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Introduction

In India, smartphone usage and internet penetration have increased dramatically over the previous decade. This resulted in the widespread acceptance of online gaming as a result of the pervasiveness of mobile devices and the internet. Because the online gaming industry is still mostly unregulated, there has been a growth of both chance and skill-based games. More crucially, the popularity of real money gaming has skyrocketed. COVID-19’s isolation has led to a huge increase in the number of casual internet gamers in India.

Gambling is placing a wager on the outcome of an event or game with an unknown outcome. People who gamble put a certain amount of money on the line in order to win more. Thus, we can say that gambling is an activity that is dependent on the luck and outlet of an individual who placed a bet on an event; whereas betting is a type of gambling that is defined as an organised commercial activity between two parties in which one party predicts the outcome of the event and places the bet, and the other party who loses the bet agrees to pay the player the money.

During the pandemic, the gaming industry exploded, and India lacks a comprehensive legal framework to support it. Regulation has been far outpaced by technology. India’s gaming regulations are out of date, and as a result, their application to online structures is complicated. The conflict between the centre and the States, as well as the differing perspectives of various Indian courts, makes it difficult for businesses to understand what activities are authorised in the sector.

In Financial Year 2020, the market value of India’s gaming business was estimated to be approximately INR 90 billion. By 2022, it is expected that this figure would have risen to approximately INR 143 billion. The sector has been rapidly growing in the country, with analysts predicting that over 40,000 new employment possibilities would be available by 2021. In India, online gaming will reach 500 million players by 2025.

In this article, we are going to discuss the legal conundrums in which these online cards game have been caught and how some State Governments are bringing amendments into their respective Gaming Act to put a ban on these games. Further, in this paper, we are going to discuss how various High Courts in India have upheld the validity of these amendments by creating a distinction between “game of skill versus game of chance”.

Legality of online rummy in India

Under the Constitution, betting and gambling are considered State subjects, and each State has the sole legislative authority to adopt laws governing betting and gaming within its borders. Certain Indian States have passed their own legislation to govern betting and gaming inside their borders (“State enactments”), while others have accepted the Public Gambling Act, 18671 (PGA). The PGA and most State enactments (collectively, “gaming enactments”) were created before the advent of virtual/online gambling, and hence largely ban gambling operations that take place within physical premises, described as a “common gaming house”.

Section 122 of the Public Gaming Act carves out an exception for those games where an element of skill predominates the element of chance. To put it another way, skill games are excluded from the Public Gambling Act in India. The Indian courts have used the so-called “dominant factor test” to determine if a game is a game of skill or a game of chance. A game of “mere skill,” according to this criterion, is one in which the element of skill is the most important component in selecting the game’s winner.

The jurisprudence behind the gaming and betting laws has been evolved through various judicial pronouncements. The Supreme Court in R.M.D. Chamarbaugwalla v. Union of India3 has construed the words “mere skills” to include games that are based on a preponderance of skill and laid down that competition where a substantial degree of skill is involved will not come into the category of “gambling” even if an element of chance is present in it. The Supreme Court observed that whether a game is of chance or skill has to be decided from a case-to-case basis. Following the rationale of Chamarbaugwalla4 case, the Supreme Court in State of A.P. v. K. Satyanarayana5 held that game of rummy is not entirely based on the game of chance, it involves a substantial degree of skill. The Supreme Court based its conclusion on the fact that the game of rummy involves memorising the fall of cards and the building up of rummy requires considerable skill in holding and discarding cards.

Some States are trying to regulate online gaming by bringing an amendment to their respective State Gaming Act. For instance, Section 14 of the Kerela Gaming Act, 1960 provides that provision of the Act will not be applicable to any game where skill is involved. Section 14-A, which was added at later date, states that the Government may exempt any game from the Act by notifying the public in the Gazette if it is satisfied that the element of skill outweighs the element of chance in the game. Accordingly, the Kerala Government issued a notification exempting “rummy” from the Act on the term that no side betting shall be allowed under Section 14-A. However, in February 2021, the State of Kerala issued a new notification, modifying the previous one by adding the phrases “except online rummy when played for stakes”.6 The argument from the State was that gambling and betting come under Entry 34 in List II and the State has the power to legislate on the subject-matter. The Government argued that online rummy is not primarily a skill-based game and there was an element of cheating involved and that even the card deal was manipulated. The State argued that because the judgment in K. Satyanarayana7 case was handed down before Section 14-A was enacted, it was impracticable to apply it to all the decisions because it did not examine the case where the enactment contained Section 14-A.

Similarly, the Government of Tamil Nadu comes up with Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021 which has amended the Tamil Nadu Gaming Act, 19308. The Amendment Act prohibited all forms of games being conducted in cyberspace, irrespective of the game involved being a game of mere skill if such game is played for a wager, bet, money, or other stakes. In the 1930 Act, Section 11 provided that games of “mere skills” will be exempted from the application of the 1930 Act thereby games that involve “mere skill” were not considered as an offence however the amended Section 11 under the 2021 Amendment Act, it provides that the games of mere skill will be considered as an offence if such games are played for a wager, bet, money or other stakes.

Some of the other important features of the Amendment Act are that the definition of the word “game” has been expanded, Section 3-A has been introducing in the Act to prohibit wagering or betting in cyberspace. The State’s argument was that because the legislature, as the rightful representative of the people in the State, considers betting in cyberspace to be pernicious, and because the State has exclusive authority under the Constitution to legislate in the field of betting, the amending statute meets the standards because the legislation’s goal is to stop gambling and ensure that citizens are protected. The State also argues that activities being of gambling nature cannot be regarded as trade or commerce and no one can claim any right in respect of such activities under Article 19(1)(g)9 of the Constitution10 and all online games are invariably open to manipulation. Therefore, no distinction needs to be made in such regard between games of chance and games of skill.

What is the issue all about

It is an undisputed fact that the whole area of online rummy’s business is regulated in a grey area. There is no definite law in place regarding its legality regulations or its taxes. With its meteoric ascent, there has been a surge in interest in the legality of the game of online rummy, specifically whether they will come under betting/gambling or fall under the legally permissible category of “game of skill”. The legal concern with online rummy arises from the fact that, in most cases, these games include real money transactions and are frequently compared to betting and gambling.

The argument of the Tamil Nadu Government in Junglee Games India (P) Ltd. v. State of T.N.11 was also based on the same line of reasoning. The Tamil Nadu Government was of the view that the policy decision to bring the amendment in the 1930 Act is to prevent the addictive tendency which is resulting in multiple instances of suicide and financial losses. The State argues that the target audience for these games is the young and uneducated since the games provide “simple incentives in the form of real cash as prizes.12 However, the Court observed that when legislation is challenged based on overbearing paternalism, a cost-benefit analysis must be conducted to see if the benefit in the form of public good surpasses the cost of the person being robbed of his freedom of choice. The Court also observed that paternalistic legislation might be used to control activities when it is thought necessary or if the undesirable effects of overindulgence in certain activities are sought to be eradicated. The Court further observed that the stronger the moral foundation for controlling an activity, the greater the degree of authoritarianism exercised by the Government in stopping persons from exercising their freedom of choice, under the garb of protecting such persons from such activity. So, to counter the State argument the Court noted that, in the absence of any scientific or empirical evidence to support the proposed action, the amending Act may be seen as adopted out of a feeling of morality rather than a genuine attempt to reduce the (perceived) impact of such games.

It is worth noting that the Law Commission of India, in its 276th Report13 on the legalisation of gambling and sports betting in India, suggested that skill-based games may be exempted from the definition of gambling, without identifying which activities would qualify as “games of skill”.

