This article is written by Mahelaka Abrar, from Faculty of Law, Aligarh Muslim University wherein she presents a detailed overview of the Lotteries Regulation Act of 1998 along with its critical analysis and the way forward.
The Lotteries Regulation Act, 1998 is an important piece of legislation that lays down thorough guidelines for the central government to conduct lotteries in India. It also allows the government of the states to conduct and regulate lotteries subject to certain conditions. This act was enacted on the 7th of July in the year 1998 and was brought into force on the 2nd of October 1998 subsequently. It replaces the Lotteries (Regulation) Ordinance of 1998. The basic question that now arises in this regard has been mentioned below.
What is a lottery
According to Section 2 (b) of the Lotteries Regulation Act, the lottery can be defined as a scheme under which the distribution of prizes takes place by deciding the fate of the purchasers of tickets by a lot or chance. The distribution might be in “whatever form” and may be called by “whatever name”.
Additionally, Section 2 (a) of the Act defines the term “bumper draw of the lottery” which means a special lottery which is drawn on any festival or special occasion wherein the offered prize money is greater than the prize money offered in an ordinary draw of lotteries.
Other than that, there are also different kinds of lotteries such as the single-digit lottery, the double-digit lottery or the 50-50 draw lottery wherein half the amount earned as prize money by the lottery winner is given to him and the other half retained by the lottery organisers in accordance to certain prior agreements between the two.
Significance of lottery
Lotteries have been a popular game of gambling worldwide for a long time. They were usually sold in the medieval period to raise money for the fortifications of the town, and to help the needy population of the area. In today’s world, many lotteries are conducted worldwide as a means for governments to raise revenue without raising taxes. But since the advent of the 21st-century lotteries have been banned in many countries in order to stop gambling and bankruptcy among the poorer sections of society. While in other countries, the likes of India, the Central and State lotteries are organized with restrictive terms and conditions.
Objective of enactment
While the whole of India’s gambling is governed by many Indian gambling laws, the Lotteries Regulation Act of 1998 acts as a separate law is to just deal with the system of lotteries in India. The act was drafted with a view to regulate the buying and selling of lotteries in the country and subsequently bringing the whole commerce of selling lotteries under the grip of the State. It also leaves the discretion upon the state government to regulate, control, and promote lotteries or ban them altogether. The Act with its enforcement has, therefore, banned private conduction of lottery in any form whatsoever.
As of 2019, many state governments have considered banning lotteries except for 13 states which include Sikkim, Mizoram, Nagaland, Arunachal Pradesh, Kerala, Assam, Goa, Maharashtra, Punjab, Madhya Pradesh, West Bengal, Manipur, and Meghalaya. The lottery system enjoys much popularity in these states and witnesses a large number of public participation. This, in turn, has also invited several criticisms and has constantly been a subject of consideration of many social activists who are trying to raise awareness about the harmful and addictive nature of lottery gambling and therefore, demanding its ban altogether.
The key provisions of the Act are enumerated as below:
Conditions subject to which lotteries are to be organized
- This law allows for the Central Government of India to control the conduct of lotteries within each state. The Act creates regulatory roles for the central and state-level governments where central governments must keep track of states running lotteries and states must ensure their lawful participation and execution of lotteries within their borders.
- Under the Central Lotteries Regulation Act of 1998, private individuals are forbidden from operating and running any lottery schemes. The Act also states rules for the look of lotteries themselves in which they must have a logo or type or mark identifying them and the lottery retailer/operator. The State government is required to print lottery tickets bearing the imprint or logo of the state in such a manner that the authenticity of the ticket is ensured. [Section 4 (b)]
- In order to lawfully provide lotteries, states and their authorized selling agents are prohibited from pre-announcing prizes before drawings and are not permitted to allow more than one lottery drawing per week [Section 4 (h)]. Moreover, the bumper draw of the lottery is to be kept at a maximum of six draws per year. [Section 4(j)]. In addition to that, it is necessary that the place of the draw of the lottery must be within the concerned state organizing the lottery. [Section 4(g)]
- Moreover, it is mandatory that the proceeds of the sale of lottery tickets are to be credited into the public accounts of the State [Section 4(d)] and the prize money, if unclaimed, within the time prescribed by the State Government shall be deemed to have become the property of that Government [Section 4(f)].
Penalty for breach
- If any lottery is organized in contravention of the provisions of this Act, the head of the Department of the concerned Department will be held for the breach and be punishable with rigorous imprisonment for two years or with or both [Section 7(1)]. However, if he proves that such contravention was committed without his knowledge or that he exercised his due diligence, he will not be rendered liable for the same.
