Experts CornerSiddharth Batra

   

Introduction

The recent data published by Statista.com suggests that in 2022, the global eSports market was valued at just over 1.38 billion US dollars3. Additionally, the growth of the global market revenue of the eSports industry was forecasted to be as much as 1.87 billion US dollars in 2025.4 A report titled “Ready. Set. Game On! eSports in India” by Ernst and Young and Federation of Indian Chambers of Commerce & Industry (FICCI) estimated that “the esports industry is expected to grow fourfold to INR 11 billion by FY 2025 from FY 2021″.5

Electronic sports, popularly known as eSports, in simple words, are video games that are played in a highly organised competitive environment. eSports are generally multiplayer video game competitions held between professional players, individually or as a team. It transforms online gaming into a spectator sport. The main factor or component required in an eSports tournament/competition/league is the use of skill. Several genres are associated with eSports, such as real-time strategy (e.g. age of empires), first-person shooter (FPS) games (e.g. call of duty), multiplayer online battle arena (MOBA) games (e.g. league of legends), etc.

In 2021, the International Olympic Committee (IOC) in the run-up to the Tokyo Summer Olympics, announced that it “will partner with five International Sports Federations (IFs) and game publishers to produce the olympic virtual series (OVS), the first-ever, Olympic-licensed event for physical and non-physical virtual sports”.6 This was the first stride the IOC had made towards accepting eSports as a legitimate sport. Esports is going to make its debut at the Asian Games 2022 with medals being awarded in eight games — International Federation of Football Association (FIFA) (made by EA Sports), an Asian Games version of PUBG Mobile and Arena of Valor, Dota 2, League of Legends, Dream Three Kingdoms 2, Hearthstone and Street Fighter V.7 In 2018, eSports was included in the Asian Games as a demonstration title.

However, despite the increase in the popularity and growth of eSports in India, it cannot be denied that the eSports industry is highly fragmented and undocumented, which leads to several uncertainties and confusion. The term “eSports” continues to be open to many interpretations, often being misunderstood for online gaming. In India, eSports is often confused with fantasy poker, rummy, teen patti, RMG, etc. This confusion blurs the lines between eSports, competitive gaming and fantasy sports. Additionally, the lack of a regulatory framework ensures that the area between what requires skill and where it borders on public gambling becomes obfuscated.

Game of skill v. Game of chance

Every game can either be a game of chance or a game of skill or game of skill and chance combined. The Supreme Court has itself pondered upon the difference between the game of skills and game of chance. In K.R. Lakshmanan v. State of T.N.8, the Supreme Court held as follows:

3. … Games may be of chance or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. A game of skill, on the other hand — although the element of chance necessarily cannot be entirely eliminated — is one in which success depends principally on upon the superior knowledge, training, attention, experience and adroitness of adroitness of the player. Golf, chess and even rummy are considered to be games of skill.

The Supreme Court, in the two Chamarbaugwala cases9 and in the Satyanarayana case10 clearly lay down that, (i) the competitions where success depends on a substantial degree of skill are not “gambling”; and (ii) despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of “mere skill”.

The Indian courts, while deciding the question of “skill v. chance”, have adopted the test followed by the US Courts, known as the dominant factor test. As per the test, the primary question is whether skill or chance is the dominating factor in the determination of the outcome of the game. The Supreme Court applied this test in the case of rummy (Satyanarayana case11) and horse-racing (Lakshmanan case12).

In the Satyanarayana13 case, the Supreme Court held that it cannot be said that rummy is a game of chance, and there is no skill involved in it. However, it was observed that if there is evidence of gambling in some other way or that the owners of the house are making a profit or gain from the game of rummy or any other game played for stakes, the offence may be brought home. It was held as follows:

12. … Rummy, on the other hand, requires certain amount of skill because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of rummy is a game of entire chance. It is mainly and preponderantly a game of skill. The chance in rummy is of the same character as the chance in a deal at a game of bridge. In fact in all games in which cards are shuffled and dealt out, there is an element of chance, because the distribution of the cards is not according to any set pattern but is dependent upon how the cards find their place in the shuffled pack. From this alone it cannot be said that rummy is a game of chance and there is no skill involved in it….

In the Lakshmanan14 case, the Supreme Court attended to a similar concern; however, in the context of horse-racing, when Tamil Nadu brought horse-racing within the definition of “gaming” by enacting the Tamil Nadu Horse Races (Abolition and Wagering or Betting) Act, 1974, even though the Public Gambling Act, 1867 provided punishment for public gambling, however, the Act did not bring within its cope the betting on horse races. The Supreme Court held as follows:

30. We have no hesitation in reaching the conclusion that horse-racing is a sport which primarily depends on the special ability acquired by training. It is the speed and stamina of the horse acquired by training, which matters. Jockeys are experts in the art of rising. Between two equally fast houses, a better trained jockey can touch the winning-post.

