Supreme Court of India
ALL KERALA ONLINE LOTTERY DEALERS ASSOCIATIONversusSTATE OF KERALA & ORS.
- Citation
- 2015 INSC 831
- Decided
- 5 November 2015
- Disposal
- Dismissed
- Bench
- H L DATTU
Holding
A State Government may prohibit a particular class of lottery, such as online lotteries, and the delegation of power under Section 5 of the Lotteries (Regulation) Act, 1998 is valid when applied uniformly.
Summary
The State of Kerala issued notifications prohibiting the sale of computerized and online lottery tickets while permitting paper lotteries, which the All Kerala Online Lottery Dealers Association and others challenged as discriminatory under Section 5 of the Lotteries (Regulation) Act, 1998. The petitioners argued that the State could not selectively ban online lotteries and that such a ban violated Article 14 and amounted to an unconstitutional delegation of legislative power. The State contended that online lotteries constitute a distinct class of lottery and that Section 5 empowers a State to prohibit any particular type of lottery, even while running other types. The Supreme Court held that the State is competent to prohibit a specific class of lottery, such as online lotteries, and that the delegation under Section 5 is valid provided the ban is applied uniformly. Consequently, the Court dismissed the appeals and writ petitions, upholding the Kerala notifications.
Issues considered
- The State can discriminate between paper and online lotteries under Section 5 of the Lotteries (Regulation) Act, 1998.
- Whether the delegation of power to the State under Section 5 amounts to an unconstitutional abdication of legislative power.
- Whether online lotteries are a separate class of lottery distinct from paper lotteries for the purpose of prohibition.
Legislation cited
- Constitution of Indias. Article 246(1), s. Article 246(2), s. Article 246(3), s. Article 246(4)
- Lotteries (Regulation) Act, 1998s. 12, s. 2(b), s. 3, s. 4, s. 5, s. 6
- Lotteries (Regulation) Rules, 2010s. Rule 2(e), s. Rule 3
Subjects
online lotterypaper lotterydiscriminationSection 5Lotteries (Regulation) Actdelegation of legislative powerArticle 14gamblinglottery free zone
Judgment
(2015] 10 S.C.R. 880
A ALL KERALA ONLINE LOTTERY DEALERS
ASSOCIATION
v.
STATE OF KERALA & ORS.
B (Civil Appeal No. 3518 of2007)
NOVEMBER 05, 2015
[H.L. DATTU, CJI., R.K. AGRAWAL AND
ARUN MISHRA, JJ.]
c
Lotteries (Regulation) Act, 1998: s.5 - Ban on online
lottery-Notification dated 27.01.2005 permitting the sale of
paper lotteries organized, conducted or promoted by every
State Government including the State of Kera/a while
D maintaining the prohibition imposed on the sale of
computerized and on-line lottery tickets organized,
conducted or promoted by every State Government and
declaring the territory of the State of Kera/a to be online,
internet and computerized lotteries free zone- Whether the
E State Government can discriminate between the paper lottery
and on line lottery- Held: State Government is competent to
prohibit a particular type of lottery- That means a particular
lottery can be the subject matter ofprohibition - In other words,
all types of lotteries need not be prohibited - r.3 of Rules,
F 2()_10 makes clear that online lottery is treated as separate
lottery from paper lottery and it is a class in itself - Thus,
State Government can separately ban the sale of online
lotteries as on/ine lottery is a particular class of lottery,
G different and distinct from paper lotteries- State Government
is, therefore, empowered uls. 5 to prohibit the sale of on line
lotteries or internet lotteries in its State - Constitution of India,
1950 -Articles 246 - Lotteries (Regulation) Rules, 2010 -
rr.2(e), 3.
H
880
ALL KERALAONLINE LOTTERY DEALERS ASSN. v. 881
STATE OF KERALA & ORS.
Dismissing the appeals and writ petition, the Court A
HELD: 1. The relevant provisions of the Lotteries
(Regulation) Act, 1998 clearly demonstrate that even though
all types of lotteries are meant to be regulated by the said
Act, on line lotteries were not under the contemplation of the B
Central Government at the time when the Act came into force.
The online lotteries became popular in India recently and in
any case after the enforcement of the Act and that is why the
Government of India while framing the 201 ORules specifically
defined 'online lotteries'. In this background, the Scheme C
of the Act clearly show that the Government at that stage
was concerned with paper lotteries of all kinds. With regard
to the contention regarding the function of the on line lottery;
any type of manipulation can be done in the printing of tickets
at the terminal. The customer cannot know whether the D
ticket is printed at the terminal based on the command from
the central server or not. The State of Sikkim does not have
any control over its thousands of terminals all over India. As
per Section 4(h) of the Act, the draw should be held once in
a week. It means a fortune seeker, after purchasing the E
ticket, will get a week's cooling time to wait for the result of
the draw. But, under the scheme of on line lotteries, a number
of lotteries run simultaneously. So, by holding several
lotteries, there can be several draws with a gap of few F
minutes in a day and the gullible will remain glued and there
is every likelihood of purchase of tickets repeatedly, till all
his savings are exhausted. So, if the Government takes a
decision in public interest to prohibit on line lotteries, this
Court should not interfere with the said decision unless G
there are compelling grounds. While interpreting a Statute
of this nature meant to suppress the mischief of gambling,
this Court should accept the concept of purposive
interpretation and if possible save the notification intending
H
882 SUPREME COURT REPORTS [2015] 10 S.C.R.
A to save the people from the vice of gambling. It is common
case that lottery is a species of gambling. Gambling is
considered as a pernicious vice by all civilized societies
from time immemorial. [Paras 24-26] [918-H; 919-A-F]
B Words and Phrases, Butterworlhs, 3rd Edition at
page 71 - referred to.
2. Article 246(1) of the Constitution of India deals
with exclusive power of the Parliament to make laws with
C respect to matters enumerated in List I (Union List) in
the Seventh Schedule. As per Article 246(2), Parliament
and the Legislature of any State also have power to ma.ke
laws with respect to any of the matters enumerated in
List Ill (Concurrent List) in the Seventh Schedule. The
o Legislature of the State has, however, exclusive power
to make laws with respect to matters enumerated in List
II (State List) in the Seventh Schedule, as per Article
246(3) of the Constitution. Also, there being a specific
entry dealing with lotteries, the power to legislate on
E lotteries would be in the exclusive domain of the
Parliament, even though it is a form of gambling and
would be generally covered under Item No. 34 of List II
(State List). The Parliament, in exercise of the power
vested in it to enact law on lotteries as per Item No. 40 of
F List I (Union List), enacted the Lotteries (Regulation) Act,
1998. Section 3 of the Act or~ains that save as otherwise
provided in Section 4, no State Government shall
organize, conduct or promote any lottery. A State
Government has been authorized to organize, conduct
G or promote a lottery, subject to the conditions
enumerated in Section 4. By virtue of the provisions
contained in Section 12 of the Act, the Government may,
by notification in the Official Gazette, make rules to carry
H out the provisions of the Act. Exercising the powers
·ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 883
STATE OF KERALA & ORS.
vested in it by the provisions co_ntained in Section 12, A
the State of Kera la has framed the "Kera la Paper Lotteries
(Regulation) Rules, 2005." By virtue of the provisions
contained in Section 12 of the Act, the Centre has
delegated its power to legislate with regard to lotteries
to States and further that there is specific delegation with B
regard to ban of lotteries of other States by virtue of the
provisions contained in Section 5 of the Act. This
delegation of legislative power of the principal to the
delegatee would not amount to abdication of legislative
power by the Centre and it would not be without any c
guidelines and would be sustainable in law if the
concerned State may ban a lottery in its own State and
of other States as well. What is true with regard to the
total ban of lotteries of other States, would also be true
with regard to a particular kind of lottery as the delegation 0
of power has been held to be valid if the power by the
delegatee may be used uniformly in its own State and
also with regard to the other States. In the context of the
facts and circumstances of the case when the State of .
Kerala may prohibit a particular kind of lottery from its E
own State, it can prohibit sale of such lottery from any
other State and that would not be unsustainable in the
eyes of law nor it could be against law. It is not a case of
abdication of legislative power and would not be bereft
of any guidelines ifthe legislation banning lotteries was
applied uniformly. [Paras 29, 33, 34] [921-A-H; 922-A-C; F
931-D-H; 932-A]
3. With the ongoing development in the field of
science and technology, even though the online lotteries
were not in vogue in 1998 when the Parliament had G
passed the Act, it came into existence at a later point of
time. The principles laid down by this Court in B.R.
Enterprises would apply to the paper lotteries which
were in existence at that point of time. The principles
laid down therein would also apply to online lotteries or H
884 SUPREME COURT REPORTS [2015] 10 S.C.R.
A internet lotteries by treating them as a separate class.
The principle laid down therein is that if the State
Government has to prohibit any lottery organized,
conducted or promoted by every other State, it has to
prohibit the sale of its own lottery also. Meaning thereby,
B if a paper lottery is being prohibited.by a particular State
then that paper lottery has to be prohibited as a whole.
Likewise, if online or internet lottery is to be prohibited
by a State then that online lottery or internet lottery of all
States including that State also has to be prohibited.
C Viewed from this angle, State of Kerala was well within
its rights to prohibit the sale of on line or internet lotteries
in its State and there is no fault in it. It is well within the
powers conferred on it under Section 5 of the Act. [Paras
D. 38, 39] [935-D-H; 936.-AJ
B.R. Enterprises v. State of UP and Ors. (1999) 9
sec 700: 1999 (2) SCR 111 - relied on.
The Senior Electric Inspector and Ors. v. Laxmi
E Narayan Chopra and Ors. 1962 (3) $CR 146;
State (Through CBI/New Delhi) v. S.J. Choudhary
(1996) 2 sec 428: 1996 (2) SCR 556; SIL
Import, USA v. Exim Aides Silk Exporters,
Bangalore (1999) 4 SCC 567: 1999 (2) SCR 958
F - referred to.
Case Law Reference
1999 (2) SCR 111 relied on Para 5
G 1962 (3) SCR 146 referred to Para 8
1996 (2) SCR 556 referred to Para 8
1999 (2) SCR 958 referred to Para 8
H
ALL KERALAONLINE LOTTERY DEALERS ASSN. v. 885
STATE OF KERALA & ORS.
CIVIL APPELLATE JURISDICTION: Ci"1il Appeal No. A
3518 of 2007
From the Judgment and Order dated 23.05.2006 of
the Division Bench of the High Court of Kera la at Ernakulum in
Writ Appeal No. 2011 of 2005
B
WITH
C. A. Nos. 3519 & 3520 of 2007
W.P. (C} Nos. 641/2007 & 233/2010
Nikhil Nayyar for the Appellants. Appellant-in-person. c
Liz Mathew, Arputham Aruna & Co., Go pal Singh, Rituraj
Biswas, Varsha Poddar, Shreekant N. Terdal, T.C. Sharma,
for the Respondents.
The Judgment of the Court was delivered by D
R.K. AGRAWAL, J.
Civil Appeal Nos. 3518-3520
1. These appeals are directed against the common final E
judgment and order dated 23.05.2006 passed by the Division
Bench of the High CourtofKerala at Ernakulam in WritAppeal
Nos. 2011, 2012 and 2235 of 2005 whereby the High Court
dismissed the appeals filed by.the appellants herein against
the judgment and order dated 27.07.2005 passed by learned F
single Judge of the High Court in Writ Petition (C) Nos. 14495,
16063 and 19582 of2005.
