The Curious Case of The Indian Gaming Laws

MUMBA I S I L IC O N VAL L E Y BA N G A LO RE SI N G A P O RE M U M BA I B KC NE W DELH I MUNIC H NE W YORK
The Curious Case

of the Indian
Gaming Laws
Legal Issues Demysitified
February 2018
© Copyright 2018 Nishith Desai Associates www.nishithdesai.com

The Curious Case of the Indian Gaming Laws
February 2018
ndaconnect@nishithdesai.com
© Nishith Desai Associates 2018

Contents
THE GAMING LAWS OF INDIA: GAMBLING, SOCIAL
AND CASUAL GAMING 01
1. GAMBLING, BETTING AND LOTTERIES 03
I. Overview of The Legal Framework Regulating The Gambling Industry 03

II. Physical & Internet Gambling 04
2. PRIZE COMPETITIONS 13
3. SKILL BASED / CASUAL AND SOCIAL GAMING 15
4. LEGAL AND REGULATORY ISSUES 16
I. Laws Affecting The Content of Games 16

II. Telecom Laws Applicable to Social Gaming 19
III. Other Laws Affecting The Gaming / Gambling Industry 21
ANNEXURE - I 26
Nagaland: Online gaming licenses for skill games 26
ANNEXURE – II 29
First Indian Court to Rule Fantasy Sport Preponderantly Skill- based 29
ANNEXURE – III 31
All Bets Off for Gaming Operators in Telangana:

State Government Passes Ordinance Prohibiting Skill Games 31
ANNEXURE IV 35
Synopsis of the proceedings in the Gujarat Case 35
ANNEXURE V 40
The ‘Mahalakshmi’ Saga90 40

The Gaming Laws of India: Gambling, Social

and Casual Gaming
Games, whether in the form of gambling, popularity of new media with the masses.
or popular social or casual games, are enjoyed This huge size of the potential market in India
by people of all age groups across the globe for has led to a surge in the number of online
their entertainment value. In fact, gambling, gaming sites over the last few years. The impact
irrespective of its many vices, has been a part is evident by the rise in demand for quality game
of the Indian culture since time immemorial. content, game developers, game developing
Even before the six side dice was invented, companies and the gaming industry in general.
Indians used the nuts of the Bibhitaki tree as Gaming as a whole is gaining increasing
dice. References to gambling can be traced to the significance as a major source of income and
Mahabharata, one of India’s oldest mythological a profitable business venture worldwide.
epics, in which the opponents were tested based
In a recent study by KPMG India and Google
on their skills at board and dice games rather
dated May 2017, it suggests that the Indian
than through wars.
online gaming industry is set to become
The gaming industry has witnessed a paradigm a USD 1 billion industry by 2021.1
shift with the evolution of television, digital and
There has been considerable increase in the
online gaming models. Following the increased
Indian betting market which can be evidenced
internet penetration in the mid-1990s, from
from the report issued by International Centre
being targeted at academics to being used by
for Sports Security (“ICSS”), where ICSS claims
the general population, internet-based online
that the betting market in India could be worth
games gained popularity. The Digital India drive
over US$130 billion.
under the aegis of the Modi government has
led to improving the infrastructure as a whole. Given the high growth potential of the gaming
Better internet speed even in the remote areas industry in India, many foreign entities are
has led to more consumption of content even exploring possibilities to set up operations here.
where the mass population resides i.e. the rural Similar trends are reflected in many industry
areas. Post demonetization, the digital online related research reports which say that several
payment systems received a boom with a larger global gaming firms have opened offices in
part of the population being incentivized and India or have signed distribution agreements
compelled to use the same. with leading Indian mobile game developers in
order to distribute their products in India. While
All these factors add to the huge potential of
operating gaming businesses is easier in some
the market in India and has led to a surge in
countries of the world2 where gaming is legal,
the number of online gaming sites over the last
the situation is not so easy in India where the
few years. The popularity of online gambling
laws are stringent.
is best evidenced by the rapid growth of in the
popularity of online card games, like Poker and With the advent of social and casual games
Rummy and new age games like fantasy sports. both offline and online, the ‘gaming’ industry
can now be said to comprise of 2 verticals –
Mobile and online models received further
gambling in both traditional and online forms,
impetus in India by the telecom revolution,
and skill based social or casual gaming.
penetration of internet and cable in substantial
parts of the country, and the increasing
1. Online Gaming in India: Reaching a New Pinnacle,A Study
by KPMG in India and Google, available - https://assets.kpmg.
com/content/dam/kpmg/in/pdf/2017/05/online-gaming.pdf.
2. A few examples include Macau, Nepal, U.K. etc.
© Nishith Desai Associates 2018 1

Provided upon request only
In this paper, we discuss the scope of gambling / to social and casual gaming. However, under
gaming laws and the evolution of the gambling certain Indian laws, gambling activities are
/ gaming industry in India. To clarify, in this referred to as ‘gaming’, and specific references
paper we have used the term ‘gaming’ to refer to the same may be included in this paper.
2 © Nishith Desai Associates 2018

1. Gambling, Betting and Lotteries

§§Punjab Public Gambling Act, 1867
I. Overview of The Legal
Framework Regulating The §§Sikkim Online Gaming (Regulation)
Act, 2008
Gambling Industry
§§Tamil Nadu City Police Gaming Rules,
1949
A. Physical Gambling & Sports
§§Tamil Nadu Gaming Act, 1930
Betting
§§The Andhra Pradesh Gaming Act, 1974
Under the Constitution of India, the state
§§The Andhra Pradesh Gaming Rules, 1976
legislatures have been entrusted with the power
to frame state specific laws on ‘betting and §§The Delhi Public Gambling Act, 1955
gambling’.3 The Public Gambling Act, 1867, is
§§The J. & K. Public Gambling Act, 1977
the central ena ctment on the subject, which
has been adopted by certain states of India. §§The Kerala Gambling Act, 1960
The other states in India have enacted their
§§The Meghalaya Prevention of Gambling
own legislation to regulate gaming / gambling
Act, 1970
activities within its territory (“Gambling
Legislations”). Most of these Gambling §§The Pondicherry Gaming Act, 1965
Legislations were enacted prior to the advent
§§The Rajasthan Public Gambling
of virtual / online gambling and therefore
Ordinance, 1949
primarily refer to gambling activities taking
place in physical premises, defined as “gaming §§The West Bengal Gambling and Prize
or common gaming houses”. Competitions Act, 1957
§§The West Bengal Gambling Rules, 1958

Some Gambling Legislation regulating physical
§§Uttar Pradesh Public Gambling Act,1961
gambling and sports betting are as follows:
§§Assam Gaming and Betting Act, 1970

§§Bombay Prevention of Gambling Act, B. Online Gambling
1887
The Gambling Legislations were introduced
§§Goa, Daman and Diu Public Gambling before the emergence of the internet. Therefore,
Act, 1976 the provisions of these laws do not expressly
contemplate online gambling. The states of
§§Karnataka Police Act, 1963
Sikkim and Nagaland are the only states to have
§§Madhya Pradesh (C.P.) Public Gambling adopted specific legislation that permits and
Act,1867 regulates
online gambling, namely the:
§§Madhya Bharat Gambling Act, 1949
§§Sikkim Online Gaming (Regulation) Act
§§Orissa Prevention of Gambling Act, 1955
2008 (“Sikkim Gambling Law”) was passed
§§Public Gambling Act, 1867 (applicable to on June 28, 2008 with the dual objects of
Uttar Pradesh, Punjab, Delhi and Madhya controlling and regulating online gaming
Pradesh) through electronic or non-electronic formats,
and imposing a tax on such games in the
State of Sikkim. The Sikkim Online Gaming
3. Constitution of India, Seventh Schedule, List II, Entry No. 34

(Regulation) Rules, 2009, were subsequently specified in the Central Lotteries Laws.
passed on March 4, 2009 (and the same have The state governments may appoint an
been amended from time to time). individual or a corporate as a “distributor or
selling agent” through an agreement to market
§§Nagaland Prohibition of Gambling and
and sell lotteries on behalf of the organizing
Promotion and Regulation of Online
State. While some states such as Punjab, have
Games of Skill Act 2015 and the Nagaland
gone to the extent of specifically providing for
Prohibition of Gaming and Promotion and
and approving online lottery systems7 to be
Regulation of Online Games of Skill Rules
governed by the state Lottery Laws, lottery is
2016 (“Nagaland Gambling Law”), which
banned in certain states in India, for example
regulate games of skill such as chess, sudoku,
Madhya Pradesh.
quizzes, binary options, bridge, poker, rummy,
nap, spades, auction, solitaire, virtual golf and
virtual racing games. E. Horse Racing
Further, the state of Telangana has amended the Horse racing has been given a special status
Gambling Legislation applicable to Telangana under the Gambling Legislations. Most
as an amendment to the legislation, which inter legislations specifically exclude betting on
alia, expands the scope of offences to apply to horse races from within their purview, subject
the online medium as well. to certain conditions. In K R Lakshmanan vs
State of Tamil Nadu8 (“Lakshmanan Case”), the
Supreme Court held that betting on horse racing
C. Casinos was a game of skill since factors like fitness, and
The Gambling Legislations regulate casinos skill of the horse and jockey could be objectively
in India. The Gambling Legislations of Goa, assessed by a person placing a bet. The analysis
Daman & Diu4 and Sikkim5 allow gambling is interesting to note as this reasoning could
to a limited extent, under a license, in five star possibly be used to justify other forms of betting
hotels. In Goa, the law also permits casinos on as games of skill, especially sports betting.
board an offshore vessel.
II. Physical & Internet
D. Lotteries Gambling
Under the Constitution of India, the central
legislature has the power to enact laws with The most common forms of gambling in India,
respect to lotteries.6 Lotteries have been from time immemorial, are the many versions
expressly excluded from the purview of the of card games like teen patti (akin to flush), poker,
Gambling Legislations and are governed by the rummy and bridge, as well as sports betting.
central law - Lotteries (Regulation) Act, 1998 With the dawn of technology, these games have
under which the Lottery (Regulation) Rules effectively extended their reach and popularity
2010 (“Central Lottery Laws”) and state via the digital medium. Most popular online
specific rules have been framed (“Lottery gambling sites in India are card games sites
Laws”). The Central Lottery Laws allow the hosting Rummy and Poker tournaments.
state governments to organize, conduct or
promote a lottery, subject to the conditions
4. The Goa, Daman and Diu Public Gaming Act, 1976.

5. Sikkim Casinos (Control and Tax) Act, 2002 read with
Sikkim Casino Games Commencement (Control and Tax)
Rules, 2007 and Sikkim Casino Games (Control and Tax)
Amendment Rules, 2011 7. AIR 1996 SC 1153
6. Constitution of India, Seventh Schedule, List I, Entry No. 40. 8. AIR 1996 SC 1153

The Gambling Legislations were enacted enclosures for the purposes of betting on horse
when digital media and internet were racing, subject to the terms of license issued
uncommon and its reach was not as far as it is to the licensee. It is pertinent to note that, the
today. The Gambling Legislations deal with Gambling Legislations of some states read with
gambling in the context of a physical enclosure, relevant Horse Racing Licensing Legislations,
termed a “common gaming houses”. Therefore, viz. Maharashtra, West Bengal, Andhra Pradesh,
when these Gambling Legislations are read in Karnataka and Tamil Nadu provides that
the context of online and digital gambling, their a licensee can set up the enclosure subject to
interpretation and applicability gets complex. prior approval of the state governments subject
to certain conditions.
A. Meaning of Gambling
‘Gambling’ as per most Gambling Legislations
C. Games of Skill Outside
is understood to mean “the act of wagering The Purview of Gambling
or betting” for money or money’s worth.
The Gambling Legislations provide that
Gambling under the Gambling Legislations the restrictions would not apply to games
however does typically not include (i) wagering of “mere skill”.
or betting upon a horse-race/dog-race, when
The Supreme Court of India (“SC”) has
such wagering or betting takes place in certain
interpreted the words “mere skill” to include
circumstances, (ii) games of “mere skill” and (iii)
games which are preponderantly of skill and
lotteries (which is covered under Lottery Laws).
have laid down that (i) the competitions where
success depends on substantial degree of skill
B. Exemption for Betting will not fall into category of ‘gambling’; and
on Horse Racing (ii) despite there being an element of chance,
if a game is preponderantly a game of skill,
While carving out betting on horse racing it would nevertheless be a game of “mere
from falling outside the purview of ‘gaming/ skill”.9 Whether a game is of chance or skill is
gambling’, most Gambling Legislations provide a question of fact to be decided on the facts and
certain conditions that are required to be met. circumstances of each case.10 The judicial view
The turf clubs where the horse races are held has been very strict in this regard.
operate under a license from the respective
Thus, it may be possible that games which
State governments (“Horse Racing Licensing
satisfy the test of “skill versus chance” are not
Legislations”).
regulated under the Gambling Legislations and
In most states, the Gambling Legislation provide may be legally offered through the physical as
exemption for betting on horse races from well as virtual mediums (including internet and
the definition of “gaming/gambling” when mobile), throughout India.
wagering or betting takes place:
In the case of State of Andhra Pradesh v. K.
i. On the day on which such race is to run; Satyanarayana & Ors.11 (“Satyanarayana
Judgment”), the SC specifically tested the game
ii. In an enclosure which the licensee of the
of rummy on the principle of skill versus chance
race-course, on which such race is to be run,
and held that Rummy was not a game entirely
has set apart for the purpose under the
based on chance like the ‘three-card’ game
terms of the license issued to the licensee
in respect of such race-course.
The definition of ‘gaming/ gambling’ further 9. State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699.
suggests that the licensee of the race course on 10. ManoranjithanManamyilMandram v. State of Tamil Nadu, AIR
which the race is to be run, can set up separate 2005 Mad 261.
11. AIR 1968 SC 825.