***

51. … Horse-racing is neither “gaming” nor “gambling” as defined and envisaged under the two Acts read with the 1974 Act and the penal provisions of these Acts are not applicable to the horse-racing which is a game of skill….

The Indian judiciary and the games of skills

The New Encyclopedia Britannica defines gambling as “the betting or staking of something of value, with the consciousness of risk and hope of gain on the outcome of a game, a contest or an uncertain event the result of which may be determined by chance or accident or have an unexpected result by reason of the better's miscalculations”. According to Black's Law Dictionary (6th Edn.), “Gambling involves not only chance, but hope of gaining something beyond the amount played. Gambling consists of consideration, an element of chance and a reward.”

The long title of Public Gambling Act, 1867 (hereinafter referred to as “Public Gambling Act”) and the Preamble of the said Act clearly show that the Public Gambling Act was passed with a view to punishing public gambling and the keeping of common gaming houses. The long title and Preamble read as follows:

Long title:

An Act to provide for the punishment of public gambling and the keeping of common gaming houses in the [United Provinces, East Punjab, Delhi] [and the Central Provinces].

Preamble:

Whereas it is expedient to make provision for the punishment of public gambling and the keeping of common gaining-houses [in the United Provinces, East Punjab, Delhi and the Central Provinces].

Section 1 of the Public Gambling Act defines “common gaming house” as follows:

Common gaming house”.—“Common gaming house” means any house, walled enclosure, room or place in which cards, dice, tables or other instruments of gaming are kept or used for the profit or gain of the person owning, occupying, using or keeping such house, enclosure, room or place, whether by way of charge for the use of the instruments of gaming, or of the house, enclosure, room or place, or otherwise howsoever.

It is worth noting that the Public Gambling Act has been drafted keeping physical enclosures in mind, and it has not been amended to include mobile phones and the internet under the definition of “common gaming house”.

Further, Section 12 of the Public Gambling Act states that the said Act would not apply to any game of mere skill. It reads as follows:

12. Act not to apply to certain games.—Nothing in the foregoing provisions of this Act contained shall be held to apply to any game of mere skill wherever played.

Thus, this makes it clear that games of chance which involve mutual consideration or are played for profit or gain would be considered gambling, whereas any game wherein luck has little to no role to play and the winner of the game is determined purely on the basis of the skill possessed by the player/team, such game would not be considered as gambling.

Furthermore, the exception of the “game of mere skill” is extremely vague and one of the reasons for discrepancies in the laws enacted by the States. No explanation of what constitutes “mere skill” has left the doors open for interpretation. The Supreme Court, as discussed in the earlier paragraphs, have determined several games, such as rummy15, horse riding16, bridge17, video games,18 etc., on the basis of the degree of skill involved.

The Public Gambling Act is a pre-independence Act and is derived from the British Gaming Act, 1845 and the Betting Act, 1853. Since betting and gambling is listed as Entry 34 of List II of the Seventh Schedule, and therefore, only the State Legislatures have the competence to make laws pertaining to betting and gambling. In the current regime, the States/Union Territories have passed enactments by adopting the Public Gaming Act, 1867.

The exemption under Section 12 of the Public Gambling Act has been adopted by States such as Delhi 19 and Maharashtra20. However, States such as Andhra Pradesh21, Assam22, Odisha23 and Telangana24 have repealed the exclusion for the game of skill.

The question of whether eSports would constitute a game of skill or a game of chance has not knocked on the doors of the Indian judiciary yet; however, the lack of regulations governing esports as a sport would pose an issue in the determination of the status of eSports. The matter became more complicated after the interpretation of the game of skill by the Supreme Court in M.J. Sivani v. State of Karnataka25. The questions before the court were whether a video game is a game and whether it is a game of skill or chance in the backdrop of the Mysore Police Act, 1963 and Madras City Police Act, 1888. The Court held that “no game can be a game of skill alone”. It went on to further state that:

11. … In any game in which even great skill is required, chance must play a certain part. Even a skilled player in a game of mere skill may be lucky or unlucky, so that even in a game of mere skill chance must play its part. But it is not necessary to decide in terms of mathematical precision the relative proportion of chance or skill when deciding whether a game is a game of mere skill. When in a game the element of chance strongly preponderates, it cannot be a game of mere skill. Therefore, it is not practicable to decide whether a particular video game is a game of skill or of mixed skill and chance. It depends upon the facts, in each case.26

The interpretation of the Court in M.J. Sivani27 case proved to be radical as it deviated from the judgments passed in Lakshmanan28 case, where the Supreme Court had divided the games into three categories, namely, the game of skill, a mixed game of skills and chance and games of mere chance. M.J. Sivani29 definitely muddied the waters for future interpretations by the courts with respect to what is a game of skill and what is a game of chance.