2. Brief facts:
(a) The State of Kerala, by notification dated 13.01.2005, G
issued in exercise of the power conferred by Section 5
of the Lotteries (Regulation) Act, 1998, (in short 'theAct'),
prohibited the sale of all computerized and online lottery
tickets marketed and operated through vending H
886 SUPREME COURT REPORTS [2015] 10 S.C.R.
A machines, terminals, electronic machines and tickets
sold through internet in the State with immediate effect
and declared that Kerala shall be a free zone from online
and internet lotteries.
B (b) By a subsequent notification dated 27.01.2005, the
State of Kerala decided to prohibit the sale of all lotteries
organized, conducted or promoted by the State as well
as by every other State Government in the State of Kerala
with immediate effect and declared that the State shall
c hereafter be a Lottery Free Zone.
(c) The State of Kerala, in partial modification of the
notification dated 27.01.2005, issued a subsequent
notification dated 22.04.2005, permitting the sale of
D paper lotteries organized, conducted or promoted by
every State Government including the State of Kerala and
the prohibition imposed on the sale of computerized and
on·-line lottery tickets organized, conducted or promoted
by every State Government continued to remain in force
E declaring the territory of the State of Kerala to be online,
internet and computerized lotteries free zone.
(d) Being aggrieved by the notification dated 22.04.2005
discriminating between the paper lotteries and online
F lotteries, the All Kerala Online Lottery Dealers
Association, State of Sikkim and one Sreekala and
others filed Writ Petition (C) Nos. 19582, 14495 and
16063 of 2005 respectively before the High Court.
G (e) A learned single Judge of the High Court, by judgment
and order dated 27.07.2005, dismissed the writ
petitions.
(f) Being aggrieved by the decision of the learned single
Judge, the petitioners therein preferred Writ Appeal Nos.
H
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 887
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.)
2011, 2012 and 2235 of 2005 beftire the Division Bench A
of the High Court.
(g) The Division Bench, by a common judgment and order
dated 23.05.2006, dismissed the appeals.
B
(h) Against the said order, the appellants have preferred
these appeals by way of special leave before this Court.
Writ Petition (C) Nos. 641 of 2007 and 233 of 201C
(a) One Bibhash Karmakar-the petitioner herein has filed C
the above petitions in public interest alleging that the
States of Sikkim, Nagaland and Goa are running lottery
business contrary to the provisions of the Act which is
detrimental to the society as a whole.
D
(b) This Court, by order dated 27 .11.2009 in Writ Petition
(C) No. 641 of 2007, directed the State to explain as to
whether the State of Sikkim is running lottery business
contrary to the provisions of Section 4 of the Act. In
response to the above, the State Government filed an E
affidavit dated 10.12.2009 before this Court denying all
the irregularities as claimed by the petitioner herein and
cited various provisions of the Act as well as the Sikkim
Online Network Lottery Rules, 2001 to show that the
lottery business in the State is in consonance with the F
pre-existing rules and regulations.
(c) This Court, by order dated 21.06.2010, tagged Writ
Petition (C) No. 233 of 2010 with Writ Petition (C) No.
641of2007. G
3. Heard the arguments advanced by learned senior
counsel for the parties and perused the records. Since a
common question of law and facts arise in these appeals and
petitions, they are being disposed of by this common judgment. H
888 SUPREME COURT REPORTS [2015] 10 S.C.R.
A Points for Consi'cteration:
4.The sole question for consideration before this Court is
whether the State Government can discriminate between the
paper lottery and on line lottery in pursuance of the provision of
B Section 5 of the Act.
Rival Submissions:
5. Learned senior counsel for the appellants contended
before this Court that on line lottery is also a lottery, as defined
C under Section 2(b) of the Act. So, if the State Government
intends to prohibit the same, it has to prohibit all the lotteries
whether paper or on line. The selective prohibition of the sale
of on line lottery tickets is impermissible, in the light of Section
5 of the Act, as interpreted by this Court in B.R. Enterprises
0
vs. State of U.P. and Others (1999) 9 SCC 700. The
distinction drawn by the State Government between paper
lottery and online lottery is discriminatory and violative of Article
14 of the Constitution of India. Learned senior counsel further
E contended that the impugned notification is vitiated by mala
fides. It was further alleged that the State Government is being
controlled by the paper lottery mafia and under its influence
the sale of on line lottery tickets has been prohibited. The State
Government does not have the competence to issue the
F impugned notification. Though the State Government is
competent to legislate on lotteries by virtue of lten:i 34 of List II
concerning betting and gambling, the power to legislate on
lotteries organized by the Government of India or the
Government of a State is the exclusive preserve of the
G Parliament by virtue of Entry 40 of List I of the Seventh
Schedule. So, the State Government, which is incompetent to
legislate on lotteries run by other States, has no power to issue
the impugned notification. The State Government, without
legislative competence, has ventured to prohibit online lottery
H
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 889
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
which is totally fraudulent and colourable exercise of the power. A
6. Learned senior counsel for the appellants further
pointed out that the contention that on line lottery was not in the
contemplation of the Parliament or the Court, cannot be
accepted. The Act has to be interpreted to adapt it to the B
changing times. According to learned senior counsel, the
Parliament was well aware about the growing advancement
of science and technology and the use of electronic media in
future days to come and, therefore, when it defined 'lottery'
under Section 2(b) of the Act, it included also the Online lottery C
or internet lottery which may come into existence in future. It
was further submitted that the provision contained in Section
5 of the Act would empower the State Governmern to prohibit
the sale of tickets of all the lotteries and it cannot be restricted
only to online or internet lotteries. He further submitted that if it D
is to be taken that the online lottery is a class of lotteries for
which the State Government is empowered to prohibit then it
is only the Parliament which can classify the same and the
State of Kera la has no power to do so. According to him, the
Central Government framed the Lotteries (Regulation) Rules, E
2010 (in short 'the Rules') under sub-section (1) of Section 11
of the Act and defined online lotteries under Rule 2(e) of the
Rules that too for the first time in the year 2010, therefore, the
State Government had no right or jurisdiction to prohibit the F
online lottery in the year 2005. The principles laid down in
B.R. Enterprises (supra) will apply to all types of lotteries
and a judgment of this Court cannot be ignored merely by saying
that it failed to consider some point or other.
7. Learned senior counsel further contended that this Court, G
in B.R. Enterprises (supra), has read down Section 5 of the
Act, to save it from the vice of unconstitutionality, emanating
from conferring unbridled power on the State, which may be
termed as abdication of the essential legislative function, by H
890 SUPREME COURT REPORTS [2015] 10 S.C.R.
A failing to provide guidelines forthe exercise of that power. In
the said decision, in paragraphs 84 and 87, it was held as
follows:
"84. In Section 2(b) lotteries are defined to be a Scheme
8 for distribution of prizes by a lot or chance. This definition
itself recognizes that even in State lotteries the prizes
are to be collected by chance without any skill, hence
gambling in nature. Section 3 prohibits that no State
lotteries can be organized without the condition stipulated
c under clauses (a) to (k) of Section 4. Section 4 provides
the conditions to be complied with by the State lotteries.
To initiate any State lottery it is left to the policy of each
State 1 for this Act is silent. The only control is, in case it
decides, then it must follow the conditions as laid down
D under Section 4. Next comes Section 5 which is subject
matter of challenge, the delegation of power to the State
to prohibit the sale of lottery tickets organized by every
other State. If a State desires not to subject its people to
the lottery gambling, it has no power to restrict lotteries
E organized by other States. It is to remove this mischief
that power is conferred through delegation to the States
to do it in terms of their own policy. By virtue of this, now
the State Government can prohibit sale of lottery tickets
of every other State within its territory. Next, Section 6
F
seeks strict compliance with Section 4. Under this the
Central Government may prohibit any State lottery which
is being conducted in contravention of the conditions as
laid down under Section 4 or Section 5. Section 7 shows
G the rigour of this Act by making it a penal offence as
against all, who violate the provisions of this Act, be it is
Head of the Department of the Government or the agent,
promoter or trader to be punishable with two years
rigorous imprisonment. Section 8 makes such an offence
H cognizable and non-bailable. Similarly, Section 9 deals
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 891
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
with offences committed by the companies. Section 10 A
entrusts the Central Government power to give directions
to the State Government for carrying into execution the
provisions of this Act, Rule or Order. Sections 11 and 12
are the rule-making power entrusted to the Central and
the State Governments respectively. Section 13 repeals B
the Ordinance. Thus, the whole Act makes clear that the
subject it is dealing with is gambling in nature. The object
of the Act is not to control the policy decision of each
State to start or to close its lotteries, but to regulate it in
case a State decides to run its own lottery through C
modalities and conditions laid down therein. Emphasis
of the whole Act is to abide by the conditions strictly if
you want to run a lottery. Thus, regulation is through
· conditions to eliminate even the remotest possibility of
0
malpractices by providing stringent measures for its
compliance. Perusal of the Act reveals, the scheme of
the Act is limited in its application, and it admits the
subject it is dealing is gambling in nature. As we have
said, the decision to collect or not to collect revenue E
through State lotteries is exclusively within the policy
decision of the State and for this, neither the Union nor
Parliament interferes nor is there any indication under
the Act. Thus, the question which remains is, if any State
decides that it does not want any lotteries but if it feels F
helpless as having no jurisdiction over the lotteries
organized by other States, what is the way out ? This
can only be done by Parliament or by entrusting this power
on such State desiring so, which has been done through
Section 5. In this background, for this helplessness of a G
State as recorded in Anraj case-I [(1984) 2 sec 292]
the remedy is provided by entrusting this power on the
State under the impugned provision. This helps such
State to achieve its objective of lottery (gambling) free
zone within its territory. A well-concerned remedy. Next H
892 SUPREME COURT REPORTS [2015] 10 S.C.R.
A question is what could have been the guideline? If State
lotteries are gambling and it cannot be terms as 'trade
and commerce' at common parlance for any free right
under the Constitution. Such right though recognized
under Article 298, so other States may continue to enjoy
B till prohibited by valid law, and if any State wants within
its State lottery-free zone and for which the power is
entrusted to such State, it cannot be said in this setting
and background and the nature of the subject that such a
delegation is of its essential legislative power. The only
c guideline necessary in such delegation is to see that the
State does not pick and choose one State from the other,
which guideline is already provided in this Section. It
provides that such a ban could only be if it is applied to
every other State. The only residual field of attack so far
D
as this delegation could be, which has been attacked in
this case, that the State could on one hand. ban lotteries
of every other State but run its own lotteries. It is argued
that while a State bans lotteries of other States not to
E permit any gambling activity in the public interest as a
policy but this very public interest is flouted by having
lotteries of its own. It is true that unless this provision is
read down to mean a State can only ban lotteries of other
States when it bans as a policy its own lotteries it is bound
F to be subjected to the vagaries as pointed out and on
deeper scrutiny it may not successfully stand. But, by
reading down the provision, which has to be read that it
is only that State which decides lottery-free zone within
its State can prohibit lotteries of other States clearly
G provides the guidance for the exercise of such a power.