(i.e. ‘flush’, ‘brag’ etc.) which were games such instrument of gaming in the enclosed
of pure chance. It was held that Rummy was physical premises; and (iii) profit or gain by way
a game involving a preponderance of skill rather of charge for use of the same enclosed premises
than chance. The SC based its conclusion on or “instruments of gaming” or otherwise.
the reasoning that Rummy requires a certain
However, under certain Gambling Legislations,
amount of skill as the fall of the cards needs to
like Delhi, it may not be necessary for such
be memorized, and the building up of Rummy
“profit or gain” to accrue to the person owning,
requires considerable skill in holding and
occupying or keeping such premises in order
discarding cards. The chance element in Rummy
for it to qualify as a common gaming house for
is of the same level as that involved in a deal in a
certain purposes/games only.
game of bridge. In all games in which cards are
shuffled and dealt out, there exists an element of “Instruments of gaming” means ‘any article used
chance, because the distribution of the cards is or intended to be used as a subject or means
not according to a predetermined pattern, but is of gaming, any document used or intended to
dependent upon how the cards find their place in be used as a register or record or evidence of
the shuffled pack. In this judgment the SC has also any gaming, the proceeds of any gaming, and
passingly observed that bridge is a game of skill. any winnings or prizes in money or otherwise
Presently, there has been no case in India where distributed or intended to be distributed in
card games (apart from Rummy) have been tested respect to any gaming.’12 In today’s context,
against the principle of skill versus chance. there is a school of thought that believes that
computer terminals used for gambling and
In most jurisdictions, including India, the
servers on which gambling takes place and
growing popularity of Texas Hold’em Poker
related e-records are maintained also constitute
cannot be doubted. Though there is a lack of clear
“instruments of gaming”.
jurisprudence on this subject in India presently,
with different High Courts/ State Governments On analysis of the definition of “common
taking different views, there appears to be an gaming house” in general under the Gambling
increasing trend internationally considering Legislations, it seems that the intention of the
Texas Hold’em Poker as a game preponderantly legislatures is to impose restrictions on the
of skill, and not a game of chance alone, except use of a physically enclosed premises for the
in the states of Gujarat and Telangana. purposes of making “profit or gain” from
the use of such premises.
D. Concept of Common Gaming Thus, a private house should not ideally
Houses constitute a “Common Gaming House”, if there
is lack of intent on the part of the owner to derive
Under the Gambling Legislations (except states any profit or gain from the use of his house for
like Assam and Orissa where gambling per se is gambling purposes. Extending the same analogy
an offence), most offences and prohibitions are to the digital world, when a person is accessing
in relation to a “common gaming house”. online gambling websites from his house, it
would not be a “common gaming house”.
Generally, under the Gambling Legislations, to
qualify as a “common gaming house” , there The situation may however be different where
should be (a) an enclosed physical premises such gambling activities are carried out in
such as a house or a tent; and (b) “instruments of places such as clubs or cyber cafés, where the
gaming” kept or used in such enclosed physical cyber cafés derive profits by allowing the use of
premises for the purpose of accrual of profit or the computer terminals (which may be caught
gain to the person owning, occupying, keeping within the scope of “instruments of gaming”).
such enclosed physical premises or using any
12. The Public Gambling Act, 1867

Most of the Gambling Legislations refer to “any Sikkim Gambling Law, without a license to
place” in the definition of “Common Gaming operate these online games.
House”. In the absence of a specific exclusion,
The liability for offences under the Gambling
the definition could include a server/portal/
Legislations usually vests with :
website providing means of gaming. Taking
money for providing the online medium to §§The owner of the gaming/common gaming
play games may also fall within the ambit of house;
profiteering from providing and maintaining
§§The person keeping or having charge
“Common Gaming Houses”. To put an end to
of the gaming/common gaming house;
this confusion, the online rummy websites had
approached the Supreme Court13 (details of §§The person gambling or possessing
the case have been discussed below) to clarify instruments or records of betting or suspected
whether the Gambling Legislations cover online of gambling or possessing such instruments
gambling portals.
All Gambling Legislations prescribe penalties
which are more or less similar. The Bombay
E. Offences, Offenders & Prevention of Gambling Act, 1887 imposes
Penalties a fine and imprisonment for offenders. A first
offence is punishable with a fine of at least
Most Gambling Legislations prohibit the act of: INR 500 (approximately USD 8) and 3 months
imprisonment, a second offence is punishable
§§Owning, keeping, occupying or having care
with a fine of at least INR 1,000 (approximately
and management of a gaming house/
USD 15-20) and imprisonment for 6 months.
common gaming house;
and a third or subsequent offence entails a fine
§§Advancing or furnishing money for the of at least INR 2,000 (approximately USD 30-35)
purposes of gambling to persons frequenting and imprisonment for one year.14
any such gaming house;
§§Gambling in common gaming house or F. Licenses for Physical & Online

present for the purpose of gambling in Gambling & Sports Betting
Common Gaming House;
While all the above legislations prohibit
§§Gambling or suspected gambling in any
gambling in common gaming houses, there
public street, place or thoroughfare;
are certain state legislations that have
§§Printing, publishing, selling, distributing or legalised some form of gambling and issue
in any manner circulating anything with the specific licenses to the gambling / gaming
intention of aiding or facilitating gambling. establishments. For instance, the West Bengal
Gambling & Prize Competition Act, 1957
§§Gambling per se (This is not applicable to every
specifically excludes ‘games of cards like Bridge,
state. Only the Gambling Legislation of states
Poker, Rummy or Nap’ from the definition
like Orissa prohibit the act of gaming itself)
of “gaming and gambling” and allows the
§§Offering online gaming with stakes in organizing of such games on procuring a permit
Telangana; from the Commissioner of Police in Calcutta
or the District Magistrate or the Sub-divisional
§§Offering of skills games online in Nagaland
magistrate when such game is played in any
without a license;
place where the public may have access.
§§Offering those games in the State of Sikkim
that are sought to be covered under the
14. Section 4 & 5 of the Bombay Prevention of Gambling Act,

13. SLP No. 15371 / 2012 1887

Further, under the Sikkim Gaming Laws, an The developments in relation to online
interested person can obtain a “license” for the gambling, sports betting as well as legislative
purpose of conducting online games such as developments in the State of Nagaland has been
Roulette, Black-jack, Pontoon, Puntobanco, Bingo, discussed in the Annexures.
Casino Brag, Poker, Poker dice, Baccarat, Chemin-
de-for, Backgammon, Keno and Super Pan 9
and sports betting, including its organization,
G. Collection of a Stake from
management or promotion or negotiation or Players Playing Games- The
receipt of bets. A licensee can take the prior Mahalakshmi & Gaussian
approval of the state government to offer any Network Sagas
other /addition online games under the license.
The Nagaland Gambling Law only permits
i. The Mahalakshmi Cultural
skill- based games. Licences allow operators to Association case:
organise betting or wagering on online games
Another important issue that arises is whether
of skill or to make a profit through the operation
the owners of gaming houses can collect
of online platforms for playing games of skill.
stakes or derive profits from the players. In the
Games of skill are all games where there is
Satyanarayana Judgment,15 the Supreme Court
a preponderance of skill over chance, and
inter alia observed that clubs usually charge an
include card-based games (such as poker,
additional amount for anything they supply to
rummy and solitaire), quiz/strategy-based games
their members; the additional payments are used
(such as chess or sudoku) and action, sports and
to manage the club and provide other amenities.’
adventure games (such as fantasy leagues and
The court observed that merely charging an extra
virtual sports) (Nagaland Gambling Law).
fee for playing cards (unless excessive) will not
Under the Nagaland Gambling Law, a licence amount to the club making a profit or gain so
can be granted to an individual, a public as to render the club a common gaming house.
company or a limited liability company The court has laid down this principle in
incorporated in India and with a substantial general and has not particularly applied it
holding and controlling stake in India (that is, to games of skill like rummy.
the ownership of more than 50% of a company’s
The courts of India have also held that while
voting stock must be Indian). Only entities
it is the right of the clubs to have recreational
that have no interest in any online or offline
activities which are not prohibited, the authorities
gambling activities in India or overseas can
have the right to take appropriate proceedings
apply for a licence. Applicants must not have
against illegal games of betting, wagering, etc.
any criminal history or have been charged
Thus, the owners of clubs need to be careful about
with, or convicted for, any offence under the
the manner in which services against which fee/
Foreign Exchange Management Act 1999 or
stakes are collected from players are carried out, in
for money laundering in India and abroad.
order to avoid falling under the penal provisions
Firms and companies must ensure that their of the Gambling Legislations.
controlling stake remains in India and that
In a subsequent case16 before the High Court
all executive decisions are taken in India.
of Andhra Pradesh, the court stated that penal
The operations of both the companies holding
statutes should be strictly construed and the
the licence and those providing technology
benefit of any loophole in the statute was to
support (such as the platform, software, servers
be given to the accused. Therefore, it is for the
and so on) must be controlled, maintained
legislature to intervene and amend the law,
and operated from India.
15. AIR 1968 SC 825.

16. D. Krishna Kumar and Anr. v. State of A.P, 2003 CriLJ143

and lay down that playing rummy with stakes SC also mentioned that the observations in the
would also be ‘gambling / gaming’ within the Impugned order may not necessarily relate to
meaning of the law. online rummy. The SC at this juncture was yet
to deliver its verdict on the issue of taking stakes
In 2012 the Madras High Court in the
from Rummy in the offline context.
matter of Director General of Police, Chennai v.
Mahalakshmi Cultural Association17 interpreted The 19th August 2015 saw under twist in the
the Satyanarayana Judgment differently in the tale. The counsel for the Association stated
context of a statute in pari materia and held that the trial court had passed an order on 11th
that rummy played with stakes would amount October, 2014 by way of which the Association
to gambling. This judgment had unsettled had been acquitted. Interestingly, the issue
a rather settled position of law. The Supreme before the trial court brought by the prosecution
Court was seized of the matter by way of was not based on the case of Rummy (or
a Special Leave Petition filed by Mahalakshmi any other 13 card game) but for members
Cultural Association (“Association”). Certain indulging in a game colloquially and locally
online gaming websites (“Intervenors”) filed called Mangatha “ulle, velliye” by betting money
intervention applications on the apprehension for profit. The counsel for the Association
that they would be subject to criminal sought permission to withdraw the original
prosecution like brick and mortar rummy writ filed before the Madras High Court and
providers. The Supreme Court heard arguments such permission was granted by the SC with
based on business models adopted – for example, an observation that since the writ petition is
in the context of online gambling, if a fee was dismissed as withdrawn, the observations made
collected for the services provided by the hosts of by the Madras High Court in the Impugned
a website, as opposed to a buy-in for a particular Order or the matter before the SC do not survive
game, would the same be considered ‘stakes’? as the writ is infructuous.
The Intervenors were also asked to submit
detailed affidavits by the Supreme Court, ii. Gaussian Network Case:
explaining the structure of the games offered,
The question of whether a virtual platform
the fees charged for such games and the flow
could allow games of skills to be played for
of profits in relation to the same.
stakes also came up for consideration before
It was expected that the Supreme Court would the Delhi District Court.18 A petition was
lay down guidelines on what business models filed under Order 36 Rule 1 of the CPC seeking
(including online) would constitute gambling the opinion of the district court on inter alia
as restricted / prohibited under the gambling whether there was any restriction in allowing
legislations of various states (even when skilled participants to play games of skill for stakes
games were played for a fee / stake). with the intention of making a profit.
The SC on 13 August, 2015 disposed of the The Court had opined that it would be illegal to
petitions of the Intervenors stating that it found allow skill based games to be played for stakes in
that the impugned order did not deal with the virtual space. It observed that the degree of
online Rummy and that it applied specifically to skill prevalent in games played in the physical
Rummy played in the brick and mortar format form cannot be equated with the degree of skill
only. Further, the judges noted that the States involved while game was played online. The
had not taken any decision on whether the Court seems to have assumed that the degree
provision of online Rummy would constitute of chance would increase in online gambling;
gambling under the Chennai City Police Act. and there was a possibility for manipulation
Therefore, the SC was of the opinion that it was of outcomes by cheating and collusion April
not necessary to entertain this petition. The
18. M/s Gaussian Networks Pvt Ltd. v. Monica Lakhanpal and State
17. W.A.No. 2287 of 2011, Madras High Court. of NCT, Suit No 32/2012, Delhi District Court.

21, 2016 saw a very unexpected turn of events. of doubt on action on part of the judiciary is now
The Counsel appearing for Gaussian sought clear and the dilemma of the online operators
permission from the High Court to withdraw for the last four years has finally seen it’s end.
the revision petition. The Counsel argued
that under common law as well as established
case-law such as R. M. D. Chamarbaugwalla
H. Clarity on Fantasy Sports being
v. Union of India,State of Andhra Pradesh v. K. a ‘Game of Skill’
Satyanarayana & Orsand K R Lakshmanan v.
Under Nagaland Online Gambling Law, games
State of Tamil Naduthere was a clear exception
of skill include games where the “skill lies in
provided for games of skill in India. In states
team selection or selection of virtual stocks
like West Bengal, offering games like Poker for
based on analysis”. This law also specifies that
stakes was permissible. The Nagaland Act also
virtual sport fantasy league games and virtual
legitimised offering games of skill such as online
team selection games are games of skill, and that
Poker and online Rummy. The order of the
games of skill can be virtual sports-based games.
Delhi District Court, therefore would limit
the rights of Gaussian even though it would In 2017, the High Court of Punjab and
be legal to offer such games under the Nagaland Haryana (“PH Court”) became the first and
Act or West Bengal. only Indian court to rule fantasy sport to be
predominantly skill-based (Shri Varun Gumber
The Counsel for Gaussian requested that the
v. UT of Chandigarh & Ors.). The plaintiff in
approach followed by the Supreme Court while
this matter was registered as a player with
dismissing the Mahalakshmi case be taken in
the respondent company, Dream 11 Fantasy
the present scenario also. As mentioned above,
Private Limited (“Dream 11”). He lost his bet of
in the Mahalakshmi case, petitioners sought
INR 50,000 (£610/€660) while playing fantasy
permission for the withdrawal of the original
sports tournaments offered by Dream 11. The
writ petition filed before the Madras High Court
plaintiff moved PH Court alleging that fantasy
and permission for the same was granted by the
sports was not based on skill and that Dream
Supreme Court of India. Consequentially, the
11 was carrying on business covered within the
proceedings before the Supreme Court of India
definition of ‘Gambling’ under the Gambling
became infructuous and the observations of the
Legislation applicable to the state of Punjab.
Madras High Court does not survive.
The PH Court relied on the Supreme Court’s
The High Court acceded to the request made by
decision in K.R. Lakshmanan v State of Tamil
the parties and granted permission to withdraw
Nadu, which had held that betting on horse
the reference made before the Delhi District
races was a game of skill.
Court and the revision petition filed before the
High Court. The observations of the District The PH Court construed that the SC had held
Court, thus, do not survive any longer. that competitions in which success depended
upon a substantial degree of skill were not
The law continues to remain grey in
gambling, and despite there being some element
terms of whether the state wise gambling
of chance, if a game was preponderantly of skill,
enactments cover online gaming sites as well.
it would be a game of ‘mere skill’.
The Mahalakshmi Case and the Gaussian Network
Case could have been the turning point where it The PH Court reasoned that playing fantasy
was expected that the SC and Delhi High Court sports required the same level of considerable
respectively would lay down the law stating skill, judgment and discretion. Hence, it was
whether the state gaming enactments cover held that the element of skill predominated the
online models as well. However, the shadows outcome of the fantasy game and fantasy games
were of “mere skill” and could not amount to