Recently, the Rajasthan Government issued a draft “Rajasthan Virtual Online Sports (Regulation) Bill, 2022”30 to regulate pay to participate formats of virtual online sports within the State and to provide for matters connected therewith or incidental thereto. There are several issues with the Bill such as clubbing eSports with fantasy sports. E-Sports has been defined to mean “a simulated real life domestic or internationally recognised sports and games in the form of online competitions, played over the internet, including through an internet website or a mobile application and approved from time to time by the Government or accredited sporting federations or appropriate authority as may be notified.”31 The definition itself assumes that online gaming is synonymous with eSports, which in itself is a highly wrong and problematic interpretation of the term “eSports”. Moreover, the way the Bill attempts to regulate/restrict/limit eSports will only prove to be detrimental to the growth of the sport.

Recognition of eSports as sports

The question whether eSports can be considered as sports has been a matter of debate in the past. Many are of the opinion that eSports is not a sport, however, on the other hand, the opinion seems to be that eSports qualifies as a sport in the same way video games qualify as real entertainment. Several countries have recognised esports as a sport — China's General Administration of Sports has included esports as an official sport in the country32, Russian Ministry in 2016 recognised esports as a sport discipline33. South Korea was one of first nations to recognise eSports as a legitimate sport and as a job category.34 In 2020, the Danish Tax Assessment Council ruled that “eSports is a grassroots sport on equal terms with handball, gymnastics and other association-based activities”. 35 In the same year, Commission for the Recognition of Sports of the Ukrainian Ministry for Youth and Sports, recognised eSports as a sport.36 Interestingly, South Africa has classified esports as a mind game, placing it in the same category as chess. 37 There are several eSports leagues in league of legends and other which mirror the traditional sports, in terms of competition, spectators, skill required, etc. In fact, the professional eSports athletes require a lot of training to hone their skills and abilities. It would not be out of place to state that the eSports players go through the same stress and physical exertion as the “regular sports” players. There is a specialised skill set that an eSports player has, which cannot be expected from an amateur player. Interestingly, sports leagues are also venturing into eSports. The NBA 2K League, for example, is a joint venture between the National Basketball Association (NBA) and Take-Two Interactive and is a professional eSports league featuring the best NBA 2K players in the world and is the first official eSports league operated by a US professional sports league.38 The traditional sports leagues are no longer taking esports lightly and are seeing it as a developing domain. Another reason for recognising esports as a sports is the ease in the travel and visa issuance for eSports athletes. There a lot of similarities between esports and sports and believes that eSports is a sport.

Conclusion

In a vast country like India, where there is no central legislation governing and regulating the eSports industry, the responsibility is on the shoulders of the judiciary to determine in which category esports will fall in game of skill, game of skill mixed with chance or game of chance. However, before the stage of interpretation is reached, it is paramount that the meaning of esports is made crystal clear. E-sports is neither online gaming nor fantasy sports. E-sports are video games played in the format of competitions which require a lot of skills on the part of the players. E-sports is picking up its pace and is being recognised by several international organisations such as International Olympic Committee; however, given the lack of a unified global outlook it is important that India continues to not only adopt a conventional global outlook, but also builds the legal contours of esports that protects all involved stakeholders, and not be contrived with other forms of gaming. It is pivotal that the end consumer, the gamer or esports player, is protected at all costs.

Federation of Electronic Sports Associations of India (FEAI) has been meeting with various stakeholders to ensure growth of esports in the country. FEAI recognises esports to be an important part of the gaming industry and is focused on bringing esports to the forefront.

E-sports, first and foremost, needs to be recognised as a sport, and to achieve that, a central legislation governing esports has become a need of the hour.


† Advocate-on-Record, Supreme Court of India. Author can be reached at siddharth.batra@satramdass.com

†† Senior Associate, Satram Dass B & Co. Author can be reached at archna.yadav@satramdass.com

3. Statista, Revenue of the Global eSports Market 2019-2025 (5-7-2022), <https://www.statista.com/statistics/490522/global-esports-market-revenue/>.

4. Statista, Revenue of the Global eSports Market 2019-2025 (5-7-2022) <https://www.statista.com/statistics/490522/global-esports-market-revenue/>.