It is inbuilt and inherent in the provision itself in view of
the scheme of the Act and nature of subject in issue. If
interpretation as given on behalf of the State of Tamil Nadu
is accepted that delegation of power is absolute, then
H the submission that such delegation is unbridled without
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 893
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
any guideline carries great weight. Submission for the A
State of Tamil Nadu is that the lotteries may be prohibited
in phases, viz. while running its own lotteries yet
prohibiting other lotteries, may be as a public policy, for
law and order, for political reasons, morality, etc. For
surviving such an interpretation given by Mr. Ganguli, B
Parliament should have provided some guidelines. Such
an interpretation falls into the trap of the submission that
this delegation is unbridled. So, if there are two
interpretations, the interpretation which upholds the
validity should be accepted. So, the interpretation as C
. given by Mr. Ganguli cannot be accepted.
87.We find on plain reading of Section 5, it empowers
the State Government within its State to prohibit the sale
of tickets of the lotteries organized by every other State. D
There is also nothing in the language reading by itself so
as to say, whether such power can be exercised by the
State while running its own lottery or can be exercised
only where such.State does not run its own lottery. This
leads to two possible interpretations, as referred to E
above. In view of settled principle of interpretations, the
interpretation given by the union to read down the
provision has substance. This would mean that the State
could only exercise such discretion if it decides not to
have any lottery within its territory including its own lottery. F
In this situation, the delegate is tied down by this limitation
which itself is a clear guide to a State hence cannot be
said to be unbridled delegation. So even to the first part
it cannot be said to be arbitrary or unbridled. So, we G
have no hesitation to approve the interpretation given by
the Union to uphold the validity of Section 5."
Relying on the above quoted paragraphs, learned senior
counsel for the appellants vehemently contended that the State
shall either prohibit the sale of all lotteries or allow the sale of H
894 SUPREME COURT REPORTS [2015] 10 S.C.R.
A all lotteries in the State. Selective prohibition of a particular
type of lottery is impermissible in the light of the above binding
judgment.
8. In support of this submission learned senior counsel
B apart from the decision in B.R. Enterprises (supra) relied on
the following decisions, viz., The Senior Electric Inspector
and Others vs. Laxmi Narayan Chopra and Others 1962
(3) SCR 146, State (Through CBI/New Delhi) vs. S.J.
Choudhary (1996) 2 SCC 428 and SIL Import, USA vs.
C EximAides Silk Exporters, Bangalore (1999) 4 SCC 567.
9. The learned senior counsel for the State of Kerala-the
respondent herein supported the impugned notification by
contending that the State Government is competent to prohibit
o a particular type of lottery. There is no fetter on the power of
the Government under Section 5. Learned senior counsel
further submitted that when the Parliament enacted the Act in
the year 1998, there was nothing before it to presume that in
times to come online lotteries will also come into existence
E apart from the paper lotteries and, therefore, the provision of
Section 5 which empowers the State Government to prohibit
the sale of tickets of a lottery organized, conducted or promoted
by every other State necessarily relate to paper lottery. Even
otherwise, on line lottery is different from paper lottery and can
F be treated as a class in itself. The State Government is,
therefore, empowered under Section 5 of the Act to prohibit
the sale of online lotteries or internet lotteries in its State. He
further submitted that the Central Government itself treated
online lotteries as a different class in itself and, therefore,
G framed the Rules providing the rules and regulations for
organizing paper lottery or orrline lottery or both subject to
certain terms and conditions. Thus, the intention of the
Parliament was to treat paper lotteries and online lotteries a
H different class.The decision in B.R. Enterprises (supra) would
therefore necessarily be understood to relate to paper lotteries
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 895
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
only. The said decision cannot be construed as a precedent. A
So, the declaration of law, made therein, is not applicable to
on line lotteries. It is also submitted that prohibition of sale of
online lotteries has been made bona fide and the classification
is reasonable and not arbitrary. Learned senior counsel further
submitted that the scheme of Section 4 would show that the B
Act was framed with a view to deal with paper lotteries which
were in vogue at t.hat point of time whereas the distributors of
online lotteries do much more than selling the tickets. They
decide and implement the lottery schemes, provide infra-
structure and technology, print lotteries and participate in the C
conduct of draws. Section 4(h) of the Act prohibits holding of
draws, more than once in a week. This restriction has been
made taking into account the conduct of paper lotteries. But,
in on line lotteries, 70 to 100 draws are made every day in a
0
week. On the above grounds the respondents prayed for
dismissal of the appeals.
Discussion:
10. Before going into the validity of the impugned E
notification, it is fruitful to refer to certain provisions ·of the Act.
The relevant portion of the Statement of Objects and
Reasons for framing this legislation is as under:
"The conduct of certain types of lottery trade in the country, F
the malpractices thereof and their impact on the poorer
sections of the society has been under scrutiny of the
Government for quite some time. The continued
prevalence of the popularly known single digit and instant
lotteries and the temptation offered by them proved to G
be the undoing of many families, especially poor daily
wagers and low income groups. In spite of the guidelines
issued by the Central Government over a period of time
as also the guidelines issued in the recent .st by the
Honourable Supreme Court. In the matter, the evil has H
896 SUPREME COURT REPORTS [2015] 10 S.C.R.
A not been totally eliminated and it is felt that a Central
legislation to regulate the conduct of lotteries is necessary
to protect the interest of the gullible poor."
Section 2(b) defines 'lottery' which reads as follows:
8
"2 (b)'lottery' means a scheme, in whatever form and by
whatever name called, for distribution of prizes by lot or
chance to those persons participating in the chances of
a prize by purchasing tickets."
c 3. Prohibition of lotteries.-Save as otherwise
provided in Section 4, no State Government shall
organize, conduct or promote any lottery.
Section 4 enumerates the conditions, subject to which a
D State Government may organize, conduct or promote a
lottery, which reads as follows:
"4.Conditions subject to which lotteries may be
organized etc.:- A State Government may organize,
E conduct or promote a lottery, subject to the following
conditions, namely:-
"(a) prizes shall not be offered on any pre-announced
number or on the basis of a single digit;
F (b) the State Government shall print the lottery tickets
bearing the imprint and logo of the State in such manner
that the authenticity of the lottery ticket is ensured;
(c) the State Government shall sell the tickets either itself
or through distributors or selling agents;
G
(d) the proceeds of the sale of lottery ticket$ shall be
credited into the public account of the State;
(e) the State Government itself shall conduct the draws
H of all the lotteries;
ALLKERALAONLINE LOTTERYDEALERSASSN. v. 897
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
(f) the prize money unclaimed within such time as may A
be prescribed by the State Government or not otherwise
distributed, shall become the property of that Government;
(g) the place of draw shall be located within the State
concerned; B
(h) no lottery shall have more than one draw in week;
(i) the draws of all kinds of lotteries shall be conducted
between such period of the day as may be prescribed
by the State Government; C
'
(j) the number of bumper draws of a lottery shall not be
more than six in a calendar year;
(k) such other conditions as may be prescribed by the o
Central Government."
5. Prohibition of sale of ticket in a State.-A State
Government may, within the State, prohibit the sale of
tickets of a lottery organized, conducted or promoted by E
every other State.
6. Prohibition of organization etc., of lottery.-The
Central Government may, by order published in the
Official Gazette, prohibit a lottery organized, conducted F
or promoted in contravention of the provisions of Section
4 or where tickets of such lottery are sold in contravention
of the provisions of Section 5.
7. Penalty.-(1) Where a lottery is organized, conducted
or promoted after the date on which this Act receives the G
assent of the President, in contravention of the provisions
of this Act, by any Departn 1ent of the State Government,
the Head of the Department shall be punishable with
rigorous imprisonment for a term which may extend to H
898 SUPREME COURT REPORTS [2015] 10 S.C.R.
A two years or with fine or with both:
Provided that nothing contained in this section shall
render such Head of the Department liable to any
punishment if he proves that the contravention was
B committed without his knowledge or that he exercised
all due diligence to prevent the commission of such
contravention.
(2) Notwithstanding anything contained in sub-section (1 ),
c where a contravention under this Act has been committed
by a Department of Government and it is proved that the
contravention has been committed with the consent or
connivance of, or is attributable to any neglect on the part
of, any officer, other than the Head of the Department,
D such officer shall also be deemed to be guilty of that
contravention and shall be liable to be proceeded against
and punished accordingly.
(3) If any person acts as an agent or promoter or trader
E in any lottery organized, conducted or promoted in
contravention of the provisions of this Act or sells,
distributes or purchases the ticket of such lottery, he shall
be punishable with rigorous imprisonment for a term
which may extend to two years or with fine or with both.
F
8. Offences to be cognizable and non-bailable.-
.The offence under this Act shall be cognizable and non-
bailable."
11. From the above provisions, it can be seen that the
G tickets of a State-run lottery shall be printed by the State itself.
Sale of tickets alone is permitted through the agents or through
distributors. The entire sale proceeds have to be credited in
the public account of the State. Draws of all the lotteries have
H to be conducted by the State Government. No lottery can have
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 899
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
more than one draw in a week. Bumper draws shall not be A
more than six in a calendar year. The cumulative effect of sub-
sections (h) and 0) appears to be that a State can run only 52
ordinary lotteries and six bumper lotteries in a year. Section 5
empowers the State Government to prohibit the sale of tickets
of lotteries organized, conducted or promoted by every other B
State Government. . Section 6 empowers the Central
Government to prohibit the conduct of lotteries, which are in
violation of the provisions of Section 4 or which are sold in
contravention of the prohibition imposed by the State
Government under Section 5. Section 7 provides the penalty C
for running a lottery in violation of the provisions of the Act.
The Head of the Department and other officers responsible
for the conduct of the lottery shall be punished with
impri_sonment, which may extend to two years or with fine or
0
with both. Similar punishment can be imposed on those who
sell or purchase the tickets of such a lottery. Section 8 makes
the offences under the Act cognizable and non-bailable.
Cognizable offence means an offence for which a police officer
may arrest the accused without warrant (Section 2( c) of the E
Code of Criminal Procedure, 1973 (in short 'the Code'). In
this background, it is also relevant to quote Section 4 of the
Code which reads as follows:
"4. Trial of offences under the Indian Penal Code F
and other laws:- (1) All offences under the Indian Penal
Code (45of1860) shall be investigated, inquired into,
tried, and otherwise dealt with according to the provisions
hereinafter contained.
(2) All offences under any other law shall be investigated, G
inquired into, tried, and otherwise dealt with according
to the same provisions, but subject to any enactment for
the time being in force regulating the manner or place of
investigating, inquiring into, trying or otherwise dealing H
900 SUPREME COURT REPORTS [2015] 10 S.C.R.
A with such offences."Since no provision is made for
investigating the offences under the Act, the provisions
under the Code will apply to its investigation, by virtue of
Section 4(2) of the Code quoted above.
B 12. It is also relevant to mention the Notifications issued
by the State Government from time to time.
"Government of Kerala Reg. No. KL/TV(N)/12/2003-2005
2005
KERALA GAZETTE
c EXTRAORDINARY
PUBLISHED BY AUTHORllY
Vol.L Thiruvananthapuram 13th January, 2005
Volume 50 Thursday
D No. 77 23rd Pousha 1926
GOVERNMENT OF KERALA
Taxes (H) Department
NOTIFICATION
E
G.O.(P) No. 4/2005/TD dated,Thiruvanathapuram, 131h
January, 2005.