gambling. Pertinently, the PH Court also held Amendment incorporates the changes
that since fantasy sports did not amount to brought in by both Ordinance I and
gambling, Dream 11 was conducting a business Ordinance II. The primary grounds of
activity protected under Article 19(1)(g)7 of the challenge by the Rummy Operators to both
Constitution. Please refer to Annexure II for our the Ordinances (now the Amendment),
detailed description of this judgment. and the rebuttals by the State of Telangana
are synopsized in Annexure III.
I. Telangana outlaws
preponderance in skill games J. Poker: Game of Skill or Chance
In a recent judgment passed in Dominance
The Governor of the State of Telangana has
Games Pvt. Ltd. vs State of Gujarat & 2 Ors.
promulgated two ordinances, which amended
(“Gujarat Case”) a single judge of the Gujarat
the Telangana Gambling Legislation:
High Court has held that: (i) poker is a game of
i. The Telangana State Gaming (Amendment) chance; and (ii) accordingly, conducting poker
Ordinance, 2017 (“Ordinance I”) was games falls within the prohibitions under the
promulgated on June 17, 2017. Ordinance I Gujarat Gambling Legislation. . Importantly,
inserted an explanation to the skill – games the Court held that any game, even if it involves
exemption under the Telangana Gambling skill but is played with stakes, would fall within
Legislation stating that games of skill the ambit of gambling. This judgment by the
which have part – elements of chance could Single Judge of the Gujarat High Court has been
not be termed skill games. Furthermore, challenged before the Division Bench, and the
Ordinance I expanded the offences to apply next hearing is scheduled on February 6, 2018.
to the online medium as well.
A synopsis of the proceedings in the Gujarat
On June 20, 2017, Ordinance I was Case is set out in Annexure IV.
challenged by the Rummy Operators
In the wake of these developments, another
before the High Court of Hyderabad in
case has been filed before the Delhi High Court
Auth Rep, Head Infotech (India) Pvt. Ltd.,
matter, Karan Mutha vs. State of NCT wherein
Hyderabad & Anr vs. Chief Secy, State
the petitioner has filed a petition to quash
of Telangana, Hyderabad & Ors (“the
the proceedings initiated against him under
Telangana Proceedings”).
the Delhi Gambling Legislation. The state
ii. Pending final outcome of the Telangana authorities had initiated proceedings against
Proceedings, the Governor promulgated the the petitioner upon raiding premises in which
Telangana Gaming (Second Amendment) the petitioner was found playing Poker. The
Ordinance, 2017 (“Ordinance II”) to amend petitioner is seeking to quash the proceedings
the Telangana Gambling Legislation on the ground that poker is a game of skill and
further. While Ordinance II has, inter alia, accordingly exempted from the applicability of
removed the skill – games exception in the Delhi Gambling Legislation. This matter will
its entirety from the Telangana Gambling be taken up next by the court on April 27, 2018.
Legislation, it has also amended the
It is also pertinent to note that, the High
definition of ‘gaming’ under the Telangana
Courts of Karnataka and Kolkata, in various
Gambling Legislation to state that games
matters, have stated that in situations where
(including online games) when played with
Poker is played as a game of skill, there was no
stakes would amount to ‘gaming.’
objection to the games being organized and
On December 1, 2017, the Governor of have prevented the local police from harassing
Telangana gave his assent to the Telangana individuals who conducted Poker tournaments.
Gaming (Amendment) Act, 2017. This

K. Policy efforts for legalizing Following this, recently, the Law Commission
betting and gambling headed by Justice B. S. Chauhan, a former judge
of the Supreme Court was mandated by the
The first instance when the Law Commission Government if India to make recommendations
of India (“Law Commission”) was entrusted on the possibilities of legalization of sports
with the task of simplifying and streamlining betting in India and the review of Gaming
the Gaming Enactments was in 2014. Enactments with a view to provide for a Central
This culminated in the 20th Law Commission licensing regime. The Law Commission has
issuing a report titled “Obsolete Laws: already taken comments and held active
Warranting Immediate Repeal” – An Interim discussions with all stakeholders. In the appeal
Report” (“2014 Report”).19 In the 2014 Report, of the Law Commission dated May 30, 2017,
the Law Commission observed that the Public they invited recommendations for legalizing
Gambling Act, 1867 was an obsolete law in betting and gambling. They set out specific
need of immediate repeal. Most of the State queries for the stakeholders to respond to.
Enactments are based on the provisions of the Strong legal and business cases have been
Public Gambling Act. Thus, it construed that submitted in support of a regime to legalise the
the Law Commission acknowledged the need already burgeoning gambling industry in India.
to overhaul the outdated Gaming Enactments
The Law Commission is yet to release its report
governing the industry in India.
with the recommendations in this regard,
Thereafter, following the developments in however, recent news reports suggest that, the
some highly- reported match fixing matters in Law Commission is in the process of finalizing
India, the Supreme Court appointed a three – their report.
member committee (“Lodha Committee”) to,
There have been recommendations from the
among other things, make recommendations
industry bodies like All India Gaming Federation
necessary to prevent sports frauds and conflicts
to introduce a unified licensing regime for
of interests in the game. The Lodha Committee
operating online skill games and setting up
recommended the legalization of betting in
a gaming commission at the national level
cricket in their report.20
(with possible offshoots in each state handling
certain activities under the central law).
19. Law Commission of India, Obsolete Laws: Warranting Immedi-

ate Repeal” – An Interim Report, September 12, 2014, available
at: http://lawcommissionofindia.nic.in/reports/Report248.
pdf
20. http://www.firstpost.com/sports/ipl-betting-full-text-of-lodha-
panels-verdict-on-rajasthan-royals-and-csk 2342310.html

2. Prize Competitions
Many popular games and contests in India are in on conducting such prize competitions has
the form of crossword puzzle prize competitions, to obtain a license to engage in such activities,
missing-word prize competitions, picture prize and the details for obtaining such licenses are
competitions, etc., in which monetary or other provided in the rules framed thereunder.
prizes are offered for the solving of any puzzle Any person conducting competitions falling
based upon the building up, arrangement, within the purview of the Prize Competition
combination or permutation, of letters, words, Act, that does not obtain a license, is punishable
or figures. with imprisonment for a term up to 3 months,
or with a fine which may extend to INR 1,000
Traditionally, one would find a prize
(approximately between USD 15 to 20) , or
competition in a local newspaper or announced
with both. “Prize competition” has been
on the radio. However, in recent times, with
defined by the Prize Competition Act as any
the growing number of media outlets, prize
competition in which “prizes are offered for
competitions have begun to feature in different
the solution of any puzzle based upon the
forms For example, on television shows in
building up, arrangement, combination or
the form of a puzzle, crossword or a picture
permutation, of letters, words, or figures.”21
prize competition where the viewers would
subsequently send the solutions to the organizer In the case of Bimalendu De v. Union of India
by way of SMS’ or calls. Also, there have been & Ors.,22 the legality of the popular show
a growing number of SMS driven competitions Kaun Banega Crorepati (“KBC”) was in issue.
and online prize competitions. A public interest litigation was filed before
the Calcutta High Court requesting that the
These competitions are regulated under
game shows KBC (a game show based on the
the various prize competition laws in India
format of popular British show ‘Who wants to
including the Prize Competition Act, 1955
be a Millionaire’) and Jackpot Jeeto be prohibited
(“Prize Competition Act”) which is a central
from being telecast on television on the grounds
enactment. Only some of the states of India
that the same amounted to gambling, and were
have passed resolutions to give effect to this law,
henceprohibited under the laws.
being the states of Andhra Pradesh, Maharashtra,
Tamil Nadu, Orissa, Uttar Pradesh, Madhya The court reviewed the provisions of the West
Pradesh, Punjab and Gujarat. Some states have Bengal Gambling and Prize Competition Act, 1957
also enacted separate laws for regulating prize (which has an analogous provision to the Prize
competitions in their respective states, such as Competitions Act) and held that game show
West Bengal. However, the definition of ‘prize did not fit within the definition of a ‘prize
competition’ in such state enactments is more or competition.’
less similar to that in the Prize Competition Act.
Similarly, the Bombay High Court23 has also
The Prize Competition Act prohibits prize held that the Prize Competition has a limited
competition(s) in which the total value of the meaning and does not include games of skill and
prize or prizes (whether in cash or otherwise) competitions such as KBC. . As such, the Prize
offered in any month exceeds INR 1,000 Competition Act only regulates a competition
(approximately between USD 15 to 20), and when prizes are offered for the solution of any
prize competition(s) where the value of entries numerical or alphabetical puzzle.
exceeds INR 2,000 (approximately between USD
30 to 35). Further, any person intending
21. Section 2(d) of the Prize Competition Act
22. AIR 2001 Cal 30.
23. News Television India Ltd. and Others v. Ashok D. Waghmare
and Another; 2006 (2) MhLj431

While the prize competitions are regulated Though the Prize Competition Act does not
under the Prize Competition Act and the state expressly cull out an exception for skill based
specific prize competition laws, depending on games, the Supreme Court in the case of R. M. D.
the facts and circumstances of each case, the Chamarbaugwalla v. Union of India25 laid down
Gambling Legislations may also get attracted the principle that skill based or preponderantly
while considering such competitions. skill based competitions were not sought to be
regulated under the Prize Competition Act. The
The Tamil Nadu Prize Schemes (Prohibition)
Supreme Court looked at, inter alia, the intention
Act, 1979 (“Tamil Nadu Act”) regulates “prize
of the legislators, the mischief that they sought
schemes” in the state of Tamil Nadu. Under
to address under the legislation, and the history
this enactment, there is a prohibition on the
before the legislation was brought into force.
conduct or promotion of a prize scheme.24
The applicability of this provision is determined However, under the Tamil Nadu Act this
purely on the facts and circumstances of position has not been clarified. Therefore, till
each case. If the game format includes the (i) the time the courts or the legislature specifically
purchase of goods; and (ii) draw of lots to select clarifies the legal position under the Tamil Nadu
the prize winner from amongst the persons Act vis-à-vis skill based games/prize schemes,
who have purchased the product, then such depending upon its appetite for risk, companies
a game format would fall within the ambit hosting such games/prize schemes have been
of this enactment. Under the said enactment, relying on either of the interpretations. In view
there is no express exemption given for skill of the same, some entities in their terms and
based (or preponderantly skill based) games/ conditions for the games, expressly exclude
prize schemes. players from the state of Tamil Nadu.
24. “Prize Schemes” has been defined as follows:

“prize scheme means any scheme by whatever name called whereby
any prize or gift (whether by way of money or by way of
movable or immovable property) is offered, or is proposed to be
given or delivered to one or more persons to be determined by
lot, draw or in any other manner from among persons who
purchase or have purchased goods or other articles from shops,
centers or any other place whatsoever specified by the sponsors of
the scheme or on any event or contingency relative or applicable to
the drawing of any ticket, lot, number or figure in relation to such
purchasers.”
25. AIR 1957 SC 628

3. Skill Based / Casual and Social Gaming

‘Casual games’ typically refers to games like participants that role play as owners, managers,
puzzles, adventure themed games, sports and or coaches of virtual / fictional sports teams.
action games, arcade games, card or board These games are offered to participants through
games, etc. This is a separate category of games different business models – paid-leagues,
than those which fall within the scope of the free-entry leagues, knock-out tournaments or
Gambling Legislations and the objective of any other tournament model, often based on
casual games is not to bet or wager. statistics generated and/or points accrued by
real individual players or teams of a professional
Casual games have always been one of the
sport. Participants have the ability to trade, buy,
popular means of entertainment for the masses.
sell, rotate and substitute players in their teams
While traditional board games have been
before each round of matches, just like a real
popular world over for many decades now,
sports team manager/coach.
electronic games first became popular with
arcade game machines in countries like Japan For example, in a typical online football fantasy
and USA. These arcade games then gave way to game, a participant may choose 11 (eleven)
video games and ‘home entertainment’ systems, players as a starting line-up, with a few additional
such as Nintendo’s Gameboy and Wii, Sony’s players as substitutes. The outcome of the real
Playstation series and Microsoft’s Xbox series, football matches involving these players will
which have now become a common fixture, determine the points that the participant attains.
starting with western countries, and moving to Each player is awarded points and consequently
emerging markets such as India. These video the participant’s team as a whole achieves
games introduced their audiences to a whole a certain amount of points (aggregate of each
new experience of gaming compared to the of the players’ points and any bonuses, in any).
traditional board games and today such gaming
Another type of casual gaming is through social
businesses thrive on the online and mobile
media – Social games such as Farmville, Cityville,
platforms too. Computer games have also
etc. have impacted the way consumers use social
become popular with the advent of the internet
networks, and Facebook is reckoned as one of the
giving rise to ‘online games’, multiple player
world’s largest online gaming platforms.
interfaces and the ease of interactions with
players online. This has enabled casual games to The nomenclature “casual” does not do away
carve a niche for themselves in the market. with the fact that there are laws to regulate
The mobile and smartphone revolution has casual games. For example, since certain
added millions of new gamers and thousands casual games may also be based on building
of game developers, thanks to the popularity of up, arrangement, combination or permutation,
‘app stores’. These application stores now make it of letters, words, or figures, the provisions of
possible for small teams to make and sell games the Prize Competition Act and related prize
that could, if they became popular, result in competition laws may get attracted to such
millions of downloads and millions in revenues. games. We have elaborated the provisions and
applicability of the prize competition laws above
Online fantasy sports have also become
in Chapter V (Prize Competitions) of this paper.
extremely popular today, both in India and
abroad. This format of gaming consists of

4. Legal and Regulatory Issues

content27 or sexually explicit material in
I. Laws Affecting The Content electronic form,28 including child pornographic
of Games content.29
As per the IPC and the IT Act, any material
A. Pornographic and Obscenity which is lascivious or appeals to the prurient
Laws interest or which may deprave and corrupt
persons, is considered obscene. In determining
Many games and gaming websites in India whether or not the games and the images
include content which may be considered depicted in the games are lascivious or appeal
objectionable under the pornographic and to the prurient interest, the court takes into
obscenity laws of India. For instance, some consideration factors such as - (a) whether the
of the popular websites offer games which work taken as a whole appeals to the prurient
have animated caricatures of human beings, interest; (b) whether the work is patently
including women, depicted in a manner which offensive; (c) whether the work taken as
may be construed as offensive as per the moral a whole, lacks serious literary, artistic, political
standards of India. or scientific value. The court also takes into
account other factors depending on the facts
i. Indian Penal Code,1860 and and circumstances of the case.30
the Information Technology Act, Under both these legislations, liability could
2008 be in the form of imprisonment, ranging from
three to seven years, or a fine in the range of INR
The Indian Penal Code (“IPC”) and the
0.5 million (approximately USD 7500) to INR 1
Information Technology Act, 2008 (“IT Act”)
million (approximately USD 15000), or both,31
penalize the publication, distribution and
transmission of obscene content. The IPC
inter alia prohibits the sale, hire, distribution, 27. Section 67 of IT Act prescribes the following penalty:
exhibition, and circulation of any obscene object Any person contravening the provisions of this section
shall on first conviction be punished with imprisonment
and also penalizes any person who engages, for a term which may extend to 3 years and with fine which
advertises, promotes, offers, or attempts to do may extend to INR 500,000 and in the event of a second or
subsequent conviction with imprisonment or a term which
any obscene activity.26 The IT Act inter alia may extend to 5 years and also with fine which may extend
penalizes the transmission of any obscene to INR 1,000,000.
28. Section 67A of IT Act prescribes the following penalty: Any
person contravening the provisions of this section shall
be punished on first conviction with imprisonment for
a term which may extend to 5 years and with fine which
may extend to INR 1,000,000 and in the event of second or
subsequent conviction with imprisonment for a term which
may extend to 7 years and also with fine which may extend
to INR 1,000,000.
29. Section 67B of the IT Act prescribes the following penalty:
Any person contravening the provisions of this section
shall be punished on first conviction with imprisonment
for a term which may extend to 5 years and with fine which
may extend to INR 1,000,000 and in the event of second or
subsequent conviction with imprisonment for a term which
may extend to 7 years and also with fine which may extend
to INR 1,000,000.
30. Director General, Directorate General of Doordarshan & Ors vs
Anand Patwardhan & Anr , Appeal (Civil) 613/2005; Supreme
Court of India
31. Section 292, 293 and 294 of the IPC and 67, 67A and 67B of
26. Section 292 and 294 of the IPC. the IT Act.