5. FICCI & EY, Ready. Set. Game On! Esports in India (June 2021).

6. International Olympic Committee, IOC makes Landmark Move into Virtual Sports by Announcing First-Ever Olympic Virtual Series (22-4-2021) <https://olympics.com/ioc/news/international-olympic-committee-makes-landmark-move-into-virtual-sports-by-announcing-first-ever-olympic-virtual-series>.

7. International Olympic Committee, Asian Games 2022: Esports to make Debut; FIFA, PUBG, Dota 2 among eight medal events (9-9-2021) <https://olympics.com/en/news/fifa-pubg-dota-2-esports-medal-events-asian-games-2022>.

8. (1996) 2 SCC 226, 233.

9. See State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699 and R.M.D. Chamarbaugwalla v. Union of India, AIR 1957 SC 628.

10. State of A.P. v. K. Satyanarayana, AIR 1968 SC 825.

11. AIR 1968 SC 825.

12. (1996) 2 SCC 226.

13. AIR 1968 SC 825.

14. (1996) 2 SCC 226, 249.

15. Satyanarayana, AIR 1968 SC 825.

16. (1996) 2 SCC 226.

17. Satyanarayana, AIR 1968 SC 825.

18. M.J. Sivani v. State of Karnataka, (1995) 6 SCC 289, para 11.

19. Delhi Public Gambling Act, 1955, S. 13.

20. Bombay Prevention of Gambling Act, 1887, S. 13.

21. Andhra Pradesh Gaming (Amendment) Act, 2020.

22. Assam Game and Betting Act, 1970.

23. Orissa Prevention of Gambling Act, 1955.

24. Telangana Gaming (Amendment) Act, 2017.

25. (1995) 6 SCC 289, 299.

26. M.J. Sivani, (1995) 6 SCC 289, para 11.

27. (1995) 6 SCC 289.

28. (1996) 2 SCC 226.

29. (1995) 6 SCC 289.

30. Rajasthan Virtual Online Sports (Regulation) Bill, 2022, available at <https://finance.rajasthan.gov.in/PDFDOCS/REVENUE/10746.pdf>.

31. Rajasthan Virtual Online Sports (Regulation) Bill, 2022, S. 2(h),.

32. Esports Insider, “Esports Around the World: China”, 17-5-2022, can be accessed from <https://esportsinsider.com/2022/05/esports-around-the-world-china/>

33. Samuel Lingle, “Esports Insider, Esports is now a Sport in Russia”, 9-6-2016, can be accessed from: <https://dotesports.com/general/news/esports-is-a-sport-russia-3412>; Also see: <http://publication.pravo.gov.ru/Document/View/0001201606070022>

34. Esports Insider, “Esports Around the World: South Korea”, 3-5-2022, can be accessed from <https://esportsinsider.com/2022/05/esports-around-the-world-south-korea/>

35. ISCA, “Landmark Decision: Esport is an Association-Based Grassroots Sport — And Should be Exempt from VAT”, 2-7-2020, can be accessed from <https://www.isca.org/news-detail/815/landmark-decision-esport-is-an-association-based-grassroots-sport-and-should-be-exempt-from-vat#:~:text=Esport%20is%20a%20grassroots%20sport,a%20landmark%20and%20important%20decision>; Also see: Esports Insider, “Esports Around the World: Denmark”, 17-4-2022, can be accessed from <https://esportsinsider.com/2022/04/esports-around-the-world-denmark/>.

36. Niji Narayan, “European Gaming Industry New: Ukraine Approves Esports as an Official Sport”, 15-9-2002, can be accessed from <https://europeangaming.eu/portal/latest-news/2020/09/15/77707/ukraine-approves-esports-as-an-official-sport/>; Also see: Thomas Lace, “Esports Insider, Esports Gains Official Government Recognition in Ukraine”, 10-9-2020, can be accessed from <https://esportsinsider.com/2020/09/esports-gains-offical-government-recognition-in-ukraine/>.

37. Esports Insider, “Esports Around the World: South Africa”, 24-5-2022, can be accessed from: <https://esportsinsider.com/2022/05/esports-around-the-world-south-africa/>.

38. NBA 2K League, accessed from <https://2kleague.nba.com/league-info/>.

Case BriefsHigh Courts

Delhi High Court: Explaining the significance of a trademark, Asha Menon, J., observed that,

When people are satisfied with the products supplied by a manufacturer or service provider, they buy them on the basis of the trade mark and over time it becomes popular and well known. Thus, the use of a similar or identical trademark by a competitor in the same product would lead unwary customers to believe that it originates from the same source.

Present suit was filed to seek a perpetual and mandatory injunction restraining the defendants from infringement of plaintiff’s registered trademarks, passing off, unfair practices, etc.

In the instant matter, the plaintiff claimed to be a part of the “Baazi Group” and a leading and pioneering name in the Indian gaming industry. The said group has attained worldwide popularity and reputation.