S.R.O. No. 34/2005- In exercise of the powers conferred
F by Section 5 of the Lotteries (Regulation) Act, 1998
(Central Act 17 of 1998), the Government of Kerala
hereby prohibit the sale of all Computerised and Online
lottery tickets marketed and operated through vending
machines, terminals, electronic machines and tickets
G sold through Internet in Kera la, with immediate effect and
declare that Kerala shall be the free zone from Online
and Internet
By order of the Governor.
P. MARAPANDYAN,
H Secretary to Government
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 901
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
(This does not form part of the Notification, but is intended A
to indicate its general purport).
Government have decided to prohibit the sale of
computerized and online lottery tickets in the State of
Kerala with immediate effect B
This notification is intended to achieve the above object."
"Government of Kerala Reg.No.KUTV(N)/1212003-2005
2005
KERALA GAZETTE c
EXTRAORDINARY
PUBLISHED BY AUTHORITY.
Vol.L Thiruvananthapuram 2J1h January, 2005
Volume 50 Thursday No. 169 D
7th Magga 1926
GOVERNMENT OF KERALA
Taxes (H) Department
NOTIFICATION E
G.O.(P) No. 11/2005/TD dated, Thiruvanathapuram, 271h
January, 2005.
S.R.O. No. 73/2005 - WHEREAS Notification II GO. (P)
No. 4/2005/TD dated 13th January, 2005 published as F
S.R.O. No 34/2005 in Kerala Gazette Extraordinary No.
77 dated the 131h January, 2005 prohibiting the sale of
computerized and online lottery tickets in the State of
Kera la has been issued under Section 5 of the Lotteries G
Regulation Act, 1998 (Central Act 17of1998).
AND WHEREAS the Government of Kerala have
decided to prohibit the sale of all lotteries organized,
conducted or promoted by the State of Kerala with
immediate effect. H
902 SUPREME COURT REPORTS [2015] 10 S.C.R.
A AND WHEREAS the Government of Kerala have
decided to prohibit the sale of tickets of all lotteries
organized, conducted or promoted by every other State
Government also;
B. NOW THEREFORE, in exercise of the powers conferred
by Section 5 of the Lotteries (Regulation) Act, 1998
(Central Act 17of1998) and all other powers enabling
for it, the Government of Kerala hereby prohibit the sale
of tickets of all lotteries organized, conducted or
C promoted by every other State Government including
lotteries organized, conducted or promoted by the
Government of Kerala in the State of Kerala with
immediate effect and declare that the State of Kerala
shall hereafter be a Lottery Free Zone .
.D
By order of the Governor.
P. MARAPANDYAN,
Secretary to Government
E
Explanatory Note
(This does not form part of the Notification, but is intended
to indicate its general purport).
F ' Government of Kerala have decided to make the State
ofKerala a Lottery Free Zone.
This notification is intended to achieve the above object.
II
G
G.O.(P) No.11/2005/TD dated, Thiruvananthapuram, 27th
January, 2005.
S.R.O.No. 74/2005, - In exercise of the powers
conferred by subsections (1) and (2) of section 12 of the
H
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 903
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
Lotteries (Regulation) Act, 1998 (Central Act 17of1998), A
the Government of Kerala hereby make the following rules
to repeal the Kerala State Lotteries (Regulation) Rules,
2003 issued in G.O.(P) No. 118/2003/TD dated the 16th
July, 2003 and published as S.R.O.No 646/2003 in the
Kerala Gazette Extraordinary No. 1278 dated the 16th B
July, 2003, as amended subsequently, namely:-
Rules
1. Short title, application and commencement:- (1) These
rules may be called the Keraia State Lotteries C
(Regulation) (Repeal) Rules, 2005.
2. These rules shall apply to the whole of the State of
Kera la.
3. They shall come into force at once. D
2. Repeal:-The Kerala State Lotteries (Regulation)
Rules, 2003 is hereby repealed.
By order of the Governor. E
P. MARA PAN DYAN,
S~cretary to Government
(This does notform part of the Notification, but is intended
to indicate its general purport).
F
Government of Kerala by notification issued as G.O.(P)
No.11 /2005/TD dated 27th January, 2005 and published
as S.R.O.No 73 in Kerala Gazette Extraordinary No. 169
dated 27th January, 2005 has prohibited the sale of lottery
tickets organized, conducted or promoted by the G
Government of Kerala. Accordingly the Kerala State
Lotteries (Regulation) Rules, 2003 has to be repealed.
This notification is intended to achieve the above object."
H
904 SUPREME COURT REPORTS [2015] 1OS.C.R.
A "Government of Kerala Reg. No.KL!lV(N)/12/2003-2005
2005
KERALA GAZETIE
EXTRAORDINARY
PUBLISHED BY AUTHORITY
B
Vol.L Thiruvananthapuram 22nd April, 2005
Volume 50 Friday No. 837
2nd Vaisakha 1927
c GOVERNMENT OF KERALA
Taxes (H) Department
NOTIFICATIONS
•
G.O.(P) No. 382/2005/TD dated, Thiruvanathapuram,
D 22"d April, 2005.
S.R.O. No. 73/2005 - WHEREAS Notification II GO. (P)
No. 4/2005/TD dated 13th January, 2005 published as
S.R.O. No. 34/2005 in Kerala Gazette Extraordinary No.
77 dated the 13th January, 2005 prohibiting the sale of
E
computerized and online lottery tickets in the State of
Kera la.
A'\ID WHEREAS, by Notification No. I issued as G.O.
(P)No.11 /2005/TD dated 27th January, 2005 and
F
published as S.R.O.No. 73 in the Kerala Gazette
Extraordinary No. 169 dated the 27 1hJanuary, 2005, the
Government of Kera la prohibited the sale of tickets of all
lotteries organized, conducted or promoted by every
State Government including that of State of Kera la and
G
declared the State as a Lottery Free Zone.
NOW THEREFORE, in exercise of the powers conferred
by Section 5 of the Lotteries (Regulation) Act, 1998
(Central Act 17 of 1998) and in partial modification of
H
ALL KERALAONLINE LOTTERY DEALERS ASSN. v. 905
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
the Notification issued as S.R.O. No. 73/2005 dated the A
27th January, 2005, the Government of Kerala hereby lift
the prohibition partially by permitting the sale of paper
lotteries organized, conducted or promoted by every
State Government including the State of Kerala provided
that the prohi~ition imposed on the sale of computerized B
and online lottery tickets organized, conducted or
promoted by every State Government shall continue to
remain in force and the territory of the State of Kerala
shall be online, internet and computerized lotteries free
zone. c
By order of the Governor.
P. MARA PAN DYAN,
Secretary to Government
D
Explanatory Note
(This does notforrn part of the Notification, but is intended
to indicate its general purport).
E
Government of Kerala by notification issued as G.O. (P)
No.66/2005/TD dated 20th April, 2005, have
. reconsidered the issue of the prohibition imposed on the
sale of all Lottery Tickets in the State of Kera la and have
decided to reintroduce Paper Lottery conducted by the F
State Government with the same pattern and prize
Structure as it prevailed before 27th January, 2005."
From a perusal of the Notification dated 13.01.20015,
issued by the Government of Kerala, we find that the State
had prohibited the sale of all computerized and online lottery G
tickets m·arketed and operated through vending machines,
terminals, electronic machines and tickets sold through internet
in Kerala. However, by notification dated 27.01.2005, the State
had prohibited the sale of tickets of all lotteries in the State of H
906 SUPREME COURT REPORTS [2015] 10 S.C.R.
A Kerala. Vide notification dated 27.01.2005, the Government·
of Kerala made the Kerala State Lotteries (Regulation)
(Repeal) Rules, 2005 which repealed the entire Kerala State
Lotteries (Regulation) Rules, 2003. Vide another notification
dated 22.04.2005, the Government of Kerala lifted the
B prohibition of sale of paper lotteries organized, conducted or
promoted by every State Government including the State of
Kerala. However, the prohibition imposed on the sale of
computerized and online tickets continued to remain in force .
c .13. In the 2010 Rules, framed by the Central Government,
on line Lottery has been defined under Rule 2(1 )(e) which is as
under-
'"online lottery' means a system created to permit players
to purchase lottery tickets generated by the computer or
D
online machine at the lottery terminals where the
information about the sale of a ticket and the player's
choice of any particular number or combination of
numbers is simultaneously registered with the central
E computer seNer;"
Rule 3 permitted the State Government to organize a
paper lottery or online lottery or both subject to the conditions
specified in the Act and these rules. Thus from the Rules, it is
F clear that on line lottery is being treated as a separate lottery
from paper lottery and it is a class in itself.
14. In the case on hand, we are mainly concerned with the
provisions of Section 5 and Section 6 of the Act. These two
Sections cover different fields. Section 5 deals with prohibition
G of sale of tickets, whereas Section 6 deals with prohibition of
conduct of the lottery itself. So, Section 5 enables the State
Government to prohibit the sale of tickets of lotteries run by
every other State Government. The grounds on which
H prohibition of sale of tickets can be made are not detailed
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 907
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
under Section 5. But, the same can be gathered from other A
provisions of the Act and also by reference to the Object and
Scheme of the Act.. Going by the scheme of the Act, it appears
that violation of any of the conditions contained in Section 4
could be a ground for the State Government to prohibit the
sale of tickets of a particular lottery, organized, conducted or B
promoted by any other State Government. If the State
Government thinks it fit, it may prohibit the sale of all lottery
tickets in the State and make it a lottery free zone. Section 6 ·
empowers the Central Government to prohibit a lottery run by
the State Government. The Central Government can prohibit C
the running of a lottery by a State Government if it is found that
the same is in violation of the provisions of Section 4. The
Central Government can also prohibit the running of a lottery if
it is fo\Jnd that the tickets of that lottery are sold in a State,
0
where the sale of the same has been prohibited by the
concerned State Government under Section 5.
15. In view of the above, it is relevant to mention Entry 40
under List I and Entry 34 in List II of the Seventh Schedule and
Article 246 of the Constitution of India which are as under:- E
Entry 40 List I-Union List
"40. Lotteries organized by the Government of India or
the Government of a State." F
Entry 34 List II-State List
"34.Betting and Gambling."
Article 246 of the Constitution G
"246. Subject matter of laws made by Parliament and by
the Legislatures of States.-( 1) Notwithstanding anything
in clauses (2) and (3), Parliament has exclusive power
to make laws with respect to any of the matters H
908 SUPREME COURT REPORTS [201_5] 10 S.C.R.
A enumerated in List I in the Seventh Schedule (in this
Constitution referred to as the "Union List") .
.
(2) Notwithstanding anything in clause (3), Pariament and,
subject to clause (1 ), the Legislature of any State also,
B have power to make laws with respect to any of the matters
enumerated in List Ill in the Seventh Schedule (in this
Constitution referred to as the "Concurrent List").
(3) Subject to clauses (1) and (2), the Legislature of any
c State has exclusive power to make laws for such $tate
or any part thereof with respect to any of the matters
enumerated in List II in the Seventh Schedule (in this
Constitution referred to as the "State List").
(4) Parliament has power to make laws with respect to
D
any matter for any part of the territory of India not included
in a State notwithstanding that such matter is a matter
enumerated in the State List."