which may increase in case or repeat offenders. manner stated hereinabove. The penalty for
Further liability could be attracted under the IPC violating provisions of the Indecent Representation
when obscene material is made available to young of Women (Prohibition) Act, 1867 is imprisonment
persons, (that is, below the age of 20 years).32 for a term of up to two years and fine of up to
INR 2,000 (approximately USD 30-35) with
In Sharat Babu Digumatri v. Government of
provisions for more severe punishments in case
NCT of Delhi, the Supreme Court held that,
of repeat offences.34
while the IPC makes the sale of obscene material
through traditional print an offence, once that
offence has a nexus with an electronic record B. Laws Affecting Action based
under the IT Act; and no charge is made under and Violent Games
the relevant provision of the IT Act, the accused
cannot be proceeded against under similar Many popular casual games, such as Grand
provisions of the IPC. This case ensures that Theft Auto, Call of Duty, etc., are action based
in case there is a conflict between laws, the games which specifically appeal to young gamers.
special law(s) such as the IT Act shall prevail The provisions of the Young Persons’ (Harmful
over general and prior laws. Publications) Act, 1956 makes it an offence to print,
publish or otherwise be involved in the printing,
ii. Indecent Representation of distribution or selling of any publication
Women portraying the commission of offences, acts of
violence or incidents of a repulsive nature in
The Indecent Representation of Women (Prohibition) such a manner as would tend to corrupt young
Act, 1986 prohibits any indecent representation persons (that is, a person under the age of 20
of women i.e. the depiction in any manner years), and thus it assumes relevance in such
of the figure of a woman, her form or body cases. The liability under this legislation could be
in such a way as to have the effect of being in the form of imprisonment for a term up to 6
indecent, or derogatory to, or denigrating, months or fine or both.35
women, or that likely to deprave, corrupt or
While the linkage between exposure of certain
injure the public morality or morals.33 The
forms of games to teenagers and violence in
statute prohibits any such depiction, whether
society has not been tested in Indian courts, this
through advertisements or in publications,
issue has been subject to enormous interest and
writings, paintings, figures or in any other
controversy in the USA, Europe, and other Asian
manner and provides for penalty in connection
countries. Some US states, including California,
with the same. The mode of transmission of
have previously passed laws to regulate the sale
advertisements is not specified and it may
of certain types of videos to children, but the US
be construed that such advertisement may
Supreme Court invalidated the same saying that
also be transmitted through the electronic
video games formed part of the constitutional right
form. This legislation also penalizes the
to free speech and hence could not be regulated.36
circulation of any material (including a film, any
The Supreme Court also ruled that there was
writing or drawing) containing any indecent
representation of women, and may get attracted
if the casual games represent women in the
34. Any person who contravenes the provisions of the act
shall be punishable on first conviction with imprisonment
of either description for a term which may extend to 2
years, and with fine which may extend to INR 2,000, and
32. Section 293 of the IPC provides that on first conviction, the
in the event of a second or subsequent conviction with
offender shall be punished with imprisonment for
imprisonment for a term of not less than 6 months but
a term which may extend to 3 years, and with fine which
which may extend to 5 years and also with a fine not less
may extend to INR 2,000, and, in the event of a second
than INR 10,000 but which may extend to INR 1,00,000.
or subsequent conviction, with imprisonment of either
description for a term which may extend to 7 years, and also 35. Penalty shall be imprisonment which may extend to 6
with fine which may extend to INR 5,000. months, or with fine, or with both.
33. Section 2(c) of the Indecent Representation of Women 36. http://www.nytimes.com/2011/06/29/arts/video-games/what-
(Prohibition) Act, 1986. supreme-court-ruling-on-video-games-means.html?_r=0

evidence indicating that these video games cause In India, a user of an unregistered trademark
violence in society. However, despite this ruling, cannot sue another party for infringement of its
the state of New Jersey is mulling over a law trademark but may institute only a passing off
restricting the sale of video games to minors.37 action against the defaulting party. However,
to successfully defend a passing off action, the
It is also interesting to note that countries such
proprietor of the title will need to prove that the
as USA and Canada have independent self-
titles of the games (especially popular games),
regulatory bodies such as the Entertainment
or get-up of the title logos is distinctive, and
Software Rating Board (ESRB), which assigns
the public identifies these with the proprietor,
ratings in respect of age and content, and also
which would not be required if the trademark is
issues various guidelines to the video and
registered. The proprietor will also need to prove
computer games industry.38
that the defaulting party has been using the
marks deceptively and passing off their goods
C. Intellectual Property Rights or services as that of the former.
Issues
On the flip side, especially in the case of online /
Casual games are often theme based in nature social and casual games, since any software
and use pictures, musical notes, figures, as well as visual content, music, characters etc.
characters etc. to add to the appeal of the games. that are developed for the purpose of a game
Since all such works are subject to copyright are protected by copyright and trademark
protection in their individualright, , the use laws (as applicable), the game developer /
of such copyrighted material in the games, owner of such content will have the right to
without taking adequate permissions/licenses commercially exploit such content. Increasingly,
from the owner of copyrighted material, can it has been seen that most lucrative facets
trigger copyright infringement issues under of casual and social gaming are licensing of
the Copyright Act, 1957. The owner of the intellectual property and merchandising.
copyright can take civil39 or criminal action
In addition to the rights described above, the
against the infringer.40
software related to certain types of games
Popular titles may also be protected under / functionalities within the games can also
the trademark law of India. More often than be protected by way of a patent right. While
not, competitors may try to piggy back on the software as such is not patentable in India,
popularity of game titles or series titles (titles certain countries such as the US allow the
for a series of games). In India, titles can be patenting of software. This distinction between
registered and protected as trademarks under the patent regimes is of importance in relation
the Trade Marks Act, 1999. Unregistered titles to games that are made available online. A game
which are popular may be protected under developed in India, when offered online and
common law if they have acquired a secondary made available / downloaded in a country like
meaning in the judgment of the target customers. the US, may be found to be infringing patent
The owner of the trademarks can take civil41 or rights held over similar functionalities
criminal action against the infringer. by any person such a country.
D. Personality Rights Issues

37. http://arstechnica.com/gaming/2013/04/new-jersey-ignores-
supreme-court-in-pushing-for-violent-game-legislation/ In order to attract gamers, many games such
38. http://www.esrb.org/index-js.jsp as the FIFA series or the Fallout Franchise, use
39. Such as injunction, suit for damages or account of profits. the caricatures, likeness, voice, reputation
40. Copyright infringement or abetment of the same is punish- or popularity of a celebrity for a commercial
able with imprisonment for a term which may vary between
6 months to 3 years and fine which may vary between INR
benefit without authorization from the celebrity.
50,000 to INR 2,00,000. This may result in violation of the celebrity’s
41. Such as injunction, suit for damages or account of profits. personality rights which is a combination of the

privacy and publicity rights of a person. is entitled to an injunction, if the said celebrity
A violation of such rights would result in the could be easily identified by the use of his name by
court passing an order restraining the company the others. Since the celebrity in the instant case
or person owning the game from displaying/ was easily identifiable in relation to the movie,
exhibiting these games or using the image of the court granted him an injunction. The court
the celebrity in such games and/or award additionally held that infringement of right of
damages to the celebrity for harm caused to publicity requires no proof of falsity, confusion, or
the reputation of the celebrity. deception, especially when celebrity is identifiable.
In India, personality rights have traditionally Thus, in a similar manner, games using celebrity
not been recognised by the courts. However, the images/caricatures/voice/style etc. without due
Madras High Court in the case of Shivaji Rao authorization, may be held to be infringing the
Gaikwad v. Varsha Productions (“Defendant”)42 respective celebrity’s personality rights.
witnessed the celebrated actor ‘Rajinikanth’
seeking an interim injunction restraining
the Defendant from using his name, image /
II. Telecom Laws Applicable
caricature / style of delivering dialogues to Social Gaming
in the film “Main Hoon Rajinikanth” and
A recent study by market research45 firm
other forthcoming films so as to infringe his
Nielsen provided an interesting insight into
copyright, infiltrate his personality rights or
the usage of mobile phones in India. As per the
cause deception in the minds of the public
study, voice calls and texting accounted for
leading to passing-off. The court granted the
46% (forty six percent) of smartphone usage
interim injunction and stayed the release of
whereas multimedia, games, apps and Internet
the impugned film, the name of which was
browsing made up the rest.46 Importantly,
later changed to “Main Hoon Rajini”.43
games were the most popular category among
As regards the copyright in the name paid apps, with nearly 3 out of 5 users (58%)
“Rajnikanth,” the court held that only the first paying for games. There are certain telecom
owner can claim copyright and would be entitled laws that are particularly important to consider
to a licence of copyright; so far as the name by the gaming companies while evaluating their
‘Rajinikanth’ is concerned, nobody being able to business models.
give definite knowledge of when the name came
into inception and by whom; further, the name
‘Rajinikanth’ has been used in different movies
A. SMS Related Laws
on several occasions; hence, no one can claim In light of various complaints made against
exclusivity as regards the material in public domain. spam calls and SMSes, the Telecom Regulatory
Authority of India (“TRAI”) issued the Telecom
Regarding the personality rights, the court
Commercial Communications Customer Preference
observed that ’personality rights.’ while
Regulations, 2010 (“Regulations”) which
not defined in any particular statute, have
seeks to prohibit Unsolicited Commercial
been identified by courts in India in various
Communications (“UCC”).
judgements such as ICC Development (International)
Ltd. v. Arvee Enterprises.44 The court held that such These Regulations prohibit the transmission of
rights vests in those who have attained the status SMSes to subscribers who have elected not to
of celebrity. If any person uses the name of a
celebrity without his/her permission, the celebrity
45. Smartphones Keep Users in India Plugged In, dated June 2, 2013.
Available at: http://www.nielsen.com/us/en/newswire/2013/
smartphones-keep-users-in-india-plugged-in.html. Last
42. CS(OS) 598/2014
visited: August 31, 2014.
43. http://indianexpress.com/article/entertainment/bollywood/
46. Online Gaming in India: Reaching a new pinnacle, A study
faisal-saif-changes-title-of-main-hoon-rajinikanth-film/
by KPMG India and Google (available at: https://assets.kpmg.
44. 2003 (26) PTC 245 com/content/dam/kpmg/in/pdf/2017/05/online-gaming.pdf )

receive such messages. Under these Regulations, Further, telemarketers sending commercial
subscribers have been given the option of communication have been prohibited from
registering either under the fully blocked receiving incoming messages. This poses a
category or the partially blocked category challenge when the interactive games require
depending on their preferences. responses to be sent via SMS by the subscriber.
However, we have observed that most
In the fully blocked category, a subscriber
interactive games in India are now structured
opts not to receive any type of commercial
in a manner that the number which the
communication, while the partially blocked
participant needs to respond to is included in
category enables subscribers to receive
the body of the text with instructions to reply
commercial communications only in the
to the designated number instead.
categories they have chosen. Therefore, in the
event that a subscriber has registered under the TRAI has reexamined UCC in a Consultation
fully blocked category, he should not be sent any Paper released in September 2017. This Paper
type of promotional/ commercial messages/calls. brings up issues such as the registration and
enforcement requirements for Telemarketers,
Whereas, subscribers under the partially
the possibility of a TRAI Mobile Application,
blocked scheme may choose from a selection
bulk registration, and the implementation of
of categories including: banking, insurance,
new systems. Comments have been received
financial products and credit cards; real
from stakeholders, and we await TRAI to
estate; education; health; consumer goods and
release subsequent Recommendations.
automobiles; communication, broadcasting and
entertainment; IT; and tourism.
However, certain SMSes do not need to adhere
B. Activation of Value Added
to the above mentioned restrictions and may Services
be sent to any subscriber. Such messages are
After various complaints regarding the activation
known as transactional messages, i.e. messages
of value added services (“VAS”) without the
that represent a transaction undertaken by the
authorization of subscribers and the consequent
subscriber, for example, messages regarding
deduction in balance of the subscribers, the
banking transactions, ticket reservations, etc.
TRAI enacted specific regulations to ensure
since these SMSes are generated pursuant to
that consumers are not charged incorrectly/
a request made by the subscriber himself.
excessively for any VAS.
Interactive games modeled around SMSes
The TRAI has imposed various obligations
typically face the following embargos:
on telecom operators including:
§§The Regulations lay down that only an entity
§§Informing the consumer, through SMS, on
registered with the TRAI (“Telemarketer”)
activation of a VAS, the validity period of
may send commercial communication and
such service, the charges for renewal and the
that no other entity shall send commercial
procedure for the consumer to unsubscribe
communication.
from the service;
§§There are other restrictions placed on
§§Before subscribing to a VAS, the operator
commercial communication, such as, these
must obtain confirmation from the consumer
messages can only be sent from 9 AM to 9 PM
via an SMS within 24 hours of activation of
and no commercial communication can be
the VAS. The consumer must be charged only
sent thereafter.
if such confirmation is received, failing which,
Therefore, interactive SMS based games need to the VAS must be discontinued;
be structured carefully so that SMSes qualify as
transactional messages.

