Holding

Horse racing is a game of mere skill, not gambling, and the 1986 acquisition Act is unconstitutional as it violates Article 14.

Summary

The Madras Race Club, a company that conducts horse races, challenged the Tamil Nadu Horse Races (Abolition and Wagering or Betting) Act, 1974 and the Madras Race Club (Acquisition and Transfer of Undertakings) Act, 1986. The Court held that horse racing is a game of "mere skill" under Section 49 of the Police Act and Section 11 of the Gaming Act, and therefore wagering on races within the club premises does not constitute "gaming" or "gambling". Consequently, the penal provisions of the two Acts do not apply to the club’s races. The 1986 Act, which sought to acquire the club’s undertaking on a purported public purpose, was found to be arbitrary, discriminatory and violative of Article 14 of the Constitution, and was struck down. The High Court’s judgment was set aside, and the club was directed to be managed by a duly constituted committee. The parties each bore their own costs.

Issues considered

What is the meaning of 'gambling' under the relevant statutes?
What does 'mere skill' signify in Section 49-A of the Madras City Police Act and Section 11 of the Madras Gaming Act?
Is horse racing a game of chance or a game of mere skill?
Does wagering or betting on horse races fall within the definition of 'gaming' under the Police and Gaming Acts?
Are horse races prohibited under Section 49-A of the Police Act and Section 4 of the Gaming Act even if they are games of mere skill?
Does the Madras Race Club (Acquisition and Transfer of Undertakings) Act, 1986 give effect to the policy of Articles 39(b) and 39(c) of the Constitution and enjoy protection under Article 31‑C, or does it violate Articles 14 and 19(1)(g)?

Legislation cited

Companies Act, 1956
Constitution of Indias. Article 14, s. Article 19(1)(g), s. Article 31-C, s. Article 39(b), s. Article 39(c)

Subjects

horse racinggamblinggamingskill vs chanceArticle 14Article 31-CArticle 39(b)Article 39(c)public purposeacquisition of undertakingconstitutional validitydiscriminationmismanagement

Judgment

DR. K.R. LAKSHMANAN ETC. ETC. A
v.
STATE OF TAMIL NADU AND ANR.

JANUARY 12, 1996

[KULDIP SINGH, B.L. HANSARIA AND S.B. MAJMUDAR, JJ.] B

Tamil Nadu Horse Races (Abolition and Wagering or Betting) Act,
1974: Section 2.

Madras City Police Act, 1888 : Section 49 and 49-A. c
Madras Gaming Act, 1930: Sections 3, 4 and 11.

Madras City Police and Gaming (Amendment) Act, 1949 : Sections 2
and4.
D
Race Club-Horse racing within premises-Held neither gaming nor
gambling-It is a game of skill where winning depends substantially and
preponderantly on skill-Held wagering or betting on horse racing does not
come under the definition of gaming.

Madras Race Club (Acquisition and Transfer of Undertakings) Act E
1986-Valiclity of

Race club-Registration as company under Companies Act--Act ac-
quiring under taking of the club--No investigation or inquiry held by
State--Before Acquisition Act, law was already enacted abolishing betting p
on horse racing--Acquisition of club-Held violative of Article 14-ln case
of mismanagement of club procedural safeguards under Companies Act held
relevant-Singling out the club held discriminatory--Acquisition Act held
not protected by Article 31-C of the Constitution-Held provisions of Act had
no nexus with the objective contained in Articles 39(b) and (c) of the G
Constitution.

Constitution of India, 1950 :

Article 14--Madras.Race Club (Acquisition and Transfer of Undertak-
ings) Act, 1986 held unconstitutional. H
395
396 SUPREME COURT REPORTS [1996] l S.C.R.
A Article 31-C-Laws giving effect to directive principles of State policy
Saving of-Declaration in statute-Court c::an ignolt! declaration and exam-
ine validity of law-Declaration cannot act as cloak to protect the law.

lnterpretatiun of Statute-Presumption of Constitutionality of
statute-Applicability of
B
Woni> & Phrases: 'Gampling' .ind Gaming'-Madras Ganiing Act,
1930.

"Mere skill"-Meaning of-Madras City Police Act, 1888.
c The principal object of the Madras Race Club, an association
registered as a company with limited liability under the Companies Act,
1956, is lo carry on the business of a race club in the running of horse
races. The club is one of the five "Turf Authorities of India", the other
four being the Royal Calcutta Turf Club, the Royal Western India Turf
D Club Limited, the Bangalore Turf Limited and the Hyderabad Race
Club. Race meetings are held in the club's own race course at Madras
and at Uthagamandalam for which bets are made inside the race course
premises. In 1949 the Tamil Nadu Legislature enacted law by which
horse racing was brought within the definition of "gaming". The said
E law, however, was not enforced till 1975. By sections 2 and 4 of the
Madras City Police and Gaming (Amendment) Act, 1949 the defmition of
'gaming' was amended. Although no notification enforcing Sections 2
and 4 of the 1949 Act was ever issued by the State Government, hut the
said provisions were brought into existence and enforced by an Act of
F Legislature called the Tamil Nadu Horse Races (Abolition and Wagering
or Betting) Act, 1974. The 1974 Act was unsuccessfully challenged before
the High Court on the grounds that (i) the betting on the horse races not
being gambling the State Legislature under entry 34 of list II of the
Seventh Schedule to the Constitution, had no legislative competence le
G legislate the 1974 Act; and (ii) the horse racing being a game of
substantial skill, the provisions of the two Acts were not applicable to
horse races. On leave granted by the High Court the club preferred
appeal before this Court. Under the interim orders of this Court, issued
from time to time, the club is functioning and the horse races are being
H conducted. During the pendency of the appeal the .Tamil Nadu Legisla-
K.R. LAKSHMANAN (DR.)" STATE -397
lure enacted the Madras Race Club (Acquisition and Transfer of Under- A
takings) Act, 1986 for a public purpose i.e. to acquire the undertaking of
the club • The Committee members of the club, horse owners and other
interested persons filed writ petitions before this Court challenging the
validity of the Act. The questions involved in these cases are :
B
(1) What is 'gambling' ?

(2) What is the meaning of expression "mere skill" in terms of
Section 49-A of the Madras City Police Act, 1888 and Section 11 of the
Madras Gaming Act, 1930 ?

(3) Whether the running of horse-races by the club is a game of
c
11
chance 11 or a game of "mere skill".

(4) Whether 'wagering' or 'betting' on horse-races is 'gaming' as
delined by the Police Act and the Gaming Act ?
D
(5) Whether the horse-racing - even if it is a game of 'mere sill'
- is still prohibited under Section 49-A of the Police Act and Section 4 of
the Gaming Act ?

(6) Whether the Madras Race Club (Acquisition and Transfer
of Undertaking) Act, 1986 gives effect to the policy under Article 39(b)
E
and (c) of the Constitution of India and as such is protected under
Article 31{c) or the Constitution. If not, whether the 1986 Act is liable to
be struck down as violative of Articles 14 and 19(l)(g) of the Constitu-
tion ?
F
Allowing the petitions and the appeal and setting aside the im-
pugned judgment of the High Court, this Court

HELD : 1. Horse racing is a game of mere skill within the meaning
of Section 49 of the Police Act and Section 11 of the Gaming Act. Horse
G
racing is neither "gaming" nor "gambling" as delined and envisaged
under the two Acts read with the 1974 Act and the penal provisions of
these Acts arc not applicable to the horse racing which is a game of
skill. [438-E-F]

2. Gambling in a nut-shell is payment of a price for a chance to win H
398 SUPREME COURT REPORTS [1996] l S.C.R.
A a prize. Games may be of chance, or of skill or of skill and chance
combined. A game of chance is determined entirely or in part by lot or
mere luck. The throw of the dice, the turning of the wheel, the shuffiing
of the cards, are all modes of chance. In these games the result is wholly
uncertain and doubtful. No human mind knows or can know what it will
B be until the dice is thrown, the wheel stops its revolution or the dealer
had dealt with the cards. A game of skill, on the other hand - although
the element of chance necessarily cannot be entirely eliminated - is one
in which success depends principally upon the superior knowledge,
training, attention, experience and adroitness of the player. Golf, chess
C and even rummy are considered to be game of skill. The courts have
reasoned that there are few games, if any, which consist purely of chance
or skill, and as such a game of chance is one in which the element of
chance predominates over the element of skill, and a game of skill is one
in which the element of skill predominates over the element of chance. It
is the dominant element "skill" or "chance" - which determines the
D
character of the game. [404-F-H; 405-A-B] ...
New Encyclopaedia Britannica 15th Edn. Vol .. 5 page 105; Black's
I.Aw Dictionary (Sixth Edn.), referred to.

E 3. Gaming is the act or practice of gambling on a game of chance.
It is staking on chance where chance is the controlling factor. 'Gaming'
in the two Acts i.e. Police Act and Gaming Act would, therefore, mean
wagering or betting on games of chance. It would not include games of
skill like horse-racing. In any case, Section 49 of the Police Act and
F Section 11 of the Gaming Act specifically save the games of mere skill
from the penal provisions of the two Acts. Wagering or betting on horse-
racing - a game of skill - does not come within the definition of 'gaming'
under the two Acts. (427-F-G]

4. It is settled that (i) the competitions where success depends on
G substantial degree of skill are not 'gambling' and (ii) despite there being
an element of chance if a game is preponderantly a game of skiUit would
nevertheless be a game of "mere skill". Therefore, the expression "mere
skill" would mean substantial degree or preponderance of skill. (418-G]

H State of Andhra Pradesh v. K. Satyanarayana & Ors., (1968] 2 SCR
K.R. LAKSHMANAN (DR.) v. STATE 399
387, State of Bombav v. R.M.D. Chamarbaugwala, AIR (1957) SC 699 and A
R.M.D. Chamarbaugwala & A11r. v. U11io11 of India & A11r., AIR 1957 SC
628; referred to.

