There’s no precise definition of gambling within the act which makes it hard to determine, for example, whether betting on a game of cricket is illegal online. The law in India very strictly and straightforwardly bans Foreign Direct Investment in the gambling sector in India. This article discusses the status of online gambling in India in depth.
Tue Aug 16 2022 | Business Law | Comments (0)
The Public Gaming Act made it illegal to operate a venue where gambling took place. It also made it illegal to visit such a venue. While this is clear enough, there's no precise definition of gambling within the act which makes it hard to determine, for example, whether betting on a game of cricket is illegal online in the same way as betting on the roll of a dice might be. We have further examined the laws pertaining to online gambling below in order to ascertain its legality and if investments can be made within the same or not.
The Public Gaming Act of 1867 makes no reference to online gambling. This is no surprise, given that the internet was a long way from being invented when it was introduced. It can be ascertained that a gambling website in India is deemed illegal under the terms of this act, given its wording.
There's also another act which could be considered to relate to online betting and gaming.The Information Technology Act of 2000. This makes provisions for various offences relating to online activity. Even though investments in online gambling is profusely prohibited by foreign investors, it does give the Indian Government the power to block any foreign websites.
The Government has used this power to instruct Internet Service Providers to prevent Indian residents from accessing certain foreign betting and gaming sites. On a state level, there are two states which have introduced legislations relating specifically to online gambling. In Maharashtra, its completely prohibited, while in Sikkim the Government has now provided the authority to issue licenses to operators wishing to provide online gambling services within the state and under the guidance of the law. This is a notable step forward for regulated gambling in India, provided it is strictly in adherence to the specific law mentioned above.
In every sense of the way, the legal situation relating to the usage of online gambling sites in India is decidedly complicated but can be made clear through an analysis. Many of the major gambling sites welcome Indian customers readily, but since these sites are operated overseas they are not governed by Indian law and can be deemed as illegal under the present law, if found in contradiction to any provisions relating to the same.
With that being said, with the exception of Maharashtra, there are no such laws which clearly state that it is illegal for an Indian resident to gamble online. Even though online gambling may be banned in most parts of the country, if one wishes to indulge in this activity one may only do so through a site which is reputable and trustworthy and which accepts Indian customers and complies with the state governed laws with regards to gambling.
The Foreign Exchange Management Act (FEMA) 1999 was introduced in India in 1999 in order to govern the exchange of foreign currencies. Technically, depositing to a gambling site in a currency other than rupees could be considered an exchange of foreign currencies and thus be covered by the act however, no direct provision for the same has been clearly made till date.
This is why many Indians find it difficult to deposit at sites from their bank or by using a credit card.
It's not unreasonable to expect that in the coming years, the gambling legislation in India will be updated and amended in order to provide a clearer idea of what is illegal and what is not however, the latest changes, if any have been elaborated below
October, 2014
The Sikkim state Government issues its first license for an online gambling operator; Future Gaming Solutions Private Limited. Future Gaming will now be able to legally offer real money for online betting and gaming services within the state.
Game of Skill v. Game of Chance
There has been a substantial discussion by Supreme Court and High Court on what constitutes a game of skill and a game of chance. What is adduced from the judgments is that a game where there is preponderance of skill over chance is a game of skill and vice-versa.
By taking the above ratio into account, SC in the matter of State of AP v. K.Satyanarayana(1968) held the game of Rummy to be a game of skill. However, the Court in its judgment had indicated that if there is gambling or if the gambling house is making any profit whatsoever from the game of rummy, then it could amount to an offense under the laws of AP. It was further observed by the SC that the three card game which goes under different names such as flush, brag, etc. is a game of pure chance. This was relied upon by SC in another its other judgments viz. M.J.Sivani v. State of Karnataka (1995) and Dr. K.R. Lakshmanan vs State Of Tamil Nadu And Anr (1996).
The issue of whether rummy if played with stakes amounts to gambling or not has not been decided by Supreme Court. However, Andhra Pradesh High Court in D. Krishna Kumar And Anr. vs State Of A.P.(2002) (Annexure-2) relying upon the SC decision of 1968 held that till such time the state gambling Act is amended to lay down that playing Rummy with stakes is "gaming", playing Rummy with stakes is not 'gaming' within the meaning of the Act and is therefore allowed.
Delhi District Court: Gaussian Network Pvt. Ltd. Vs. Monica Lakhanpal
The issue of Online Gaming/gambling laws in India was discussed in detailed in the above case when the issue was put up before the Court under Order 36 Rule(1) of CPC by the parties. The Court held the following
Having said that, the said ruling was rendered infructuous as during the final arguments in the revision petition, parties sought to withdraw the petition. So the effect being there is no ruling which can be treated as a precedent as regards online gambling.
Gujarat High Court on Poker
The issue of whether Poker is a game of skill or a game of chance was never discussed in detail by any Court in India until the recent decision/order dated December 4, 2017 passed by the Gujarat High Court in, Dominance Games Pvt. Ltd. V. State of Gujarat, wherein, the said issue was extensively pondered upon. The Court in its said decision held that poker is a game of chance and hence amounts to gambling under the Gujarat Prevention of Gambling Act, 1887. While arriving at the aforesaid decision, the Court inter alia observed the following
Mr. K.N Suresh, Secretary of Indian Poker Association has filed an appeal against the said order, being Letters Patent Appeal No. 2625 of 2017 before the Division Bench of Gujarat High Court. The bench, after hearing the matter briefly on December 28, 2017 issued a notice to the state Government and other respondents and till date the matter is not heard finally. Having said that, since no ad-interim/interim reliefs are granted presently, the Single Judge order stands valid and enforceable.
Though the order does not specifically make any observation on Poker, if played as a sport and/or without stakes, however, while differentiating between rummy and poker, the Hon'ble Court makes a presumption that wagering or betting is an inseparable part of the game of poker and therefore would involve stakes higher than imagined. The Court while holding poker to be a game of chance has also predominantly relied upon moral religious and social grounds. In the absence of the said order being overruled and the issue being addressed specifically, the game of poker, even if played as a sport and/or without any stakes, remains a grey area which is then left at the discretion of police authorities.
POSITION
Though the issue of poker was considered by the Gujarat High Court in view of the provisions of the Gujarat Prevention of Gambling Act, 1887, in arriving at the decision of poker being a game of chance, the court made several observations as to how the game is played, the origin of the game, reference to ancient Indian literature, moral and religious grounds, etc. which may be applied by other states/state machineries having similar gambling laws. The issue is likely to be clarified by the Division Bench of the Gujarat High Court, once the appeal is finally heard.
In view of the above, it is clear that if a game is considered to be a game of chance under the state laws and rulings by the Courts and is played with stakes, it would constitute as gambling under the respective state laws with exceptions pertaining to a few states as mentioned above. If an entity is able to show that a particular online game or a particular on-ground gaming activity has preponderance of skill over chance and/or is played as a sport without stakes, it may fall within the exception of gambling under the state gambling laws. It is pertinent to note however that if online gambling is illegal in any state, the promotion of the same in such a state would amount to violation of ASCI Code as well as Cable TV Network Regulation Act, 1994.
The law in India very strictly and bans Foreign Direct Investment in the gambling sector in India. There has been a clear and consistent policy decision that no foreign investment is allowed in Indian gambling businesses. No foreign company or subsidiary of such a company can directly or in joint venture with Indian companies participate in legal gambling businesses in India. Even foreign holding of securities is not allowed in an Indian venture, even if such shareholding is minority or marginal.
Taking capital in the form of debt from foreign investors is also not an option since Indian entities must toe the lines drawn by External Commercial Borrowings (ECB) Guidelines. Automatic route under the current ECB rules do not allow borrowing for the gambling sector
(a) Retail Trading (except single brand product retailing)
(b) Atomic Energy
(c) Lottery Business including Government /private lottery, online lotteries, etc.
(d) Gambling and Betting including casinos etc.
(e) Business of chit fund
(f) Nidhi company
(g) Trading in Transferable Development Rights (TDRs)
(h) Real Estate Business or Construction of Farm Houses
(i) Activities / sectors not opened to private sector investment.
Besides, foreign investment in any form, foreign technology collaboration in any form, including licensing for franchise, trademark, brand name, management contract etc., is also completely prohibited for Lottery Businesses and Gambling and Betting activities.
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