§§In case a VAS is offered via WAP or mobile elements of chance, an argument can be made
internet, explicit consent of the consumer is that foreign direct investment may be permitted
required via an online consent gateway as is in such games. However, in the absence of any
detailed in TRAI’s directions. precedent wherein the scope of the phrase,
‘lottery, gambling and betting’ has been analyzed
Though the TRAI has placed all these
by the regulators from a FDI Policy perspective,
obligations on telecom operators we have
there is a possibility that the regulators may
observed that most VAS agreements between
take a different view since these are matters of
the game developers and telecom operators
government policy.
typically involve the telecom operator passing
on its obligations to the VAS provider. Further, Further, the FDI Policy also prohibits foreign
telecom operators typically also require the VAS technology collaborations in any form
provider to comply with all applicable laws and including licensing for franchise, trademark,
further indemnify the telecom operator in the brand name, management contract for lottery
event of any loss/penalty. business and gambling and betting activities.
Thus, any arrangement between Indian and
Therefore, in the event that an interactive
foreign entities for conducting gambling /
game is designed to be centered around regular
gaming business needs to be carefully structured
SMSes being activated on a subscriber’s handset,
to avoid risks under the FDI Policy. For violating
the game developer must be mindful of such
the FDI Policy, one may have to pay a penalty
obligations that may be applicable to such games.
of up to thrice the sum involved where such
amount is quantifiable, or up to INR 2,00,000
III. Other Laws Affecting The (approx. USD 4000) where the amount is not
Gaming / quantifiable, and where the contravention is
a continuing one, further penalty which may
Gambling Industry extend to INR 5,000 (approx. USD 100) for
every day after the first day during which the
contravention continues. Recently, there have
A. Foreign Direct Investment been a huge surge in foreign direct investment
& Foreign Technology in entities offering games preponderantly on
Collaborations in Gambling skill, including Rummy and fantasy sports.
Industry
Under the Foreign Direct Investment Policy
B. Restrictions under Exchange
(“FDI Policy”) of India issued by the Ministry Control Regulations
of Commerce & Industry, Government of
Under the Foreign Exchange Management Act,
India, Foreign Direct Investment (“FDI”) is
1999 (“FEMA”) read with Foreign Exchange
prohibited in entities involved in
Management (Current Account Transaction) Rules,
§§lottery, including government, private lottery, 2000 (“Current Account Rules”), remittance
online lotteries, etc; and of income from winnings from lottery, racing/
riding or any other hobby is prohibited. Though
§§gambling and betting including casinos, etc.
in letter remittance for the purpose of betting is
The terms “lottery, gambling and betting” have not prohibited, keeping in view the spirit of this
not been defined under the FDI Policy. Hence, provision, remittance for the purpose of betting
one may rely on the statutes in pari materia, or any prizes to any player in foreign currency
judgments (both domestic and foreign), may potentially contravene these rules and
dictionaries, etc. for the meaning of these terms. incur penalties which may extend up to three
Certain operations such as fantasy sports games times the amount remitted. Further, remittance
offered in India may be classified as games of monies from India, by Indian players to
in which an element of skill predominates gaming sites is prohibited.

The Central Board of Direct Taxes (“CBDT”) cafes”. Thus, along with ISPs, even websites
in 2015 had released a circular with certain which serve as aggregators for third party
“clarifications on tax compliance for undisclosed games shall qualify as intermediaries.
foreign income and assets”73 (“Circular”)
As part of the obligation set out in the
under the Black Money (Undisclosed Foreign
Intermediary Guidelines, such rules and
Income and Assets) and Imposition of Tax Act,
regulations and user agreements need to
2015 (“Black Money Act”).
include terms which inter alia, inform the
The Circular clarified that a person having users of the bandwidth not to host, display,
funds, subject to tax in India but on which upload, modify, publish, transmit, update or
tax was not paid, lying in offshore e-wallets / share any information that is relating to or
virtual card accounts maintained with online encouraging gambling, or contains obscene
gaming / poker websites and having made content etc. or is otherwise unlawful in any
profits therefrom is required to disclose to the manner whatever. It appears that the rule has
Indian tax authorities all the details in relation been included with the purpose of, , among
to these accounts. The Circular stated that that other things, discourage any activity of gaming/
an e-wallet / virtual card account would be gambling that may be unlawful under the
considered similar to a bank account where Gambling Legislations in the country.
inward and outward cash movement takes place.
Additionally, an intermediary, upon obtaining
Hence, the same valuation and declaration of
knowledge by itself or being brought to actual
such accounts should be made by persons as in
knowledge by an affected person, shall act
the case of a bank account, in order to comply
within 36 hours to disable content found
with certain tax compliance requirements
to be in infringement of the Intermediary
under Chapter VI of the Black Money Act.
Guidelines.48 We understand that as an industry
practice the intermediaries have already been
C. Intermediary Guidelines including such terms in their user agreements
Notified under the IT Act and other policies and have been either
temporarily or permanently been blocking
In April 2011, the Information Technology gambling and gaming content as and when
(Intermediaries guidelines) Rules, 2011 they receive any take down notices from the
(“Intermediary Guidelines”) were notified authorities or others. The Registrars accredited
under the IT Act, which require intermediaries with the Internet Corporation for Assigned
like ISPs and other intermediaries to inter alia Names and Numbers (“ICANN”) have also been
observe necessary due diligence and publish blocking the websites on their own. However,
rules and regulations and user agreements for since the law expressly imposes inserting such
access or usage of the bandwidth provided by terms as an obligation on the intermediaries,
the intermediary. The term ‘intermediary’ has the intermediaries may increasingly block
been defined under the IT Act47 to include such websites suo motu or on notices from
“telecom service providers, network service providers, the Ministry of Electronics and Information
internet service providers, web-hosting service Technology or similar authorities.
providers, search engines, online payment sites,
In the landmark judgment of Shreya Singhal v.
online-auction sites, online-market places and cyber
Union of India,49 known for the Supreme Court
striking down the controversial section 66A of
47. Section 2(1)(w) of the IT Act: “intermediary”, with respect to the IT Act, the Supreme Court also read down
any particular electronic records, means any person who on the provisions of the Intermediary Guidelines
behalf of another person receives, stores or transmits that
record or provides any service with respect to that record and related to blocking of content. Recognizing
includes telecom service providers, network service provid-
ers, internet service providers, web-hosting service providers,
search engines, online payment sites, online-auction sites,
48. Regulation 3(4) of the Intermediary Guidelines
online-market places and cyber cafes
49. 2015 5 SCC 1

the concern related to preemptive blocking of The PMLA requires reporting entities51
content by intermediaries so as to not attract to maintain records of transactions52 and
potential liability, the Supreme Court read documents evidencing identity of their
down the obligation of intermediaries. The court clients in accordance with the Rules.53
has now interpreted the term “actual knowledge”
The following documents are required to be
to only include court or government orders.
maintained by Gaming Entities:
Thus the obligation to block content has only
been limited to cases where the intermediary
receives a court or government order. i. Record of all transactions,
The Delhi High Court, in Super Cassettes Industries including: 54
Ltd. v. Myspace Inc. & Anr, passed a landmark ruling
§§All cash transactions of the value of more
with relation to intermediary law. The Court
than INR 1,000,000 (approx. USD 15,000) or
held that an intermediary may held to be liable
its equivalent in foreign currency
for infringing content hosted on its platform
only when it has specific or actual knowledge or §§All series of cash transactions integrally
a reason to believe that such information may connected to each other which have been
be infringing. Insertion of advertisements and individually valued below INR 1,000,000
modification of content formats by an intermediary (approx. USD 15,000 ) or its equivalent
via an automated process and without manual in foreign currency where such series of
intervention does not result in the intermediary transactions have taken place within
being deemed to have actual knowledge of the a month and the monthly aggregate exceeds
content hosted. Once an intermediary has an amount of 1,000,000 (approx. USD 15,000)
been informed by a complainant of potentially or its equivalent in foreign currency
infringing content hosted on its platform, it is
§§All transactions involving receipts by
not obligated to proactively verify and remove
non-profit organizations of value more
content subsequently hosted on its platform
than INR 1,000,000 (approx. 15,000) or
that may infringe the intellectual property
its equivalent in foreign currency
rights of the complainant.
D. Anti-Money Laundering Laws:

In India, the Prevention of Money Laundering Act, 51. Section 2(wa) of the PMLA, “reporting entity” means a banking
2002 (“PMLA”) is the law which prevents money company, financial institution, intermediary or a person carrying
on a designated business or profession;
laundering activities. The PMLA was amended by
52. The term ‘transaction’ is defined under rule 2(h) of the Rules
the Prevention of Money Laundering (Amendment) as: “transaction” means a purchase, sale, loan, pledge, gift, transfer,
Act 2012, which brought about significant changes delivery or the arrangement thereof and includes- (i) opening of an
account; (ii) deposits, withdrawal, exchange or transfer of funds in
to the compliance procedures required under the whatever currency, whether in cash or by cheque, payment order or
PMLA. Among other things, entities carrying out other instruments or by electronic or other non-physical means; (iii)
the use of a safety deposit box or any other form of safe deposit; (iv)
the activities for playing games for cash or kind entering into any fiduciary relationship; (v) any payment made or
(including casinos) (“Gaming Entity”) are also received in whole or in part of any contractual or other legal obliga-
tion; (vi) any payment made in respect of playing games of chance
required to adhere to the provisions of the PMLA for cash or kind including such activities associated with casino; and
and related rules (“Rules”).50 (vii) establishing or creating a legal person or legal arrangement.”
53. Section 12 of the PMLA
54. Section 2(g) of the Rules: “Suspicious transaction” means a
50. The Prevention of Money-laundering (Maintenance of transaction referred to in clause (h), including an attempted trans-
Records of the Nature and Value of Transactions, the action, whether or not made in cash, which to a person acting in
Procedure and Manner of Maintaining and Time for good faith— (a) gives rise to a reasonable ground of suspicion that
Furnishing Information and Verification and Maintenance it may involve proceeds of an offence specified in the Schedule to the
of Records of the Identity of the Clients of the Banking Act, regardless of the value involved; or (b) appears to be made in
Companies, Financial Institutions and Intermediaries) Rules, circumstances of unusual or unjustified complexity; or (c) appears
2005, prescribes the nature and value of transactions for to have no economic rationale or bonafide purpose; or (d) gives rise
which records are required to be maintained by a financial to a reasonable ground of suspicion that it may involve financing of
institution. the activities relating to terrorism;

§§All suspicious transactions55 whether or not i. Transaction of an amount equal to or

made in cash. exceeding INR 50,000 (approx. USD 733)
whether conducted as a single transaction
§§All cross border wire transfers of the value of
or several transactions that appear to be
more than INR 500,000 (approx. USD 7,350) or
connected, or
its equivalent in foreign currency where either
the origin or destination of fund is in India. ii. All international money transfer operations
§§All purchase and sale by any person of The PMLA also provides provisions regarding
immovable property valued at fifty lakh inquiry and penalties in case of non-compliance
rupees or more that is registered by the with the obligations mentioned above. The
reporting entity, as the case may be. director57 on his own person, or upon any
application made by any authority, office or
ii. Records of the identity of the person, make such inquiry or cause such inquiry
clients which are required to be to be made, as he thinks fit to be necessary.58
If in the course of any inquiry, the director finds
maintained: that a reporting entity or its designated director
It has been provided that every reporting entity on the Board or any of its employees have failed
at the commencement of any account-based to comply with the obligations under the PMLA,
relationship with its client must:56 he may issue a warning in writing; or direct such
reporting entity or its designated director on the
a. Identify its client;
Board or any of its employees, to comply with specific
b. Verify their identity; instructions; or direct such reporting entity or its
designated director on the Board or any of its employees,
c. Obtain information on the purpose and
to send reports at such interval as may be prescribed
intended nature of business relationship;
on the measures it is taking; or by an order, impose
Additionally, in all other cases, the reporting a monetary penalty on such reporting entity or its
entity must verify identity while carrying out: designated director on the Board or any of its employees,
which shall not be less than INR 10,000 but may
extend to INR 100,000 for each failure.59
55. Section 2(g) of the Rules: “Suspicious transaction” means a

transaction referred to in clause (h), including an attempted
transaction, whether or not made in cash, which to a person acting
in good faith— (a) gives rise to a reasonable ground of suspicion
that it may involve proceeds of an offence specified in the Schedule
to the Act, regardless of the value involved; or (b) appears to be
57. “Director” or “Additional Director” or “Joint Director” means
made in circumstances of unusual or unjustified complexity; or (c)
a Director or Additional Director or Joint Director, as the case
appears to have no economic rationale or bonafide purpose; or (d)
may be, appointed under subsection (1) of section 49.
gives rise to a reasonable ground of suspicion that it may involve
financing of the activities relating to terrorism; 58. Section 13(1) of the PMLA
56. Rule 9(1) of the Rules 59. Section 13(2) of the PMLA

iii. Know Your Customer (KYC) Considering the development of technology

norms and Anti-Money and cashless transactions the KYC norms also
suggest that agents through whom credit/
Laundering (AML) standards debit/ smart or gift cards are issued must also be
under the PMLA subjected to due diligence and KYC measures.
The norms lay out that before issuance of such
Additionally, the RBI through a Master
card to any client, banks must ensure that all
Circular60 has laid down certain KYC norms and
appropriate KYC procedures are duly applied
Customer Identification Procedure (“CIP”)61 to
before issuing the cards to the customers.63
be followed by banks and financial institutions
for opening of accounts and monitoring
transactions of suspicious nature for the
purpose of reporting the same to appropriate
authority such as Financial Intelligence Unit –
India62 and RBI.
60. Know Your Customer (KYC) norms / Anti-Money

Laundering (AML) standards/Combating Financing
of Terrorism (CFT)/Obligation of banks and financial
institutions under PMLA, 2002, RBI/2015-16/42 DBR.AML.
BC.No.15/14.01.001/2015-16
61. Clause 3.2.1 of the Master Circular: The CIP means, “un-
dertaking client due diligence measures while commencing an
account-based relationship including identifying and verifying
the customer and the beneficial owner on the basis of one of the
Officially Valid Document (“OVD”)”.
62. Under the Department of Revenue, Ministry of Finance 63. Part II of the Master Circular

Annexure - I
Nagaland: Online gaming licenses for

skill games
Publisher: World Online Gaming Law Report
I. Test For Games of Skill
The State of Nagaland, which is located in
The “preponderance of skill” test as laid down by
eastern India has passed The Nagaland Prohibition
the Supreme Court of India65 has been considered
of Gambling and Promotion and Regulation of
in the Act as the key element in determining
Online Games of Skill Act, 2016 (“Act”). The Act
whether or not a game is ‘game of skill’. A “game
contemplates issuance of online gaming licenses
of skill” would include all games where there is
for skill games. This is a first of its kind legislation
a preponderance of skill over chance, including
in India, consequently, it has created a lot of
where the skill relates to (i) strategizing the
excitement among Indian as well as international
manner of placing wagers or placing bets, (ii)
operators. The Act as such is a very short piece of
selection of a team or virtual stocks based on
legislation, therefore only when the government
analysis, or (iii) the manner in which the moves
issues rules in support of the Act, clarity will
are made, whether through deployment of
emerge as to how the Act will be operationalised.
physical or mental skill and acumen.
In India, gaming and gambling are a State
Certain games such as chess, card games like
subject i.e. each State is free to legislate on the
bridge, poker, rummy, napoleon; virtual sports,
said subject for activities within its State.64 Most
and fantasy sports leagues have been delineated
Indian States have legislations in place that
as “games of skill” in the First Schedule to the
prohibit certain gambling activities, but skill
Act. The Act contemplates the First Schedule
based games are specifically excluded. State
to be a moving schedule, i.e. the Government
legislations do not define what is meant by
may either on its own or on representation of
‘game of skill’; but the Supreme Court of India in
any party, update it to include new games of
various judgements has clarified that when
skills. Further, games declared to be a “game of
a game has a preponderance of skill over chance,
skill” by (i) courts in India or internationally or
then such game would be considered to be
by statutes; (ii) games for which competitions
a game of skill. The primary objective of the
and tournaments are conducted, or (iii) games
Act is to prohibit gambling, and to regulate and
which can be determined to be “games of skill”
promote ‘online games of skill’ within Nagaland.
may get included in the Schedule.
65. State of Andhra Pradesh v. K. Satyanarayana & Or AIR 1968 SC

825. The game of Rummy was held to be a game involving
preponderance of skill rather than chance based on the fact
64. Constitution of India, Seventh Schedule, List II, Entry No. that Rummy required certain amount of skill as the fall of the
34 allows states in India to enact their own legislations to cards needs to be memorized and the building up of Rummy
regulate gaming / gambling activities within its territory requires considerable skill in holding and discarding cards.