It is common case that the Parliament, by virtue of Entry
E 40 under List I of the Seventh Schedule, has got exclusive power
to legislate on State lotteries,. By virtue of Entry 34 in the State
List, concerning betting and gambling, $tate Legislatures have
the power to legislate on lotteries, other than State Lotteries
F because it is also one of the forms of gambling
16. The State of Sikkim, in its trading capacity, has been
organizins, conducting and promoting online lotteries in
accordance with the provisions of the Act and lottery tickets
are being sold in various lottery playing States in India including
G the State of Kerala. The State of Sikkim, as pleaded before
this .Court, substantially depends on the revenue raised by the
sale of lottery tickets. It is a north eastern State with no avenues
of industrialization. It is the case of the appellants that they
H started the business of online lottery in the State of Kerala in
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 909
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
the year 2003.0nline lottery is a tamper proof lottery which A
has been designed using the aid of modern technology that
eliminates all the ills of paper lottery and has greater
transparency and is universally recognized as a tamper proof
and safe method of conducting lotteries. Modernization led to
spurt of computerization, satellite and internet connectivity B
which bears a great impact on every aspect of life, made things
easier and faster and brought in more transparency. Thus
began lottery in another form, popularly called "online lottery."
The difference in the lotteries of this form is that "online" is free
from possibility of any duplication, tamper etc., and is totally C
transparent.
17. Online lotteries became popular in our country, only
recently. It made their presence felt in India from 2000-2001
onwards. Though all types oflotteries are meant to be covered D
by the Lotteries (Regulation) Act, 1998, the deleterious effect
of paper lotteries was uppermost in the mind of the Central
Government while bringing forth the above legislation as, at
the relevant time, paper lotteries were most popular among
the people. The various sub-sections of Section 4 will reveal E
that the irregularities in the conduct of paper lotteries were
mainly in the contemplation of the Parliament. The decision in
B.R. Enterprises (supra) also dealt with the prohibition of
sale of tickets of paper lotteries invoking power under Section F
5 of the Act. Still, the general principles laid down by this Court
in the abovementioned case, while interpreting Section 5, are
binding. So, the power to prohibit sale of tickets is granted in
relation to a particular lottery or particular type of lottery. That
means, a particular lottery can be the subject-matter of G
prohibition. In other words, all types of lotteries need not be
prohibited. But, going by that decision, a particular type of
lottery can be prohibited, if only, the State Government also
does not run that lottery. The online lottery is a particular lottery,
which is not run by the State Government. So, going by the H
.910 SUPREME COURT REPORTS [2015] 10 S.C.R.
A principles laid down in B.R. Enterprises (supra), the State
Government can separately ban the sale of online lotteries as
online lottery is a particular class of lottery, different and distinct
from paper lotteries.
B 18. Learned coµnsel for the appellants also brought into
notice para 21 oft~ Writ Petition filed before the High Court
to show how the sy~tem of online lottery functions, which is as
under: I
c 'The Online l<;>ttery involves installation of a Central Server,
various terminals, which are connected to the said Central
Server through a satellite and all this involves huge
expenses running into hundred of crores. In this online
lottery form, there are no pre-printed tickets as such. A
D person interested to purch::ise a ticket of online lottery
comes to the terminal, fills a play-slip with numbers
selected by him and hands it over to the person manning
the terminal. This play-slip is put into the terminal and
numbers selected by the player are transmitted to the
E central server, which registers the said numbers. A
person may not like to select any numbers and may play
lucky dip in which case the computers makes random
generation of numbers itself and transmit them to the
central server, which registers the said numbers. In either
F . of the cases after the central server has registered the
numbers, it generates a ticket and commands. the ·
terminal, which acts like a fax on command and delivers
the ticket, which is on an imported thermal paper. The
ticket besides containing these numbers contains various
G codes, details as also bar codes, which ensures against
any possibility of any duplication etc. The game is made
more interesting and entertaining since the player has
option to choose numbers for himself. Like paper lottery
in this case also various tickets can be printed and sold
H
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 911
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
as such, however, the same may not sell at all because A
the player does to like to lose the charm of selecting the
numbers himself. However, whatever be the position, all
the details regarding the number of tickets sold, their
respective playing numbers, the number to tickets sold
from each terminal etc. are all available in the central B
server. The generation of tickets for any particular
scheme closes 30 minutes before the holding of the draw
and no retail terminal can generate a ticket for such draw
after such closing and at the time of draw all the details
are readily available to the authorities immediately before C
the draw. The draw is held by the respective State
themselves through a tamper free machine and is
telecast on the Zee Television Network and watched by
the public at large."
D
19. It was also contended before this Court that in exercise
of the powers conferred by Section 5 of the Act and in partial
modification of the notification issued earlier declaring Kera la
a lottery free zone State, the Government lifted the prohibition
partially by permitting the sale of paper lotteries and the E
prohibition imposed on the sale of computerized and online
lotteries continued to remain in force declaring the territory of
Kera la to be online, internet and computerized lottery free zone.
The legislative competence in respect of State run lotteries F
vests exclusively with the Centre except where a State is a
lottery free State and that only the Central Government will have
the power to deal with the same. The notification dated
22.04.2005 was issued by the State on the ground that the
State of Kerala shall be an on line lottery free zone. G
20. The State of Kerala is of the view that online lottery
and conventional paper lotteries are to be dealt separately
and are entirely different in every aspect by the nature and
features inherent in it. The State of Kera la is of the view that H
912 SUPREME COURT REPORTS [2015] 10 S.C.R.
A on line lottery does not characterize the features of a lottery as
defined under the Act. In fact, the so-called online lottery is not
a lottery as it is a widespread network using internet, cheating
the public in a massive way in the absence of a proper
regulatory system of the same standards. The online
B companies are merely 'gaming', but not conducting any lottery
as per the guidelines issued under the Act. It is further pleaded
that though it is claimed that online lotteries are universally
. recognized as tamper proof lotteries, in experience, it is felt
that the so-called online lotteries were cheating the massive
C gullible public by misusing the advancement of information
technology in the field of economy. The Government of Kera la
has detected and established before the Union Government
that onlin.e lotteries organized. by the State of Sikkim are
D blatantly violating the provisions of Section 4 of the Act. It was
further contended that the Central Act was enacted by the
Parliament on 07. 07 .1998. At the time of formulating the Act,
only conventional paper lottery was being conducted in the
country. No online lottery existed at the time of enactment of
E the Act. The Central Act did not envisage or took into account
the online lotteries in the definition clause while stipulating
conditions under section 4 oftheAct for organizing, conducting
or promoting a lottery by a State Government. The conditions
stipulated therein are only intended to cover the conduct of
F paper lotteries. The Government of Kerala has detected the
flagrant violations and fraud inherent in the online lotteries and
also the illegal activities of the appellants which directly affects
more than 15 lakhs people of Kerala who have already been
deceived and are being continuously cheated on minute to
G minute basis. The ill effects of these lotteries had assumed
major dimensions in the State. The newspaper reports,
petitions from the public and reports from the police reveal the
magnitude of its ill effects, which include suicides, divorces,
starvation and murders. This created more hardship to the
H respondent-State.
ALLKERALAONLINE LOTTERYDEALERSASSN. v. 913
STATE OF KER.ALA& ORS. [R.K.AGRAWAL, J.]
21.The violations in terms of the Act in the case of A
Meghalaya, Sikkim and Nagaland State lotteries have already
been furnished to the Union Government on 12.01.2004 and
23.08.2004, some of which mentioned by the Division Bench
of the High Court in the judgment are as follows:-
B
"(a) The online lottery tickets of Meghalaya, Sikkim and
Nagaland States are printed by the terminal in violation
of Section 4(b) of the Lotteries (Regulation) Act, 1998
(b) The tickets of these States are printed in the stationery c
of the Sole:Selling agent.
(c) The draws are conducted in such a manner that the
transparency and credibility of the draw process is not
at all established. According to Meghalaya rules, the
0
presence of one Judge shall form the quorum.
(d) The draws are conducted daily in a severe gambling
fashion and in violation of Section 4(h) and prizes are
offered on the basis of a single digit violating Section
4(a) of the Act. E
(e) There are clear similarities in the name of different
lotteries and they follow the same prize pattern, obviously
making an attempt to circumvent Section 4(h)."
F
It is then pleaded that in practice, the so-called online
lotteries, mislead the general public by its mesmeric gambling
instinct inherent in it. People are attracted to the modern
technology used in these lotteries and the instantaneous nature
of it. They spend all their time in front of the online outlets and G
spoil all their money. They are being trapped by the simple
prizes they get and they invest the remaining part of their money
in a hope to get more and more big prizes. This is a continuous
process starting from early in the morning and extends too
late in the night. The lotteries conducted by these online H
914 SUPREME COURT REPORTS [2015] 10 S.C.R.
A companies have draws in every 15 minutes. Technically, they
call it 'weekly lotteries' in order to circumvent the objectives of
the Act, but in resultthey are ridiculously setting aside the spirit
of the Act. As a technical argument, each lottery has only one
draw in a week. The draw of one lottery repeats only in the
B next week. But, the tactics followed by these States is that
they are conducting more than 100 lotteries with very strange
names and by assigning pseudonyms. The online lotteries
running in Kerala were in flagrant violation of the provisions of
C the Act and this fact was detected by the State of Kera la. The
State of Kerala has made known this fact to the Union
Government twice. The findings of the Government of Kera la
revealed that the other States, on whose behalf the lotteries
are being conducted in Kerala, have least control over them
and major source of income from these gambling type of
0
lotteries siphoned by the so-called middlemen who acts in the
name of 'sole selling agents'. Similarly, the states of Karnataka
and Arunachal Pradesh have stopped the sale of on line lotteries
as they have admitted the violations pointed out by the State
E of Kera la. Online lotteries are being conducted under the name
of other State Governments, circumventing the provisions of
the Act, and also the single digit lotteries through dubious
methods adopted by their distributors and agents. In some
cases, some lotteries except one digit all other digits will be
F pre-fixed and the buyer has to choose only a single digit. In
some other cases, one digit of two digit number or of three
digit number will be changing continuously, but in a pre-
determined cyclic manner, which shows that the draw is held
only for one digit. It was detected from the lottery terminals
G that the tickets of States of Meghalaya and Nagaland are being
printed one after another from the same terminal and the same
pool in an unbroken manner. Several tickets without the imprint
and logo of other State Governments and even without
signature of the authorized officer of those States have been
H found being sold in the State of Kerala. Standard set of rules
ALL KERALAONLINE LOTTERY DEALERS ASSN. v. 915
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
are printed on the reverse side of the stationery and tickets of A
more than one States are being printed on the same material,
by the same terminal in unbroken strips. The proceeds of the
sale of online lotteries are rather shared by the distributors
and agents without crediting in the public account of the
respective States, in violation of the provisions of the Act. The B
details of unclaimed money are not brought to the knowledge
of the other State Governments, whereas the unclaimed prize
money is being appropriated by the distributors and agents.
The place of draw is not at all located within the other States,
whereas the same is being conducted according to the C
convenience of the distributors. The lottery distributors and
agents of other State Governments are resorting to such
unscrupulous methods and conducting online lotteries in eve.ry
15 minutes from the lottery terminals. The Lottery Department D
of the State had detected the draws being conducted in lottery
outlets for more than 49 draws in a day.