5. Horse racing is a sport which primarily depends on the special
ability acquired by training. It is the speed and stamina of the horse,
B
acquired by training which matters. Jockeys are experts in the art of
riding. Between two equally fast horses, a better trained jockey can
touch the \Vinning-post. Thus horse-racing is a game where the winning
depends substantially and preponderantly on skill. (427-A-B]

6. Horse-racing is a game of skill and as such protected under C
Section 49 of the Police Act and Section 11 of the Gaming Act. Horse-
racing is not a game of chance and as such is not gambling. That being
the situation, horse racing which is conducted at the race course of the
club is not "gaming" under the two Acts and as such cannot be made
penal. Section 49-A of the Gaming Act is not applicable to wagering or D
betting on a horse-race when such wagering or betting takes place within
the club premises and on the date on which such race is actually run on
the turf of the club. These sections are applicable to the bucket-shops or
any house room, tent, enclosure, vehicle, etc. which are run in the streets,
bazaars or any other place away from the club. (429-G-H; 430-A-B]
E
People (){Monroe 85 ALR 605; Edward J. Rohan et al. v. Detroit
Racing Associatio11 el al., 166 ALR 1246; Harless v. United States, (1843)
Morris (Iowa) 169; Engle v. State, (1939) 53 Ariz 458 and Earl of
Ellesmere v. Wallace, 1929 (2) CID, referred to.
F
King v. Co1111ara, (1939) 61 C.L.R. 596(M); Coles v. Odhamm Press
Ltd., 1936 (I) K.B. 416(A); Commonwealth v. Ke11rycky Jockey Club, 238
Ky 739: 38 SW2d 987; Utah Stale Fair Ass'n v. Green 68 Utah 251, 249
p. 1016; Panas v. Texas Breeders & Racing Ass '11 Inc. Tex, Civ App.80
SW2d 1020; State v. Thompson, 160 Mo 333, 60 SW 1077; 54 LRA 950,
83 Am St Rep 468; E11file v. State ()f Arizona, 53 Ariz 458, 90 P2d 988;
G
Stoddart v. Sagar 64 LJ (MC) 234 : 2 QB 474; Cami11ada v. Hulton 60 LJ
(MC) 116: 64 LT 572; Attorney General v. lu11cheo11 and Sports Club Ltd.,
1929 AC 400 and Tote Investors ltd. v. Smoker, (1967) 3 A.E.R. 242, cited.

7. It is no doubt correct that in a handicap race the competitors are H
400 SUPREME COURT REPORTS [1996] l S.C.R.
A given advantages or disadvantages of weight, distance, time etc. in an
attempt to equalize their chances of winning, but that is not the classic
concept of horse-racing, according to which the best horse should win.
The very concept of handicap race goes to show that there is no element
of chance in the Regular horse-racing. It is a game of skill. Even in a
B handicap race - despite the assignment of imposts - the skill dominates.
In any case an.occasional handicap race in a race-club cannot change the
natural horse-racing from a game of skill to that of chance. [427-C-F] ·

8. Accepting the respondents' contention that Section 49-A of the
Police Act and Section 4 of the Gaming Act prohibit the holding of the
c horse-races would tantamount to hold that two contradictory provisions
had been operating in the two Acts from 1955 till 1975. One set of
provisions prohibit the horse-races by making it an offence and the other
set of provisions permitted the horse-races. The Legislature could have
never intended such a situation. The only reasonable interpretation
D which can be given to the two sets of provisions in the two Acts is that
they apply to two different situations. Section 49-A of the Police Act
and Section 4 of the Gaming Act do not apply to wagering or betting in
the club premises and on the horse-races conducted within the enclosure
of the club. These Sections are applicable to the bucket-shops run in
E the city street or bazaars purely for gambling purposes. It would be
useful to have a look at the Statement of Objects and Reasons of the 1955
Act. [428-E-G]

9. The provisions of the Madras Race Club (Acquisition & Transfer
F of Undertakings Act, 1986) are discriminatory and arbitrary and as such
violate and infract the right to equality enshrined under Article 14 of the
Constitution. Accordingly the said Act is struck down. [438-C-D]

10. The Policy of the State Government as projected in all the
G enactments on the subject prior to 1986 shows that the State Govern-
ment considered horse-racing as gambling and as such prohibited under
the law. The 1986 Act on the other hand declares horse racing as a public r-....
purpose and in the interest of the general public. There is apparent
contradiction in the two stands. It cannot be said that the 1986 Act is a
colourable piece of legislation. However, no public purpose is being
H
K.R. LAKSHMANAN (DR.) v. STATE 401
served by acquisition and transfer of the undertaking of the club by the A
Government. One fails to understand how the State Government can
acquire and take over the functioning of the race club when it has
already enacted the 1974 Act with the avowed object of declaring horse
racing as gambling? Having enacted a law to abolish betting on horse
racing and stoutly defending the same before this Court in the name of B
public good and public morality, it is not open to the State Government
to acquire the undertaking of liorse racing again in the name of public
good and public purpose. It is ex-fade irrational to invoke "public good
and public purpose" for declaring horse racing as gambling and as such
prohibited under law, and at the same time speak of "public purpose and C
public good" for acquiring the race club and conducting the horse racing
by the Government itself. Arbitrariness is writ large on the face of the
provisions of the Act. [437-G-H, 438-A-C]

11. There is no material on the record to show that any inquiry or
investigation was held by the State Government in the affairs of the club,
D
revealing that the management have so mis-behaved and mismanaged
-' that they are no longer fit and proper persons to be permitted to
manage the affairs of the club. Even if the mismanagement on the part
of the club is assumed, it is not open to single out a club of the type for
discriminatory treatment. May be that a race-club of national impor- E
tance or of considerable importance in the State can be taken over in the
interest of the State, but the club is an ordinary race-club which has no
impact whatsoever on the material resources of the community or the
, economic system of the State. There are no special circumstances or
reasons to single out the club as a class for the purpose of the impugned F
Act. Even if the recitation is accepted in the objects and reasons that
the company was being mismanaged, the Companies Act provide for
ample machinery to deal with the mismanagement in the companies
registered under the Companies Act. It is true that the presumption is in
favour of the constitutionality of a legislative enactment and it is to be G
presumed that a legislature understands and appreciates the needs of its
own people, but when on the face of the Statute there is no classification
and no attempt has been made to select an individual with reference to
any differentiation attributes peculiar to that individual and not pos-
sessed by others, the presumption is of no assistance to the State. There H
,l.I

402 SUPREME COURT REPORTS [1996) 1 S.C.R.
A is no reasonable basis for classifying the race-club for the purposes of
acquiring and transfer of its undertaking on the ground of mismanage-
ment. [436-F-H; 437-A-D)

12. It is settled proposition of law that notwithstanding the decla-
B ration by the Legislature that an Act has been made to implement the
Directive Principles specified in Article 39, it is open to the Court to
ignore such a declaration in a given case and examine. the constitutional
validity of the Act. The declaration cannot act as a cloak to protect the
law bearing no relationship with the objectives contained in Article 39 of
the Constitntion._[432-H; 433-A)
c
Assam Sillimanite Ltd. and Anr. v. Union of India and Ors., [1992]
Su11p. 1 SCC 692, relied on.

13. The club does not own or control any material resources of the
community which are to be distributed in terms of Article 39(b) of the
D
Constitutio;. of India. There are two aspects of the functioning of the club.
One is the betting by the punters at the totalisator and with the bookies.
The club does not earn any income from the betting-money except 5%
commission. There is no question whatsoever of the club owning or
controlling the material resources of the community or in any manner
E
contributing towards the operation of the economic system resulting in
the concentration of wealth and means of production to the common
detriment. The second aspect is the conduct of horse-races by the club.
Horse-racing is a game of skill, the horse which wins the race is given
prize by the club. It is a simple game of horse racing where the winning
F horses are given prizes. Neither the "material resources of the commu.
nity" nor "to subserve the con1mon good" has any relevance to the twin
functioning of the club. Similarly, the operation of the club has no
relation or effect on the "operation' of the economic system." There is
no question whatsoever of attracting the Directive Principles contained
G in Article 39(b) and (c) of the Constitntion. Reference to Article 39(b)
and (c) in the aims and objects and in Section 2 of the Act is nothing
but a mechanical reproduction of constitutional provisions in a totally ,.... __
inappropriate context. There is no nexus so far as the provisions of the
1986 Act are concerned with the objectives contained in article 39(b)
H and (c) of the Constitution. Therefore, the protection under Article 3l(c)
KR. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 403

of the Constitution cannot be extended to the 1986 Act. A
[434-D-H; 435-C]

CIVIL ORIOINAL JURISDICTION Writ Petition (C) No. 665 of
1986 Etc. Etc.

(Under Article 32 of the Constitution of India.) B

Vineet Kumar, Mukul Mudgal, Ajit Kumar Sinha, P.R. Seethararnan,
R.P. Wadhwani, S. Srinivasan, W.C. Chopra, K. Swami, Ms. Asha jain
Madan, P.N. Ramalingam, Mrs. M. Karanjawala, K.R. Nambiar,
V.Balachandran, J.B. Dadachanji, S. Sukumaran, A.T.M. Sarnpath and R. C
Venkatararnani for the appearing parties.

The Judgment of the Court was delivered by

KULDIP SINGH, J. The Madras Race Club (the club) is an Associa-
tion registered as a company with limited liability under the Companies Act,
D
1956. The club was formed in the year 1896 by taking over the assets and
liabilities of the erstwhile unincorporated club known as Madras Race Club.
According to its Memorandum and Articles of Association, the principal
object of the club is to carry on the business of a race club in the running
of horse races. The club is one of the five "Turf Authorities of India", the E
other four being the Royal Calcutta Turf Club, the Royal Western India Turf
Club Limited, the Bangalore Turf Club Limited and the Hyderabad Race
Club. Race meetings are held in the club's own race course at Madras and
at Uthagarnandalam (Ooty) for which bets are made inside the race course
premises. While horse races are continuing in the rest of the country, the F
Tamil Nadu Legislature, as back as 1949, enacted law by which horse racing
was brou~ht within the definition of "gaming". The said law, however, was
not.enforced till 1975, when it was challenged by the club by way of a writ
petition before the Madras High Court. The writ petition was dismissed by
the High Court. These proceedings before us are sequel to the chequered G
history of litigation, between the parties, over a period of two decades.

From the pleadings of the parties and the arguments addressed
before us by the learned counsel the following questions arises for our
consideration : H
404 SUPREME COURT REPORTS [1996) l S.C.R.
A I. What is 'gambling'?

2. What is the meaning of expression "mere skill" in terms of Section
49-A of the Madras City Police Act, 1888 (The Police Act) and Section 11
of the Madras Gaming Act, 1930 (the Gaming Act)"?

B 3. Whether the running of horse-races by the club is a game of
"chance" or a game of "mere skill"?

4. Whether 'wagering' or 'betting' on horse-races is 'gaming' as
defined by the Police Act and the Gaming Act?
c 5. Whether the horse-racing - even if it is a game of 'mere skill' - is
still prohibited under Section 49-A of the Police Act and Section 4 of the
Gaming Act?

