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This article is authored by Akash Krishnan, a law student from ICFAI Law School, Hyderabad. It analyses the recent Kerala High Court judgment regarding the ban of online rummy that was played for stakes.

Introduction

The case in question is Head Digital Works Private Limited v. State of Kerala (2021). Herein, the Kerala Government vide Notification no. G.O.(P)No.26/2021/HOME had amended the exemption Notification dated 30-09-1976 issued under Section 14A of the Kerala Gaming Act, 1960 (KGA). The Petitioners were companies that engaged in providing services of online gaming that were skill-based. Through this amendment Notification, the Kerala Government had banned online rummy that was played for stakes on the ground that it was not a game of skill since stakes were involved. The Hon’ble High Court of Kerala after observing the various statutory provisions and precedents involved came to the conclusion that online rummy, irrespective of whether or not it is played for stakes, is a game of skill and that the Notification issued by the Government is arbitrary, illegal and in violation of the fundamental rights guaranteed under Articles 14 and 19(1)(g) of the Constitution.

Before moving on towards the case, we need to understand the concept of a game of skill and a game of chance and the distinction between them.

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A game of chance is a game in which some device that produces random outcomes, plays and decides the outcome of the game and all the players involved bet or wager on the outcome. These devices include dice, roulette wheels, playing cards etc. On the other hand, a game of skill is a game where the mental or physical skill of the player determines the outcome of a game. The test to be applied to determine whether a game is a game of chance or a game of skill was laid down by the Supreme Court in R. M. D. Chamarbaugwalla v. Union of India (1957). The Court held in a game, if the chance is also a deciding factor in the outcome of a game but at the same time game is mainly dependent on the skill of the player, then the game will be considered as a game of skill.

Case analysis

Statutory provisions involved

Several provisions of the Kerala Gaming Act 1960 (KGA) were considered by the Court. The relevant provisions have been enumerated below:

SectionProvision
Section 2(2)Gaming: This includes both wagering and betting. Wagering and betting include any activity where there is a collection of bets and distribution of the winnings amongst the winners and any other act that aids/abets wagering and betting.
Section 14Game of skill: The provisions of this Act do not apply to any game of mere skill.
Section 14AExemptions: The Government may exempt any game from the provisions of this Act if it deems that such game is based predominantly on skill.

In light of the powers given to the Government under Section 14A, the Government issued a Notification dated 30-09-1976 exempting certain games from the ambit of this Act subject to the condition that no side betting should be allowed in such games. The exempted games are enumerated below:

  1. Rummy;
  2. Card games;
  3. Dart throw;
  4. Ball throw;
  5. Cup and coin;
  6. Shooting contests.

Arguments by the Petitioners

  1. Section 14A of the KGA gives the Government the power to exempt games that are skill-based from the purview of the Act. The provision does not empower the Government to take away an exemption that was already granted.
  2. The Notification issued by the Government under Section 14A only prohibited side betting but did not prohibit playing a game for stakes.
  3. Online rummy played for stakes is similar to rummy played for stakes in clubhouses and when clubhouse rummy is deemed to be a game of skill, online rummy should also be given the same status.
  4. Section 14 of the KGA exempts any game of mere skill from the provisions of the Act. Online rummy is a game that is predominantly based on the skill of the player. Skills w.r.t holding and discarding cards, memorising the fall of cards etc is an absolute necessity to play and win the game.
  5. The term side betting does not include playing for stakes. Support for this argument was drawn from the definition of side betting given under Merriam Webster’s dictionary.
  6. The Petitioners have a fundamental right to carry on business as provided under Article 19 and thus the Notification that places a ban on continuing the business of providing services w.r.t online rummy is violative of Article 19.

Arguments by the State

  1. Gambling and betting are covered under Entry 34 of the State List under Schedule VII. Thus, the State has the power to legislate on the same.
  2. Online rummy is not a game of skill and there is an element of cheating and manipulation involved in the game.
  3. By engaging in playing rummy for stakes, the hard-earned money of the common man is lost thereby leading to lowering his standards of living and driving him into a chronic state of indebtedness.
  4. Therefore, the game of rummy is injurious to the public interest and such trade should be prohibited.

Issues involved

  1. Whether rummy is a game of mere skill?
  2. Whether the element of skill is predominant than the element of chance in rummy?
  3. If rummy is a game of skill, then can online rummy also be treated as a game of skill?
  4. Does the inclusion of stakes for playing online rummy shift the balance of skill towards chance?
  5. Does the Government have the power under Section 14A of the KGA to notify a game as a game of chance?
  6. Whether the Notification issued by the Government is arbitrary, illegal and in violation of Articles 14 and 19(1)(g) of the Constitution?

