India: Mahalakshmi Case Update: Online Rummy Operators Get Some Respite

For the last few years the case of Mahalakshmi Cultural Association v. The Director, Inspector General of Police & Ors1 ("Mahalakshmi Case"), before the Supreme Court of India ("SC"), had been causing the brick and mortar clubs and online gaming businesses much anxiety. In a dramatic turn of events, over the last week the SC has delivered two orders, which give operators organising skill based games some respite. A brief background on this matter and the relevant consequences of the orders are discussed below.

Background

The gambling laws in India are State specific. In most State enactments games of skill are excluded from the application of gambling laws. In the year 1968, the Supreme Court of India in State of Andhra Pradesh v. Satyanarayan2 ("Satyanarayana Case") held that Rummy (a 13 card game) was a game of skill and therefore gambling law should not apply. Following this order, various courts held that games of skill fell outside the purview of the gambling laws of the relevant States and therefore stakes could be taken or profit could be made from such games.

In 2012 a two judge bench of the Madras High Court, however, held that Rummy when played for stakes would amount to gambling ("Impugned Order")3. The Impugned Order unsettled a rather settled position of law. A challenge was filed against the Impugned Order of the Madras High Court before the Supreme Court by Mahalakshmi Cultural Association ("Association").

To give a brief background, the Inspector of Police, Chennai had raided the premises of the Association on the grounds that its premises was being used for gambling and that the members of the Association were playing Rummy with stakes in violation of the Chennai City Police Act. A case was accordingly registered against the Association. Aggrieved, the Association filed a writ petition before the Madras High Court seeking directions to forbear the police from, inter alia, interfering with the activities of the Association in any manner, including in relation to playing Rummy with or without stakes. The said writ petition was decided in favour of the Association by the single judge bench, on the grounds that rummy was a skill based game and hence the activities were not illegal. Certain directions were also issued to the police in this case. The court relied on the Satyanarayana Case to arrive at this conclusion.

The Inspector of Police, Chennai challenged this order before the two judge bench of Madras High Court. The two judge bench interpreted the Satyanarayana Case differently and held that in the event a club / association allowed its members or guests to play rummy with stakes or make any profit or gain out of such play, the police would have the authority to invoke the provision of Chennai City Police Act and penalize the Association.

During the course of the proceedings before the Supreme Court an application for intervention was filed by Games 24*7 and Play Games ("Gaming Websites") to be impleaded in this matter. It was contended that their operations were being affected by the refusal of banks to process payments and to provide loans to the interveners. There was also the apprehension of criminal prosecution, since brick and mortar Rummy providers were being prosecuted.

Extensive submissions were made by the counsels for the Gaming Websites over the course of hearings conducted in 2014-15. Several issues were discussed before the Supreme Court regarding different kinds of business models adopted – for example, in the context of online gambling, if a fee was collected for services provided by the hosts of website, as opposed to a buy-in for a particular game, would it be considered as 'stakes'? A brief synopsis of the arguments advanced over the last few hearing may be accessed here4.

It was contended that in K. R. Lakshmanan v. State of Tamil Nadu5, ("Lakshmanan Case"), the SC had held that horse racing was a game of skill and playing for stakes in a game of skill was not illegal. It was urged that the rationale followed in the Lakshmanan Case be applied in case of Rummy given that the Satyanarayana Case had held that Rummy was a game of skill. It was further contended that Rummy being a game of skill, even when played for money would not amount to gambling as the sole motivation was not money but the display of skill. The skill required to engage in the activity would not be eliminated by the addition of the monetary factor. There was a clear distinction in common law between games of skill and games of chance. Further, the jurisprudence reflected that there was a legal, judicial and executive policy to put games of skill in a different genus and specie from games of chance.

Some online operators who had made representations before the SC were asked to submit detailed affidavits explaining the structure of the games offered, the fees charged for playing such games, and the flow of profits in relation to the same. It was expected that the SC would lay down guidelines on what business models would constitute gambling as restricted / prohibited under the gambling legislations of various States (even when skilled games were played for a fee / stake).

Order on August 13, 2015

When a new bench of the SC heard the matter in August, 2015, it considered the petitions of the Gaming Websites in a simplistic manner. It observed that the Impugned Order did not deal with online Rummy. Further, the judges noted that the government had not taken any decision on whether online Rummy fell afoul of the law or not. Therefore, the SC was of the opinion that it was not necessary to entertain petitions of the Gaming Websites. The SC also observed that the Impugned Order had not dealt with online Rummy, therefore any observations made in the same may not necessarily relate to online Rummy. The SC at this juncture had not delivered its verdict on the issue of taking stakes and making profit in the context of Rummy in the offline context. The findings on these issues in the subsequent hearing and order would have had an impact on the manner in which the commercial arrangement between the players and online operators is structured.

Order on August 19, 2015

This day however saw a twist in the tale. The counsel for the Association stated that a trial court had passed an order on October 11, 2014 which had acquitted the Association. The Association was being prosecuted before a trial court since its members were indulging in a game colloquially and locally called Mangatha "ulle, velliye" and were playing the game with stakes. The proceedings were not initiated for playing Rummy. In light of the acquittal, the counsel for the Association sought permission to withdraw the original writ petition filed before the Madras High Court and such permission was granted by the SC. The SC observed that since the original writ petition was dismissed as withdrawn, the observations made by the Madras High Court in the Impugned Order or the matter before the SC would not survive.

Analysis: Reason to rejoice but matters remain grey

After these twists, the matter which caused anxiety to the industry is finally put to rest. But the law still remains grey in terms of whether the State gambling enactments cover online gaming sites as well. Interestingly, the government made a statement before the SC that it is yet to decide on whether online Rummy fell foul of the law or not. Thus, the SC did not take upon itself to fill the lacuna in the policy and the law.

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 State gambling laws and therefore stakes may be taken or profit may be made from such games.

However, online poker sites would still need to wait and watch the developments in the matter pending before the Delhi High Court in the Gaussian Networks case, where the question of whether games of skill can be offered for money on virtual platforms was considered. The petitioners in this matter had filed a petition under Order 36 of the Code and Civil Procedure Code before the Delhi District Court6 for seeking the opinion of the Hon'ble court on inter alia whether there was any restriction on taking stakes from games of skill on websites making profit. The Court opined that when skill based games are played for money in virtual space, the same would be illegal and observed that the degree of skill involved in games played in a physical form cannot be equated with those played online. The Court seems to have assumed that the degree of chance increased in online gambling; and there was a possibility of manipulation including randomness, cheating, and collusion in the online space. It was important to note that this judgment is binding only on the parties to the matter and that it has already been challenged before the Delhi High Court. The next hearing is scheduled to be in January 2016. It would be interesting to see how the arguments develop here.

With the advent of online gaming models, it is getting difficult for the businesses to have clarity of applicability of various laws both federal and State. Hence, the governments may look into these issues at a policy level.

Footnotes

1 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)

2 AIR 1968 SC 825

3 The Director General of Police vs Mahalakshmi Cultural Association, (2012) 3 Mad LJ 561

4 The Curious Case of the Indian Gaming Laws at Pg 16, accessible at http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/The_Curious_Case_of_the_Indian_Gaming_Laws.pdf

5 AIR 1996 SC 1153

6 M/s Gaussian Networks Pvt Ltd. v. Monica Lakhanpal and State of NCT, Suit No 32/2012, Delhi District Court

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
S.S. Rana & Co. Advocates
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions