The Madras High Court held that the State cannot ban online games of rummy and poker as they are games of skill though it can regulate them.

The court that the definition of “online gambling” under Section 2(i) of the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, shall be read as restricted to “games of chance” and not games involving skill.

Although, the Division Bench of Chief Justice Sanjay V. Gangapurwala and Justice P.D Audikesavalu clarified that “The State has miserably failed to demonstrate that online games of rummy and poker are different and distinct from offline games of rummy and poker. The apprehension expressed by the State that bots may be used or the dealer (software) would know the cards are without any substantive material. In view thereof, the Schedule under Section 23, incorporating rummy and poker as games of chance, is set aside”.

Further, “The State may make regulations as contemplated under Section 5 of the impugned Act, thereby providing reasonable regulations for the time limit, age restriction or such other restrictions in regard to playing of online games”, added the Bench.

Senior Advocate Dr. Abhishek Manu Singhvi appeared for the Petitioner, whereas Senior Advocate Kapil Sibal appeared for the Respondent.

The brief facts of the case were that the assessee was established with the objective of protecting consumers of online skill gaming and representing the interests of various online skill gaming Companies, including online skill gaming Companies offering skill-based games/platforms at various forums. As per the counsel for assessee, the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, is solely based on the report submitted by the Committee under the Chairmanship of Justice K. Chandru (Retd.), which has arbitrarily categorised games of skill, i.e., online rummy and online poker, to be games of chance, and therefore, they challenged the same. It was alleged that the terms of reference of the said Committee show that the whole intent was predetermined, that is to ban online games of rummy and poker, despite being a legally permissible business activity and protected under Article 19(1)(g) of the Constitution of India. It was also alleged that State purports unreasonable classification and creates an artificial distinction between online and offline rummy. Therefore, the State has failed to place any material or evidence on record to justify the difference in playing rummy physically or in online mode and the said classification is in utter violation of Article 14 of the Constitution of India, claimed the Petitioner.

Opposing the same, the counsel for State argued that the Preamble of the Act of 2022 establishes the societal concerns, which need to be addressed with reference to betting and gambling and its impact on the family and its societal impact. Further, the I.T. Amendment Rules themselves provide that when an online gaming intermediary hosts any online games which violate the impugned Act, such conduct would be a breach of due diligence under the I.T. Amendment Rules. It was also contended that the matter of “betting and gambling” is enumerated in Entry 34 in the State List, and as such, the State of Tamil Nadu has an exclusive jurisdiction in respect of the same.

After considering the submission, the Bench observed that the State is competent to legislate to extent of prohibiting online gambling, and at same time has authority to regulate online games of skill.

Further, the Bench said that the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022 cannot be declared as ultra vires to Constitution in its entirety.

The Bench elaborated that the impugned Act, in its entirety, need not be held to be ultra vires, and the definition of “online gambling” under Section 2(i) of the impugned Act shall be read as restricted to “games of chance” and not games involving skill. Also, the games of rummy and poker are games of card, but are games of skill and Section 2(l)(iv) is being read down, to mean, it excludes games of skill viz., rummy and poker.

Having held that the State has got the authority to legislate on online games of chance, as gambling would be betting on the games of chance, the Bench clarified that it is not necessary to declare Sections 7, 8 and 9 of the impugned Act as ultra vires.

Going further, the Bench emphasized that the State may make regulations as contemplated under Section 5 of the impugned Act, thereby providing reasonable regulations for the time limit, age restriction or such other restrictions regarding playing of online games.

“Section 10 of the impugned Act may not be declared as ultra vires as it will be necessary for the State to know about the online game providers operating within its State and that they are not indulging in any games of chance. If the State comes across the usage of bots or any dubious methods in the play of games of rummy and poker, it can take action and for that purpose also it will be necessary to uphold Section 10 of the impugned Act”, added the Bench while negating the prayer to declare the entire impugned Act of 2022 as ultra vires.

Accordingly, the High Court set aside the Schedule of the impugned Act, including the games of rummy and poker, and concluded that Sections 2(i) and 2(l)(iv) of the impugned Act shall be read as restricted to games of chance and not games involving skill, viz., rummy and poker.

Cause Title: All India Gaming Federation and Ors. v. State of Kerala and Ors.

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Madras High CourtChief Justice Sanjay V. GangapurwalaJustice P.D.Audikesavalu

Pankaj Bajpai