6. Whether the Madras Race Club (Acquisition and Transfer of
D Undertaking) Act, 1986 (the 1986 Act) gives effect to the policy under
Article 39(b) and (c) of the Constitution of India (the Constitution) and as
such is protected under Article 3l(c) of the Constitution. If not, whether the
1986 Act is liable to be struck down as violative of Articles 14 and 19(l)(g)
of the Constitution.
E
The New Encyclopaedia Britannica defines gambling as "The betting
or staking of something of value, with consciousness of risk and hope of gain
on the outcome of a game, a contest, or an uncertain event the result of which
may be determined by chance or accident or have an unexpected result by
reason of the better's miscalculations''. According to Black's Law Dictionary
F (Sixth Edition) "Gambling involves, not only chance, but a hope of gaining
something beyond the amount played. Gambling consists of consideration, an
element of chance and a reward" .......... Gambling in a nut-shell is payment
of a price for a chance to win a prize. Games may be of chance, or of skill
or of skill and chance combined. A game of chance is determined entirely or
G in part by lot or mere luck. The throw of the dice, the turning of the wheel,
the shufOing of the cards, are all modes of chance. In these games the result
is wholly uncertain and doubtful. No human mind knows or can know what ,
//;'-
it will be until the dice is thrown, the wheel stops its revolution or the dealer
has dealt with the cards. A game of skill, on the other hand - although the
H element of chance necessarily cannot be entirely eliminated - is one in which
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 405
success depends principally upon the superior knowledge, training, attention, A
experience and adroitness of the player. Golf, chess and even Rummy are
considered to be games of skill. The courts have reasoned that there are few
games, if any, which consist purely of chance or skill, and as such a game
of chance is one in which the element of chance predominates over the

- element of skill, and a game of skill is one in which the element of skill
predominates over the element of chance. It is the dominant element- "skill"
or "chance" - which determines the character of the game.
B

The Public Gambling Act, 1867 provided punishment for public
gambling and for keeping of "common gaming house". The Act did not bring
within its scope the betting on horse races. The Bengal Public Gaming Act,
c
1867 provided punishment for public gambling and the keeping of common
gaming house. Gaming was defined in the Bengal Act to include wagering
or betting except wagering or betting on horse races. The next legislation was
the Bombay Prevention of gambling Act, 1887 which defines "gaming" in
similar terms as the Bengal Act.
D

• Before we deal with the Madras legislations on the subject, it would be
useful to refer to the judgments of this Court where in the question whether
trade or business which is of 'gambling' nature can be a fundamental right
within the meaning of Article 19 ( l)(g), of the Constitution. E

This Court in State ~f Bombay v. R.M.D. Chamarbaugwala, A.LR.,
1957 S.C. 699 speaking through S.R. Das, C.J. Observed as under :

"(38) From ancient times seers and law-givers of India looked upon
gambling as a sinful and pernicious vice and deprecated its practice.
F
Hymn. XXXIV of the Rigveda proclaims the. demerit of gambling.
Verses 7, 10 and 13 :

"7. Dice verily are armed with goads and driving hooks,
deceiving and tormenting, causing grievous woe. They give frail G
gifts and then destroy the man who wins, thickly anointed with the
player's fairest good.

10. The gambler's wife is left forlorn and wretched : the mother
mourns the son who wanders homeless. In constant fear, in debt, and H
406 SUPREME COURT REPORTS [1996] l S.C.R.
A seeking riches, he goes by night unto the home of others.

11. Play not with dice; no, cultivate thy cornland. Enjoy the
gain, and deem that wealth sufficient. There are thy cattle, there
thy wife, 0 gambler, so this good Savitar himself hath told me." The
Mahabharata deprecates gambling by depicting the woeful condi-

-
B
tions of the Pandavas who had gambled away their kingdom."

"While Manu condemned gambling outright, Yajnavalkya sought to.
bring it under State control but he too in verse 202 (2) provided that
persons gambling with false dice or other instruments should be
c branded and punished by the king. Kautilya also advocated State
control of gambling and, as a practical person that he was, was not
averse to the State earning some revenue therefrom.

Vrihaspati dealing with gambling in chap. XXVI, verse 199, recog-
D nises that gambling had been totally prohibited by Manu because it
destroyed truth, honesty and wealth, while other !aw-givers permit-
ted it when conducted under the control of the State so as to allow
the king a share of every stake. Such was the notion of Hindu law-
' •,
givers regarding the vice of gambling. Hamilton in his Hedaya vol.
E IV, Book XLIV, includes gambling as a kiraheeat or abomination"

The learned Chief Justice then referred to various statutes in India
prohibiting public gambling and also referred to case-law on the subject in
other countries. He quoted the following observations of McTiernan, J. of the
Australian High Court in King v. Cmmara, (1939) 61 C.L.R. 596 (M) :
F
"Some trades are more adventurous or speculative than others, but
trade or commerce as a branch of human activity belongs to an order
entirely different from gaming or gambling. Whether a particular
activity falls within the one or the other ord~r is a matter of social
G opinion rather than jurisprudence............. It is gambling to buy a
ticket or share in a lottery. Such a transaction does not belong to the
commercial business of the country. The purchaser stakes money in
a scheme for distributing prizes by chance. He is a gamester."

H On the question whether gambling is protected either by Article
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 407
!9(l)(g) or Article 30! of the Constitution, this Court held as under : A
"(42) It will be abundantly clear from the foregoing observations
that the activities which have been condemned in this country from
ancient times appear to have been equally discouraged and looked

- upon with disfavour in England, Scotland, the United States of
America and in Australia in the cases referred to above.

We fipd it difficult to accept the contention that those activities
B

which encourage a spirit of reckless propensity for making easy
gain by lot or chance, which lead to the loss of the hard earned
money of the un?iscerning and improvident common man and C
thereby lower his standard of living and drive him into a chronic
state or indebtedness and eventually disrupt the peace and happiness
of his humble home could possibly have been intended by our
Constitution makers to be raised to the status of trade, commerce or
intercourse and to be made the subject matter of a fundamental right D
guaranteed by Art 19(1 )(g).

We find it difficult to persuade ourselves that gambling was ever
intended to form any part of this ancient country's trade, commerce
or intercourse to be declared as free under Art. 301. It is not our
E
purpose nor is it necessary for us in deciding this case to attempt an
exhaustive definition of the word "trade", "business" or "inter-
course." We are, however, clearly of opinion that whatever else may
or may not be regarded as falling within the meaning of these
I words, gambling cannot certainly be taken as one of them. We are
convinced and satisfied that the real purpose of Arts., 19(1 )(g) and F
301 could not possibly have been to guarantee or declare the
freedom of gambling. Gambling activities from their very nature and
in essence are extracommercium although the external forms,
formalities and instruments of trade may be employed and they are
not protected either by Art. 19 (I) (g) or Art. 301 of our Constitu- G
tion.

On the crucial question whether the games which depend lo a substan-
tial degree upon the exercise of skill come within the stigma of "gambling",
S.R. Das, Chief Justice in Cha1narbauglvala's case held as under : H
408 SUPREME COURT REPORTS [ 1996] I S.C.R.
A "Thus a prize competition for which a solution was prepared
beforehand was clearly a gambling prize competition, for the
competitors were only invited to guess what the solution prepared
beforehand by the promoters might be, or in other words, as Lord
Hewart. C.J. observed in Coles v. Odhams Press Ltd., (1936) I K.B.
B 416 (A) "the competitors are invited to pay certain number of pence
to have the opportunity of taking blind shots at a hidden target". -
Prize competitions to which the second part of the qualifying
clause applied, that is to say, the prize competitions for which the
c solution was determined by lot, was necessarily a gambling adven-
ture.

Nor has it been questioned that the third category, which
comprised "any other competition success in which does not depend
to substantial degree upon the exercise of skill", constituted a
D
gambling competition. At one time the notion was that in order to
be branded as gambling the competition must be one success in
which depended entirely on chance. If even a scintills of skill was
required for success the competition could not be regarded as of a
gambling nature.
E
The Court of Appeal in the Judgment under appeal has shown
how opinions have changed since the earlier decisions were givell
and it is not necessary for us to discuss the matter again. It will
suffice to say that we agree with the Court of Appeal that a
F competition in order to avoid the sigma of gambling must depend to
a substantial degree upon the exercise o.f skill. Therefore, a
competition success wherein does not depend to a substantial degree
upon the exercise of skill is now recognised to be of a gambling
nature."
G
On the same day when this Court decided Chamarbaugwalas' case, the
same four-judge Bench presided over by S.R. Das, Chief Justice, delivered
judgment in another case between the same parties titled R.M.d.
Chamarbaugawala & Anr. v. Union of India & Anr., AIR ( 1957) SC 628. The
H validity of some of the provisions of the Prize Competitions Act (42 of
KR. LAKSHMANAN (DR.) 1•. STATE [KULDIP SINGH, J.] 409

1955) was challenged before this Court by way of petitions under Article A
32 of the Constitution. Venkatarama Ayyar J. speaking for the Court
noticed the contentions of the learned counsel for the parties in the following
words :

' "Now, the contention of Mr. Palkhiwala, who addressed the main B
argument in support of the petitions, is that prize competition as
defined in S.2(d) would include not only competitions in which
success depends on chance but also those in which it would depend
to a substantial degree on skill; ....... that even if the provisions
could be regarded as reasonable restrictions as regards competitions C
which are in the nature of gambling, they could not be supported as
regards competitions wherein success depended to a substantial
extent on skill, and that as the impugned law constituted a single
inseverable enactment, it must fail in its entirety in respect of both
classes of competitions. Mr. Seervai who appeared for the respond-
ent, disputes the correctness of these contentions. He argues that
D
prize competition' as defined in S.2 (d) of the Act, properly
construed, means and includes only competitions in which success
does not depend to any substantial degree on skill and are essentially
... gambling in their character; that gambling activities are not trade or
business within the meaning of that expression in Art. 19(l)(g), and E
that accordingly the petitioners are not entitled to invoke the
protection of Art. 19 (6) ; and that even if the definition of "prize
competition' in S. 2( d) is wide enough to include competitions in
i
which success depends to a substantial degree on skill and Ss. 4 and
5 of the Act and Br. 11 and 12 are to be struck down in respect of F
such competitions as unreasonable resrtrictions not protected by Art.
19(6) that would not affect the validity of the enactment as regards
the competitions which are in the nature of gambling, the Act being
severable in its application to such competitions."
G
The learned Judge thereafter, observed as under :

"We must hold that as regards gambling competitions, the petitioners
before us cannot seek the protection of Art. 19(l)(g) ............... (5)
As regards competitions which involve substantial skill however,
H
410 SUPREME COURT REPORTS [1996] l S.C.R.

