.
4. Violation of Article 19(1)(g) concerning the right to profession/business.
5. Manifest arbitrariness.
6. Excessive paternalism and populism by the State.

Detailed Analysis:

1. Legislative Competence:
The petitioners argued that the Karnataka Police (Amendment) Act 2021 (Amendment Act) lacks legislative competence as it does not fit into Entry 34, List II, Schedule VII of the Constitution, which covers "Betting and gambling." They cited precedents such as CHAMARBAUGWALA-I and II, K. SATYANARAYANA, and K.R. LAKSHMANAN, which distinguish between games of skill and games of chance. The court agreed that the Amendment Act, by criminalizing games of skill, overstepped the legislative competence granted under Entry 34.

2. Violation of Article 21:
The petitioners contended that the Amendment Act violates Article 21, which guarantees the right to life and liberty, as playing games and sports falls under this right. The court noted that the right to life and liberty has been expanding and includes the right to engage in recreational activities like online gaming, provided they predominantly involve skill.

3. Violation of Article 19(1)(a):
The petitioners argued that playing games of skill is a form of speech and expression protected under Article 19(1)(a). The court agreed, noting that games of skill involve elements of expression and are thus entitled to protection under this article. The Amendment Act's blanket prohibition on online games of skill was found to be an unreasonable restriction.

4. Violation of Article 19(1)(g):
The petitioners claimed that the Amendment Act violates their fundamental right to profession/business under Article 19(1)(g). The court noted that games of skill are recognized as business activities and are protected under Article 19(1)(g). The Amendment Act's absolute prohibition on games of skill was found to be disproportionate and unreasonable, failing the test of proportionality and least restrictive measure.

5. Manifest Arbitrariness:
The court found the Amendment Act to be manifestly arbitrary, as it did not recognize the distinction between games of skill and games of chance. The expanded definition of "gaming" under Section 2(7) was found to be over-broad, encompassing games of skill, which contradicts the legislative intent of Section 176 that exempts games of skill from penal provisions.

6. Excessive Paternalism and Populism:
The court noted that the Amendment Act imposes excessive paternalism by clamping a blanket ban on online games of skill, thereby infringing on the individual’s freedom of contract. The court emphasized that while the State has a vested interest in protecting its citizenry, it must balance this with the individual's right to partake in recreational activities responsibly.

Conclusion:
The court declared the provisions of Sections 2, 3, 6, 8, and 9 of the Karnataka Police (Amendment) Act 2021 to be ultra vires the Constitution and struck them down. The court issued a writ of mandamus restraining the respondents from interfering with the online gaming business and allied activities of the petitioners. The judgment emphasized the need for any future legislation concerning betting and gambling to comply with constitutional provisions.