Further, the plaintiff claimed that it had honestly and originally adopted “Baazi” as its trademark, registering several variations between 2014 and 2020 which were still valid, and had become the trading identity, corporate name and domain names of the “Baazi Group”.

Plaintiff even filed the registration certificates.

Senior Counsel, Chander M. Lall submitted that being the registered proprietor of the trademarks, Baazi, Baazi Games, PokerBaazi, RummyBaazi, BalleBaazi, etc., the plaintiff had the exclusive right to use the said trademarks in relation to the goods and services it was providing.

Defendant 1 had dishonestly started using “Baazi” in respect of the services that they were providing and thus passing off their services as those of the plaintiff.

Further, it was argued that in view of the success of the plaintiff’s venture defendant 2 began his own business called “WinZo Games” in India. Hence, defendant 1 was the competitor of the plaintiff.

Further, it was contended that under Section 29(3) of the Trade Marks Act, 1999, in view of the identity of the registered trademark of the plaintiff and that copied by defendants, the Court had to presume that confusion would be caused to the public as also within the trade circle. Therefore, the Court had to restrain the defendants from using the word “Baazi” in respect of the services they were providing.

Analysis, Law and Discussion

High Court noted that the plaintiff was the registered proprietor of the trademarked word “BAAZI” under class 41, class 9 and the trademarked word “Baazi Games” under class 28 and other trademarks, both words, devices and domain names in the same classes of gaming services.

Further, not just the combined words such as “POKER BAAZI”, “RUMMY BAAZI”, “BALLE BAAZI” were registered in the name of the plaintiff, in fact the word “BAAZI” was also registered.

On the other hand, it was noted that the defendants did not claim that they too have registered trademarks in their names with the word “BAAZI”, in fact, they did not insist that they were not even using “BAAZI” in the trademark sense. Though, their argument was that righ to use trademarks under Section 28 would be available only if the trademarks were validly registered and which Baazi had not been since it was only a descriptive word.

The word “Baazi” may be used in Hindi/Urdu to mean a test of skill or strength in a game. It may indicate wagering or betting. As observed by Lord Simon , Lord Chancellor in Yorkshire Copperworks Limited , the more apt is a word to describe the goods of a manufacturer the less apt would it be to distinguish them, but surely “Baazi” is not a word apt to describe gaming or wagering services online or as a mobile App. Thus it is a clever and creative use of a common word by the plaintiff for its services. There is nothing on record to indicate that the word “Baazi” is commonly used in the industry. 

The Bench observed that prima facie the plaintiff had disclosed a case for protection of its rights as a registered proprietor which is assured to it under Section 28 of the T.M. Act. Even under Section 29 of the T.M. Act, the plaintiff disclosed a case.

The Court elaborated stating that, even the conjunctive use of “Baazi” with “WinZo” is similar to the use by the plaintiff of “Baazi” with “Poker”, “Rummy”, “Balle”, etc. The services provided are identical and therefore, in the light of such identity under Section 29(2)(c) read with Section 29(3) of the T.M. Act, the court will necessarily presume that confusion would arise in the mind of a player as to the origin of the services and accordingly, injunction would have to be issued.

Delay and Acquiescence

Bench referred to the Supreme Court’s decision in Midas Hygiene Industries (P) Ltd. v. Sudhir Bhatia, (2004) 3 SCC 90,

“5. The law on the subject is well settled. In cases of infringement either of trade mark or of copyright, normally an injunction must follow. Mere delay in bringing action is not sufficient to defeat grant of injunction in such cases. The grant of injunction also becomes necessary if it prima facie appears that the adoption of the mark was itself dishonest.”

High Court remarked that if the adoption of the word “Baazi” appeared to be dishonest and intended to take unfair advantage of the reputation of or the distinctive use of the word by the plaintiff, the delay would not come in the way.

Another significant point that was noted was that even after filing the present suit, the defendants copied the word “Team Baazi” from the website of the plaintiff.

Interest of the Consumers

Bench proceeded to make another significant observation that the interests of the consumers cannot be overlooked and would need to be protected, as it is for the benefit of consumers that a trademark is used by a manufacturer or service provider to distinguish his products from those of competitors, so that on the basis of the quality provided the purchaser may make an informed and considered selection of the products in the market.

In the instant case, the online players may be led into believing that “WinZo Baazi” was another service offered by the plaintiff, therefore in order to protect such unwary customers, it would be necessary to protect the plaintiff’s rights to its registered trademark.

Bench held that the defence of delay and acquiescence are defences in equity and in the present case, the defendants do not appear to be fair and honest in adopting “Baazi” along with their registered trademark “WinZo”.