- If a contravention under the Act has been committed by a Department of Government with the consent or neglect on the part of any officer, such officer is also to be held guilty of the contravention and punished accordingly under relevant sections. [Section 7(2)]
- Further, if an individual portrays himself as an agent, trader or promoter of any lottery that is organized, conducted or promoted in violation to the provisions of this Act or even sells, distributes or purchases tickets of such lottery, he will be punishable with rigorous imprisonment for two years or levied a fine or may be charged with both. [Section 7(3)]
- Similarly, if a violation under this Act has been perpetrated by a company, every person in the company, who has been vested with the responsibility of the fair conduct of the company will be made liable and punished accordingly. [Section 9(1)]
- In circumstances where it has been proved that a company has transgressed under the Act and that such transgression is committed with the consent of any director, secretary, director or is attributable to any neglect on their part, then such person will be considered guilty of the offence and will be proceeded against and punished accordingly. [Section 9(2)]
- It is important to note that the offences under this Act are cognizable and non-bailable. [Section 8]
Power of Central and State Government to make rules
- The Central Government is empowered to make rules in order to carry out any of the provisions of the Act [Section 11 (1)]. After receiving approvals from both the House of Parliament, the rule so made shall have effect only in such modified form so that any modification or annulment is without prejudice to the validity of anything previously done under the rule. [Section 11(2)]
- The State government, similarly, can make rules to carry out any of the provisions of this Act [Section 12 (1)]. The rule so made could be made in particular and without prejudice to the generality of the foregoing power for matters like fixing time for claiming the prize, the period for drawing of lotteries, or any matter which is required to be settled. [Section 12 (2)]
Prohibition of sale of tickets or organization
- The state government is empowered to prohibit the sale of tickets of lottery organized, conducted, or promoted by any other state in its own state [Section 5]. However, it cannot single out another state’s lottery for the ban. It has to either allow all lotteries or ban lotteries altogether.
- The Central Government is empowered to ban any lottery that is organized, conducted, or promoted in violation to the provisions of Section 4 of the Act or when a lottery is sold as against the provisions of Section 5 of the Act [Section 6].
Ban on single-digit lottery
Section 4 (a) of the Act bans lottery for a single-digit number. This brings us to the question as to what is a single-digit lottery. A paper or paperless lottery may have several digits in it but if the prizes are announced on the basis of the last digit, then it becomes a single-digit lottery. This trend tends to attract more buyers as chances of winning a prize are certain when a buyer buys a bunch of tickets to increase one’s chances of winning. However, with the coming of this Act single-digit lottery has been banned by the government as it might increase gambling among the poor and bankrupt large sections of low-income populations.
How is India’s lottery legal
At present lotteries in India are governed by the Lotteries Regulation Act, 1998. The state is allowed to conduct, promote, and regulate lotteries subject to conditions. Amid the uproar of many social activists for banning lotteries India, the Supreme Court awarded this right to be rested in each individual state government to decide whether or not the activity can be carried out in their respective jurisdiction. The apex court also refused to give the sale of lotteries the status of a fundamental right. Many of the state governments in India have banned lotteries but these bans are not effective as lotteries still continue to function online and also illegally.
At the moment, the lottery is legal only in the 13 abovementioned states. They enjoy a lot of popularity in the states of Kerala, Mizoram, Maharashtra, Nagaland, and Sikkim. The minimum age to purchase a lottery ticket in India is 18 years but no age limit on the gifting of a lottery ticket has been prescribed.
Many operators within India also run online lottery schemes, which are, technically, more difficult to monitor as they have extensive reach via the internet. In addition to this, there are several international online lotteries, which are also popular across India. Lotto India is one such online legal lottery platform in India that enjoys considerable popularity among the masses.
Why is lucky draw legal but not a lottery
To answer this question as to why is lucky draw legal in India recently the NITI Aayog clarified that the Lotteries Regulation Act, 1998, Section 2(b) states that the lucky draws which are conducted to promote digital transactions do not come under the category of lottery and are thus not banned. The Act defines lottery as ‘a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets’
The Supreme Court sanctions the state governments to ban lottery in India as it is a form of gambling that has the potential to make the poorer section of the society an addict and push it to the verge of bankruptcy. However, this could not be said in the case of lucky draws as the lucky draw scheme abides by the Lotteries Regulation Act, 1998 stays within the given parameters. Moreover, most lucky draws which are organized by the governments do not require the participants to purchase a ticket and anyone can directly come and try their luck.
This, by any means, does not account to gambling. Sometimes, online lucky draws require the payment of a small amount which is generally collected by companies like Mastercard or Rupay, or by other banks used for payment but the government on its side does not charge anything from the participants and offers prizes gratuitously. With that being said, it is clear that a lucky can be distinguished from the lottery and would not fall under the same category of gambling. This answers the legality of lucky draws in India as against the lottery.