22. The provisions in respect of Sikkim State Lotteries
was reported to the Ministry of Home Affairs, Government of
India on 12.01.2004. The scheme of lotteries furnished by the E
Government of Sikkim revealed that they were not in conformity
with the provisions of Section 4 of the Act. The irregularities/
violations in respect of the Sikkim lotteries being sold in Kerala
in the year 2004 were brought to the notice of the State
Government earlier with a request for further documents/ F
clarifications. Some of these violations/ irregularities are briefly
mentioned below:
"i.On a perusal of the agreement .between the
Government of Sikkim and M/s. Tashi Delek Gaming G
Solutions Pvt. Ltd., the Marketing Agent, it is seen that
the agreement with the marketing agent is executed
seven days before the Sikkim Online Network Lottery
Rules came into effect.
H
916 SUPREME COURT REPORTS [2015] 10 S.C.R.
A ii . The Marketing Agent is vested with powers more than
what the Lottery Regulation Act permits. The State of
Sikkim was asked to offer specific remarks on this.
iii. Since a detailed description of the method of draw
was not furnished by the State of Sikkim, the same was
B
called for from this office.
iv. As per rule 12 of the Sikkim Online Network Lottery
Rules, 2001, the tickets will be printed on pre-printed
ticket material. On perusal of the tickets of Super-Lotto
c and Thunder Ball it is seen that the specimen play slips
furnished by the Director of Lotteries, Sikkim bear the
imprint and logo of PLAYWIN. This shows that the tickets
are instantly printed at the retail computer terminal,
violating Section 4(b) of the Lotteries Regulation Act,
D 1998.
v. The contractual agreement between the Play Win sub-
agent and the distributors was not furnished. So also
the names of distributors for certain districts in Kerala
E were notfurnished.
vi. The Government has furnished the details of 926 retail
outlets operating in the State. But the contractual
agreement between the distributor and these retail outlets
were not submitted.
F
vii. The marketing Agent under the Sikkim State Lotteries
is empowered to set-up the required infrastructure and
use of technology for the draw purpose. It is clearly more
than what is statutorily permissible under Section 4(c) of
G the Act.
viii. As per Section 4(e) of the Central Act, 'the State
Government itself shall conduct the draws of all the
lotteries.' But actual conduct of the draws is done by the
H Marketing Agent, reducing the role of the State
ALLKERALAOIJLINE LOTTERY DEALERS ASSN. v. 917
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
Government to that of a mere spectator, thereby violating A
the above provision.
ix. Te Thunderball, the last prize amount of Rs.20/- is 'when
one main number and the Thunder ball (fixed) are
matched.'· Until clarifications to the contrary are provided 8
with evidence, it has to be presumed that this is a
camouflaged single digit lottery specifically prohibited
under Section 4(a) of the Central Act."
It was also pointed out in the letter to the Government of
India that Sikkim has delegated .more rights and C
responsibilities to the Marketing Agents than what is statutorily
permissible under the Act. However, regarding the
appointment of Marketing Agents, the State of Sikkim has
informed that they will discuss the matter with the legal wing.
The State of Sikkim has admitted that the tickets are printed
0
on PLAYWIN Stationery, clearly admitting violation of Section
4(b) of the Act. With regard to the allegation that 'Thunder Ball'
lottery is being organized on the basis of single digit, the State
of Sikkim has not offered any reasonable explanation or E
furnished any document instead the State has merely refuted
the same. Even though the State of Sikkim was requested to
furnish details/documents/clarifications regarding the
allegations raised, no reply was received from it. The
Government of Sikkim was reminded on 11.05.2004 and F
15.06.2004 to furnish the details called for earlier and also to
provide details of the new lotteries introduced by them in
Kerala. There has been no response from the State so far.
Thus the violations and irregularities pointed out in respect of
Sikkim State Lotteries as in January, 2004 continue unabated. G
This shows that the Government of Sikkim is not inclined to
address the serious issues pointed out by the Government of
Kerala with regard to the illegalities and violations connected
with Sikkim State Lottery tickets which are being sold among
the public in Kerala. H
918 SUPREME COURT REPORTS [2015] 10 S.C.R.
A Conclusion:
23. The conduct of certain types of lottery trade in the
country, the malpractices thereof and their impact on the poorer
sections of the society have been under scrutiny of the
Government for quite some time. The continued prevalence
8
of the popularly known single digit and instant lotteries and the
temptation offered by them proved to be the undoing of many
families, especially poor daily wagers and low income groups.
In spite of the guidelines issued by the Central Government
c over a period of time as also the guidelines issued in the recent
past by this Court, the evil has not been totally eliminated.
24. The relevant provisions of the Act clearly demonstrate
that even though all types of lotteries are meant to be regulated
by the said Act, online lotteries were not under the
D contemplation of the Central Government at the time when the
Act came into force. It is otherwise also not a disputed fact
that online lotteries became popular insofar as India is
concerned only recently and in any case after the enforcement
of the Act and that is why the Government of India while framing
E the 2010 Rules specifically defined 'online lotteries'. Having
this background in mind, the Scheme of the Act would clearly
show that the Government at that stage was concerned with
paper lotteries of all kinds. From the preamble of the Act
F spelled out from the Statement of Objects and Reasons as re-
produced hereinbefore, the necessity to bring about legislation
in the matter of regulating lotteries was felt on account of
continued prevalence of single digit and instant lotteries. It
was primarily done to curb malpractices in the conduct of such
G lotteries which at that time were paper lotteries only when the
Act came into force.
25. With regard to the contention regarding the function of
the on line lottery, we are of the considered view that any type
of manipulation can be done in the printing of tickets at the
H terminal.The customer cannot know whether the ticket is printed
ALL KERALA 01~LINE LOTTERY DEALERS ASSN. v. 919
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
at the terminal based on the command from the central server A
or not. The State of Sikkim does not have any control over its
thousands of terminals all over India. As per Section 4(h) of
the Act, the draw should be held once in a week. It means a
fortune seeker, after purchasing the ticket, will get a week's
cooling time to wait for the result of the draw. But, under the B
scheme of online lotteries, a number of lotteries run
simultaneously. So, by holding several lotteries, there can be
several draws with a gap of few minutes in a day and the gullible
will remain glued and there is every likelihood of purchase of
tickets repeatedly, till all his savings are exhausted. So, ifthe C
Government takes a decision in public interest to prohibit on line
lotteries, this Court should not interfere with the said decision
unless there are compelling grounds. As held earlier, going
by Section 5, as interpreted by this Court in B.R. Enterprises D
(supra), the sale of ticket of a particular lottery can be prohibited
provided the concerned State Government is not running that
lottery. While interpreting a Statute of this nature meant to
suppress the mischief of gambling, this Court should accept
the concept of purposive interpretation and if possible save E
the notification intending to save the people from the vice of
gambling.
26. It is common case that lottery is a species of gambling.
Gambling is considered as a pernicious vice by all civilized F
societies from time immemorial. The Rigvedas, Smritis and
Arthashastras have condemned gambling as a vice. Several
Judges and learned authors are unanimous in their
condemnation of gambling. Experience has shown that the
common forms of gambling are comparatively innocuous when G
placed in contrast with widespread pestilence of lotteries. The
former are confined to a few persons and places, but the latter
infests the whole community; it enters every dwelling; it reaches
every class; it preys upon the hard earnings of the poor; it
plunders the ignorant and the simple. H
920 SUPREME COURT REPORTS [2015] 10 S.C.R.
A 27. In Words and Phrases, Butterworths, 3rd Edition at
page 71, it is stated as follows:
"It must not be entirely forgotten in the construction of
these Acts of Parliament (see now the Lotteries and
B AmusementsAct, 1976) that the evil which the lottery law
has sought to prevent was the evil which existed w~ere
poor people with only a few pence to feed their children
would go and put these few pence into a lottery and lose
them, and this sociologically was a bad thing ... "
c
28. Even in B.R. Enterprises (supra), this Court has held
as under:
"47. From the references from Dharmashastra, opinions
of distinguished authors, references in the Encyclopaedia
D
Britcannica and Boston Law Review and others, we find
that each concludes, as we have observed, lottery
remains in the realm of gambling. Even where it is State-
sponsored still it was looked down upon as an evil. Right
E from ancient time till the day all expressed concern to
eliminate this, even where it was legalized for raising
revenue either by the king or in the modern times by the
State. Even this legitimization was for the sole purpose
of raising revenue, was also for a limited period, since
F this received condemnation even for this limited purpose.
All this gives a clear picture of the nature and character
of lottery as perceived through the conscience of the
people, as revealed through ancient scriptures, also by
various courts of the countries."
G
This Court further added:
"59 ..... But it cannot be doubted and it is recognized by
all the countries that gambling by its very nature promises
to make a poor man a rich man; to quench the thirst of a
H
ALL KERALAONLINE LOTTERY DEALERS ASSN. v. 921
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
man in dire economic distress or to a man with a bursting A
desire to become wealthy overnight it draws them into
the magnetic field of lotteries with crippling effect. More
often than not, such hopes with very remote chance
encourages the spirit of reckless prosperity (sic
propensity) in him, ruining him and his family. This B
encouraging hope with the magnitude of prize money
never dwindles. Losses and failures in lotteries instead
of disencouragement increases the craze with
intoxicating hope, not only to erase the losses but to fill
his imaginative coffer. When this chance mixes with this C
utopian hope, he is repeatedly drawn back into the circle
of lottery like a drug addict. Inevitably, the happiness of
his family is lost. He goes into a chronic state of
indebtedness ..... "
D
29. Article 246(1) of the Constitution of India deals with
exclusive power of the Parliament to make laws with respect
to matters enumerated in List I (Union List) in the Seventh
Schedule. As per Article 246(2), Parliament and the Legislature
of any State also have power to make laws with respect to any E
of the matters enumerated in List Ill (Concurrent List) in the
Seventh Schedule. The Legislature of the State has, however,
exclusive power to make laws with respect to matters
enumerated in List II (State List) in the Seventh Schedule, as F
per Article 246(3) of the Constitution. Also, there being a
specific entry dealing with lotteries, the power to legislate on
lotteries would be in the exclusive domain of the Parliament,
even though it is a form of gambling and would be generally
covered under Item No. 34 of List II (State List). The Parliament, G
in exercise of the power vested in it to enact law on lotteries
as per Item No. 40 of List I (Union List), enacted the Lotteries
(Regulation) Act, 1998. Section 3 of the Act ordains that save
as otherwise provided in Section 4, no State Government shall
H
922 SUPREME COURT REPORTS [2015] 10 S.C.R.
A organize, conduct or promote any lottery. A State Government
has been authorized to organize, conduct or promote a lottery,
· subject to the conditions enumerated in Section 4 which has
already been re-produced earlier. it is absolutely clear that
even though the power to legislate on lotteries vests exclusively
B with the Parliament, the respective States have been
delegated this power, but it has to be subject to conditions
enumerated in Section 4. By virtue of the provisions contained
in Section 12 of the Act, the Government may, by notification
in the Official Gazette, make rules to carry out the provisions
C of the Act. Exercising the powers vested in it by the provisions
contained in Section 12, the State of Kerala has framed the
"Kerala Paper Lotteries (Regulation) Rules, 2005."
