1. INTRODUCTION
Pronouncing its much-awaited judgment in the batch of writ petitions challenging the amendments to the Karnataka Police Act, 1963 ("Parent Act"), the High Court of Karnataka ("High Court") on February 14, 2022 quashed a majority of the provisions of the Karnataka Police (Amendment) Act, 2021 ("Amendment Act") thereby lifting the blanket ban that had been imposed last year in Karnataka on all games (including online skill games) played for stakes. This article provides a crisp and topic-wise note on the key highlights of this judgment.
2. CASE SUMMARY1
The State of Karnataka in October 2021 implemented the Amendment Act to, inter alia, prohibit all games (including online games of skill) if played for monetary or equivalent stakes. The blanket ban forced online skill gaming platforms such as those offering rummy, poker and fantasy sports, etc. to suspend real-money contests from the state. Most of these operators along with some industry associations approached the High Court and challenged the validity of the Amendment Act.
The petitioners contended that the Amendment Act was in violation of their fundamental rights under Article 19 (1) (g) of the Constitution of India ("Constitution"); that the State of Karnataka ("State") lacked legislative competence to enact it and it was manifestly arbitrary and arose from populism and paternalism. The State argued that playing skill games with real money amounted to betting and it had become a big menace which required a blanket ban to curb it effectively. The State contended that it had ample legislative competence under different heads including under Entries 1, 2 and 34 of the State List of the Constitution. Multiple writ petitions were filed, including a few by individual gamers, all of which were clubbed and heard together by a special division bench of the High Court, headed by the Chief Justice. The arguments concluded on December 22, 2021 and the judgment was reserved.
3. KEY TAKEAWAYS AND OBSERVATIONS FROM THE JUDGMENT
Except those provisions of the Amendment Act which had merely enhanced the quantum of punishments (fines and jail terms), all the other provisions have been struck down in their entirety by the High Court and declared ultra vires the Constitution. The definition clause of the Amendment Act which, inter alia, had extended the applicability of the Parent Act to the online medium has also been struck down and so has the dilution of the skill game exception. Consequently, the Parent Act now stands as it was before the Amendment Act came into force, save for the enhanced quantum of punishments.
3.1 On the meaning of "betting and gambling"
The High Court refused to give these words a wide meaning and held that once certain words have been given a judicial connotation by the Supreme Court of India ("Supreme Court"), other courts cannot venture to interpret the same to mean something else. These two words as employed in Entry 34, List II of the Constitution have to be read conjunctively to mean only betting on gambling activities. The word "betting" takes its colour from the companion word "gambling".
3.2 On gambling v/s skill games
Gambling is something that does not depend, to a substantial degree, upon the exercise of skill, and therefore something which does depend on the exercise of skill, ought not to be considered as gambling. Whether a game is, a 'game of chance' or a 'game of skill', is to be adjudged on the basis of a predominance of either element.
3.3 On playing games online
The High Court held that games of skill do not metamorphize into games of chance merely because they are played online, all other things being equal.
3.4 On playing with stakes
A game of skill does not cease to be so even when played with stakes.
3.5 On fantasy sports
The High Court cited with approval and concurred with almost all the recent gaming cases from various High Courts in India and the Supreme Court, including those which have upheld the legality of fantasy sports.
3.6 On the State's legislative competence under other heads
No matter how liberally one construes Entry 1 (Public order) and Entry 2 (Police) of the State List of the Constitution, online games of skill cannot fall within their parameters. An activity which is a legitimate business under Article 19 (1) (g) of the Constitution and is not res extra commercium2 cannot intrinsically give rise to any issue of 'Public order' or 'Police'. Similarly, the material presented by the State and the intervener is insufficient to make a ground for legislative competence under Entry 6 (Public health) of the State List in the Constitution.
3.7 On games of skill being protected under Article 19 (1) (a) and Article 21 of the Constitution
The High Court held that games of skill are a kind of expression of the individual and therefore fall within the protective contours of Article 19(1)(a) and Article 21 of the Constitution, subject to reasonable restrictions.
3.8 On the State's argument of harmful effects of gaming
The High Court found that this argument was neither supported by the empirical data adduced by the State in the present case nor by research material available in the public domain.
3.9 On the need for proper research
The State did not constitute an expert committee to undertake a scientific and empirical study as to the alleged ill effects of online games, specific to the socio-economic and cultural conditions in the State. A data driven exercise is required to be undertaken based on empirical evidence to gauge the impact of online gaming in the future.
3.10 On blanket bans
Blanket bans take away scope for any positive development and benefits that the State may otherwise achieve by balancing the competing interests of the society and the individual.
3.11 On Entry 26 of the State List of the Constitution
Though the State has claimed competence under this Entry, it has failed to discharge the accompanying burden of proving the reasonableness of the blanket ban imposed on skill games which are a legitimate and protected activity under Article 19 (1) (g) of the Constitution.
3.12 On Article 14 violation
The Amendment Act is violative of Article 14 of the Constitution as it does not recognize the difference between a 'game of skill' and a 'game of chance' (which animates the entire scheme of the Parent Act) and thus ends up treating unequals equally.
3.13 On rule of law
Relying on the landmark Keshavananda Bharati3 case, the High Court held that by encompassing within its ambit, games of every kind irrespective of their skill quotient, the Amendment Act violates one of the imperatives of rule of law namely, that laws which regulate the act/conduct of persons or entities must give a fair notion of the act/conduct that is forbidden or required of them. Owing to its multiple internal inconsistencies, the Amendment Act fails to do so.
4 INDUSLAW VIEW
The judgment is yet another judicial affirmation of the legality of real-money skill games in India and is a welcome verdict for skill gaming operators throughout the country, especially in Karnataka. Online skill gaming platforms can now resume real-money contests in the state. Though this is a judgment by a state High Court on a specific state enactment and its provisions and cannot be said to have a binding effect on other states, it however, cannot be denied that this judgment will have a persuasive value if similar factual matrices and enactments come up for adjudication before other courts. State governments should understand the fundamental distinction between skill gaming which is a legitimate business activity protected under the Constitution and gambling which is a prohibited activity and that the two cannot be conflated. The narrative around online gaming needs to change for a meaningful and progressive regulation to be brought in.
Footnotes
1. All India Gaming Federation v. State of Karnataka and Anr., Writ Petition (Civil) No. 18703 of 2021.
2. Things outside the scope of legal commerce and not subject to ownership or trade. Example: gambling, prostitution.
3. Kesavananda Bharati Sripadagalvaru and Ors. v. State of Kerala and Anr. (AIR 1973 SC 1461).
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