The manner in which “Baazi” was written and projected, and used in a mobile App in 2021, and the adoption of “Team Baazi”, while the suit itself was pending, reinforced the plaintiff’s grievance that the defendants were trying to pass off their services as probably originating from the plaintiff.

Hence, the plaintiff disclosed a prima facie case for interim injunction for infringement of trademark as well as for passing off.

“…the continued use of the word “Baazi” by the defendant 1 would impact the reputation and goodwill of the plaintiff, which clearly cannot be compensated in terms of money.”

 Bench found no reason from the defendants for the adoption of the word “Baazi” except to claim that it is a descriptive word.

After all, the trademark of the defendants is WinZo. Where was the need to borrow the word used by the plaintiff along with its registered trademark, if it was not for benefitting from the goodwill of the plaintiff‟s trademark? There are several words that could have been used to describe the gaming services and App of the defendant instead of “Baazi” and which are indicative of gaming /wagering/competing.

User of a similar word by a competitor coupled with dishonest intention and bad faith would suffice to restrain such user and misuser, to do equitable justice to the plaintiff.

High Court allowed the application and restraining the defendants from using or attempting to use the plaintiff’s well-known brand and registered mark “Baazi”, “Baazi Games”, “PokerBaazi”, “BalleBaazi”, et al., or any other mark or trade indicia, which is confusingly similar to the Plaintiff‟s said trademarks, in any form or manner, whatsoever, including as Winzo Baazi / WinzoBaazi, in respect to any product and service for which the plaintiff has obtained registration including inter alia gaming services, which use amounts to infringement or passing off its products/ services as that of the plaintiff.

Lastly, the defendants were directed to remove/delete/omit or withdraw any and all references or use of the plaintiff’s well-known brand and registered mark “Baazi” in any form which amounts to a violation of the plaintiff’s intellectual property rights. [Moonshine Technology (P) Ltd. v. Tictok Skill Games (P) Ltd., 2022 SCC OnLine Del 296, decided on 31-1-2022]


Advocates before the Court:

For the plaintiff:

Mr. Chander M. Lall, Senior Advocate with Ms. Ananya Chug, Mr. Subhash Bhutoria & Mr. Amit Panigrahi, Advocates

For the defendants:

Mr. Abhishek Malhotra, Ms. Shilpa Gamnani and Ms. Sanya Sehgal Advocates

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan*, R. Subhash Reddy and MR Shah, JJ has held that while determining the taxable value of lottery the prize money is not to be excluded for the purpose of levy of GST.

The Court explained that for determining the value of the lottery, there is statutory provision contained in Section 15 read with Rule 31A. Section 15 of the Central Goods and Services Tax Act, 2017 by sub-section (2) provides what shall be included in the value of supply. What can be included in the value is enumerated in sub-clause (a) to (e) of sub-section (2) of Section 15. Further, subsection (3) of Section 15 provides that what shall not be included in the value of the supply.

“What is the value of taxable supply is subject to the statutory provision which clearly regulates, which provision has to be given its full effect and something which is not required to be excluded in the value of taxable supply cannot be added by judicial interpretation.”

Further, Rule 31A as noted above, sub-rule (2) as amended clearly provides that value of supply shall be deemed to be 100/128 of the face value of ticket or of the prize as notified in the Official Gazette by the Organising State, whichever is higher.

The Court said that the value of taxable supply is a matter of statutory regulation and when the value is to be transaction value which is to be determined as per Section 15 it is not permissible to compute the value of taxable supply by excluding prize which has been contemplated in the statutory scheme. It was hence, held that

“When prize paid by the distributor/agent is not contemplated to be excluded from the value of taxable supply, we are not persuaded to accept the submission of the petitioner that prize money should be excluded for computing the taxable value of supply.”

[Skill Lotto Solutions v. Union of India, 2020 SCC OnLine SC 990, decided on 03.12.2020]


*Justice Ashok Bhushan has penned this judgment

For petitioner: Senior Advocate Ravindra Shrivastava,

For Union of India: Additional Solicitor General Vikramjit Banerjee

For Intervenor: Senior Advocate C.A. Sundaram

Also read: Supreme Court upholds constitutionality of imposition of GST on lotteries, betting and gambling 

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan, R. Subhash Reddy and MR Shah, JJ has upheld the constitutionality of imposition of GST on lotteries, betting and gambling.

Here are the key takeaways from the judgment: 

Whether the inclusion of actionable claim in the definition of goods as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is contrary to the legal meaning of goods and unconstitutional?

The inclusion of actionable claim in definition “goods” as given in Section 2(52) of Central Goods and Services Tax Act, 2017 is not contrary to the legal meaning of goods nor it is in conflict with the definition of goods given under Article 366(12).