30. Provisions of.theAct, in particular, Section 12 of the
D Act clearly manifest that even though the power to legislate on
the subject 'lotteries' is in the exclusive domain of the
Parliament, the power to legislate as well has been delegated
by the Parliament to the respective States in the country and
as mentioned above, it is in exercise of that power the State of
E Kerala has in.deed framed the Rules of 2005. It is significant
to mention that Section 5 further authorizes a State Government
to prohibitthe sale of tickets of the lottery organized, conducted
or promoted by every other State. Section 5 of the Act was,
F however, under a serious challenge in B.. R. Enterprises
(supra). Framed in somewhat different language, the challenge
to Section 5 was that the delegation to the State to decide to
prohibit the sale of lotteries organized by other States is a
delegation by Parliament of its essential legislative power,
G without any policy or bereft of the guidelines and that there
was total abdication of the legislative power of the Parliament
which was a naked delegation, hence, violative of Article 14 of
. the Constitution of India. The counter contention raised by the
States and, in particular, the State of Tamil Nadu which had
H banned lotteries of other States, but continued to have its own,
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 923
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
was that on a plain reading of Section 5, a State without banning A
its own lotteries can ban lotteries organized by other States.
The Union of India and also the State of U.P. had raised a
contention that Section 5 should be read as to entitle only such
State to ban which, as a policy, does not permit its own lottery
to run. If this be so, possibly there could be no discrimination B
as it would apply uniformly to all the States. On the respective
contentions of the learned counsel as mentioned above, this
Court framed the question as follows:
"81. The legal principle which emerges, as submitted, is C
that delegation of essential legislative power of the
.principal to the delegatee would amount to abdication of
its legislative power and if it is bereft of any guidelines
then it is unsustainable in the eye of the law ..... "
D
While dealing with the question aforesaid, this Court-first
recorded reasons as to why the power had been delegated
by the Union to the States. It was inter alia observed as follows:-
"83. As revealed from Anraj case-I some of the States E
sought permission of the Union as a policy to raise their
revenue through these lotteries, which was conferred by
the Presidential Order under Article 258(1), though it
· records, the State could have exercised their discretion
as a policy to have their own lotteries without such F
permission in view of its extended executive power under
· Article 298. It further reveals, till Parliament makes any
law, the decision to start its lottery or to close it is
exclusively within the executive power of each State. This
is because it is the policy decision of a State which has G
to decide as a principle whether it desires to collect in
this form the revenue or not. The benefit of Article 298
is, it is extraterritorial, applicable beyond its territory, it is
for this State lotteries are places in Entry 40 List I. So in
a federal structure, Union has to play a role to coordinate H
924 SUPREME COURT R~PORTS [2015] 10 S.C.R.
A between one State with the other. So by regulation it has
to subserve the objectives. The Union cannot force a
State to gamble if such a State does not want to gamble.
To run its own lotteries or to close it is left on the discretion
of each State. It is each State which has to decide its
B policy and has to be concerned about its subject. In any
case, the Union cannot force any State that it must run its
own lotteries. But control of State lotteries running in the
territory of other States is left on the Union. The State
cannot restrict sales of lotteries organized by other States
c even in its territory unless authorized by the Union. This
difficulty was felt by the State which is indicated in Anraj
case-I. That seems to be the reason that Parliament has
delegated this power to the State under section 5 ..... "
D 31.Aftertaking into consideration the background leading
to delegation of power by Union to the States, the question as
to whether the delegation could be construed to be such as
amounting to delegation of its essential legislative power and
that too unguided or unbridled was examined. The question
E was answered as follows:-
"84. In Section 2(b) lotteries are defined to be a scheme
for distribution of prizes by a lot or chance. This definition
itself recognizes that even in State lotteries the prizes
F are to be collected by chance without any skill, hence
gambling in nature. Section 3 prohibits that no State
lotteries can be organized without the condition stipulated
under clauses (a) to (k) of Section 4. Section 4 provides
the conditions to be complied with by the State lotteries.
G To initiate any State lottery it is left to the policy of each
State, for this Act is silent. The only control is, in case it
decides, then it must follow the conditions as laid down
under Section 4. Next comes Section 5 which is subject
matter of challenge, the delegation of power to the State
H
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 925
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
to prohibit the sale of lottery tickets organized by every A
other State. If a State desires not to subject its people to
the lottery gambling, it has no power to restrict lotteries
organized by other States. It is to remove this mischief
that power is conferred through delegation to the States
to do it in terms of their own policy. By virtue of this, now B
the State Government can prohibit sale of lottery tickets
of every other State within its territory. Next, Section 6
seeks strict compliance with Section 4.
Under this the Central Government may prohibit any State C
lottery which is being conducted in contravention of the
conditions as laid down under Section 4 or Section 5.
Section 7 shows the rigour of this Act by making it a penal
offence as against all, who violate the provisions of this
Act, be it the Head of the Department of the Government D
or the agent, promoter or trader, to be punishable with
two years rigorous imprisonment. Section 8 makes such
an offence cognizable and non-bailable. Similarly,
Section 9 deals with offences committed by the
companies. Section 10 entrusts the Central Government E
power to give directions to the State Government for
carrying into execution the provisions ofthisAct, Rule or
Order. Sections 11 and 12 are the rule-making power
entrusted to the Central and the State Governments F
respectively. Section 13 repeals the Ordinance. Thus,
the whole Act makes clear that the subject it is dealing
with is gambling in nature. The object of the Act is not to
control the policy decision of each State to start or to
close its lotteries, but to regulate it in case a State G
decides to run its own lottery through modalities and
conditions laid down therein. Emphasis of the whole Act
is to ::ibide by the conditions strictly if you want to run a
lottery. Thus, regulation is through conditions to eliminate
even the remotest possibility of malpractices by providing H
926 SUPREME COURT REPORTS [2015] 10 S.C.R.
A stringent measures for its compliance. Perusal of the
Act reveals, the scheme of the Act is limited in its
application, and it admits the subject it is dealing is
gambling in nature. As we have said, the decision to
.collect or not to collect revenue through State lotteries is
B exclusively within the policy decision of the State and for
this, neither the Union nor Parliament interferes nor is
there any indication under the Act. Thus, the question
. which remains is, if any State decides that it does not
want any lotteries but if it feeis helpless as having no
c jurisdiction over the lotteries organized by other States,
what is the way out? This can only be done by Parliament
or by entrusting this power on such State desiring so,
which has been done through Section 5. In this
ba".kground, for this helplessness of a State as recorded
D
inAnraj case-I [(1984) 2 sec 292] the remedy is provided
by entrusting this power on the State under the impugned
provision. This helps such State to achieve its objective
of lottery (gambling) free zone within its territory. A well-
E concerned remedy. Next question is what could have
been the guideline? If State lotteries are gambling and it
cannot be terms as 'trade and commerce' at common
parlance for any free right under the Constitution. Such
right though recognized under Article 298, so other States
F may continue to enjoy till prohibited by valid law, and if
any State wants within its State lottery-free zone and for
which the power is entrusted to such State, it cannot be
said in this setting and background and the nature of the ·
subject that such a delegation is of its essential legislative
G power. The only guideline necessary in such delegation
is to see that the State does not pick and choose one
State from the other, which guideline is already provided
in this Section. It provides that such a ban could only be
if it is applied to every other State. The only residual
H field of attack so far as this delegation could be, which
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. . 927
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
has been attacked in this case, that the State could on A
one hand ban lotteries of every other State but run its
own lotteries. It is argued that while a State bans lotteries
of other States not to permit any gambling activity in the.
public interest as a policy but this very public interest is
flouted by having lotteries of its own. It is true that unless B
this provision is read down to mean a State can only ban
lotteries of other States when it bans as a policy its own
lotteries it is bound to be subjected to the vagaries as
pointed out and on deeper scrutiny it may not successfully
stand. But, by reading down the provision, which has to C
be read that it is only that State which decides lottery-
free zone within its State can prohibit lotteries of other
States clearly provides the guidance for the exercise of
such a power. It is inbuilt and inherent in the provision
0
itself in view of the scheme of the Act and nature of subject
in issue. If interpretation as given on behalf of the State
of Tamil Nadu is accepted that delegation of power is
absolute, then the submission that such delegation is
unbridled without any guideline carries great weight. E
Submission for the State of Tamil Nadu is that the lotteries
may be prohibited in phases, viz. while running its own
lotteries yet prohibiting other lotteries, may be as a public
policy, for law and order, for political reasons, morality,
etc. For surviving such an interpretation given by Mr. F
Ganguli, Parliament should have provided some
guidelines. Such an interpretation falls into the trap of
the submission that this delegation is unbridled. So, if
there are two interpretations, the interpretation which
upholds the validity should be accepted. So, the G
interpretation as given by Mr. Ganguli cannot be
accepted."
"85. There are two parts of the attack of the delegation
of power to the State under Section 5. The latter part, by H
928 SUPREME COURT REPORTS [2015] 10 S.C.R.
A which it can prohibit sale of lottery tickets organized by
every State which leaves no scope of any discretion on
the States to discriminate from one State to other. So if
it decides no lottery tickets of any State to be sold it c~nnot
pick and choose from one State to the other.
B
Once it, as a policy, decides to prohibit the sale of lottery
tickets of other States it must prohibit every other State,
that is to say, all the States and such a delegation cannot
be said to be either abdication of the legislative power
c of Parliament or to be unbridled or unguided. As we have
said looking to the nature of the subject and object of the
Act which is to help each State in its endeavor to run
State lotteries which would include starting or closing its
lotteries and when a State wants to have lottery-free zone
D in its State, then such a delegation to ban lottery of every
other State cannot be said to be invalid. To the first part,
there are two interpretation, one on the plain reading of
Section 5, a State may run its own lottery yet may prohibit
the sale of lotteries of other States. This construction
E leads to discrimination and opens for criticism of
unbridled delegation. The submission further is, if the
ban of sale of lottery tickets of every other State is as a
public policy, affecting the morality and resultant ill effect
on its subject then there is no justification that the State
F may run its own lottery affecting the very subject for which
the power is exercised prohibiting the lotteries of other
states. It is true, if such an interpretation is accepted
then this submission has a force. On the other hand, on
behalf of the Union the submission is that the language
G of the section has to be read down. The decision to have
its lottery or not to have its lottery has to be in the public
interest. Every decision to have either lotteries authorized
by the State or organized by the State has to be in public
interest. May be for collection of public revenue or for a
H
ALLKERALAONLINE LOTTERYDEALERSASSN. v. 929
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
public purpose. It has been held in Central Inland Water A
Transport Corporation Ltd. v. Brojo Nath Ganguly AIR
para 93:
There must be no injury or harm to the public interest,
public good and public welfare.
B
Thus, the decision to run State lottery has to be made
with the conscience (sic consciousness) of its evil
consequences on its subject. Thus before deciding the
State has to equate the public welfare with the injury on
its public. It may be in a given case within the limitation C
of its financial capacity with the need of the hour it has to
decide to run its own lotteries to augment its revenue in
the larger interest of the public which if weighed with the
evil consequences on its subject, the public welfare gains
more by running it then the evil consequence on its D
subject has to give way till the situation changes by finding
a better way for this additional source or evil
consequences inflicting on its subject overweighing. This
exercise has to be by each State, the Union not coming E
in its way. It is for each State to decide what is its public
welfare and what constitutes an injury to the public
interest. Rattan Chand Hira Chand vs. Askar Nawaz Jung
holds, what constitutes public interest or welfare would
depend upon the time. The social milieu in which the F
contract is sought to be enforced would decide the factum,
the nature and the degree of injury.
86.So, whenever a State decides to run or not to run its
lotteries it is the State which has to decide as a public
policy in the public interest. Once such a decision is G
taken to have its State lottery-free zone, the entrustment
of power by Parliament cannot be said to be ultra vi res.
