In Part-I, my focus was on contextualising the dispute and providing a background. In this part, let me focus on the Supreme Court’s observations in Junglee Games case. The Supreme Court sub-divided the issues for consideration into nine different categories. Let me try and group them into five categories and analyse the Supreme Court’s observations on each issue.
I. Scope and Interpretation of Entry 34, List II
The Supreme Court relied on an extract of Constituent Assembly debates where a concern was expressed by some members that people in the State of Bombay (‘as it was then’) play rummy with such high stakes that it amounted to gambling. The Supreme Court cited this excerpt from the debates to hold that even a game of skill such as rummy, if played for money, can amount to gambling. And the Constituent Assembly intended games of skill, involving monetary stakes, to be regulated by States under Entry 34, List II. Relatedly, the Supreme Court held that if States were deprived of the power to regulate betting on games of skill, it would render them ‘powerless to prohibit the activity of betting and gambling.’ (para 223)
While a reference to the Constituent Assembly debates typically enhances the meaning and understanding of underlying Constitutional issues. However, in this case the reference to the Constituent Assembly debates did not serve the intended purpose. The Constituent Assembly members were concerned about preventing gambling and playing rummy was used as an example. The debate was not about the meaning of gambling. In fact, Dr. B.R. Ambedkar only stated that Entry 34, List II was to give States power to regulate gambling without defining what amounts to gambling. The question of what amounts to gambling was answered by the Supreme Court in RMDC-I case. The Supreme Court also observed that if Entry 34, List II is interpreted to exclude games of skill, it would denude States power to regulate games of skill. And, the ‘constitutional position’ needs to be respected. This was a questionable reason because the Constitution only permitted States to regulate gambling and not games of skill in the garb of regulating gambling. If the Constitution only permits States to regulate gambling/games of chance then the boundaries of such regulatory powers also need to be respected. Merely because States will be unable to regulate games of skill is not a justifiable reason to expand the scope of a legislative entry. The Union can always – and already has stepped into regulate online gaming.
II. Re-Interpretation of RMDC-I case
The Supreme Court underlined the import of RMDC-I case and the RMDC-II case. In the former while delineating the scope of games of skill, the Supreme Court had held that if the general public was invited to ascertain the result of an uncertain event then to assess if the game pre-dominantly involved skill or chance, the appropriate standard is common people and not expert statisticians. Relying on these observations, the Supreme Court concluded that:
the Court was cognizant of the fact that while games of skill may be excluded from the term “gambling”, they would still be covered under the expression “betting” as betting is nothing but staking money on the outcome of a future uncertain outcome. (para 245)
The Supreme Court’s conclusion does not follow from the observations made in RMDC-I case. The latter never expressed any opinion about the meaning of betting and only concerned itself with games of skill and games of chance distinction. Also, Supreme Court’s understanding of betting does not distinguish staking by players themselves or third parties. Instead, the Supreme Court – by misreading RMDC-I case – arrived at a generic and broadbrush meaning of betting. The Supreme Court added that:
Both betting and gambling involve the aspect of staking money on an uncertainty. Merely because the risk element is commonly perceived as “taking a chance”, it cannot mean an expression would cover only games of chances. In both Rummy, a game of skill, and Teenpathi, a game of chance, the persons staking on the uncertain outcome, equally risk and “take a chance” on their unknown and uncertain victory. (para 273)
The Supreme Court repeatedly emphasised on two elements in betting: staking of money and the uncertain outcome of game, irrespective of the game involved. Thereby making a clear departure from the jurisprudence post RMDC-I case wherein the pre-dominant element test was crucial to determine the nature of a game and not whether players had placed monetary stakes in a game. Only side-betting by onlookers was prohibited in the Satyanarayana case. But what about the Lakshmanan case where betting on game of skill was also permitted? The Supreme Court distinguished it from the impugned case by underlining that the Lakshmanan case involved betting on horse racing which took place in controlled environments and the exception was narrow and specific to horse racing. For example, betting can only take place on the day or horse racing and in specified physical enclosures inside the horse racing club.