This suggests that though certain games may and consequently a degree of foreign
not listed in First Schedule, representations shareholding.
may be made by a potential licensee to include
iv. The executive decision making powers and
additional games and the government may
processes of the licensee would be required
update the First Schedule if it is convinced on
to be performed within India.
the skill element.
v. Technology support, including hosting and
management of the website, placement of
II. Profit Motive is permitted the servers would need to be within India.
Revenue models adopted by the licensee may vi. Applicant for a licence cannot be the entity
involve earning revenue through advertising, having any interest in any online or offline
claiming a percentage of the winnings and/ gambling activities in India or overseas.
or charging a fixed fee for membership, as per It is not clear how the government would
the Act. Thus, a licensee may follow a profit interpret ‘gambling activity’, nor is it
motive based model. Before the Supreme Court clear whether the group company of the
of India, in Mahalakshmi Cultural Association. v. potential licensee could be involved in
Dir. Inspector Gen. of Police & Or,66 the issue of gambling activity.
profiteering on skill based games was discussed
In order to ensure predictability and
and debated, however it was not specifically
accountability in the procedure for grant of
decided. However, based on various earlier
licence, the Act mandates that the licensing
Supreme Court and State High Court judgements,
authority make a decision within 6 months
it can be argued that since skill based games are
from the date of receipt of an application, on
excluded from gaming legislations, profiteering
whether or not to issue a license to an applicant.
activities on such games should be permitted.
This position should assist a licensee to offer The Act clarifies that licensees may offer “games
skill games to residents of other Indian States of skill” on their website, mobile platform,
as well, as discussed below. television or any other online media.
The Act contemplates issuance of rules which
III. Licenses will prescribe the manner and format for
applications for a license, or the terms and
In so far as conditions of license / eligibility conditions under which a license may be issued.
criteria are concerned, there are certain hurdles Such rules may also address aspects such as
and ambiguities in so far as involvement of license fees payable and annual fees payable by
foreign operators are concerned, especially if operators to the State Government.
they are involved in gambling activities. Some
of the issues are as follows:
IV. Games of Skill offered Pan
iii. A license may be granted to a person, India
company or limited liability company
incorporated in India, and having
The Act allows a licencee to offer “games of skill”
a substantial holding and controlling
in other Indian States, where such games are
stake in India. This may be a point of
not classified as gambling. Thus, States where
concern for Indian companies that have
games of skills are excluded from the ambit of
or propose to have foreign investments
the gambling legislation, are territories where
it is permissible for a licensee to offer its skill
66. http://www.nishithdesai.com/information/
based games. This adds a layer of legitimacy to
research-and-articles/nda-hotline/nda-hotline- operations by licencees by taking into account
single-view/article/mahalakshmi-case-update-
online-rummy-operators-get-some-respite.html?no_
the regulatory framework at the point of
cache=1&cHash=8c7a963cb096310edd4a35552557dad4 consumption.

Earlier, in 2009 the Sikkim Government allowed VI. Licensing Authority

for online gaming to be offered from the
territory of the state. However, based on advice The Act provides that the State Government
from the federal government, restrictions were may designate an authority or body to monitor
imposed whereby sites offering online gaming and regulate activities of the licensees to ensure
could be accessed only within the geographical compliance under the Act, and to settle disputes
borders of Sikkim. arising out of the licensees’ activities.
The Act acknowledges the power of each
State to regulate the gaming activity within VII. Way ahead
its jurisdiction. It has therefore established
a framework for addressing issues that various Taking into consideration the challenging legal
States may have with the extra territorial landscape in India, obtaining a licence under the
operations of the licensee. If any State is of the Act may provide an added level of protection
opinion that the licensee was offering its games for an operator. In the event of any prosecution
in that State in violation of the Act or local being initiated against a licensed operator, the
laws of the relevant State, it may inform the fact that such games were being offered under
Nagaland Government of such violation. a legitimate licensing regime may constitute
a line of defence. It would assist the licensee to
Various State specific gaming legislations seek
argue that under a legislative regime the games
to regulate activities in a “common gaming
are considered to be games of skill.
house”. Contemporaneously, it may be argued
that a common gaming house could also include Once the rules are published by the Nagaland
a server/portal/website providing means of government, several grey areas in the Act are
gaming. Therefore, any operator falling afoul of likely to be clarified.
any State level gaming legislation may be open
to being prosecuted by a state government. The
Act may provide a safe harbour to such operators.
V. Penalties
In case a licensee was found to be engaging
in “games of chance or gambling activities”,
it would be liable to a fine of INR 20,00,000
(approx. USD 30,000) in the first instance and
may be extended to simple imprisonment
in case of a repeat offender. Although the
Act does not specify, it is likely that
imprisonment would extend to directors
and other officers in charge of the company
in the event of a repeated offence.

Annexure – II
First Indian Court to Rule Fantasy Sport

Preponderantly Skill- based
The PH Court has given fantasy sports 67 A participant was, while drafting his team,
the sanction of a preponderantly skill - based required to:
game in a recent ruling.68 The PH Court’s ruling
§§assess players and evaluate the worth of
has provided respite to fantasy sports operators
a player against the other available players
by safeguarding them from the prohibitions
keeping aside bias for an individual or a team;
under the Central Act as it had been made
applicable to Punjab and Haryana69 (“Punjab §§Adhere to an upper credit limit, and ensure
State Enactment”). that the team did not entirely/substantially
consist of players from a single real- world
A petitioner (“Player”) was a customer of the
team. This pivotal precondition also ensured
respondent company Dream 11 Fantasy Private
that a player did not create a situation
Limited (“Dream 11”) and claimed to have
resembling the act of betting on the
fallen prey to the alleged gambling business of
performance of a single real- world team;
the Dream 11 through their website https://
fantasycricket.dream11.com.in. Following the §§Evaluate a player’s anticipated statistics, for
rules of the play, the Player created virtual cricket example, in the case of a batsman in a fantasy
and football teams and joined various leagues. The cricket game, the batting averages, total runs,
Player bet on his virtual teams, and lost the entire number of centuries, etc. This evaluation was
amount he had bet, a sum of INR 50,000/-. The based on past statistics, as well as prevailing
Player consequently approached the PH Court circumstances such as age, player injuries, etc.
to issue directions to initiate investigation or
In playing in the fantasy game, a participant
criminal investigation against Dream 11, alleging
was also required to constantly monitor the
that fantasy sports were not based on skill, but
scores of athletes drafted by him, and make
were purely gambling activities.
substitutions where necessary. He also had the
In its defense, Dream 11 described the nature of opportunity to avail of Dream 11’s free-to-play
fantasy sports to the PH Court, and the integral variants to test his skill and gain experience.
skills required by a player in effectively drafting Dream Eleven canvassed the argument that
virtual teams and partaking in leagues. The crux the Player had been unable to perform well in
of Dream 11’s arguments in contending that the fantasy game as he had failed to exhibit the
skill predominated chance in playing fantasy aforementioned skills.
sport is as follows:
Apart from the aforementioned factual
arguments made by Dream 11, it also relied
67. Fantasy sport is a game which takes place over a number of heavily upon the landmark judgment of the
rounds (i.e. a single match, or an entire league). Participants
select players to build virtual teams, and act as managers of Supreme Court (“SC”) in K.R. Lakshmanan v
their virtual teams. These virtual teams compete against one- State of Tamil Nadu70 (“Lakshmanan Case”)
another to collect points based on the results/achievements
of real sportspeople or teams in professional sporting events. in which the SC had held that betting on
The winner is the participant whose virtual team garners the horse races was a game of skill. The PH Court
maximum number of points across the rounds.
studiedly analyzed the Lakshmanan Case,
68. CWP No.7559 of 2017
69. The Public Gambling Act, 1867, was made applicable to the
State of Punjab and Haryana via the Public Gambling (Punjab
Amendment) Act, 1929 70. AIR 1996 SC 1153

in which it had been held that the inherent The PH Court held, relying on the Lakshmanan
capacity of the animal, capability of the jockey, Case, that playing fantasy sports too required
the form and fitness of the horse, distance of considerable skill, judgment and discretion.
the race etc., were all objective factors capable The wide gamut of factors that a participant
of assessment by race- goers. Thus, betting on would need to assess, as elucidated above, would
horse- races was a game of ‘mere skill.’ The undoubtedly affect the result of the fantasy
PH Court construed that the SC had held that game. In drafting players, a participant was
competitions in which success depended upon required to study the rules and regulations
a substantial degree of skill were not gambling, of strength of the athlete, along with his
and despite there being some element of chance, weaknesses. Success in Dream 11 fantasy sport
if a game was preponderantly of skill, it would had its genesis in a user’s knowledge, judgment
be a game of ‘mere skill.’ Pertinently, the PH and attention. Thus, the element of skill
Court also held that since fantasy sports did not predominated the outcome of the fantasy game,
amount to gambling, Dream 11 was conducting and fantasy sport was a game of ‘mere skill,’
a business activity protected under Article 19(1) which did not amount to gambling.
(g)71 of the Constitution.
71. Article 19(1)(g) of the Constitution of India states that all

citizens have the right to practice any profession, or to carry
on any occupation, trade or business

Annexure – III
All Bets Off for Gaming Operators in Telangana:

State Government Passes Ordinance
Prohibiting Skill Games
Seemingly overnight, the State Government four days shy of the next date of hearing in the
of Telangana has promulgated two ordinances Writ. Ordinance II came into effect immediately.
which have created uncertainties for the
businesses of Telangana- based operators, or
those offering games to players in Telangana.
II. The Challenge to
Several affected rummy operators have moved Ordinance I
swiftly to challenge the said ordinances before
the High Court of Hyderabad. The status of The Act, like most State gaming enactments
these businesses in Telangana is currently excludes games of skill from its purview.
in limbo as the High Court of Hyderabad Therefore, prohibitions under the Act do not
contemplates whether to uphold the validity apply to games of skill. Ordinance I added an
of the ordinances. explanation stating that games of skill which
have part- elements of chance cannot be
termed ‘skill games.’ Ordinance I furthermore
I. Background specifically stated that Rummy was not a skill
game as it involved part chance. In the past, the
The Telangana State Gaming (Amendment)
Supreme Court has held in the case of State of
Ordinance, 2017 (“Ordinance I”) was
Bombay v. R.M.D. Chamarbaugwala72 that the
promulgated by the Governor of the state of
meaning of ‘mere skill’ means games which
Telangana (“State”) on June 17, 2017 to amend
are preponderantly of skill. The Supreme Court
the Telangana State Gaming Act, 1974 (“the
has also held in State of Andhra Pradesh v. K.
Act”). The passing of the Ordinance was an
Satyanarayan73 that Rummy is a game which
unanticipated development which has taken
is preponderantly of skill.
the industry by surprise and created several
uncertainties for established skill based gaming In addition, while the Act only made gaming
businesses. within common gaming houses an offence,
Ordinance I amended the law to specifically
On 20 June, 2017, Ordinance I was challenged
make online gaming an offence in the state as
before the High Court of Hyderabad (“Court”) in
well. A similar issue was raised in the case of
Auth Rep, Head Infotech (India) Pvt. Ltd., Hyderabad
Mahalakshmi Cultural Association v. The Director,
& Anr vs. Chief Secy, State of Telangana, Hyderabad
Inspector General of Police & Ors.74 Interestingly, the
& 3 Ors (“the Writ”) by several rummy operators.
state government of Tamil Nadu had made
Four hearings took place in the Writ between 27
a statement before the Supreme Court that it was
June, 2017 and July 4, 2017 in which arguments
yet to decide whether Rummy played for stakes
were heard by the Court.
Pending final outcome of the proceedings before
the Court, on July 8, 2017, the State hastily 72. 1957 AIR 699
passed another Ordinance, the Telangana 73. 1968 AIR 825
Gaming (Second Amendment) Ordinance, 2017 74. Special Leave to Appeal (C) No(s).15371/2012 (Arising out of
(“Ordinance II”) to amend the Act further, just impugned final judgment and order dated 22/03/2012 in WA
No. 2287/2011 passed by the High Court of Madras)

in the online medium fell afoul of the law or not. games (such as rummy) as well, and thereby
We have provided a date - wise summary of the derive the competence to legislate on the same.
proceedings in the Writ in the Schedule below. The petitioners argued that the entry relating to
‘betting and gambling’ in the Constitution ought
to be read in consonance with the Supreme
III. Second Strike: Court cases interpreting games of mere skill
Promulgating Ordinance II to be those which were preponderantly of skill.
Only legislation which regulated games which
On July 8, 2017, the State passed Ordinance II. were predominantly chance- based would fall
Ordinance II has provided the rationale of the within the legislative competence of the State.
State in amending the gaming laws of Telangana
In this regard, the petitioners drew a parallel
in the preamble. It articulated that due to the
with another constitutional law case (Builders
ease of access of online rummy, several people,
Association of India and others etc. etc., Petitioners
including young people, were becoming
v. Union of India and others etc.75) which involved
addicted to online rummy played with real
the question of whether the state legislature had
money. The addition had affected the stability
the power to enforce sales tax on the transfer
of family life, and the careers of students, and
of goods which were sold as part of a works
thus become a threat to public order.
contract. Under the Constitution of India, the
Ordinance II has removed the skill – games state government is endowed with the exclusive
exception in its entirety from the Act. right to tax the sale of goods. The question
Ordinance II replaced it with a completely before the Supreme Court in Builders Association
unrelated provision to give power to the State was whether the state could artificially expand
to enact provisions to remove difficulties in the meaning of ‘sale of goods’ under the
implementing the provisions of the Act. Constitution to bring it within the legislative
competence of the State Government.
Ordinance II also amended the definition
The Supreme Court reasoned that it could not
of ‘gaming’ under the Act to state that games
be said that a transfer of goods as part of a works
(including online games) when played with
contract was a sale of goods, and hence fell
stakes would amount to ‘gaming.’ Furthermore,
outside the competence of the state legislature.
the acts of risking money or otherwise on an
unknown result of any event including on Relying on the reasoning in Builders Association,
a game of skill is included in the definition the petitioners contended that, similarly, the
of ‘betting and wagering.’ The Ordinance State could not, by implication, expand the
also specified that wagering or betting would meaning of ‘betting and gambling’ to include
include acts undertaken directly or indirectly by skill games as well. During the arguments the
players playing any game or by third parties. counsels also briefly mentioned that inclusion
of the online space in the Act can be challenged.
Schedule A - Telangana Proceedings This point however, was not been argued in detail.
June 28, 2017
June 27, 2017
The Petitioners continued their arguments
The petitioners in the abovementioned matter
the next day. In addition to the legislative
challenged the legislative competence of the
competence argument that was tendered the
state of Telangana to enact Ordinance I. ‘Betting
previous day, the leading argument made by
and gambling’ is a state subject under the
the Petitioners on this date was that offering
Constitution of India which may be regulated
games of skill fell within their fundamental
exclusively by the state, and not the central
right to carry on a trade or business under
Government. The petitioners argued that
the State could not, by implication, interpret
‘betting and gambling’ to include skill based 75. 1989 SCALE (2)768

