Updates on gaming laws and discretion on writ petitions

By Vivek Vashi and Krishnendu Sayta, Bharucha & Partners
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The past few months have seen developments in the field of gaming laws in India, involving both the judiciary and state governments.

Gaming licences in Sikkim

Pursuant to the Sikkim Online Gaming (Regulation) Act, 2008, the Sikkim government issued “go live” licences in relation to the following games: roulette, black jack, pontoon, punto banco, bingo, casino brag, poker, poker dice, baccarat, chemin de fer, backgammon, keno and super pan 9.

While the issuance of new gaming licences will generate revenue, an increase in licence fees may hamper potential revenue growth. The online gaming levy has been raised from 1% of the licensee’s gross gaming yield to 10% of gross gaming yield or ₹50 million (US$782,000) per year, whichever is greater.

Vivek Vashi
Vivek Vashi

The Mahalakshmi case

In 2012, in a case involving the Mahalakshmi Cultural Association, Madras High Court held that although rummy is a game of skill, it would, if played with stakes, amount to gambling. The Supreme Court while hearing the appeal stayed the operation of the high court’s order. The industry is eagerly awaiting the outcome of the appeal, as it will affect whether entities can profit from a game of skill. The parties have specifically asked the Supreme Court to consider the issue of the legality of online gaming websites where rummy is played for stakes.

The central government has been impleaded to provide its opinion on a range of issues including money laundering and the applicability of the Information Technology Act, 2000. However, in September 2014, the additional solicitor general stated that since gaming and gambling were on the state list of India’s constitution, the state would be the appropriate authority to intervene. A hearing on the matter is pending.

Public interest litigation

A public interest litigation seeking a writ of mandamus directing the Maharashtra government to enforce the Maharashtra Casinos (Control and Tax) Act, 1976, is pending before Bombay High Court. The act was passed in the legislative assembly and received the governor’s assent on 19 July 1976. However, as the state government has not notified the act in the Official Gazette, the act has not and cannot be enforced.

Bombay High Court has asked the state government to file an affidavit and clarify its stand.

The value of India’s betting industry has been estimated at about US$60 billion, which is about 18% of the world’s gaming market. Therefore, these recent developments in the gambling laws have the potential of attracting large casino operators to India and reducing the impending revenue deficits that the state governments face.

Decision on writ petitions

The Supreme Court, in its judgment in Joshi Technologies International Inc v Union of India & Ors, dated 14 May, revisited a catena of decisions to review the cardinal principle that there is no absolute bar to the maintainability of a writ petition (under articles 226 and 227 of India’s constitution), even in contractual matters, or where there are disputed questions of fact or when a monetary claim is raised. The high court has the discretion to intervene in contractual matters, which it can, under certain circumstances, refuse to exercise.

Krishnendu Sayta
Krishnendu Sayta

The Supreme Court stated that while the high court would normally refrain from intervening in monetary disputes, it may choose to exercise its discretion to intervene in exceptional circumstances and if there is a public law character to the dispute. If the contract provides for a particular mode of settlement of disputes, especially arbitration, the high court should refuse to intervene. Moreover, if there are complex questions of fact which require oral evidence, the high court may refuse to entertain a writ petition.

The Supreme Court also provided insights on aspects relating to contracts entered into by the state with private authorities. The court revisited the law in this regard, and observed that the state purely acts in an executive capacity, is bound by the obligations of fairness and cannot discriminate. In view of this, writ jurisdiction cannot be invoked for the facilitation of voluntary obligations or the avoidance of contractual obligations on the grounds of hardship or commercial difficulty.

Dismissing the appeal in the Joshi Technologies case, the court held that the dispute was purely of a contractual nature with no element of public law involved.

The Supreme Court has therefore clarified that if a contract contains a dispute resolution mechanism, such as arbitration, the high court may refuse to exercise its discretion to intervene, and dismiss a writ petition.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Krishnendu Sayta is an associate.

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