“The Constitution framers were well aware of the definition of goods as occurring in the Sale of Goods Act, 1930 when the Constitution was enforced. By providing an inclusive definition of goods in Article 366(12), the Constitution framers never intended to give any restrictive meaning of goods.”

Parliament by the  Constitution (One Hundred and First Amendment) Act, 2016 inserted Article 246A, a special provision with respect to goods and services tax in which special power has to be liberally construed empowering the Parliament to make laws with respect to goods and services tax. Article 246A begins with non obstante clause that is “Notwithstanding anything contained in Articles 246 and 254”, which confers very wide power to make laws. When the Parliament has been conferred power to make law with respect to goods and services, the legislative power of the Parliament is plenary.

“The power to make laws as conferred by Article 246A fully empowers the Parliament to make laws with respect to goods and services tax and expansive definition of goods given in Section 2(52) cannot be said to be not in accord with the constitutional provisions.”

Whether the Constitution Bench’s observation ‘lottery is an actionable claim’ in Sunrise Associates v. Govt. of NCT of Delhi, (2006) 5 SCC 603 a law or obiter dicta?

The definition of goods in Section 2(j) as noticed by the Constitution Bench states that ‘goods’ means all kinds of movable property (other than newspaper, actionable claims, stocks, shares and securities). The exclusion of the actionable claims from the goods as enumerated in the definition is also a part of the definition.

“If a particular item is covered by exclusion it is obvious that it does not fall in the definition of the goods. When the Constitution Bench came to the conclusion that the lottery is an actionable claim it was considering the definition of 2(j) itself and what has been held by the Constitution Bench cannot be held to be obiter dicta.”

The Constitution Bench in Sunrise Associates has categorically held that lottery is actionable claim after due consideration which is ratio of the judgment. The expansion of definition of goods under Section 2(52) of Act, 2017 by including actionable claim is in the line with the Constitution Bench pronouncement in Sunrise Associates and no exception can be taken to the definition of the goods as occurring in Section 2(52).

Whether exclusion of lottery, betting and gambling from Item No.6 Schedule III of Central Goods and Services Tax Act, 2017 is hostile discrimination and violative of Article 14 of the Constitution of India?

The Constitution Bench in State of Bombay Vs. R.M.D. Chamarbaugwala, AIR 1957 SC 699 has clearly stated that Constitution makers who set up an ideal welfare State have never intended to elevate betting and gambling on the level of country’s trade or business or commerce.

Lottery, betting and gambling are well known concepts and have been in practice in this country since before independence and were regulated and taxed by different legislations. When Act, 2017 defined the goods to include actionable claims and included only three categories of actionable claims, i.e., lottery, betting and gambling for purposes of levy of GST, it cannot be said that there was no rationale for including these three actionable claims for tax purposes.

“It is a duty of the State to strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of the national life.”

Hence, there is no violation of Article 14 in Item No. 6 of Schedule III of the Act, 2017.

Whether while determining the face value of the lottery tickets for levy of GST, prize money is to be excluded? 

Read here 

[Skill Lotto Solutions v. Union of India, 2020 SCC OnLine SC 990, decided on 03.12.2020]


*Justice Ashok Bhushan has penned this judgment

For petitioner: Senior Advocate Ravindra Shrivastava,

For Union of India: Additional Solicitor General Vikramjit Banerjee

For Intervenor: Senior Advocate C.A. Sundaram

 

Also read: GST on lotteries| Prize money not to be excluded for computing the taxable value of supply, holds SC

Case BriefsHigh Courts

Rajasthan High Court: A Division Bench of Indrajit Mahanty CJ, and Ashok Kumar Gaur J., dismissed a Public Interest Litigation alleging the online game “Dream 11” of committing offence of betting and gambling.

In the present case, the petitioner filed a PIL with a grievance that the online game “Dream 11” should be declared involving betting and gambling. The petitioner prayed in his petition that the Court may pass suitable order/s to prohibit the stated game and also measures needs to be undertaken in order to prohibit the commission of offences of gambling.

The Additional Advocate General representing the respondents, Rajesh Maharshi, filed a reply to the above petition contending that the issues in hand has been discussed by various High Courts and the legality of the game has been upheld. The respondents submitted that as per Section 12 of the Rajasthan Public Gambling Ordinance, 1949, the game involving “mere skill” is exempted from the applicability of the Act/Ordinance and since “Dream 11” game has been held to be a game of skill and not a game of chance.

The advocate representing the petitioner, Mr Sunil Kumar Singh, submitted that the State authorities have miserably failed to discharge their statutory obligation of preventing such game which is played by the innocent people and they indulge themselves in gambling and betting.