Article 19(1)(g) of the Constitution of India. The Petitioners sought a (i) stay on the
The Supreme Court had held in the case of implementation of the Ordinance and (ii)
R.M.D Chamarbaugwala Case that offering an interim injunction against enforcing the
competitions which involved substantial skill Ordinance against them for the period of the
were business activities, the protection of which proceedings.
is guaranteed by Article 19(1)(g). The Petitioners
At the close of the proceedings, the Court (i)
argued that Ordinance I had restrained the
temporarily (i.e. till the next date of hearing
Petitioners from offering skill games (including
on July 3), allowed operators from within
rummy) in violation of their fundamental right
the state of Telangana to offer their games
under Article 19(1)(g).
outside the state of Telangana, but (ii) did not
The Petitioners also challenged the explanations permit operators from within and outside of
to the skill – based exemption inserted by Telangana to offer their websites within the
Ordinance I. In light of the fact that the State of Telangana.
Ordinance did not delete the exclusion of skill
games from the Act, but specified instead which July 3, 2017
games were not skill games, the Petitioners
made another argument to the effect that the The State commenced with their arguments on
legislature had the power to enact law, not this date.
interpret the law. The latter was the exclusive
The State argued that Rummy played for
power of the judiciary. In view of the Supreme
stakes amounts to gambling and was not an
Court judgment in Satyanarayan Case,76
occupation, trade or business for the purposes
wherein the Supreme Court has held rummy
of Article 19(1)(g) of the Constitution of India.
to be a game of skill, it was not upto the State’s
The State also relied upon authorities in support
legislature to contradict the Supreme Court’s
of the same. Further, the State also argued that
finding of fact.
even if offering rummy amounted to a trade
The Petitioners also challenged the legislative or business for the purposes of Article 19(1)(g),
competence of the State to regulate online the State could impose reasonable restrictions
gaming. Under the Constitution, the central within the ambit of Article 19(6) in the interest
Government is endowed with the exclusive of the general public.
right to enact laws on “Posts and telegraphs;
The State also pointed out that while playing
telephones, wireless, broadcasting and other like
rummy online, allegedly, operator companies
forms of communication.”77 The Petitioners
manipulated the game as a result of which
argued that gaming through the online medium
members of the public were adversely affected.
fell within this description. Thus, the central
Government had the exclusive legislative The High Court posed certain questions to the
competence to regulate online gaming. State, and particularly sought to understand the
rationale for deviating from precedents dealing
The Court also attempted to the operations
with Rummy on the ground of whether or not
of the Petitioners and how their businesses
the game was played with stakes.
would be adversely affected if an injunction
on the operation of the Ordinance was not The State requested that it be given time till the
granted. The Petitioners highlighted to the next day to provide their inputs.
Court that they were running their business in
a transparent manner with the appropriate KYC
diligence, etc.
76. 1968 AIR 825

77. Entry 31, List I (Union List), Seventh Schedule of
Constitution of India

July 4, 2017 July 13, 2017
The State continued with their arguments on The judge clubbed the challenge to Ordinance
this date. I and Ordinance II on this date. The oral
direction given by the Judge to the State during
Most State gaming enactments cull out an
the hearing on July 12, 2017 was converted to
exception for games of ‘mere skill.’ The State
a formal direction for four weeks in which the
argued that the interpretation given to the term
Hyderabad HC directed the State of Telangana
‘mere skill’ in previous precedents should not
not to seize the Rummy Operators’ plant and
be applied to interpret the words ‘skill only’ as
machinery located in Hyderabad, or seal their
used in the skill- games exemption under the
premises on the condition that the Rummy
Act (and as adopted by the State of Telangana).
Operators would block access to their only
In Chamarbaugwala Case, the Supreme Court
rummy portals to all persons residing within
had held that the meaning of ‘mere skill’ meant
the State of Telangana. It was left open to the
games which are preponderantly of skill.
Rummy Operators to carry on their business
The State continued to argue on the basis of to persons residing in other states. It was also
State of Andhra Pradesh v. K. Satyanarayan left open to the State of Telangana to enter the
that rummy, when played for stakes, would Rummy Operators’ premises to the limited
qualify as gambling. The Petitioner counter - extent of ensuring that their portal had blocked
argued that the State’s interpretation of the access to all persons residing within Telangana.
Satyanarayan case was incorrect, and was
contrary to the interpretation given to the case August 10, 2017
by the Supreme Court in Lakshmanan Case.
The interim order granted on 13 July, 2017, was
The temporary permission granted by the Court
extended till 30 August, 2017
on June 28, 2017 was not extended further.
However, the Court indicated to the Petitioners
September 1, 2017
that if the State took any action against them for
offering games outside Telangana, to report such
The interim order granted on 13 July, 2017, was
instances to the Court.
extended till 15 October, 2017
July 12, 2017
The matter did not come up for hearing on

this date. However, towards the close of the
day, at the instance of the Petitioners, the
Judge orally restricted the State Government
from taking action against the conduct of
the operators’ business outside the
boundaries of the State of Telangana.

Annexure IV
Synopsis of the proceedings in the Gujarat

Case
I. Facts §§As per the test laid down by the SC, if
the game involved a substantial degree/
The petitioners in the Gujarat Proceedings preponderance of skill, it would be a game of
(“Petitioners”) filed special civil applications skill. However, in every game of skill, there
seeking, (i) to set aside an order/communication was an element of chance, as recognized
dated March 15, 2017 from the Commissioner by the SC in the Satyanarayana Case and
of Police rejecting the petitioner’s request for the Lakshmanan Case. However, if it was
a No Objection Certificate (“NOC”) to conduct predominantly a game of skill, it would be
poker (“Communication”) and (ii) a declaration exempt from the Gujarat Act.
that poker was a game of skill and not a game
§§Akin to a game of Rummy, there is an element
of chance and therefore, covered under the
of chance in Poker too when cards are
exception for games of skill (“Exception”) under
shuffled and dealt out initially. However, as
the Gujarat Prevention of Gambling Act, 188778
recognized by the SC in the Satyanarayana
(“Gujarat Act”).
Case (in which Rummy was held to be a game
The High Court of Gujarat (“Gujarat HC”) of skill), it is how, after receipt of the cards,
rejected the petitions and held that that (i) poker the player plays the game which makes a
is a game of chance; (ii) accordingly, conducting game predominantly one of skill. In Poker,
poker games falls within the prohibitions under too, the manner in which the player plays
the Gujarat Act. after having been dealt the cards rendered
it a game of skill, based on the following:
II. Issue »» a person had to assess rival players’ reaction
whilst maintain a ‘poker face,’ i.e. keeping
Whether Poker was a game of skill and thus fell one’s expression concealed;
within the Exception
»» Every turn of the card required a player to
make an assessment of whether to continue
III. Petitioner’s Arguments or not. The exercise of judgment was
recognized to be an exercise of skill in the
The Petitioners submitted that once it was Lakshmanan Case.
shown that Poker was a game of skill, the
provisions of the Gujarat Act would not be
»»A player must possess intellectual and
psychological skills. They must know the
attracted due to the Exception.
rules and mathematical odds, as well as
Accordingly, the Petitioners argued that Poker how to read tells and styles of other players,
was a game of skill based on the following legal as well as know when to hold and fold and
and factual arguments: raise, as well as how to manage their money.
§§The Petitioners referred to the testimony of

the experts Robert C. Hannum and Anthony
78. Section 13, Gujarat Prevention of Gambling Act, 1887: Saving N. Cabot, which had been relied upon by the
of Games of Mere Skil: Nothing in this Act shall be held to United States District Court in holding that
apply to any game of mere skill wherever played.

poker was a game of skill in United States of the NOC could not be said to be a reasonable
America v Lawrence DiCristina79 (“Di Cristina restriction on such right, which was in the
Case”). The testimony hypothesized that nature of an arbitrary and illegal prohibition.
a game of skill was one in which the player
§§The legislative competence of the State
could alter the expected outcome. The expected
legislature was also challenged by the
win in poker, too, was dependent on the skill or
Petitioners. The Constitution provided that
strategy employed by the player in making key
States had the exclusive legislative competence
decisions, which could be developed as a skill.
to legislate on ‘betting and gambling.’83
The Petitioners emphasized on the following
Accordingly, unless both betting and gambling
strategic decisions required of a player in Poker
were involved, the State did not have the
in the said testimony:
competence to legislate on the game.
»» The decision on how much money to invest
§§The Petitioners also argued, based on
»» Betting strategy, i.e. whether to fold or bet principles of natural justice that the
and how much to bet decision of the Commissioner of Police in
the Communication that poker was a game
§§Poker had been recognized as a game of skill
of chance was taken without hearing the
by other state legislatures. The legislatures
Petitioners. Moreover, the Petitioners relied on
of West Bengal80 and Meghalaya had already
Siemens Engineering & Manufacturing Co. of India
carved out an exception for poker from the
Ltd. v Union of India & Anr.,84 to submit that a
ambit of gambling, while the legislature of
charge had to be supported by reasons, and the
Nagaland had deemed poker to be a skill-
decision in the Communication was baseless,
based game.81
as it was unsubstantiated by any material to
§§The High Court of Calcutta had held82 that show that poker was a game of chance.
playing of poker could not be treated as an
offence under the West Bengal Gambling and
Prize Competitions Act, 1957.
IV. Respondent’s Arguments
§§Certain courts of the United Kingdom, the The Respondents outlined, at the outset, the
United States of America, Brazil and Australia, historical prohibitions on gambling in India.
had held that poker was a game of skill, and To this end, the Respondents traced Indian
such decisions ought to be considered scriptures which had highlighted the evils of
gambling, and religions which had forbidden
The Petitioners further canvassed the following
gambling. It was submitted that the moral fabric
arguments:
of society was eroded by gambling.
§§The observations of the SC in the
Against this backdrop, the Respondents’ argued
Lakshmanan Case were relied upon to submit
that Poker was a game of chance based on the
that Poker being a game of skill, the offering
following legal and factual contentions:
of Poker was protected under Article 19(1)
(g) of the Constitution of India. The refusal of §§The judgments referred to by the Petitioners
were in the context of the game of Rummy,
which had been held to be a game of skill and
79. United States of America against Lawrence DiCristina, accordingly fell outside the purview of gambling.
United States District Court, Eastern District of New York
80. Section 2(1)(b), West Bengal Gambling and Prize §§The observations in the Satyanarayana Case
Competitions Act, 1957, specifically carves out an
exception for poker from the definition of gambling were relied upon in which the SC had recog-
81. Poker has specifically been enlisted under the Schedule to
the Nagaland Prohibition of Gambling and Promotion and
Regularisation of Online Games of Skill Act, 2015 as a game
of skill 83. Schedule 7, List II, Entry 34, Constitution of India
82. Shri Kizhakke Naduvath Suresh, Indian Poker Association v. 84. Siemens Engineering & Manufacturing Co. of India Ltd. v
State of West Bengal & Ors. Union of India & Anr., (1976) 2 SCC 981

nized that electronic machines were operated §§In response to the Petitioner’s claim that
to ensure that a player would lose. Accord- they had a fundamental right to carry on
ingly, whether it was a game of pure chance or trade or business under the Constitution,
manipulated with the tampering of machines the observations of the SC in M.J. Sivani &
to make it a game of chance, acquired skills Ors v State of Karnataka & Ors87 were referred
would be of no assistance to a player. to, in which it was recognized that no one
had an inherent right to carry on a business
§§The outcome of the game of poker depended on
which was injurious to the public. Trade
the card dealt to a player. This by itself would
or business with attendant danger to the
suggest that it was merely a game of chance.
community may be totally prohibited or
The skill involved in Poker was at the most
permitted subject to restrictions.
how a person could bluff irrespective the card
he was dealt. However at that stage as well, the §§The Respondents also relied upon the
outcome of the game was totally dependent on Chamarbaugwala Case, in which the SC
the card dealt. Accordingly, Poker was a game had held that the provisions under the Prize
of chance. The submissions of the Petitioner Competitions Act, 1955, are severable in their
with reference to mathematical assessment application to only games of chance. The
and psychological observation and other Respondents relied upon the fact that the SC
assessment could not render Poker into a game had held in that case that gambling was never
of skill. Furthermore, how a player plays is not intended to be a part of ‘trade, business or
a skill as it depended on the traits of a player commerce,’ protected under Article 19(1)(g)
and how deep- pocketed he was. of the Constitution of India, nor form part of
the country’s trade, commerce or intercourse
§§The SC in M.J. Sivani & Ors v State of
under Article 301.
Karnataka & Ors85 had, while referring to
poker machines, observed that such games
were games of chance. V. Judgment
§§Poker had its origin in games of Flush, Brag,
At the outset, the Judge cautioned that sports
or Teen- Patti. Flush had been recognized
betting had been brought within a regulatory
as a game of chance by the SC in the
framework in countries such as Australia, the
Satyanarayana Case.
UK and USA. However, one could not overlook
§§In countries such as France, Germany and the ground realities in India where (i) the
America, Poker was considered a game of majority of the population were struggling
chance. for basic amenities, and (ii) there was a lack of
awareness amongst people of whether betting
§§The Di Cristina judgment relied upon by
was permitted amidst the craze for easy money.
the Petitioners had been overruled in a
Accordingly, law had been enacted to prohibit
subsequent case by the Superior Court of
and restrict such activity. Such laws could not
Pennsylvania.86 In this subsequent judgment,
be challenged by the Petitioners in the guise of
the court had held that Texas Hold’em Poker
challenging the Communication.
was a game of chance as the three elements of
gambling (consideration, chance and reward) The judge referred to the Chamarbaugwala
under Pennsylvania Law were present. Case in which the SC had outlined the evils of
gambling by quoting from the ancient Indian
The Respondents also advanced the following
scriptures, and also underscored that gambling
arguments:
had been looked down upon by English
common law.
85. (1995) 6 SCC 289

86. Commonwealth of Pennsylvania v Walter Leroy Watkins
(Criminal Division at No(s): CP-19-CR-0000733-2008) 87. (1995) 6 SCC 289