-
A different considerations arise. They are business activities, the
protection of which is guaranteed by Art. (l9)(l)(g) .......................... "

Finally, Venkatarama Ayyar, J. speaking for the Court held as under :

"(23) Applying these principles to the present Act, it will not be
B questioned that competitions in which success depends to substantial
extent on skill and competitions in which .it does not so depend,
form two distinct and separate c~tegories. The difference between
the two classes of competitions is as clear-cut as that between
commercial and wagering contracts. On the facts there might be
c difficulty in deciding whether a given competition falls within one
category or not; but when its true character is determined, it must
fall either under the one or the other. The distinction between the
two classes of competitions has long been recognised in the legisla-
tive practice of both the United Kingdom and this country, and the
D Courts have, time and again, pointed out the characteristic features
which differentiate them. And if we are now to ask ourselves the
question would parliament have enacted the law in question if it had
'
known that it would fail as regards competitions involving skill,
there can be no doubt, having regard to the history of the legislation, ,..
E as to what our answer would be. The conclusion is therefore
inescapable that the impugned provisions, assuming that they apply
by virtue of the definition in S.2(d) to all kinds of competitions, are
severable in their application to competitions in which success does
not depend to any substantial exteqt on skill."
F This Court, therefore, in the two Chamarbaugwala-cases, has held that
gambling is not trade and as such is not protected by Article 19( l )(g) of the
Constitution. It has further been authoritatively held that the competitions
which involve substantial skill are not gambling activities. Such competitions
are business activities, the protection of which is guaranteed by Article
G 19(1 )(g) of the Constitution. It is in this background that we have to examine
the question whether horse-racing is a game of chance or a game involving
substantial skill:

The Police Act extends to the whole of the city of Madras, as defined
H in Section 3 of the said Act. Section 3 of the Police Act defines "cvnunon
\

K.R":LAKSHMANAN (DR.) v. STATE [KULD!P SINGH, J.] 411
gaming house" "gaming" and "instru1nents of gaming" in lhe following A
words :

""Common gaming~house" means any house, room, tent. enclosure,
vehicle, vessel or any place whatsoever in which cards, dice, tables
or other instruments of gaming are kept or used for the profit or gain
B
of the person owning, occupying, using, or keeping such house,
room, ten~ enclosure, vehicle, vessel or place, whether by way of
charge for the use of instruments of gaming or of the house, room,
tent, enclosure, vehicle, vessel or place, or otherwise howsoever ;
and includes any house, room, lent, enclosure, vehicle, vessel or
place opened, kept or used or permitted to be opened, kept or used
c
for the purpose of gami11g;

"Gaming" 'Gaming does not include a lottery .but includes wagering,
or betting, except wagering or betting on a horse~race when such
wagering or betting takes place D
(i) on the date on which such race is to be run; and

(ii) in a place or places within the race enclosure which the
authority controlling such race has with the sanction of the
~late Government set apart for the purpose. E
For the purposes of this definition, wagering or betting shall be
deemed to comprise the collection or soliciting of bets, the receipt
I
or distribution of winnings or prizes, in money or otherwise, in
respect of any wager or bet, or any act which is intended to aid or F
facilitate wagering or betting or such collection, soliciting, receipt or
distribution.

Instruments of gaming - "Instruments of gaming" include any
article used or intended to be used as a subject or means of gaming,
any document used or intended to be used as a register or records G
or evidence of any gaming, the proceeds of any gaming, and any
winnings or prizes in money or otherwise distributed or intended to
be distributed in respect of any gaming."

Seection 42 of the Police Act gives power to the Commissioner to grant H
412 SUPREME COURT REPORTS [1996] l S.C.R.
A warrant to enter any place Which is used as a common gan1ing house and the
arrest of persons found therein and to seize all instruments of gaming etc.
Section 43 provides that any cards, dice, gaming table or cloth, board or
other instruments of gaming found in any place entered or searched under
Section 42 shall be evidence that such place is used as a common gaming
B house. Section 44 states that in order to convict any person of keeping
common gaming house, the proof of playing for stakes shall not be
necessary. Section 45 provides for penalty for opening, keeping or use of a
gaming house. Section 46 lays down penalty for being found in a common
gaming house for the purpose of gaming. Section 47 permits destruction of
C the instruments of gaming on conviction and Section 48 relates to indemni-
fication of witnesses. Section 49 and 49-A (to the extent relevant) of the
Police Act are. reproduced hereunder :

"49. Nothing in sections 42 to 48 of this Act shall be held to
apply to games of mere skill wherever played. 49-A, (1) whoever -
D
(a) being the owner or occupier or having the use of any house,
room, tent, enclosure, vehicle, vessel or place, opens keeps or uses
the same for the purpose of gaming -

(i) on a horse-race, or
E
(ii) ......................................... .

(iii) ......................................... .

(iv) ......................................... .
F
(v) ......................................... .

(vi) ......................................... .

(b) ................................................. .
G
(c) .................................................. .

(d) ................................................. ..

shall be punishable with imprisonment for a term which may extend
H to two yeas and with fine which may extend to five thousand rupees,
A
I
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 413
but in the absence of special and adequate reasons to the contrary to A
be sentenced in the judgn1ent to be mentioned in the judg1nent of
this Court -

(i) such imprisonment shall not be less then three months and
such fine shall not be less than five hundred rupee~ for the first
B
offence :

(ii) such imprisonment shall not be less than six months and
such fine shall not be less than seven hundred and fifty rupees for
the second offence; and

(iii) such imprisonment shall not be less than one year and such
c
fine shall not be less than one thousand rupees for the third or any
subsequent offence."

Section 49-A of the Police Act was substituted for the original Section by
Section 2(iii) of the Madras City Police and Gaming (Amendment) Act, 1955 D
(the 1955 Act).

The Gaming Act extends to the whole of the State of Tamil Nadu, with
the exception of the ·city of Madras. Section 3 of the Gaming Act defines,
common gaming houses, "gaming" and instruments of gaming which is
E
identical to the definitions given under the Police Act. Sections 5 to IO of
the Gaming Act are identical to Sections 42 to 4 7 of the Police Act. Section
11 of the Gaming Act is as under :

"11. Nothing in sections 5 to IO of this Act shall be held to apply
to games of mere skill wherever played." F
Section 4 of the Gaming Act to extent relevant reads :

"4. (!). Whoever -

(a) being the owner or occupier or having the use of any house, G
room, tent, enclosure, vehicle, vessel or place, opens, keeps or uses
the same for the purpose of gaming -

(i) on a horse -race, or

(ii) ......................................... . H
414 SUPREME COURT REPORTS [1996) I S.C.R.
A 0ii) ··········································

(iv) ...................................... .
.,
(v) ... ·············· ························

B (vi) ......................................... .

(b) ···················································

(c) ···················································

c (d) ··················································

The above quoted Section 4 of the Gaming Act was substituted by Section
3(1) of the 1955 Act. This Section is identical to Section 49-A of the Police
Act.

D The expression "gaming" as originally defined under the Police Act
and the Gaming Act (the two Acts) did not include wagering or betting on
a horse-race when such wagering or betting took place - (i) on the date on
which such race was to run; and (ii) in a place or places within the race
enclosure which the authority controlling such race had with the sanction of
E the State Government set apart for the purpose. The definition of gaming in
the two Acts was sought to be amended by Sections 2 and 4 of the Madras
City Police and Gaming (Amendment) Act, 1949 (the 1949 Act). The said
Sections are reproduced hereinunder :

"2. In the Madras City Police Act, 1888, in section 3, for the
•
F
definition of 'gaming' the following definition shall be substituted,
namely :

"Gaming does not include a lottery but includes wagering or betting.

G Explanation. - For the purpose of this definition, wagering or betting
shall be deemed to comprise the collection or soliciting of bets, the.
receipt or distribution of winnings of prizes, in money or otherwise,
in respect of any wager or bet, or any act which is intended to aid
or facilitate or wagering or betting or such collections, soliciting,
H receipt or distribution".
KR. LAKSHMANAN (DR) v. STATE [KULDIP SINGH, l.] 415
4. In the Madras Gaming Act, 1930, in section 3, for the definition A
of 'gaming' the following definition shall be substituted, namely :

"Gaming" does not include a lottery but includes wagering or
betting.

Explanation. - for the purposes of this definition wagering or betting B
shall be deemed to comprise the collection or soliciting or bets, the
receipt or distribution ~f winnings or prizes, in money or otherwise,
in respect of any wager or bet, or any act which is intended to aid
or facilitate wagering or betting or such collection, soliciting, receipt
or distribution". C
It is obvious from the 1949-Act that the words "except wagering or betting
on a horse-race when such wagocing or betting takes place-(i) on the date on
which such race is to be run; and (ii) in a place or places within the race
enclosure which the authority controlling such race has with the sanction of D
the State Government set apart for the purpose" have been omitted from the
definition of "gaming" in the two Acts. The State Government, however, did
not enforce Sections 2 and 4 of the 1949-Act till 1975. Although no
notification enforcing Sections 2 and 4 of the 1949 Act was ever issued by
the State Government, but the said provisions have been brought intc .
E
existence and enforced by an Act of Legislature called the Tamil Nadu Horse
Races (Abolition and wagering or Betting) Act, 1974 (the 1974 Act). Section
2 of the said Act is in the following terms :

"2. Amendment of Tamil Nadu Act VII of 1949. - In the Madras
City Police and Gaming (Amendment) Act, 1949 (Tamil Nadu Act F
VII of 1949), in section 1, -

(1) in sub-section (2), the portion commencing with the expres-
sion "and sections 2 and 4" and ending with the expression
"appoint", shall be omitted;
G
(2) after sub-section (2), the following sub-section shall be
inserted, namely :

"(3) Section 2 and 4 shall come into force on the 3 lst March
1975, notwithstanding anything contained in any law for the time H
416 SUPREME COURT REPORTS [1996] 1 S.C.R. ·
A being in force or in any notification or order issued by the
Govenuncnt". .,
The 1974 Act was challenged before the High Court by way of writ
petition under Article 226 of the Constitution. The challenge was primarily
B on two grounds. It was contended before the High Court that the betting on
the horse races not being gambling the State Legislature, under entry 34 of
bst II of the Seventh Schedule to the Constitution, had no legislative
competence to legislate the 1974 Act. In other words the contention was that
entry 34 being "Betting and gambling" unless both betting and gambling are
C involved the state Legislature has no legislative competence to make the law.
It was also contended that the horse racing being a game of substantial skill,
the provisions of the two Acts were not applicable to horse races. The
High Court rejected both the contentions. The High Court held the horse
racing to be a game of chance, and as such g:imbling, on the following
reasons
D
"The question is whether, having regard to his approach, betting on
horse races is of gambling nature. We are told. that it is not, because
betters bring to bear on betting considerable knowledge of each
horse as to its ancestry or pedigree, history of its performance in the
E previous races, various other factors and related circumstances and
skill based on such knowledge and experience in horse racing. We,
of course, know the plethora of publications, information by means
of booklets, pamphlets and even books and the knowledge about
horses and horse races all over the world for centuries and the
F tremendous enthusiasm exhibited by those race-goers who in decid-
ing to stake on a particular horse, know everything about it which
enables them to judge that it may in all probability come out
successful in a race. Even so, if any skill is involved in the process,
it is not the skill of the horse but of the one who bets on it and,
G based on such skill, the better cannot say with any certainty that a
horse without fail will in any case come out successful. It may be
that the knowledge and experience one would have or skill of one
who bets on a horse inay with their use eliminate as far as possible,
the odd chance of failure and ensure to a degree so to speak, a
H probability of success; but the most astute better by using his
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 417

substantial skill may still fail to be successful in his stake. The A
element of chance is not out weighed by any skill of the better or
the horse. The figures we were shown would only show that
successful betting on horses sometimes, not necessarily every time
goes with substantial skill of the one who stakes. But we are not
persuaded that betting on horses is a game of substantial skill. Horse B
racing is a competition on speed which will depend on a variety of
changing and uncertain factors which, with the best of knowledge
and skill of the better, cannot reduced to a certainty, though of
course by such knowledge and skill the probability of success of a
particular horse may be approximated. In our opinion, therefore, C
betting on horses does involve an element of gambling and we arc
unable to agree that staking on horses with expert knowledge
and skill of the better is not betting involving an element of
gambling."