Given the preceding Supreme Court rulings, it is clear that the legality of online fantasy sports is contingent on whether they are considered a “game of skill” or a “game of chance.” Several prestigious academic institutions, like the Indian Institute of Management (IIM-B), have performed empirical research to prove that fantasy sports are skill-based activities. In a study conducted by researchers from MIT and Columbia University, it was found that participants involved in fantasy sports (Cricket and Basketball) demonstrate a higher degree of skill than that of mutual fund managers managing stock portfolios.14

Game of skill versus game of chance

First and foremost, a thing which should be kept in mind while deciding the legal matrix of the game of online rummy in India is to understand the distinction between a “game of skill” and a “game of chance”, as these distinctions have a significant impact on the status of online rummy in India. In order to win in a game of skill, a player must devote time to learning, practicing, and mastering their talent. In such games, one’s ability to win is determined by how well one understands the rules and common practices, as well as how efficiently one plays. The player can become an expert and assure success over time. Physical real-world sports are largely skill-based rather than chance-based activities whereas, in a game of chance, chance takes precedence over ability, and the outcome of the game is heavily influenced by luck or chance. There is no way to anticipate who will win because the decisive variables are coincidental. However, in the real world, the boundary between ability and chance is blurred, and most games include both. Most card games, for example, are games of chance with a possibility of winning based on a player’s ability.

The Indian courts have adopted a simple method to understand the distinction between the two: a game of skill may be learned through time, but a game of chance cannot because it is dependent on the occurrence or non-occurrence of a certain event. Games of skill are permitted in most parts of the country, but games of chance are strictly forbidden and considered immoral and criminal. The age-old Public Gambling Statute of 1867, for example, is the only primary Act in India that criminalises most aspects of gambling (game of chance). While the Act restricts gambling in the country, it also specifically permits games of “mere skill” to fall under its scope. The Supreme Court, in State of Bombay v. R.M.D. Chamarbaugwala15 construed the phrase “mere skill” to encompass games that are predominately skill-based, despite modest components of chance.16 What constitutes a “game of skill” was first decided in State of A.P. v. K. Satyanarayana17 wherein a game of “rummy” was determined to be a game of skill, involving memorisation and judgment abilities. the court said that “it is principally and preponderantly a game of skill” — and so could not be criminalised under the Public Gambling Act.18 The issue was raised again in K.R. Lakshmanan v. State of T.N.19 when horse racing was ruled to be primarily a skill game. In this instance, the court employed the “preponderant factor test” or “dominant factor test” to determine whether the game is a “game of chance” or a “game of skill”. This test identifies and recognises that most games involve both chance and skill, but the dominance of one component over the other is to be considered as the decisive factor in determining whether it fits under the category of skill or chance in this test.20

Offline versus online game

Many State Governments are bringing an amendment to their respective Public Gaming Act in order to ban online fantasy sports in India. Recently the Karnataka Government has passed the Karnataka Police (Amendment) Bill, 2021 in order to ban online gaming of all forms except lottery and horse race. Karnataka has joined the ranks of Tamil Nadu, Andhra Pradesh, and Kerala in attempting to limit online gaming through law. The Karnataka Government’s law too, wants to prohibit any sorts of online games that include profit, betting, wagering, or cash exchange in any way. One thing which is common in all State Government Amendment Bills is that they are creating a distinction between the online games and the games played in enclosed spaces.

For example, the Kerela Amendment Act tried to put a blanket ban on the game of online rummy when played for stake. Section 14-A of the Amendment Act lists out some exceptions where certain games will be excluded from the ambit of the Act as they involve an element of skill in it and the game of rummy is one of such exemptions in it. Gameskraft (petitioner) sought to challenge the Amendment Act before the Kerela High Court on the ground that the Amendment Act was introduced to put a ban on side batting, it does not distinguish between the game played for stake or without a stake. One of the arguments put forth by these companies in the case is rummy played with stakes would be valid going by the contents of the notification but “online rummy” which is in no way different from the game rummy when played for stakes, would come within the purview of the Gaming Act as per the notification is irrational and arbitrary. Agreeing with the argument put forth by the petitioners in the present case, the Kerala High Court going by the decision laid down in R.M.D. Chamarbaugwalla21 case held that the games which involve a “substantial degree of skill” will come out of the purview of the Act. The Court while declaring the Amendment Act unconstitutional held that “online rummy” is in no way different from playing the game of “rummy” in clubs or enclosed spaces. The Court while going with the decision laid down in K. Satyanarayana22 and K.R. Lakshmanan23 held that game of rummy involves a substantial degree of skill, and “online rummy” also involves a substantial degree of skill, and it is no way different than a game of rummy played in enclosed spaces.