Instead, the Supreme Court pointed that the nature of online games was different and hinted at their restrictive and predatory nature by observing that:
If one examines the online gaming platforms, it is nothing but a systematic inducement technique to ensure a player bet more and more. This is provided in the form of discounts, incentives for repeated betting, incentives for a particular number of victories and of course, as stated above, retaining the winnings upto a particular amount before it could be withdrawn and a prohibition to withdraw the deposited amount before it is turned into winnings by staking the deposited amount repeatedly. (para 279)
The above observations of the Supreme Court would indicate that it viewed online gaming as a separate and independent category. And the nature of conditions and restrictions imposed by online gaming companies played a role in online money gaming being equated to gambling. However, the Supreme Court also added that placing monetary stakes on a game amounted to gambling irrespective of the medium. Thereby, contradicting itself and what was held in the RMDC-I case where monetary stakes were viewed as irrelevant to determine the nature of a game.
The Supreme Court justified its views by stating that it was only clarifying the interpretation of RMDC-I case and RMDC-II case, even if the said interpretation had been followed for more than seven decades. Specifically, the Supreme Court noted that it was trying to correct a misleading argument by online gaming companies that RMDC-I case protected games of skill played with stakes. And as part of the ‘course correction’ the Supreme Court held that:
Explicit gambling, though, while playing a game of skill, would remain gambling and taking protection under an assumed ratio of RMDC-I (supra) would be virtually undoing RMDC-I (supra). (para 286)
Thereby, a Division Bench of the Supreme Court in Junglee Games case found a cover in ‘misinterpretation’ to sidestep a decision of the Constitution Bench in RMDC-I case. An approach that is hard to justify. I would suggest that the Supreme Court’s understanding of gambling is at odds with RMDC-I case and misinterprets its ratio. The RMDC-I case was not being misinterpreted or misread by online gaming companies, but its ratio became inconvenient in wake of several States’ insistence to prohibit online money gaming.
III. Entry Fee, Tournaments, and Stakes
Even though the issue of entry fee in games was not categorised independently by the Supreme Court, it is worth a discussion. One of the claims by online gaming companies was that if money is the criteria to distinguish games of skill from games of chance/gambling then even a chess tournament played after payment of an entry fee would amount to gambling. In response, the Supreme Court permitted entry fee as an exception to the rule that monetary stakes per se convert any game into a game of chance/gambling. But only if the entry fee in a competition does not form part of stakes. If the entry fee forms part of a pool or stakes then it would become gambling. If a pre-determined prize money is awarded to the winners, then the entry fee does not become part of a stake.
Online gaming companies while offered a pre-determined prize money in some cases, a portion of the entry fee was retained by them as platform fees. Even though the online gaming companies did not enter into a contest between the players and only facilitated games by providing a platform, their deduction of money from the total pooled amount worked against them and the Supreme Court held that online gaming companies facilitated gambling. Also, the Supreme Court observed that online gaming companies cannot plausibly contend that they were organising a tournament. Online gaming companies had hundreds of virtual rooms with varying amounts of money and such a scenario is not akin to conducting a tournament. And, again, relying on RMDC-I case held that:
If a promoter is floating a skill-based competition for an entry fee, that per se would not be gambling. If a promoter is floating a chance-based competition for an entry fee, that per se would constitute gambling. This alone is the inference that can be drawn from RMDC-I (supra). (para 279)
The above inference has no basis in RMDC-I case. At no point, in the RMDC-I case did the Supreme Court express any opinion about entry fee and gambling. In fact, one of the reasons Prize Competition Act, 1955 was enacted was that entry fee charged by publications for prize competitions was viewed as a monetary stake as the participants expected to win a huge monetary prize by guessing the correct answers. And their entry fee was viewed by some members of the Parliament as a monetary stake. But the Lok Sabha and Rajya Sabha debates on the Prize Competition Bill, 1955 – which clearly mention entry fee as a monetary stake – find no mention in Junglee Games case. Supreme Court’s observations about entry fee in Junglee Games case are based on its own flawed assumptions and understanding of entry fee. The RMDC-I case is merely used as a cover and observations on entry fee are attributed to it which are not to be found in the case.