This appeal by way of leave granted by the High Court has been filed
D
by the Club. Under the interim orders of this Court, issued from time to time,
the club is functioning and the horse races are being conducted. During the
pendency of the appeal the Tamil Nadu Legislature has enacted the Madras
Race Club (Acquisition and transfer of undertakings) Act, 1986 (The 1986
Act). The said Act came into force on April 19, 1986. Writ petitions under E
Article 32 of the Constitution challenging the validity of the 1986 Act have
been filed by the committee members of the club, horse owners and other
interested persons.

We may at this stage notice the manner in which the club operates and F
conducts the horse races. ·Race meetings are held in the club-race courses at
Madras and Ooty for which the bets are made inside the race course
premises. Admission to the race course is by tickets (entrance fee) prescribed
by the clubs. Separate entrance fee is prescribed for the first enclosure and
the second enclosure. About l-1/2 of the entrance fee represents the G
entertainment tax payable to the Commercial Tax Department of the State
-. Government. The balance goes to the club's account. Betting on the horses,
participating in the races, may be made either at the club's totalizators (the
totes) by purchasing tickets of Rs. 5 denomination or with the Book Makers
(Bookies) who are licensed by the club and operate within the first enclosure. H
418 SUPREME COURT REPORTS [1996] 1 S.C.R.
A The totalizator is an electronically operated device which pools all the bets
and after deducting betting tax and the club charges, works out a dividend to
be paid out as winnings to those who have backed the successful horses in
the race. Book makers, on the other hand, operate on their own account by
directly entering into contracts with the individual punters who come to them
B and place bets on horses on the odds specified by the Book Makers. The
Book Makers issue to the punters printed betting cards on which are entered
the Book Makers' name, the name of the horse ·backed, the amount of bet
and the amount of prize money payable if the horse wins. The winning
punters collect their money directly from the Book Maker concerned. The net
C result is that 75% of the tote-collections of each race are distributed as prize
money for winning tickets, 20% is paid as betting tax to the State Govern-
ment and the remaining 5% is retained by the club as commission. Similarly,
the Book Makers collect from their punters, besides the bet amount specified
in the belting card, 20% bet-tax payable to the State and 5% payable to the
D club as its commission. It is thus obvious that the club is entitled to only 5%
as commission from the tote-collections and also from the total receipts of the
Book Makers. According to the appellant the punters who bet at the '
totalizator or with the Book Makers have no direct contract with the club.

The club pays from its own funds the prize money (stake-money) to
E the winning horses. The horses who win the first, second, third and upto 5th
or 6th place are given prizes by the club. The club income consist of entrance
fee, 5% commission paid by the Book Makers and the totalizators, horse
entry fee paid by the owners of the horses participating in the race and the
licence fee charged by the club from the Book Makers.
F
We may now take-up the second question for consideration. Section 49
of the Police Act and Section 11 of the Gaming Act specifically provide that
the penal provisions of the two Acts shall not apply to the games of "mere
skill wherever played". The expression "game of mere skill" has been
G interpreted by this Court to mean "mainly and preponderantly a game of
skill". In State of Andhra Pradesh v. K. Satyanarayana & Ors., [1968] 2 SCR
387, the question before this Court was whether the game of Rummy was a
game of mere skill or a ga1ne of chance. The said question was to be
answered on the interpretation of Section 14 of the Hyderabad Gambling Act
H (2 of 1305 F) which was pari materia to Section 49 of the Police Act and
K.R. LAKSHMANAN (DR.)" STATE [KULDIP SINGH, J.] 419
Section 11 of the Gaming Act. This Court referred to the proceedings before A
the courts below in the following words :

''The learned Magistrate who tried the case was of the opinion that
the offence was proved, because of the presumption since it was not
successfully repelled on behalf of the present respondents. In the
B
order making lhe reference the learned Sessions Judge made two
points : He first referred to s.14 ~f the Act which provides that
nothing done under the Act shall apply to any game of mere skill
wherever played and he was of opinion on the authority of two cases
decided by the Madras High Court and one of the Andhra High
Court that the game of Rummy was a game of skill and therefore the
c
Act did not apply to the case."

This Court held the game of Rummy to be a game of mere skill on the
following reasoning :
D
"We are also not satisfied that the protection of s.14 is not available
in this case. The game of Rummy is not a game entirely of chance
like the 'three-card' game mentioned in the Madras case to which
we were referred. The 'three card' game which goes under different
names such as 'flush', 'brag' etc. is a game of pure chance. Rummy,
E
on the other hand, requires certain amount of skill because the falJ
of the cards has to be memorised and the building up of Rummy
requires considerable skill in holding and discarding ·cards. We
cannot, therefore, say that the game of Rummy is a game of entire
' chance. It is mainly and preponderantly a game of skill. The chance
F
in Rummy is of the same character as the chance in a deal at a game
of bridge. In fact, in all games in which cards are shuffled and dealt
out, there is an element of chance, because the distribution of the
cards is not according co any set pattern but is dependent upon how
the cards find their place in the shuffled pack. From this alone it
G

-., cannot be said that Rummy is a game of chance and there is no skilJ
involved in it."

The judgments of this Court in the two Chamarbaugwala cases and in
the Satyanarayana case clearly lay-down that (i) the competitions where
success depends on substantial degree of skill are not 'gambling' and (ii) H
420 SUPREME COURT REPORTS [1996] I S.C.R.
A despite there being an element of chance if a game is preponderantly a game
of skill it would nevertheless be a game of "mere skill". We, therefore, hold "
that the expression "mere skill" would mean substantial degree or preponder-
ance of skill.

B The crucial question to be determined is whether a horse-race run on
the turf of the club is a game of 'chance' or a game of "mere skill". ·The
relevant pleadings before the ·High Court in the writ petition were as
under :

c "Racing is really a test of equine speed and stamina, the horses are
trained to run and their form is constantly watched by experts ......

As stated earlier, racing is not a game of chance. Experts on racing
throughout the world would bear testimony to the fact and indeed it
has been so recognised, by decisions, that the result of a horse race
D on which bets are placed is not based on pure chance. A consider-
able degree of skill does into the operation. It starts from the
breeding and training of the race horse on which much talent, time
and money are expended by trained persons, jockeys have also to be
specially trained and equipped. The horses themselves are not
E necessarily consistent in fitness, which is the reason why horses are
exercised openly and watched carefully by representatives of the
Press and their observations widely published. Thus, the inherent
capacity of the animal, the capacity of the jockey, the form and

F
fitness of the horse, the weights carried and the distance of the race
at the time of the race are all objective facts capable of assessment
'
by race goers. Thus the prediction of the result of the race is not like
drawing 3 aces in a game of poker. Rather, it is the result of much
knowledge, study and observation .......... Horse racing has been
universally recognised as a sport. Horsemanship involves consider-
G able skill, technique and knowledge and jockeys have to be specially
trained over a period of years. Whether a particular horse wins at the
race or not, is not dependent on mere chance or accident but is
determined by numerous factors, such as the pedigree of the animal,
the training given to it as well as the rider, its current form, the
H nature of the race, etc. Horse racing has been held judicially to be
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 421

A

-
a game of skill unlike pure games of chance like Roulette or a
Lottery."

The above quoted averments have not been specifically denied in the counter
affidavit filed before the High Court.

The New Encyclopaedia Britannica 15th Edition, Volume 5 at page B
105, while defining the expression "gambling" refers to Horse racing as
under :

"Betting on horse racing or athletic contests involves the assessment of
a contestant's physical capacity .and the use of other evaluative skills". C
Volume 6 of the Enclyclopaedia at page 68 onwards deals with the
subject of horse-racing. Thoroughbred horses with pedigree are selected and
trained for races. Horse-racing is a systematic spGrt where a participant is
supposed to have full knowledge about the horse, jockey, trainer, owner, turf
and the composition of the race. It would be useful to quote an extract from D
the Encyclopaedia :

Horse racing, sport of running horses at speed, mainly, Thorough-
breds with a rider astride or Standardbreds with the horse pulling a
conveyance with a driver. These two kinds of racing are called E
racing on the flat and harness racing. Some races on the flat involve
jumping .......................... "

Knowledge of the first horse race is probably lost in prehistory.
' Both four-hitch chariot and mounted (bareback) races were held in
the Olympic games of 700-40 BC. Other history of organized racing F
is not very firmly established. Presumably, organized racing began
in such countries as China, Persia, Arabia, and other countries of the
Middle East and of North Africa, where horsemanship early became
highly developed. Thence came too the Arabian, Barb, and Turk
horses that contributed to the earliest European racing. Such horses G
became familiar to Europeans during the Crusades (!Ith to 13th
centuries) from which they brought those horses back .................... "

"Eligibility rules were developed based on the age, sex, birth-
place, and previous performance of horses and the qualifications of H
,~
I
422 SUPREME COURT REPORTS [1996] I S.C.R.
A riders. Races were created in which owners were the riders (gentle-
men riders); in which the field was restricted geographically to a
township or country; and in which only horses that had not won
more than a certain amount were entered ............ "

"All horse racing on the flat except quarter-horse racing involves
B
Thoroughbred (q.v.) horses. Thoroughbreds evolved from a mixture
of Arab, Turk and Barb horses with native English stock private
studbooks existed from the early 17th century, but they were not
invariably reliable. In 1791 Weatherby published An Introduction to
a General Stud Book, the pedigrees being based on earlier Racing
c Calendars and sales papers. After a few years of revision, it was
updated annually. All Thoroughbreds are said to descend from three
"Oriental" stallions (the Darley Arabian, the Godolphin Barb, and
the Byerly Turk, all brought to great Britain, 1690-1730) and from
43 "royal" mares (those imported by Charles II). The predominance
D of English racing and hence of the General Stud Book from 1791
provided a standard ............. "

"A race horse achieves peak ability at age five, but the classic age
of three years and the escalating size of purses, breading fees, and
E sale prices made for fewer races with horses beyond the age of
four................... "

"Over the centuries the guiding principle for breeding Thorough-
breds has been, as expressed by an old cliche : breed the best to the
best and hope for the best. Performance of progeny is the most
F reliable guide to what is best for breeding purposes, of course but
in the case of horses untried at stud, their own racing ability,
pedigree, and physical cotlformation are the only available yard-
sticks. Emphasis is on racing ability, especially in evaluating poten-
tial stallions."
G
Horse racing is an organized institution. Apart from a sport, it has
become a huge public entertainment business. According to The New
Encyclopaedia Britannica the occasion of certain races are recorded as public
holidays. Derby day at Epsom where the ·public is admitted on two parts of
H the grounds at no fee has drawn as many as 5,00,000 spectators. Attendance
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 423
at horse races in many countries is a highest or among the highest of all A
sports. The horses which participate in the races are a class by themselves.
They have a history of their own. The breed of the horse is an important
factor. The experts select the horses who are to be inducted into the racing
profession. The selected horses are given extensive training by professional
trainers. Breed, upbringing, training and the past record of the race - horses B
are prominently published and circulated for the benefit of prospective
bettors. Jockeys are experts in horse riding and are extensively trained in
various aspects of horse-racing. They are supposed to know the horse they
are riding and the turf on which the horse is to run.