87.We find on plain reading of Section 5, it empowers
the State Government within its State to prohibit the sale H ·
930 SUPREME COURT REPORTS [2015] 10 S.C.R.
A of tickets of the lotteries organized by every other State.
There is also nothing in the language reading by itself so
as to say, whether such power can be exercised by the
State while running its own lottery or can be exercised
only where such State does not run its own lottery. This
8 leads to two possible interpretations, as referred to
above. In view of settled principle of interpretations, the
interpretation given by the union to read down the
provision has substance. This would mean that the State
could only exercise such discretion if it decides not to
c have any lottery within its territory including its own lottery.
In this situation, the delegatee is tied down by this
limitation which itself is a clear guide to a State hence
cannot be said to be unbridled delegation. So even to
the first part it cannot be said to be arbitrary or unbridled.
D
So, we have no hesitation to approve the interpretation
given by the Union to uphold the validity of Section 5."
32. From the observations made by this Court, as extracted
above, learned counsel representing the appellants contended
E that the State of Kerala could not prohibit any form of lottery as
long as it was running other forms of lottery of other States as
also of the State of Kerala. After having given anxious thought
to the rival contentions, we are not inclined to accept the
F contention raised by learned senior counsel for the appellants.
33. It may be reiterated that the question that came to be
framed by this Court on the rival contentions raised by the
counsel for the parties in B.R. Enterprises (supra) was as to
whether the delegation of essential legislative power of the
G principal to a delegatee would amount to abdication of its
legisl.ative power and if it is bereft of any guidelines then is it
unsustainable in the eyes of law. This Court held that if the
State decides that it does not want any lotteries but if it feels
H helpless as having no jurisdiction over the lotteries organized
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 931
S.TATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
by other States, it can only be done by the Parliament or by A
entrusting this power on such State desiring so, which has been
done through Section 5. The remedy is provided by entrusting
this power on the State under Section 5. This would help the
State to achieve its objective of 'lottery free zone' within its
territory. While dealing with the guidelines, this Court further B
observed that if a State may want it to be a lottery-free zone, it
could not be said that such delegation would be of essential
legislative power. The only guideline necessary in such a
delegation is to see that the State does not pick and choose
one State from the other, which guideline is already provided C
in the Section. If the ban is applied to all the States and also
the State banning lotteries, the contention that delegation was
excessive, uncanalised and unbridled would lose its sting. We
are satisfied that by virtue of the provisions contained in Section
0
12 of the Act, the Centre has delegated its power to legislate
with regard to lotteries to States and further that there is specific
delegation with regard to ban of lotteries of other States by
virtue of the provisions contained in Section 5 of the Act. This
delegation of legislative power of the principal to the delegatee E
would not amount to abdication of legislative power by the
Centre and it would not be without any guidelines and would
be sustainable in law if the concerned State may ban a lottery
in its own State and of other States as well. What is true with
regard to the total ban of lotteries of other States, in our view, F
would also be true with regard to a particular kind of lottery as
the: delegation of power has been held to be valid if the power
by the delegatee may be used uniformly in its own State and
also with regard to the other States. In the context of the facts
and circumstances of the case as fully detailed above, we hold G
that when the State of Kerala may prohibit a particular kind of
lottery from its own State, it can prohibit se;tle of such lottery
from any other State and that would not be unsustainable in
the eyes of law nor it could be against law as held by this Court
in B.R. Enterprises (supra). H
932 SUPREME COURT REPORTS [2015) 10S.C.R.
A 34. We also hold that it is not a case of abdication of
legislative power and would not be bereft of any guidelines if
the legislation banning lotteries was applied uniformly. We, on
the interpretation of the point on the issue of delegation of
essential legislative power bereft of any guidelines, hold that it
B is not a case of abdication of the legislative power of the Centre
and furtherthat ifthe ban on the online lottery applies uniformly,
it would not be a case of exercising power by a delegatee
without any guidelines.
c 35. In the case of The Senior Electric Inspector (supra),
this Court, while considering as to whether the doctrine of
contemporanea expositio can be applied in construing Acts
which are comparatively modern, held as under:-
D "The legal position may be summarized thus:-The maxim
contemporanea expositio as laid down by Coke was
applied to consfruin,g ancient statutes but not to
interpreting Acts which are comparatively modern. There
is a good reason for this change in the mode of
E interpretation. The fundamental rule of construction is
the same whether the court is asked to construe a
provision of an ancient statute or that of a modern one,
namely, what is the expressed intention of the
Legislature. It is perhaps difficult to attribute to a .
F legislative body functioning in astatic society that its
intention was couched in terms of considerable breadth
so as to take within its sweep the future development
comprehended by the phraseology used. It is more
reasonable to confine its intention only to the
G circumstances obtaining at the time the law was made.
But in a modern progressive society it would be
unreasonable· to confine the intention of a Legislature to
the meaning attributable to the modern Legislature to the
meaning attributable to the modern Legislature making
H
ALLKERALAONLINE LOTIERYDEALERSASSN. v. 933
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
laws to govern a society which is fast moving· must be ·A
presumed to be aware of an enlarged meaning the same
concept might attract with the march of time and with the
revolutionary changes brought about in social, economic,
political and scientific and other field of human activity.
Indeed, unless a contrary intention appears, an B
interpretation should be given to the words used to take
in new facts and situations, if the words are capable of
comprehending them."
36. In State vs. S.J. Choudhary (supra), this Court in C
paragraph 10 had referred to a passage contained in statutory
interpretation by Francis Bennion, Second Edition for holding
that the Indian Evidence Act, 1872 is by its very nature is an
"ongoing Act". Paragraph 10 of the judgment is reproduced
below:- D
(2) It is presumed that Parliament intends the court to
apply to an ongoing Act a construction that continuously
updates its wording to allow for changes since the Act
was initially framed (an updating construction). While it E
remains law, it is to be treated as always speaking. This
means that in its application on any date, the language
of the Act, though necessarily embedded in its own time,
is nevertheless to be construed in accordance with the
need to treat it as current law. F
* * *"
In the comments that follow it is pointed out that an ongoing
Act is taken to be always speaking. It is also, further, stated G
thus:
"In construing an ongoing Act, the interpreter is to
presume that Parliament intended the Act to be applied
at any future time in such a way as to give effect to the H
934 SUPREME COURT REPORTS [2015] 10 S.C.R.
A true original intention. Accordingly the interpreter is to
make_allowances for any relevant changes that have
occurred, since the Act's passing, in law, social
conditions, technology, the meaning of words, and other
matters. Just as the US Constitution is regarded as 'a
B living Constitution', so an ongoing British Act is regarded
as 'a living Act'. That today's construction involves the
supposition that Parliament was catering long ago for a
state of affairs that did not then exist is no argument
against that construction. Parliament, in the wording of
c an enactment, is expected to anticipate temporal
developments. The drafter will try to foresee the future,
and allow for it in the wording.
* * *
D
An enactment of former days is thus to be read today, in
the light of dynamic processing received over the years,
with such modification of the current meaning of its
language as will now give effect to the original legislative
E intention. The reality and effect of dynamic processing
provides the gradual adjustment. It is constituted by
judicial interpretation, year in and year out. It also
comprises processing by executive officials."
F 37. Similarly, in S/L Import USA (supra), this Court has
again reiterated as follows:-
"16. Francis Bennion in Statutory Interpretation has
stressed the need to interpret a statute by making
"allowances for any relevant changes that have occurred,
.G since the Act's passing, in law, social conditions,
technology, the meaning of words, and other matters".
17. For the need to update legislations, the courts have
the duty to use interpretative process to the fullest extent
H
ALL KERALAONLINE LOTIERY DEALERS ASSN. v. 935
STATE OF KERALA& ORS. [R.K.AGRAWAL, J.]
permissible by the enactment. The following passage at A
p. 167 of the above book has been quoted with approval
by a three-Judge Bench of this .Court in State v. S.J.
Choudhary:
"It is presumed that Parliament intends the court to apply B
to an ongoing Act a construction that continuously
updates its wording to allow for changes since the Act
was initially framed (an updating construction). While it
remains law, it is to be treated as always speaking. This
means that in its application on any date, the language C
of the Act, though necessarily embedded in its own time,
is nevertheless to be construed in accordance with the
need to treat it as current law.'"'
38. With the ongoing development in the field of science o
and technology, even though the online lotteries were not in
vogue in 1998 when the Parliament had passed the Act, it came
into existence at a later point of time. The principles laid down
by this Court in B.R. Enterprises (supra) would apply to the
paper lotteries which were in existence at that point of time. E
The principles laid down therein would also apply to online
lotteries or internet lotteries by treating them as a separate
class. The principle laid down therein is that if the State
Government ~as to prohibit any lottery organized, conducted
or promoted by every other State, it has to prohibit the sale of F
its own lottery also. Meaning thereby, if a paper lottery is being
prohibited by a particular State then that paper lottery has to
be prohibited as a whole. Likewise, if online or internet lottery
is to be prohibited by a State then that on line lottery or internet G
lottery of all States including that State also has to be
prohibited. Viewed from this angle, we are of the considered
opinion that State of Kerala was well within its rights to prohibit
the sale of online or internet lotteries in its State and there is
no fault in it. It is well within the powers conferred on it under H
936 SUPREME COURT REPORTS [2015] 10 S.C.R.
A Section 5 of the Act. A State Government can organize,
conduct or promote a lottery subject to conditions mentioned
in Section 4 and if there is any violation of the co.nditions
mentioned in Section 4, it would be always open to the State
Government to prohibit such lottery and that would be within
B the legislative power vested with the State under Section 5 of
the Act as in that case the State would be only complying with
the provisions of the Act made by the Parliament. The learned
Single Judge while examining the facts of the case, manner
and method in which the sale of online lotteries are conducted,
C has already held that it violates the provisions contained in
Section 4 of the Act. In fact, during the course of arguments,
no effort was made to dislodge the findings recorded by the
courts below. The view adopted from the observation made
by this Court in B.R. Enterprises (supra), in any case, is ·
0
possible.
39. In our considered opinion, learned single Judge of the
High Court rightly mentioned in his judgment that "in fairness,
it must be conceded that Section 5, in the light of the
E interpretation in B.R. Enterprises (supra), admits two
interpretations. One is that the State can prohibit any form of
lottery, if only it is not running any lottery at all. The second
interpretation is that the State can prohibit a particular form of
F lottery, if it is not running that form of lottery, eve'n if it is running
other types of lotteries. The Act has been designedly made to
suppress the mischief of lottery. Therefore, we feel that an
interpretation, which advances the object of the Act, should be
favoured. That means, the State can prohibit online lotteries,
G if it is not running the said type of lotteries. The decision in
B.R. Enterprises (supra), which was dealing with the
prohibition of paper lotteries, does·not stand in the way of
accepting such an interpretation. Accordingly, the main
challenge against the impugned notification that it violates
H Section 5 oftheAct is repelled.
ALL KERALA ONLINE LOTTERY DEALERS ASSN. v. 937
STATE OF KERALA& ORS, [R.K.AGRAWAL, J.]
40. In view of the foregoing discussion, we do not find any A
infirmity in the order passed by the Division Bench of the High
Court dated 23.05.2006, consequently, the appeals and the
writ petitions fail and are accordingly dismissed. However, the
parties are left to beartheir own costs.
B
Devika Gujral Appeals and Writ Petitions dismissed.
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