The Court upon analysing the facts and circumstances declared that the online game did not involve elements of gambling or betting and the State authorities have not violated any statutory obligations.

The Court placed reliance on the directions of the Punjab and High Court decision, Varun Gumber v. Union Territory of Chandigarh 2017 Cri.L.J. 3827 wherein it was decided: “The respondent company’s website and success in Dream 11’s fantasy sports basically arises out of users exercise, superior knowledge, judgment and attention…. Equally so, before I conclude, I must express that gambling is not a trade and thus, is not protected by Article 19(1)(g) of Constitution of India and thus, the fantasy games of the respondent-company cannot said to be falling within the gambling activities as the same involves the substantial skills which is nothing but is a business activity” The Court also relied on the Division Bench judgment of the Bombay High Court Gurdeep Singh Sachar v. Union of India Criminal Public Interest Litigation Stamp No. 22 of 2019 which upheld the legality of the game and upon challenge to the Supreme Court, the Apex Court had dismissed the challenge. The Bombay High Court had stated: “Only if the result of the game/contest is determined merely by chance or accident, any money put on stake with consciousness of risk and hope to gain, would be ‘gambling’ or ‘betting’. There is no merit in the submission that the result of their fantasy game/contest shall be considered as merely by chance or accident notwithstanding involvement of substantial skill.”

The Division Bench also held that the game did not involve any form of gambling since the result of the fantasy game also did not depend on winning or losing any particular team in the real world on any given day. The present Court dismissed the PIL being unable to find any merit in the prayers of the petitioner.[Chandresh Sankhla v. State Of Rajasthan, 2020 SCC OnLine Raj 264, decided on 14-02-2020]

Case BriefsHigh Courts

Karnataka High Court: A Single Judge Bench comprising of K.N. Phanendra, J. allowed a criminal petition and quashed the proceedings pending against the petitioner for the offence under Section 78(6) of  Karnataka Police Act.

The petitioners were accused of betting for an IPL match between Gujarat Lions and Mumbai Indians. They were accused of collecting money from the public and not repaying as promised. Learned counsel for the petitioners submitted that no offence as mentioned in the charge-sheet was attracted to facts of the case. He prayed that the proceedings against the petitioners may be quashed.

The High Court perused the charge sheet and found that no independent witness had been examined with reference to betting. Nothing was mentioned in the charge sheet about who all participated in the betting, paid money, how much money was paid, etc. The Court opined that the accused could not unilaterally play gambling without the help of public at large. In such circumstances, the Court held that when the offence itself was not constituted, nothing remained to be considered. Thus, the petition was allowed and proceedings against the petitioners were quashed. [Rahul v. State of Karnataka,2018 SCC OnLine Kar 633, dated 04-06-2018]

Case BriefsSupreme Court

Supreme Court: The bench comprising of T.S. Thakur CJI and FM Ibrahim Kalifulla J. accepts Justice RM Lodha panel’s recommendations almost in toto on structural reforms in the BCCI in order to streamline the working of the BCCI and possibly prevent any aberrations or controversies in which it has been embroiled in the past.

One of the most important recommendations that is accepted is the recommendation which disqualifies Ministers and Public Servants from holding offices in the State Associations or BCCI. The Court was of the opinion that the game of Cricket does not flourishes in this country because any minister or civil servant holds office in the State Associations or BCCI. Rejecting the contention that favours which the BCCI receives will disappear just because a Minister or Civil Servant is not an office bearer in the State Association or BCCI, the Court said that what is legitimately due to the game will not be denied to the game merely because Ministers or Civil Servants do not happen to be office bearers as there may be an overwhelming number of Ministers and Bureaucrats who are passionate abMinisters and Puout the game and would like to do everything that is legally permissible and reasonably possible within the four corners of the law even without holding any office in the BCCI or the State Associations.

Regarding bringing BCCI under the purview of RTI, the Court said that since BCCI discharges public functions and since those functions are in the nature of a monopoly in the hands of the BCCI with tacit State Government and Central Government approvals, the public at large has a right to know and demand information as to the activities and functions of the BCCI especially when it deals with funds collected in relation to those activities as a trustee of wherein the beneficiary happens to be the people of this country and hence, the Law Commission of India should examine the issue and make a suitable recommendation to the Government.

It was further said that the recommendation made by the Committee that betting should be legalized by law, involves the enactment of a Law which is a matter that may be examined by the Law Commission and the Government for such action as it may consider necessary in the facts and circumstances of the case. [Board Control for Cricket v. Cricket Association of Bihar, 2016 SCC OnLine SC 709, decided on 18.07.2016]