Judicial pronouncements on tJ-.; subject are primarily of American
c
Courts. In People of Monroe 85 ALR 605, it was held that the pari-mutuel
betting on the result of horse races, did not violate a provisions of the State
Constitution prohibiting lotteries. The Court observed as under :

"The winning horse is not determined by chance alone, but the D
condition, speed, and endurance of the horse, aided by the skill and
management of the rider or driver, enter into the result. ............. In
our opinion the pari-mutuel system does not come within the
constitutional inhibition as to lotteries ........................ 'In horse rac-
ing the horses are subject to human guidance, management, and E
urging to put forth their best efforts 10 win'."

The quest10n before the Michigan Supreme Court in Edaward J. Rohan
et al. v. Detroit Racing Association et al. 166 ALR 1246, was whether Act
No. 199 Pub. Acts 1933, authorising pari-mutuel betting on horse races
violated the constitutional prohibition against lotteries. The Court answered F
the question in the negative on the following reasoning :

"In the case of Commonwealth v. Kentucky Jockey Club, 238 Ky
739, 38 SW2d 987, a statute permitting pari-mutuel betting on horse
races was held to be constitutional and not in violation of a G
provision of· the State Constitution prohibiting lotteries. See, also
Utah State Fair Ass'n v. Green 68 Utah 251, 249 p. 1016; Panas v.
Texas Breeders & Racing Ass 'n, Inc., Tex Civ App, 80 SW2d 1020;
State v. Thompson, 160 Mo 333, 60 SW 1077, 54 LRA 950, 83 Am
St Rep 468; Engle v. State of Arizona, 53 Ariz 458, 90 P2d 988; H
424 SUPREME COURT REPORTS (1996] l S.C.R.
A Stoddart v. Sagar, 64 LJ (MC) 234, 2 QB 474; Cami11ada v. Hulton,
60 LJ (MC) 116, 64 LT 572.

Under the above authorities it is clear that pari-mutuel betting on a
horse race is not a lottery. In a lottery the winner is deternuned by
lot or chance, and a participant has no opportunity to exercise his
B
reason, judgment, sagacity or discretion. In a horse race the winner
is not determined by chance alone, as the condition, speed and
endurance of the horse and the skill and management of the rider are
y
factors affecting the result of the race. The better has the opportunity '
to exercise his judgment and discretion in determining the horse on
c which to bet. The pari-mutuel method or system of betting on a
horse race does not affect or determine the result of the race. The
pari-mutuel machine is merely a convenient mechanical device for
recording and tabulating information regarding the number and
amount of bets (Utah State Fair Ass'n v. Green, (supra), and from
D this information the betting odds on the horses entered can be
calculated and determined from time to time during the process of
betting. The recording and tabulating of bets could be done manu-
ally by individuals, but the pari-mutue1 machine is a more conven-
ient and faster method. The fact that a better cannot determine the
E exact amount he may win at the time he places his bet, because the
odds may change during the course of betting on a race, does not
make the betting a mere game of chance, since the better can
exercise his reason, judgment, and discretion in selecti~g the horse
he thinks will win. Horse racing, like foot racing, boat racing,
•
F football, and baseball, is game of skill and judgment and not a game
of chance. Utah State Fair Ass'n v. Green, supra.

Therefore, we conclude that Act No. 199, Pub. Acts 1933, author-
izing pari-mutuel betting on horse races, does not violate the
constitutional prohibition against lotteries."
G
In Harless v. United States, (1843) Morris (Iowa) 169, the Court while
holding that horse racing was not a game of chance observed as under :

"The word same does not embrace all uncertain events, nor does the
H expression 'games of chance' embrace all games. As generally
K.R. LAKSHMANAN (DR) v. STATE [KULDIP SINGH, J.] 425
understood, garnes are of two kinds, ga1nes of chance and games of A
skill. Besides, there arc trials of strength, trials of speed, and various
other uncertainties which are perhaps no garnes at all, certainly they
are not games of chance. A1nong this class may be ranked a horse
race. It is as much a game for two persons to strive which can raise
the heaviest weight, or live the longest under water, as it is to test B
the speed of two horses. It is said that a horse race is not only
uncertain ih its result, but is often dependent upon accident. So is
almost every transaction of human life, but this does not render them
• games of chance. There is a wide difference between chance and
accident. The one is the intervention of so1ne unlooked-for circum- C
stance to prevent an expected result, the other is uncalculated effect
of mere luck .. The shot discharged at random strikes its object by
chance; that which is turned aside from its well directed aim by
some unforeseen circumstance 1nisses its mark by accident. In this
case, therefore, we reasonably feel disappointed, but not in the other, D
for blind uncertainty is the chief element of chance. In fact, pure
chance consists in the entire absence of all the means of calculating
results; accident in the unusual prevention of an effect naturally
resulting from the means employed. That the fleetest horse some-
times stumbles in the race course and leaves the victory to its more
E
fortunate antagonist is the result of accident, but the gambler, whose
success depends upon the turn of the cards or the throwing of the
dice, trusts his fortune to chance. It is said that there are strictly few
or no games of chance, but that skill enters as a very material
• element in most or all of them. This, however, does not prevent
them from being games of chance within the meaning of the law.
F
There are many games the result of which depends entirely upon
skill. Chance is in nowise resorted to therein. Such games are not
prohibited by the statute. But fhere are other games (in) which,
although they call for the exercise of much skill, there is an
intermingling of chance. The result depends in a very considerable G
degree upon sheer hazard. These are the games against which fhe
statute is directed, and horse racing is not included in that class."

In Engle v. Slate, (1939) 53 Ariz 458, horse racing was held to be a
game of skill and not of chance on the following reasoning : H
426 SUPREME COURT REPORTS [ 1996] l S.C.R.
A "There is some conflict perhaps in the cases as to whether horse
racing be in itself a game of chance, but we think the decided
weight of authority and reason is that it is not. In any game there is
a possibility that some oversight or unexpected incident may affect
·.
the result, and if these incidents are sufficient to make a game in
B which it may occur one of chance, there is no such thing as a game
of skill.

In Utah State Fair Asso. y. Green, (1926} 68 Utah 251, a horse
race was held not to be a game of chance within the prohibition of
a state Constitution, which provided that the legislature should not
c authorize any game of chance, lottery, or gift enterprises, since in
respect thereto the elements of judgment, learning, experience, and
skill predominate over the element of chance."

Rusell L.J. in Earl ~f Ellesmere y. Wallace, (1929) 2 CHI, while
D dealing with the question whether there was a contract by way of wagering
between the Jocky club and the horse owners observed as under :

"To the unsophisticated racing man (if such there be) I should
think that nothing less like a bet can well be imagined. It is payment
of entrance money to entitle an owner to compete with other owners
E
for a prize built up in part by entrance fees, the winning of the prize
to be determined not by chance but by the skill and merit of horse
and jockey combined ........................ "

"Let us clear out mind of the betting atmosphere which sur-
F rounds all horse racing, and affirm a few relevant propositions.
There is nothing illegal in horse racing: it is a lawful sport. There
is nothing illegal in betting per se. There is all the difference in the
world between a club sweepstakes on the result of the Derby and a
sweepstakes horse race as defined in the Rules of Racing. In each
G no doubt the winner is ascertained by the result of an uncertain
event, but in the case of the former the winner is ascertained by
chance, i.e., the luck of the draw not the result of the race (for the
result is the same whether the draw is made before or after the race);
in the case of the latter the winner is ascertained not by chance, but
H by merit of performance. The former is a lottery; the latter is not".
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 427
We have no hesitation in reaching the conclusion that the horse-racing A
is a sport which primarily depends on the special ability acquired by training.
It is the speed and stamina of the horse, acquired by training, which matters.
Jockeys are experts in the art of riding. Between two equally fast horses, a
better trained jockey can touch the winning-post.
B
In view of the discussion and the authorities referred to. by us, we hold
that the horse-racing is a game where the winning depends substantially and
preponderantly on skill.
'•.
Mr. Ashok Desai, learned counsel for the State of Tamil Nadu, has
contended that the "handicap horse races'' introduce an element of chance C
and as such horse racing is not a game of skill. We do not agree. It is no
doubt correct that in a handicap race the competitors are given advantages or
disadvantages of weight, distance, time etc. in an attempt to equalize their
chances of winning, but that is not the classic concept of horse-racing,
according to which the best horse should win. The very concept of handicap D
\ race goes to show that there is no element of chance in the regular horse-
racing. It is a game of skill. Even in a handicap race - despite the assignment
of imposts - the skill dominates. In any case an occasional handicap race in
a race-club cannot change the natural horse-racing from a game of skill. to
that of chance. E
The expression 'gaming' in the two Acts has to be interpreted in the
light of the law laid-down by this Court in the two Chamarbaugwala cases,
t wherein it has been authoritatively held that a competition which substan-
tially depends on skill is not gambling. Gaming is the act or practice of
gambling on a game of chance. It is staking on chance where chance is the F
controlling factor. 'Gaming' in the two Acts would, therefore, mean wagering
or betting on games of chance. It would not include games of skill like horse-
racing. In any case, Section 49 of the Police Act and Section 11 of the
Gaming Act specifically save the games or mere skill from the penal
provisions of the two Acts. We, therefore, hold that wagering or betting on G
horse-racing - a game of skill - does not come within the definition of
gaming' under the two Acts.