IV. State’s Competence under other Legislative Entries
As mentioned in part-I, one of States argument was that even if it is not found competent to enact laws on betting under Entry 34, List II, it could enact such laws under alternate legislative entries. The Supreme Court held that law prohibiting online money gaming could be prohibited by States by relying on Entry 1, List II, i.e., public order. Citing a host of case laws the Supreme Court underlined how the term public order had been interpreted widely by courts. Public order included a state of tranquillity and if anything was detriment to the health and safety of public, States were competent to enact laws to regulate it.
The Supreme Court thereafter made a few generic observations about the wide and easy access to online gaming, attractiveness of online gaming to young people, booming business of online gaming companies due to their reach in rural areas and indicated that a public order question was intricately tied to online money gaming. The aspect of financial health, mental health, and emotional well-being of players was cited to indicate that rampant presence of online gaming had a proximate connection to disrupting public order. And upheld State’s competence to prohibit online money gaming by concluding that:
there is a proximate relation between the said Acts and the mischief they seek to curb and therefore, public order can be invoked to satisfy the competence of the States to enact the impugned legislations. The States have merely taken an effort to enforce the vision of the Constituent Assembly by seeking to protect the future and livelihood of the Population. (para 375)
While Supreme Court’s understanding of public order, its reading of relevant judicial precedents is difficult to find fault with; especially, because addiction with online gaming is a genuine concern that motivated States to prohibit online money gaming. However, the entire issue seemed superfluous once the Supreme Court decided that States could legislate on betting on games of skill under Entry 34, List II. States’ argument about possessing competence under Entry 1, List II was an alternate argument. Yet, the Supreme Court spent considerable space in concluding that States were competent to enact laws on games of skill under Entry 1, List II AFTER it had decided that States could enact such laws under Entry 34, List II.
V. Issues of Manifest Arbitrariness and Disproportionality
The Supreme Court dismissed the argument that amendments suffered from the vice of arbitrariness by stating that once monetary stakes come into the picture, the distinction between games of skill and games of chance is irrelevant. And held that:
… as far as betting and gambling are concerned, a differentiation cannot be made between games of chance and games of skill because the player staking the amount, in both cases, does it with a hope of winning more money than what is staked. (para 305)
The Supreme Court added that the medium, online or physical, is immaterial. If a game if played for stakes then it amounts to gambling. Thus, prohibiting betting on all games was not arbitrary and online money games were correctly classified as ‘res extra commercium’. And the occasion to consider the amendments as disproportionate did not arise since betting on games was also res extra commercium. Thereby refusing to grant online money games protection of Part III of the Constitution.
Confusing Way Forward
The Junglee Games case has decisively shifted the gambling jurisprudence. But cannot be faulted for introducing any significant clarity in gambling law concepts. Despite its obvious limitations and flaws, the Junglee Games case is likely to be a major pivot for two crucial reasons:
Firstly, endorsing monetary stakes as the distinguishing factor between games of skill and games of chance. A proper interpretation of the judgment is that it has preserved the pre-dominant element test laid down in RMDC-I case. A Division Bench of the Supreme Court could not expressly overrule a Constitution Bench judgment. At the same time, the Junglee Games case has added another element to gambling law jurisprudence by interpreting betting to mean staking money on the uncertain outcome of a game. This interpretation allowed the Supreme Court to sidestep binding nature of pre-dominant element test laid down in RMDC-I case. Reconciliation of both judgments is going to be an onerous task and is for future judges and cases.
Secondly, the Junglee Games case has, without expressly stating so, endorsed an intrusive regulatory regime for online gaming. States clearly admitted that online gaming is a complex area and designing a regulatory regime would be financial burden on States. In view of the potential for harm. At the same time, the Supreme Court has also suggested that once monetary stakes are involved it constitutes gambling. Medium – physical or online – is irrelevant. In view of the facts, the Supreme Court has certainly endorsed prohibition of online money gaming. But whether the same can extend to physical games remains to be seen. Though, given the wide canvas that Supreme Court has granted States to implement prohibition on gambling, it would not be surprising if physical games, involving monetary stakes, are next to face the axe of prohibition.
