TMI Blog1996 (1) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution? Held that:- 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 Gaming Act. Horse racing is neither "gaming" nor "gambling" as defined and envisaged under the two Acts read with the 1974 Act and the penal provisions of these Acts are not applicable to 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 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. - WRIT PETITION (C) NO. 665 OF 1986. - - - Dated:- 12-1-1996 - KULDIP SINGH, B.L. HANSARIA AND S.B. MAJMUDAR, JJ. Vineet Kumar, Mukul Mudgal, Ajit Kumar Sinha, P.R. Seetharaman, R.P. Wadhwani, S. Srinivasan, W.C. Chopra, K. Swami, Ms. Asha Jain Madan, P.N. Ramalingam, Mrs. M. Karanjawala, K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India (the Constitution) and as such is protected under article 31( c ) of the Constitution 1 If not, whether the 1986 Act is liable to be struck down as violative of articles 14 and 19(1)( g ) of the Constitution? 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 (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 nutshell 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 in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Play not with dice: no, cultivate thy cornland. Enjoy the gain, and deem that wealth sufficient. There are thy cattle, there thy wife, O gambler, so this good Savitar himself hath told me.' The Mahabharata deprecates gambling by depicting the woeful conditions 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 branded and punished by the king. Kautilya also advocated State control of gambling and, as a practical person that he was, was not adverse to the State earning some revenue therefrom. Vrihaspati dealing with gambling in Chapter XXVI, verse 199, recognises that gambling had been totally prohibited by Manu because it destroyed truth, honesty and wealth, while other law-givers permitted 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, Volume IV, Book XLIV, includes gambling as a kiraheeat or abomination." The learned Chie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g cannot certainly be taken as one of them. We are convinced and satisfied that the real purpose of articles 19(1)( g ) and 301 could not possibly have been to guarantee or declare the freedom of gambling. Gambling activities from their very nature and in essence are extra-commercium although the external forms, formalities and instruments of trade may be employed and they are not protected either by article 19(1)( g ) or article 301 of our Constitution." On the crucial question whether the games which depend to a substantial degree upon the exercise of skill come within the stigma of "gambling", S.R. Das, Chief Justice in State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699, held as under (page 707): "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] 1 KB 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... single inseverable enactment, it must fail in its entirety in respect of both classes of competitions. Mr. Seervai, who appeared for the respondent, disputes the correctness of these contentions. He argues that 'prize competition', as defined in section 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 article 19(1)( g ), and that accordingly the petitioners are not entitled to invoke the protection of article 19(6) and; that even if the definition of 'prize competition' in section 2( d ) is wide enough to include competitions in which success depends to a substantial degree on skill and sections 4 and 5 of the Act and rules 11 and 12 are to be struck down in respect of such competitions as unreasonable restrictions not protected by article 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." The learned judge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtends to the whole of the city of Madras, as defined in section 3 of the said Act. Section 3 of the Police Act defines "common gaming house", "gaming" and "instruments of gaming" in the following 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 of the person owning, occupying, using, or keeping such house, room, tent, 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, tent, enclosure, vehicle, vessel or place opened, kept or used or permitted to be opened, kept or used for the purpose of gaming; 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, ( 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 State Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such fine shall not be less than five hundred rupees for the first 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 fine shall not be less than one thousand rupees for the third or any subsequent offence." Section 49A of the Police Act was substituted for the original section by section 2( iii ) of the Madras City Police and Gaming (Amendment) Act, 1955 (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 house, gaming and instruments of gaming which is identical to the definitions given under the Police Act. Sections 5 to 10 of the Gaming Act are identical to sections 42 to 47 of the Police Act. Section 11 of the Gaming Act is as under: "11. Nothing in sections 5 to 10 of this Act shall be held to apply to games of mere skill wherever played." Section 4 of the Gaming Act to the extent relevant reads: "4. (1) Whoever- ( a ) being the owner or occupier or having the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the sanction of 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, the said provisions have been brought into 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 VII of 1949), in section 1, (1)in sub-section (2), the portion commencing with the expression 'and sections 2 and 4' and ending with the expression 'appoint', shall be omitted; (2)after sub-section (2), the following sub-section shall be inserted, namely: (3)Sections 2 and 4 shall come into force on the 31st March, 1975, notwithstanding anything contained in any law for the time being in force or in any notification or order issued by the Government." The 1974 Act was challenged before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 be 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, betting on horses does involve an element of gambling and we are 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 by the club. Under the interim orders of this court, issue 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 article 32 of the Constitution challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have no direct contract with the club. The club pays from its own funds the prize money (stake-money) to the winning horses. The horses who win the first, second, third and up to 5th or 6th place are given prizes by the club. The club income consists of entrance fee, 5 per cent. commission paid by the bookmakers 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 bookmakers. 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 games of "mere skill wherever played". The expression "game of mere skill" has been interpreted by this court to mean "mainly and preponderantly a game of skill". In State of Andhra Pradesh v. K. Satyanarayana [1968] 2 SCR 387; AIR 1968 SC 825, the question before this court was whether the game of rummy was a game of mere skill or a game of chance. The said question was to be answered on the interpretation of section 14 of the Hyderabad Gambling Act (2 of 1305F) which was in pari materia to section 49 of the Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a substantial degree or preponderance of skill. 