The judge rejected the contention of the §§Rummy, which has been held to be a game
Petitioners that every game involved some of skill in the Satyanarayana Case, was
element of skill and some element of chance. distinguished on the ground that it had
The judge proceeded to hold that, in applying the nothing to do with stakes. Whereas, in Poker,
test of predominance of skill, Poker was a game betting was an inescapable part of gameplay.
of chance based on the following: It was this factor which differentiated Poker
from Rummy. Accordingly, even if it was
§§The history of poker clearly suggests that it is
a game of skill, if it was played with stakes, it
a game of chance. The judgments of some
would amount to gambling.
foreign countries and some articles suggest
that it had originated from Flush/Teen Patti. §§The judge also rejected the reliance placed
Teen Patti had originated from Brag. Like by the Petitioners on foreign articles and
Teen Patti, chance was a dominant factor in judgments. He held that the hypotheses in
Poker as well. The SC in the Satyanarayana these articles could not take a game out of
Case had observed that Flush, Brag and Teen the purview of the Gujarat Act. Furthermore,
Patti were games of chance. As a natural the Di Cristina Case had been reversed upon
corollary, Poker, being a variant of the said appeal. In the appeal it had been clearly
games, was a game of chance as well. observed that the parties did not dispute that
Poker constituted gambling under New York
§§Poker begins with the distribution of three
State law. Even in the judgment of R v Kelly,88
preflop cards and the game proceeds when
the UK’s Court of Appeal had held that the
the cards are turned or opened. Thus, Poker
jury in the Trial Court was entitled to hold that
consists of two stages – an initial distribution
Texas Hold’em Poker was a game of chance as
of cards and the opening of the cards with
defined under the Gaming Act, 1968.
betting. The second stage had been submitted
to render Poker a game of skill by the §§It was not relevant whether certain states
Petitioners, such as assessing others players’ such as West Bengal had considered Poker to
faces and inducing them to bet. However, amount to gambling, as per the Constitutional
these factors would infact reflect that it was scheme, each State Legislature was
a game of chance which depended upon the empowered to regulate betting and gambling.
initial distribution of cards over which a
The judge also rejected the other contentions of
player has no control. If he had a bad day with
the Petitioners on the grounds below:
a bad card, a player could not turn around the
table. All he can do is limit his losses. §§The judge rejected the contention of the
Petitioners that their rights under Article
§§Much of a player’s decision to bet depended
19(1)(g) of the Constitution had been affected
on the individual personality of a player, for
by the Communication, by relying upon the
instance a player with good luck or deep
observations in the Chamarbaugwala Case
pockets may be induced to play even after
in which it was highlighted that gambling
being dealt an average card.
was not a trade but res extra commercium, and
§§Bluffing or deception could not be termed accordingly did not fall within the purview of
as a skill or an art, as the same would amount Article 19(1)(g). A parallel was drawn with the
to offences under the Indian Penal Code, gambling and liquor, and reference was made
1860. If the submission of the Petitioners to the SC’s judgment in Sheoshankar v State,89
that these amounted to an exercise of skill upholding an Act regulating consumption
were accepted, many such acts which of liquor upon challenge to it under the
amounted to fraud or cheating could be said Article, on the ground that liquor
said to be skills, notwithstanding that
they were offences under law.
88. R v Kelly [2008] EXCA Crim 137
89. AIR 1951 Nagpur 646

was a noxious object which ceased to be a §§The argument of the Petitioners based on
legitimate object of property or commerce. principles of natural justice could also
The SC also held that the rights under Article not be accepted as it was not an issue for
19(1)(a) – (g) of the Constitution were not adjudication by the authority when the
absolute, and could be curtailed in the interest Gujarat Act itself prohibited gambling.
of the general public as per Articles 19(2) –
Accordingly, the judge held that poker was a
19(6). Accordingly, the State was empowered
game of chance, and the Communication could
to make laws to protect the public interest
not be set aside.
and such legislative competence could not
be challenged on the ground of violation of
Article 19(1)(g).
§§When the State legislature had not provided

for the licensing of such activities, as was the
case with the US and the UK, a Court could
not read or add into it. In the case of horse-
racing, a specific provision was made.

Annexure V
The ‘Mahalakshmi’ Saga 90
-An update on the Supreme Court’s stand on the case This article gives a detailed account of how
of the Online Rummy Operators matters unfolded in the Mahalakshmi case and
what this recent order means to the business
-Ranjana Adhikari & Gowree Gokhale
community.
While India has featured on the business maps
of a number of International operators, the I. The background to the
anxiety around the case of the online operators Mahalakshmi Case
before the Supreme Court seeking clarity on the
applicability of the state gambling laws to their The gambling laws in India are State specific.
business models had stopped many from put- In most State enactments games of skill are
ting wheels on their plans. excluded from the application of gambling
laws. In the case of State of Andhra Pradesh v.
For the last few years, the entire gaming
Satyanarayana92 (“Satyanarayana Case”), the
business community was patiently watching
SC had held that Rummy (the 13 card game) was
the developments in the Mahalakshmi Case90
a game of skill.
before the Supreme Court of India (“SC”). The
matter was essentially a challenge before the The Mahalakshmi Case was essentially an
SC by Mahalakshmi Cultural Association appeal filed against the Impugned Order of the
(“Association”) to order of the Madras High Madras High Court before the Supreme Court
Court (“Impugned Order”)91 in relation to by the Association. To give a brief background,
the game of Rummy being played in brick and the Inspector of Police, Chennai raided the
mortar clubs. Since the online Rummy portals premises of the Association on the grounds
feel a slight brunt of this order, they had also that the premise of the Association was being
approached the SC for clarity on the position of used for gambling and that the members
law vis-à-vis online gaming. In a dramatic turn were playing Rummy with stakes. A case was
of events over last one week the SC has delivered accordingly registered against the Association.
two orders, which gives the operators organising
Aggrieved, the Association filed a Writ petition
skill based games some respite.
before a single judge for seeking directions to
While on 13 August 2015, the SC observed that forbear the police from inter alia interfering
the Impugned Order has not dealt with online with the activities of the Association in any
Rummy and therefore any observations made in manner, including playing 13 cards game of
the Impugned Order may not necessarily relate Rummy with or without stakes. The said writ
to online Rummy, on 19 August 2015, there was petition was disposed of by the court in favor of
a unique twist in the tale where the Association the Association, on the grounds that Rummy
withdrew the matter, thereby making the is a skill based game and hence is not illegal.
original Impugned Order infructuous. Certain directions were also issued to the police
in this case.
90. Mahalakshmi Cultural Association v. The Director, Inspector

General of Police & Ors Special Leave to Appeal (C)
No(s).15371/2012 (Arising out of impugned final judgment
and order dated 22/03/2012 in WA No. 2287/2011 passed by
the High Court of Madras)
91. The Director General of Police vs Mahalakshmi Cultural
Association (2012) 3 Mad LJ 561 92. AIR 1968 SC 825

It was this order of the single judge that had Some of the online operators who had made
been challenged by the Appellants (Police) in representations before the SC in this case,
the writ appeal before the division bench of had been asked to submit detailed affidavits,
the Madras High Court, where the court had explaining the structure of the games offered,
interpreted the Satyanarayana Case slightly the fees charged for such games to be played,
differently and held that in the event the club / and the flow of profits in relation to the same.
association allows its members or guests to play
It was contended that previously93 the SC had
Rummy with stakes or make any profit or gain
held that horse racing was a game of skill and
out of such play, the police has the authority to
playing for stakes in a game of skill was not
invoke the provision of Chennai City Police Act.
illegal. It was urged that the logic followed in
The Impugned Order had unsettled a rather the Lakshmanan Case should be applied in case
settled position of law. Various courts had of Rummy given that the Satyanarayana Case
previously held that games of skill fall outside had held that Rummy was a game of skill.
the purview of the gambling laws and therefore
It was further contended that Rummy being a
stakes or profit can be made from such games.
game of skill, even when played for money would
Different interpretations by different high courts
not amount to gambling as the sole motivation
gave rise to ambiguities on the position of law on
was not money but the display of skill. The skill
collection of stakes from the game of Rummy.
required to engage in the activity would not be
During the course of the proceedings before eliminated by the addition of the monetary factor.
the SC an application for intervention was filed There is a clear distinction made in common law
by Games 24*7 and Play Games (“Rummy between games of skill and games of chance under
Websites”) to be impleaded in this matter common law. Further, the jurisprudence reflected
since their operations were being affected that there was a legal, judicial and executive
by the refusal of banks to process payments policy to put games of skill in a different genus
of the players on these sites. There was also and specie from games of chance.
the apprehension of criminal prosecution,
since physical rummy providers were being
prosecuted. Further, many states had exemptions
II. The Verdict
for games of skill in their statutes but certain
The SC on 13 August, 2015 disposed of the
states like Orissa had no such exemption.
petitions of the Rummy Websites stating that
It was expected that the Supreme Court would it found that the Impugned Order did not
lay down guidelines on what business models deal with online Rummy and that it applied
(including online) would constitute gambling specifically to Rummy played in the brick and
as restricted / prohibited under the gambling mortar format only. Further, the judges noted
legislations of various states (even when skilled that the States had not taken any decision
games were played for a fee / stake). on whether the provision of online Rummy
would constitute gambling under the Chennai
Extensive submissions were made by the
City Police Act. Therefore, the SC was of the
counsels for the Rummy Websites over the
opinion that it was not necessary to entertain
course of hearings conducted in 2014-15. There
this petition. The SC also mentioned that the
have been many arguments and debates before
observations in the Impugned order may not
the SC on the different kinds of business models
necessarily relate to online rummy. The SC at
adopted – for example, in the context of online
this juncture was yet to deliver its verdict on
gambling, if a fee is collected for the services
the issue of taking stakes from Rummy in the
provided by the hosts of the website, as opposed
offline context.
to a buy in for a particular game, would the
same be considered ‘stakes’?
93. K. R. Lakshmanan v. State of Tamil Nadu, 1996 AIR 1153
(“Lakshmanan Case”)

The 19th August 2015 saw under twist in the tale. One would also need to keep in mind the case
The counsel for the Association stated that the of Gaussian Networks94 where the question
trial court had passed an order on 11th October, of whether games of skill can be offered for
2014 by way of which the Association had been money on virtual platforms was considered. The
acquitted. Interestingly, the issue before the trial petitioners had filed a petition under Order 36
court brought by the prosecution was not based of the Code and Civil Procedure Code (“CPC”)
on the case of Rummy (or any other 13 card game) for seeking the opinion of the Hon’ble court
but for members indulging in a game colloquially on inter alia the question of whether there was
and locally called Mangatha “ulle, velliye” by any restriction on taking stakes from games of
betting money for profit. The counsel for the skill on websites making profit. The Court had
Association sought permission to withdraw the opined that when skill based games are played for
original writ filed before the Madras High Court money in virtual space, the same would be illegal
and such permission was granted by the SC with and observed that the degree of skill in games
an observation that since the writ petition is played in a physical form cannot be equated with
dismissed as withdrawn, the observations made those played online. It is important to note that
by the Madras High Court in the Impugned Order this particular judgment is only binding on the
or the matter before the SC do not survive as the parties to the matter and that it has already been
writ is infructuous. challenged before the Delhi High Court.
One would need to now observe how the
III. Reason to rejoice but arguments would develop in this matter.
matters remain grey However, on a close perusal of the order, the
concerns raised by the court can be addressed by
building adequate fraud control checks in the
The law continues to remain grey in terms
systems. This is a standard practice globally and
of whether the state wise gambling enactments
also helps address anti-money laundering issues
cover online gaming sites as well. The
that plague these websites.
Mahalakshmi Case could have been the turning
point where it was expected that the SC would
lay down the law stating whether the state
gaming enactments cover online models as well.
This also means that the position of law on
taking stakes from games of skill reverts to
the original position fortified by many court
judgments- games of skill fall outside the
purview of the gambling laws of the relevant
States and therefore stakes or profit may be
made from such games.
94. M/s Gaussian Networks Pvt Ltd. v. Monica Lakhanpal and State of
NCT, Suit No 32/2012, Delhi District Court

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Fund Formation: Social Impact The Curious Case

Attracting Global Investing in India of the Indian
Investors Gaming Laws
March 2018
May 2017 February 2018
Corporate Social Incorporation of Outbound Acquisi-

Responsibility & Company LLP in tions by India-Inc
Social Business India
Models in India
March 2018 April 2017 September 2014
Internet of Things Doing Business in Private Equity

India and Private Debt
Investments in
India
January 2017 June 2016 March 2018
NDA Insights
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Blackstone’s Boldest Bet in India M&A Lab January 2017
Foreign Investment Into Indian Special Situation Assets M&A Lab November 2016
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The Curious Case

© Copyright 2018 Nishith Desai Associates www.nishithdesai.com

© Nishith Desai Associates 2018

1. GAMBLING, BETTING AND LOTTERIES 03

I. Overview of The Legal Framework Regulating The Gambling Industry 03

3. SKILL BASED / CASUAL AND SOCIAL GAMING 15

4. LEGAL AND REGULATORY ISSUES 16

I. Laws Affecting The Content of Games 16

Nagaland: Online gaming licenses for skill games 26

First Indian Court to Rule Fantasy Sport Preponderantly Skill- based 29

All Bets Off for Gaming Operators in Telangana:

Synopsis of the proceedings in the Gujarat Case 35

The ‘Mahalakshmi’ Saga90 40

© Nishith Desai Associates 2018

The Gaming Laws of India: Gambling, Social

© Nishith Desai Associates 2018 1

2 © Nishith Desai Associates 2018

1. Gambling, Betting and Lotteries

§§The West Bengal Gambling Rules, 1958

§§Assam Gaming and Betting Act, 1970

© Nishith Desai Associates 2018 3

4. The Goa, Daman and Diu Public Gaming Act, 1976.

4 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 5

12. The Public Gambling Act, 1867

6 © Nishith Desai Associates 2018

§§Gambling in common gaming house or F. Licenses for Physical & Online

14. Section 4 & 5 of the Bombay Prevention of Gambling Act,

© Nishith Desai Associates 2018 7

15. AIR 1968 SC 825.

8 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 9

10 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 11

19. Law Commission of India, Obsolete Laws: Warranting Immedi-

12 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 13

24. “Prize Schemes” has been defined as follows:

14 © Nishith Desai Associates 2018

3. Skill Based / Casual and Social Gaming

© Nishith Desai Associates 2018 15

4. Legal and Regulatory Issues

16 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 17

D. Personality Rights Issues

18 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 19

20 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 21

22 © Nishith Desai Associates 2018

D. Anti-Money Laundering Laws:

© Nishith Desai Associates 2018 23

§§All suspicious transactions55 whether or not i. Transaction of an amount equal to or

55. Section 2(g) of the Rules: “Suspicious transaction” means a

24 © Nishith Desai Associates 2018

iii. Know Your Customer (KYC) Considering the development of technology

60. Know Your Customer (KYC) norms / Anti-Money

© Nishith Desai Associates 2018 25

Nagaland: Online gaming licenses for

65. State of Andhra Pradesh v. K. Satyanarayana & Or AIR 1968 SC

26 © Nishith Desai Associates 2018

© Nishith Desai Associates 2018 27