Mr. Parasaran has relied on the judgment of the House of Lords in
Attomey General v. Luncheon and Sports Club Limited, 1929 Act 400, and H
428 SUPREME COURT REPORTS [1996] 1 S.C.R.
A the Judgment of the Court of Appeal in Tote htveslors, Ltd. v. Smoke1; (1967)
3 A.E.R. 242, in support of the contention that de hors Section 49 of the
Police Act and Section 11 of the Gaming Act, there is no 'wagering' or
'betting' by a punter with the club. According to him, a punter bets or wagers
with the totalizator or the Book Maker and not with the club. It is not
B necessary for us to go into this question. Even if there is wagering or belling
with the club it is on a game of mere skill and as such it would not be
'gaming' under the two· Acts.

Next comes question five for consideration. Section 49A of the Police
C Act and Section 4 of the yarning Act were brought into these two Acts by
the 1955 Act by substituting the original Sections. The provisions of these
two Sections have been operating since 1955. 'Gaming' as defined in the two
Acts, prior to March 31, 1975, did not include wagering or betting on a
horse-race when such wagering or betting took place (i) on the date on which
such race was to be run; and (ii) in a place or places within the face enclosure
D which the authority controlling such race had with the sanction of the State
Govern1nent set apart for the purpose. The position which emerges is that
during the period from 1955 till March 31, 1975 horse-racing was not
prohibited under the two Acts, despite the fact that Section 49A of the Police
Act and Section 4 of the Gaming Act were also operating. If we accept the
E contention of the learned counsel for the respondents that Section 49A of the
Police Act and Section 4 of the Gaming Act prohibit the holding of the
horse~races then two contradictory provisions had been operating in the two

Acts from 1955 till 1975. One set of provisions would have prohibited the J

horse-races by making it an offence and the other set of provisions would ,,
F have permitted the horse-races. The Legislature could have never intended
such a situation. The only reasonable interpretation which can be given to
the two sets of provisions in the two Acts is that they apply to two different
situations. Section 49 A of the Police Act and Section 4 of the Gaming Act
do not apply to wagering or betting on the club premises and on the horse·
G races conducted within the enclosure of the club. These Sections are
applicable to the bucket-shops run in the city streets or bazaars purely for
gambling purpose. It would be useful to have a look al the Statement of
Objects and Reasons of the 1955 Act, which is as under :

H "STATEMENT OF OBJECTS AND REASONS.
)
K.R. LAKSHMANAN (DR.) v. STATE [KULDJP SINGH, J.) 429

The Madras City Police Act, 1888, and the Madras Gaming Act, A
:... 1930, provide for punishn1ent for opening or keeping or conducting,
etc., any co1runon gaming house and for being found gaming in a
corrunon gaming house. A situation has arisen particularly in the
City of Madras where gambling in public streets on the figures in
the prices of New York Cotton, bullion, etc., and in the registration B
nuinber of motor vehicles has become very Widespread. In order to
put down this evil it is considered necessary that the offence of
belting on cotton price figures and bullion price figures, etc. in the
open streets should also be made punishable and that the punish-
n1ent, which is at present very inadequate, should be 1nade 1nore C
deterrent.

It is also considered desirable to bring the language of the
provisions relating to gaming in the City Police Act in line with that
in the Gaming Act and also to combine the sections relating to
gaming on horse race and_ on other forms of ga1nin,i which are D
, separate in the respective Acts at present. Opportunity has also been
taken to 01nit certain provisions which prohibit publications relating
to horse races as they have been held ultra vires the state legislatures
by the Madras High Court.
E
It is proposed to amend these two Acts so as to give effect to the
above objects."

It is obvious that the 1955 Act was brought to control gambling in

- public streets and motor vehicles. It is further clear from the Objects and
Reasons that the Act did not intend to stop horse-racing, because even the
prohibition on publications relating to horse-racing was sought to be omitted
F

under the Act.

__, We may examine the question from another angle. We have held horse-
racing to be a game of skill and as such protected under Section 49 of the G
Police Act and Section 11 of the Gaming Act. Horse-racing is not a game of
chance and as such is not gambling. That being the situation, horse-racing
which is conducted at the race course of the club is not "gaming" under the
two Acts and as such cannot be made penal. We have, therefore, no hesitation
in holding that Section 49A of the Police Act and Section 4 of the Gaming H
430 SUPREME COURT REPORTS [1996] I S.C.R.
A Act are not applicable to wagering or betting on a horse-race when such
wagering or betting takes place within the club premises and on the date on
which such race is actually run on the turf of the club. These Sections are
applicable to the bucket-shops or any house, house room, tent, enclosure,
vehicle, etc. which are run in the streets, bazaars or any other place away
B from the club.

We may finally deal with the constitutional validity of the 1986 Act.
The object and reasons and the preamble of the 1986 Act are as under :
'
"An Act to provide for the acquisition, for a public purpose, and
c transfer of the undertaking of the Madras Race Club and for matters
connected therewith or incidental thereto.

WHEREAS the Madras Race Club, which is a company, within the
meaning of the Companies Act, 1956 (Central Act I of 1956), is
D engaged in the business of running of horse races at Madras and at
Uthagamandalam including the business of inter venue betting;

AND WHEREAS it has been brought to the notice of the Govern-
ment that the Committee of management of the Madras Race Club
is ridden with factions and that the affairs of the said Club are not
E
conducted properly and in particular in the interests of the race
going public;

AND WHEREAS instances of irregularities and malpractices in the
conduct of the horse races have been brought to the notice of the
F Government;

AND WHEREAS it has been brought to the notice of the Govern-
ment that the book-makers keep huge amounts of bet from records
causing substantial loss of revenue to the Government;
G AND WHEREAS the Government arc satisfied that the Madras
Race Club is being mismanaged and that the interests of the race-
going public have been affected considerably;

AND WHEREAS the irregularities and malpractices in the conduct
H of the races and in the conduct of the affairs of the Madras Race
\
, ,/
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J] 431
Club have resulted in the concentration of wealth an<l 1ncans of A
production in a few hands. and to the co1nrnon detri1nent;

AND WHEREAS with reference to clauses (b) and (c) of Article 39
of the Constitution, it is expedient to provide that the ownership and
control of the material resources of the Madras Race Club is so
B
distributed as best to subserve the common good and that the
operation of t~e ccono1nic syste1n of the Madras Race club does not
result in the concentralion of wealth and n1eans of production to the
comti1on detriment;

AND WHEREAS it is necessary that the interests of the race-going C
public should be better served;

AND WHEREAS a policy decision has been taken to acquire for a
public purpose the undertaking of t)Je Madras Race Club to enable
the State Government of a Corporation or a Company wholly owned D
by the State, to properly conduct the horse races and to carry out the
; other objects of the club, so as to subserve the interests of the
general public and in particular, the race-going public;"

Sections 2, 4 and 5(1) of the Act are reproduced hereunder :
E
"2. Declaration. - It is hereby declared that this Act is for giving
effect to the policy of the State towards securing the principles laid
down in Clauses (b) and (c) of Article 39 of the Constitution .

. 4. Transfer to, and vesting in, the Govern1nent of the Undertaking of
the Club. - On the appointed day, the undertaking of the club and F
right, title and interest of the club in relation to its undertaking shall,
by virtue of this Act stand transferred to, and vest in, the Govern-
1ncnt.

5. General effect of vesting. - (l) The undertaking of the club shall G
be deemed to include the business in the running of !1orsc races at
Madras and at Uthaga1nandalan1 (including inter-venue betting on
horse races) and the business in relation to the other objects of the
club and shall be deemed also to include all assets, rights, lease-
holds, powers, authorities and privileges and all properly, movable H
432 SUPREME COURT REPORTS [1996] l S.C.R.
A and i1nmovable, including lands, buildings, works, stores, auton10-
biles and other vehicles, bank balances, cash balances, reserve
funds, investments and book debts and all other rights and interests
in, or arising out of, such property as were i1runcdiatcly before the
appointed Jay in the ownership possession, power or control of the
B club in relation to the undertaking whether within or outside India
and all. books of account, registers and all .other documents of
whatever nature relating thereto and shall also be deemed to include,
the liabilities specified in sub-section (I) of section 25".

Section 6 of the Act empowers the State Government to direct the vesting ·of
c the undertaking in a Govenunent company. According to Section 7, the
Government or Government company shall not be liable for the liabilities of
the club prior to the date of the coming into force of the Act. Section 8
provides that for the transfer to, and vesting in, the Govern1ncnt under
Section 4 and the right, title and interest of the club, it shall be paid by the
D Government in cash and in the manner specified in Chapter VI. Sub-sections
(2) and (3) of Section 8 provide that the amount for acquisition to be paid
would be calculated on the basis of the book value after deducting the
'
depreciation calculated in accordance with the First Schedule. Chapter JV,
consisting of Sections 9, lO & II, provides for management etc. of the
E undertaking of the club. Chapter V, consisting of Section 12 & 13, deals with
employees of the undertaking. Sections 14 to 23 deal with the appointment
of Commissioner of payment and the powers of the Commissioner to make
payme.nts. The amount quantified with reference to the value of the assets
taken over by the Government is not payable to the club but is payable to the
F Commissioner appointed under Section 14. The 1986 Act makes elaborate
provisions for distribution of the amount payable amongst creditors of the
club. The Act prescribes its own scheme of priorities as amongst the creditors
and it is only what reinains \~lith the co1n1nissioncr after making all payments
that is handed over to the club.
G
Mr. Prasaran has vehemently contended that the protection of Article
31-C of the Constitution cannot be made available to the 1986 Act as the ·~
provisions of the said Act have no nexus with the objects of Article 39 (b)
and (c) of the Constitution.

H It is settled proposition of Jaw that notwithstanding the declaration by
I
}
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 433
the Legislature that the Act has been made to implement the Directive A
Principles specified in Article 39, it would be open to the Court to ignore
such a declaration in a given case and examine the constitutional validity of
the Act. The declaration cannot act as a cloak to protect the law bearing no
relationship with the objectives contained in Article 39 of the Constitution.
This Court in Assam Sillimanite limited and Another v. Union of India and B
others, [1992] Supp I SCC 692, stated the legal position in the following
terms :

"28. The extent and scope of judicial review of legislation where
there is a declaration under Article 31-C of the Constitution which
enjoins that no law containing a declaration that it is for giving
c
effect to such a policy shall be called in question in any Court on
the plea that it does not give effect to such a policy has been
considered in Kesavananda Bharati. On an analysis of the majority
judgment therein. Sabyasachi Mukharji, J. (as he then was) observed
in Tinsukhia Electric Supply Company case that the declaration in D
Article 31-C does not exclude the jurisdiction of the Court to
determine whether the law is for giving effect to the policy of the
State towards securing the principles specified in Articles 39 (b) and
(c). Mathew J. had observed in Kesavananda Bharati that in order to
decide whether a law gives effect to the policy of the state towards E
securing the directive principles specified in Article 39 (b) or (c), a
Court will have to examine the pith and substance, the true nature
and character of the law as also its design and the subject matter
dealt with by it together with its object and scope. If a law passed
ostensibly to give effect to the policy of the State is, in truth and F
substance, one for accomplishing an unauthorised object, the Court
would be entitled to tear the veil created by the declaration and
decide according to the real nature of the law."

