State governments have the right to legislate on “betting and gambling” pursuant to Item 34, List II (State List) under the Seventh Schedule of The Constitution of India, 1949. Pursuant to such right, the Governor of the State of Telangana has recently promulgated the Telangana State Gaming (Amendment) Ordinance, 2017 (Gaming Ordinance). The Gaming Ordinance seeks to make significant amendments to the Telangana State Gaming Act, 1974 (Gaming Act) so as to extend its application to the realm of online gaming.
The Gaming Act, under Sections 3 and 4, prohibited persons from opening a common gaming house and being found in a common gaming house, respectively. The erstwhile definition of “common gaming houses” in the Gaming Act included physical premises such as a house, tent, vehicle and vessel. While “common gaming houses” was widely interpreted to cover online gaming centres, the Gaming Ordinance has specifically brought online gaming under the purview of the Gaming Act.
Further, the Gaming Act, under Section 6, presumes that any place where “instruments of gaming” are found are considered as “common gaming houses”. The erstwhile definition of “instruments of gaming” in the Gaming Act included cards, dice, and gaming tables. The Gaming Ordinance now expands the definition of “instruments of gaming” to include items such as digital form or record used or intended to be used as a register, record or evidence of gaming.
Enhanced penalties and powers
The Gaming Ordinance has prescribed higher penalties on persons found contravening, inter alia, Sections 3, 4, and 6 of the Gaming Act, and has also allowed authorised persons to freeze bank accounts that are used for gaming.
Games of skill
The Gaming Act (much like the central Public Gambling Act, 1867, and the gambling laws applicable in other States and Union Territories), specifically excludes the applicability of “games of skill”, under Section 15. The most important change brought about by the Gaming Ordinance is the insertion of the following 3 (three) explanations to Section 15, especially clarifying that rummy is not a game of skill.
- Explanation 1: A skill game is a game which is totally based on the skill and ability of the person and not otherwise.
- Explanation 2: Any game which depends partly on skill and partly on luck or chance cannot be termed as a skill game.
- Explanation 3: Rummy is not a skill game as it depends partly upon skill and partly on luck or chance.
These explanations, which seek to extend the intended application of the Gaming Act, contradict the following landmark judgments of the Supreme Court:
- Dr K.R. Lakshmanan v State of Tamil Nadu (AIR 1996 SC 1153) (Lakshmanan), where the Supreme Court distinguished between “games of chance” and “games of skill” and stated, albeit as its obiter dictum, that: “a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance”; and
- State of Andhra Pradesh v K. Satyanarayana and Ors (AIR 1968 SC 825) (Satyanarayana), where the Supreme Court, while considering whether rummy is a “game of skill” or a “game of chance”, found that: “we cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill”.
The Gaming Ordinance represents a clear move on the part of the Telangana State Government to plug gaps in the gaming laws in the State in light of a surge in online gaming. The Gaming Ordinance, particularly in amending Section 15 of the Gaming Act, has disrupted businesses (including those that have substantial foreign direct investment) that offer real money online rummy. These businesses offered real money online rummy relying on, inter alia, Lakshmanan and Satyanarayana. While the Gaming Ordinance has already been challenged before appropriate courts, it remains to be seen if other States and Union Territories follow suit and pass similar amendments to their respective gambling laws.
It is interesting to observe that States such as Nagaland are offering licenses to persons conducting online games such as rummy and poker. On the other hand, the Telangana State Government has made a regressive move with the Gaming Ordinance, especially when the State is making overtures for foreign investment.