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: "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 on which bets are placed is not based on pure chance. A considerable degree of skill goes 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 necessarily consistent in fitness, which is the reason why horses are exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished. 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 became familiar to Europeans during the Crusades (11th 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 riders. Races were created in which owners were the riders (gentlemen 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orse races, did not violate a provision of the State Constitution prohibiting lotteries. The court observed as under: "The winning horse is not determined by chance alone, but the conditions, 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 racing the horses are subject to human guidance, management, and urging to put forth their best efforts to win'." The question before the Michigan Supreme Court in Edward 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 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 provision of the State Constitution prohibiting lotteries. See also, Utah State Fair Association v. Gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain events, nor does the expression 'games of chance' embrace all games. As generally understood, games are of two kinds, games of chance and games of skill. Besides, there are trials of strength, trials of speed, and various other uncertainties which are perhaps no games at all, certainly they are not games of chance. Among 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 the speed of two horses. It is said that a horse race is not only uncertain in 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 some unlooked-for circumstance 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 misses its mark by accident. In this case, therefore, we reasonably feel disappointed, but not in the other, for blind uncertainty is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 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 minds of the betting atmosphere which surrounds 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 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 by merit of performance. The former is a lottery; the latter is not." We have no hesitation in reaching the conclusion that horse racing is a sport wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 bookmaker and not with the club. It is not necessary for us to go into this question. Even if there is wagering or betting 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 Act and section 4 of the Gaming 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 race enclosure which the authority controlling such race had with the sanction of the State Government 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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 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 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 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 club. These sections are applicable to bucket-shops or any house, house room, tent, enclosure, vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, 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: "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 Government of the undertaking of the club. On the appointed day, the undertaking of the club and 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 Government. 5. General effect of vesting. (1) The undertaking of the club shall be deemed to include the business in the running of horse races at Madras and at Uthagamandalam (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, leaseholds, powers, authorities and privileges and all property, movable and immovable, including lands, buildings, works, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the Legislature that the Act has been made to implement the directive 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 v. Union of India [1992] Supp 1 SCC 692, stated the legal position in the following terms (at page 703): "The extent and scope of judicial review of legislation where there is a declaration under article 31C of the Constitution which enjoins that no law containing a declaration that it is for giving 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 v. State of Kerala [1973] 4 SCC 225; AIR 1973 SC 1461. On an analysis of the majority judgment therein, Sabyasachi Mukharji J. (as he then was) observed in Tinsukhia Electric Supply Co. Ltd. v. State of Assam [1989] 3 SCC 709 that the declaration in article 31C does not exclude the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncentration 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 a 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 community" nor "to sub-serve the common 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 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( b ) and ( c ) of the Constitution. While article 39( b ) refers to "material resources of the community", the aims and objects of the Act refer to "the material resources of the Madras Race Club " . It is difficult to understand what exactly are the material resources of the race-club which are sought to be distributed so as to sub-serve the common good within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, it is not gambling, and as such the business of horse-racing is a fundamental right guaranteed under the Constitution. Taking away the 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 Constitution. 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 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 malpractices in the conduct of the horse-races have been brought to the notice of the Government; ( iv )The bookmakers keep huge amounts of bet from records causing substantial loss of revenue to the Government; and ( v )The Government are satisfied that the company is being mismanaged and the interests of the race-going public have been affected considerably. It was for the above reasons that the impugned Act acquiring, for a public purpose, the undertaking of the club was enacted. There is no material on the record to show that any inquiry or invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to include horse racing in the definition of "gaming". The provisions of the 1949 Act were, however, not 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 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 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 1985 shows that the State Government 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 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. Parasaran that the 1986 Act is a colourable piece of legislation, but at the same time we are of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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