Section 2(1)(r) Consumer Protection Act, 1986 also prohibits any kind of unfair trade practice which includes “conducting any lottery or contests whether skill or chance to promote the sale, use or supply of any goods or for the provision of any service.” The NITI Aayog has clarified its stance on this as well by contesting that offering lucky draws to promote digital transactions does not include any service and the customer does not pay anything for being eligible for the reward. These kinds of lucky draws usually include small cashback offers for payment through digital means. Thus, the lucky draw scheme stays out of the ambit of consumer protection laws as well as the Lottery Regulation Act, 1998.
The legality of Niti Aayog’s lucky draw scheme
The Central Government launched two schemes on 25th December 2016 namely -the Lucky Grahak Yojana and the Digi-Dhan Vyapar Yojana. The two schemes were launched by the government to encourage customers to switch to cashless modes of transactions. According to NITI Ayog the scheme aimed at giving rewards to customers who use digital mode of payments for consumptions and expenditures. It would also help to bring small and middle businesses under the digital fold.
However, the schemes came under the limelight and were criticized for being violative of the Lotteries Regulation Act, 1998. It was contested that the schemes constituted “lottery” under the mentioned Act and therefore needed to be within the parameters of the Act. Failure to be so would render the schemes illegal.
Furthermore, on a closer examination of Section 2(b) of the Act discloses that the lucky draws conducted to promote digital transactions do not fall within the definition of ‘lottery’. The definition required three essential conditions to be fulfilled in order to constitute a lottery, that is chance, consideration (for purchasing tickets), and prize or reward. In the schemes of the government, the essential element of consideration (purchasing ticket) is missing. The government on its own accord is offering incentives and prizes to customers without charging them anything. Therefore, such gratuitous offering by the government cannot be regarded as a lottery and would fall outside the ambit of the Lotteries Regulation Act, 1998.
The original intent of the drafting of the Act was to regulate and control lottery sales and bring the business of distributing lotteries back in the hands and control of state governments from private individuals. While India’s Legislature and Judiciary have often frowned on chance gambling within India, few exceptions have been made toward games of skills and lotteries.
Although lotteries can easily be categorized as a game of chance, primarily due to lack of skill involved, it has still been legalized and is considered a legal form of gambling when organized by the government of the country. A reason for this may be the immense sales and tax revenue received from gambling. A lot of people are of the view that the act was created to bring legal funds of gaming back into the pockets of state governments and central governments. However, others believe that the state and central government wish to ramp up lottery tax and sales revenue in order to fund special interest projects. This being said, while sales revenue or proceeds are ordered to be placed in the State’s Treasury or ‘public account of the state’ it seems as though the revenue made from lotteries does not trickle back down to benefit the public.
The way forward
The Lotteries Regulation Act of 1998 was amended in the year 2010 in order to provide crystal clear definitions to meet the changes of the modern generation and fit in accordingly. The additions made to the original Lotteries Regulation Act of 1998 were made under the new amendment namely the Lotteries Regulation Rules of 2010 in which certain terms like ‘Central computer server’, ‘online lottery’, ‘prizes’, ‘security deposits’, etc. were explicitly phrased and defined. In addition to that, Section 3 of the Central Lotteries Regulation Act of 1998 was completely rephrased, and new guidelines were incorporated so as to keep a track of the sale of lottery tickets in individual states. This new amendment, as a matter of fact, strengthened the Lotteries Regulation Act of 1998. While the Central Lotteries Regulation Act is still operative and applicable throughout India and remains the principal guideline for the determination, restriction, and conduction of lotteries within each State, the newly enacted Lotteries Regulation Rules of 2010 have provided the much needed legal clarification to help guide the sale of lottery tickets on online platforms and facilitate its conduction over the medium of the internet.
Suggestions and Conclusion
While lotteries remain a popular game of chance among many states of India, the Indian government should devise more such lottery laws in order to ensure it’s efficient conduction. There has been news of illegal and fraudulent lotteries, a proper mechanism to check the same should also be constructed by the mutual cooperation of the State and Central government. The rising demands among many sections of society to legalize lottery, gambling in the private sector should be also settled by way of talks with concerned representatives and shareholders. Moreover, with the constantly rising popularity of lotteries, it is important for the government to check in cases of excessive addiction which often leads to bankruptcy in the poor strata of society. This could be done by setting a limit on the buying of tickets by each individual. Given the growing need of the time, the government should manifest utmost smartness and adaptability to regulate the fair conduction of lotteries throughout the country.
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