Observations

  1. In State of Andhra Pradesh v. K. Satyanarayana (1968), the Supreme Court while dealing with Section 14 of the Public Gambling Act, 1867 which is similar to Section 14 of KGA had observed that the game of rummy is not entirely based on chance. This is because building up rummy requires considerable skill and skill is also required for memorising the fall of cards, holding and discarding cards etc. In light of the above observations, the court held that the game of rummy is predominantly a skill-based game and cannot be categorised as a game of chance and protection under Section 14 will be available to the game of rummy.
  2. In Dr. K.R. Lakshmanan v. State of Tamil Nadu (1996), the Supreme Court looked into the aspect of gambling in a game of skill. It observed that a competition wherein a substantial degree of skill is involved and the results of the competition are based on the application of such skill, even if there is an element of chance, the competition would not be deemed to be gambling. It further went on to define the term mere skill as an application of a substantial degree or preponderance of skill. It also held that in order to come within the meaning of gaming, there should be gambling on a game of chance and that playing rummy for stakes is not an offence.
  3. In Ramachandran K. v. Circle Inspector of Police, Perinthalmanna (2019), the Kerala High Court made several observations regarding whether rummy played in club premises would amount to gambling and therefore be punishable under the KGA. The relevant observations have been enumerated below:
  1. Playing rummy in a clubhouse for stakes amounts to gambling and every person involved in playing the game would be held liable under the KGA.
  2. No notification was issued by the Government under Section 14A exempting a game of rummy played for stakes from the ambit of the KGA.
  3. The definition of a common gaming house under KGA does not exclude rummy for stakes played within the club, even if the club is not making a profit from the business.
  4. Playing rummy as an innocent pastime is not an offence and is a game of skill.
  5. The Hon’ble High Court criticised the observations made in the aforesaid judgment and held that the judgement is not binding because it was rendered per incuriam. Per incuriam means ignorance of statutory provisions or any other authority that is binding on the court while giving the judgement, therefore, making the judgement demonstrably wrong. The reasons for which the Hon’ble High Court declared the judgement per incuriam have been enumerated below:
  1. The Supreme Court had time and again held that the game of rummy is a game of skill.
  2. Gambling on a game of skill does not come under the ambit of gaming as defined under the KGA Act.
  3. Once a game is declared as a game of skill, it is exempt from the provisions of KGA as provided under Section 14. Rummy being a game of skill is therefore exempt.
  4. No special notification under Section 14A is required exempting rummy as it is already exempt under Section 14.
  5. The Supreme Court has held that playing rummy for stakes is not an offence.

Judgment

  1. As decided by the Supreme Court in K. Satyanarayana and Lakshmanan and in light of Sections 3 and 14 of the KGA, the Hon’ble High Court is of the view that rummy is a game of skill as the element of skill is predominant than the element of chance.
  2. Rummy is a game of skill and is therefore exempted under Section 14 and thus, a Notification for exemption under Section 14A is not required in this case.
  3. The term game of skill is not dependent on whether or not the game is played for stakes. As long as the game is being played by using skill, irrespective of the fact that stakes are involved, the game will be exempted under Section 14.
  4. Since rummy is a game of skill, online rummy will also possess the same character and remain a game of skill.
  5. Prohibition of Online Rummy played for stakes is not a reasonable restriction under Article 19(6) of the Constitution.
  6. Since the Notification was issued w.r.t a game that was already exempt and since there is no gambling involved, the Notification shall be deemed to be arbitrary, illegal and in violation of Articles 14 and 19(1)(g) of the Constitution.

Recent decisions on online games

Name of the CaseRatio
Junglee Games India Private Limited vs. The State of Tamil Nadu (2021)Rummy is a game of skill irrespective of the mode (physical or virtual) it is played in.
Chandresh Sankhla vs. State of Rajasthan (2020)In Dream 11, there is no element of betting or gambling involved since it is a game of skill.
Gurdeep Singh Sachar vs. Union of India (2019)Dream 11 Fantasy gaming app provides games that are based on the skill of the users. Thus, they qualify as games of skill.
Varun Gumba vs. Union Territory of Chandigarh (2017)The online games in Dream Fantasy 11 are games of skill and not games of chance.
D. Krishnakumar vs. State of A.P (2002)A game of rummy that involves playing for stakes is not an offence.
Executive Club vs. State of A.P (1998)Rummy is a game that is predominantly based on the skill of the player.

Conclusion

What can be noted from the aforesaid discussion is that there is a thin line of difference between a game of chance and a game of skill. Any game that involves a considerable degree of skill being employed by the players while playing the game would qualify as a game of skill and on the other hand, any game that is merely based on the chance or luck of the player would be deemed as a game of chance. When it comes to gambling and playing for stakes, it is pertinent to note that when such gambling takes place in a game of skill it will be valid in the eyes of law. However, gambling activities in a game of chance is not valid.

Rummy or online rummy, as the case may be, requires the player to use their skills in different ways. The use of the skill is a predominant factor and therefore rummy is deemed to be a game of skill.

References

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