The test to be determined in deciding whether the game should come within the ambit of betting or wagering depends on, whether the game involves a substantial “degree of skill” or it involves “game of chance”. If the online game involves a substantial degree of skill then no prohibition should be imposed on such game as stated in the decision of the Kerala High Court and Madras High Court.

Conclusion

Skill-based gaming cannot be compared with gambling, and it differs from the game of chance as also clearly differentiated under the Indian regulatory framework held by the courts. The Courts have also observed that there is no such distinction between a game played virtually and a game played in enclosed spaces what matters is the game should involve a substantial degree of skill rather than a chance. Moreover, the Indian courts have time and again have struck down the amendments to laws that put a blanket ban on games that involve a substantial degree of skill.

Instead of such sweeping prohibitions, State Governments should implement exclusive laws to control online games, since these prohibitions would only encourage illicit gaming throughout the country. Regulation of the online gaming industry will certainly help in removing uncertainties that have arisen due to separate State laws on gaming. Putting a blanket ban on online gaming industries will result in a loss of revenue for the country. This sector has seen tremendous growth, with analysts predicting that over 40,000 new employment possibilities would be available by 2021. Thus, putting a complete ban will prove to be a disincentive for domestic and foreign investment in India.


† Authors are 4th year students of BA LLB (Hons.), West Bengal National University of Juridical Sciences, Kolkata and can be reached at <varun218050@nujs.edu>.

1. Public Gambling Act, 1867.

2. Public Gambling Act, 1867, S. 2.

3. AIR 1957 SC 628 (per T.L. Venkatarama Ayyar, J.).

4. AIR 1957 SC 628.

5. AIR 1968 SC 825 (per M. Hidayatullah, J.).

6. Head Digital Works (P) Ltd. v. State of Kerala, 2021 SCC OnLine Ker 3592 (per T.R. Ravi, J.).

7. AIR 1968 SC 825.

8. Tamil Nadu Gaming Act, 1930.

9. Constitution of India, Art. 19(1)(g).

10. Constitution of India.

11. 2021 SCC OnLine Mad 2762 (per Sanjib Banerjee, J.).

12. 2021 SCC OnLine Mad 2762 (per Sanjib Banerjee, J.).

13. Law Commission of India, Report No. 276 on Legal Framework: Gambling and Sports Betting Including in Cricket in India, (July 2018).

14. Vishal Misra, Devavrat Shah, and Sudarsan V.S. Ranganathan, “Is It Luck or Skill: Establishing Role of Skill in Mutual Fund Management and Fantasy Sports”, 2020, <https://devavrat.mit.edu/wp-content/uploads/2020/08/report_skill.pdf> (last visited on 8-6-2022).

15. AIR 1957 SC 699.

16. R.M.D. Chamarbaugwalla v. Union of India, AIR 1957 SC 628 (per T.L. Venkatarama Ayyar, J.).

17. AIR 1968 SC 825.

18. State of A.P. v. K. Satyanarayana, AIR 1968 SC 825 (per M. Hidayatullah, J.).

19. (1996) 2 SCC 226.

20. K.R. Lakshmanan v. State of T.N., (1996) 2 SCC 226 (per Kuldip Singh. J.).

21. AIR 1957 SC 628.

22. AIR 1968 SC 825.

23. (1996) 2 SCC 226.

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