Article 39(b) & (c) of the Constitution are as under :
G
"39(a) ........................................... ..

(b) that the ownership and control of the material resources of
the conununity are so distributed as best to subserve the common
~; H
\
434 SUPREME COURT REPORTS (1996] l S.C.R.
A (c) that the operation of the economic system does not result in
the concentration of wealth and means of production to the common
detriment;
...
(d) ............................................ .

B (e) ........................................... ..

(f) ........... :................................. "

The main object for which the club was established is to carry on the
business of race club, in particular the running of horse-races, steeple chases
c or races of any other kind and for any kind of athletic sports and for playing
their own games of cricket, bowls, golf, lawn tennis, polo or any other kind
of games or amusement, recreation, sport or entertainment etc. In the earlier
part of this judgment, we have noticed the working of the club which shows
that apart from 5% commission from the totalisator and the book makers no
D part of the betting-money comes to the club. The club does not own or
control any material resources of the community which are to be distributed
in terms of Article 39(b) of the Constitution of India. There are two aspects
of the functioning of the club. One is the betting by the punters at the
totalisator and with the bookies. The club does not earn any income from the
E betting-money except 5% commission. There is no question whatsoever of
the club owning or controlling the material resources of the community or in
any 1nanncr contributing towards the operation of the economic system
resulting in the concentration of wealth and means of production to the
common detriment. The second aspect is the conduct of horse-races by the ~
F club. Horse-racing is a game of skill, the horse which wins the race is given
prize by the club. It is a simple game of horse racing where the winning
horses are given prizes. Neither the "material resources of the co1nmunity"
nor "to subserve the common good" has any relevance to the twin function-
ing of the club. Siinilarly, the operation of the club has no relation or effect
G on lhe "operation of the econo1nic system." There is no question whatsoever
of attracting the Directive Principles contained in Article 39 (b) and (c) of the
Constitution. The declaration in Section 2 of the Act and the recital
containing aims and objectives totally betray the scope and purpose of
Article 39 (bl and (c) of the Constitution. While Article 39(b) refers to
H "material resources of the community", the aims and objects of the Act refer
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 435
to "the material resources of the Madras Race Club". It is difficult to A
understand what exactly arc the n1aterial resources of the race-club which are
sought to be distributed so as to sub-serve the common good within the
meaning of the Directive Principles. Equally, the reference to Article 39(c) is
wholly misplaced. While Article 39( c) relates to "the operation of the
economic systen1 .................. to the common detriment", the aims and objec- B
lives of the Act refer to "the economic system of the Madras Race Club".
What is meant by the economic system of the Madras· Race Club is not
known. Even if it is assumed that betting by the punters at the totalisator and
~ with the book makers is part of the economic system of the Madras Race
Club, it has no relevance to the objectives specified in Article 39(b) and (c). C
We are, therefore, of the view that reference to Article 39(b) and (c) in the
aims and objects and in Section 2 of the Act is nothing but a mechanical
reproduction of constitutional provisions in a totally in-appropriate context.
There is no nexus so far as the provisions of the 1986 Act are concerned with
the objectives contained in Article 39(b) and (c) of the Constitution. We, D
therefore, hold that the protection under Article 31(C) of the Constitution
cannot be extended to the 1986 Act.

Article 31-C having gone out, Articles 14 and 19 of the Constitution
come in. Mr. Prasaran has vehemently contended that it may be pe1missible
for the legislature to classify a single company where it possesses real and E
substantial features different from other companies similarly situated, but
where no reasonable basis for the classification appears on the face of the
legislation nor is deducible fro1n the surrounding circu1nstances, the legisla-
• lion would be not by Article 14 of the Constitution. According to Mr.
Prasaran the race-club is a company registered under Section 25 of the Indian F
Companies Act, 1956 (the Companies Act). If there is mismanagement of the
affairs of the club by the Directors/members or the club, necessary action can
be taken against the club under the Companies Act, which provides elaborate
procedure for such a situation. It is further contended that keeping in view
the history of the legislation and the circumstances of this case, the taking G
over of the undertaking of the race-club by the impugned Act is arbitrary. Mr.
Prasaran contended that the "public purpose" for which the undertaking of
the club has been acquired is non-existent on the face of the provisions of the
i1npugned Act. Mr. Prasaran has also contended that the horse-racing, being
a game of skill, it is not gambling, and as such the business of horse-racing H
is a fundamental right guaranteed under the Constitution. Taking away the
436 SUPREME COURT REPORTS [1996] l S.C.R.
A business of the petitioners is hit by Article 19(1 )(g) of the Constitution.

We may examine the contention based on Article 14 of the Constitu-
tion. The Object, reasons and the preamble of the 1986 Act indicate that:-

(i) The race club is a company under the Companies Act and is
B engaged in the business of running of horse-races;

(ii)' The management of the Company is ridden with factions
and the affairs of the company are not conducted properly;
.,
(iii) Instances of irregularities and mal-practices in the conduct
c of the horse-races have been brought to the notice of the Govern-
ment;

(iv) The book-makers keep huge amounts of bet from records
causing substantial loss of revenue to the Government; and
D
(v) The Government are satisfied that the company is being
mismanaged and the interests of the race-going public have been
affected considerably.

It \Vas for the above reasons that the impugned Act acquiring, for a public
E purpose, the undertaking of the club was enacted.

There is no 1natcrial on the record to show that any inquiry or
investigation was held by the State Government in the affairs of the club. In
the facts and circumstances of this case, it was of considerable importance
that there should be a proper inquiry held by the Government before such an
•
F
action is taken. The inquiry should show that the management have so
n1isbchaved and n1is1nanaged that they are no longer fit and proper persons
to be permitted to manage the affairs of the club. Even if the mismanagement
on the part of the club is assumed, it is not open to single-out a club of the
type for discriminatory treatment. May be that a race-club of national
G
i1nportancc or of considerable importance on the State can be taken over in
the interest of the State, but the club is an ordinary race-club which has no
i1npact whatsoever on the 1naterial resources of the corrununity or the
econo1nic system of the state. There are no special circumstances or reasons
to single-out the club as a class for the purposes of the impugned Act. Even
H
I
f
K.R. LAKSHMANAN (DR.) v. STATE [KULDIP SINGH, J.] 437
if we were to accept the recitation in the objects and reasons that the A
con1pany was being mismanaged, we are of the view that the Co1npanics Act
provide for ample inachinery to deal with the mismanagement in the
companies registered under the Companies Act. It is true lhal the presump-
tion is in favour of the constitutionalily of a legislative enacllnent and it is

- to be presumed that a legislature understands and appreciates the needs of its
own people, but when on the face of the Statute there is no classification and
no attempt has been made to select an individual with reference lo any
B

differentiating attributes peculiar to that individual and not possessed by
-t others, the presumption is of no assistance to the State. In the present case
the petitioner club is a company like any other company registered under the C
Companies Act. Elaborate machinery and well established procedural safe-
guards have been provided under the Companies Act for dealing with the
mismanagement in the companies registered under the Co1npanies Act. We
see no reasonable basis for classifying the race-club for the purposes of
acquiring and transfer of its undertaking on the ground of mismanagement. D
We see considerable force in the contention of Mr. Prasaran that the
acquisition and transfer of the undertaking of the club is arbitrary. The two
Acts were amended by the 1949 Act and the definition of "gaming" was
amended. The object of the amendment was to include horse racing in the
.... definition of "gaming". The provisions of the 1949 Act were, however, not E
enforced till the 1974 Act was enacted and enforced with effect from March
31, 1975. The 1974 Act was enacted with a view to provide for the abolition
of wagering or betting on horse races in the State of Tamil Nadu. It is thus
obvious that the consistent policy of the State Government, as projected
through various legislations from 1949 onwards, has been to declare horse F
racing as gambling and as such prohibited under the two Acts. The operation
of the 1974 Act was stayed by this Court and as a consequence the horse
races are continuing under the orders of this Court. The policy of the State
Government as projected in all the enactments on the subject prior to 1986
shows that the Stale Government considered horse racing as gambling and as G
such prohibited under the law. The 1986 Act on the other hand declares horse
racing as a public purpose and in the interest of the general public. There is
apparent contradiction in the two stands. We do not agree with the contention
of Mr. Prasaran that the 1986 Act is a colourable piece of legislation, but at
the same time we are of the view that no public purpose is being served by H
438 SUPREME COURT REPORTS [1996] l S.C.R.
A acquisition and transfer of lhe undertaking of the club by the Government.
We fail to understand hov,/ the State Govcrn1nent can acquire and take over
the functioning of the race club when it has already enacted the 1974 Act
with the avowed object of declaring horse racing as ga111bling? Having

-
enacted a la\\' to abolish betting on horse racing and stoutly defending the
B same before this Court in the name of public good and public morality, it is
not open to the State Government to acquire the undertaking of horse racing
again in the name of public good and public purpose. It is ex'facie irrational
to invoke "public good and public purpose" for declaring horse racing as
gambling and as such prohibited under law, and at the same time speak of ...
C "public purpose and public good" for acquiring the race club and conducting
the horse racing by the Govern1nent itself. Arbitrariness is wrir large on the
face of the provisions of the 1986 Act.

We, therefore, hold that the provisions of 1986 Act are discriminatory
and arbitrary and as such violate and infract the right to equality enshrined
D under Article 14 of the Constitution.

Since we have struck down the 1986 Act on the ground that it violates A

Article 14 of the Constitution, it is not necessary for us to go into the
question of its validity on the ground of Article 19 of the Constitution.
E ....
We allow the writ petitions and the civil appeal. The impugned
judgment of the High Court is set aside. We hold and declare that horse
racing is a game of mere skill within the meaning of Section 49 of the Police
Act and Section 11 of the Gan1ing Act. Horse racing is neither "gaming" nor
"gambling" as defined and envisaged under the two Acts read with the 1974 •
F Act and the penal provisions of these Acts are not applicable to the horse
racing which is a game of skill. The 1986 Act is ultra vires Article 14 of the
Constitution and as such is struck down.

We direct the Committee of Management under the Chairmanship of
G Justice S. Natarajan, appointed by this Court, to hand over the management,
functioning and operation of the club to a duly constituted Management
Committee, under the Memorandum and Articles of Association of the Club,
before March 31, 1996. We leave the parties to bear their own costs.

TN.A. Appeals and Petitions allowed.