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2015 (11) TMI 1698

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..... tery and that would be within the legislative power vested with the State under Section 5 of the Act as in that case the State would be only complying with the provisions of the Act made by the Parliament. The learned Single Judge while examining the facts of the case, manner and method in which the sale of online lotteries are conducted, has already held that it violates the provisions contained in Section 4 of the Act. In fact, during the course of arguments, no effort was made to dislodge the findings recorded by the courts below. The view adopted from the observation made by this Court in B.R. Enterprises (1999 (5) TMI 498 - SUPREME COURT OF INDIA), in any case, is possible. Learned single Judge of the High Court rightly mentioned in his judgment that “in fairness, it must be conceded that Section 5, in the light of the interpretation in B.R. Enterprises (1999 (5) TMI 498 - SUPREME COURT OF INDIA), admits two interpretations. One is that the State can prohibit any form of lottery, if only it is not running any lottery at all. The second interpretation is that the State can prohibit a particular form of lottery, if it is not running that form of lottery, even if it is running .....

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..... ducted or promoted by the State as well as by every other State Government in the State of Kerala with immediate effect and declared that the State shall hereafter be a Lottery Free Zone. (c) The State of Kerala, in partial modification of the notification dated 27.01.2005, issued a subsequent notification dated 22.04.2005, permitting the sale of paper lotteries organized, conducted or promoted by every State Government including the State of Kerala and the prohibition imposed on the sale of computerized and on-line lottery tickets organized, conducted or promoted by every State Government continued to remain in force declaring the territory of the State of Kerala to be online, internet and computerized lotteries free zone. (d) Being aggrieved by the notification dated 22.04.2005 discriminating between the paper lotteries and online lotteries, the All Kerala Online Lottery Dealers Association, State of Sikkim and one Sreekala and others filed Writ Petition (C) Nos. 19582, 14495 and 16063 of 2005 respectively before the High Court. (e) A learned single Judge of the High Court, by judgment and order dated 27.07.2005, dismissed the writ petitions. (f) Being aggrieved by th .....

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..... (1999) 9 SCC 700. The distinction drawn by the State Government between paper lottery and online lottery is discriminatory and violative of Article 14 of the Constitution of India. Learned senior counsel further contended that the impugned notification is vitiated by mala fides. It was further alleged that the State Government is being controlled by the paper lottery mafia and under its influence the sale of online lottery tickets has been prohibited. The State Government does not have the competence to issue the impugned notification. Though the State Government is competent to legislate on lotteries by virtue of Item 34 of List II concerning betting and gambling, the power to legislate on lotteries organized by the Government of India or the Government of a State is the exclusive preserve of the Parliament by virtue of Entry 40 of List I of the Seventh Schedule. So, the State Government, which is incompetent to legislate on lotteries run by other States, has no power to issue the impugned notification. The State Government, without legislative competence, has ventured to prohibit online lottery which is totally fraudulent and colourable exercise of the power. 6) Learned senio .....

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..... nized without the condition stipulated under clauses (a) to (k) of Section 4. Section 4 provides the conditions to be complied with by the State lotteries. To initiate any State lottery it is left to the policy of each State, for this Act is silent. The only control is, in case it decides, then it must follow the conditions as laid down under Section 4. Next comes Section 5 which is subject matter of challenge, the delegation of power to the State to prohibit the sale of lottery tickets organized by every other State. If a State desires not to subject its people to the lottery gambling, it has no power to restrict lotteries organized by other States. It is to remove this mischief that power is conferred through delegation to the States to do it in terms of their own policy. By virtue of this, now the State Government can prohibit sale of lottery tickets of every other State within its territory. Next, Section 6 seeks strict compliance with Section 4. Under this the Central Government may prohibit any State lottery which is being conducted in contravention of the conditions as laid down under Section 4 or Section 5. Section 7 shows the rigour of this Act by making it a penal offe .....

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..... nce for any free right under the Constitution. Such right though recognized under Article 298, so other States may continue to enjoy till prohibited by valid law, and if any State wants within its State lottery-free zone and for which the power is entrusted to such State, it cannot be said in this setting and background and the nature of the subject that such a delegation is of its essential legislative power. The only guideline necessary in such delegation is to see that the State does not pick and choose one State from the other, which guideline is already provided in this Section. It provides that such a ban could only be if it is applied to every other State. The only residual field of attack so far as this delegation could be, which has been attacked in this case, that the State could on one hand ban lotteries of every other State but run its own lotteries. It is argued that while a State bans lotteries of other States not to permit any gambling activity in the public interest as a policy but this very public interest is flouted by having lotteries of its own. It is true that unless this provision is read down to mean a State can only ban lotteries of other States when it bans .....

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..... f Section 5. Relying on the above quoted paragraphs, learned senior counsel for the appellants vehemently contended that the State shall either prohibit the sale of all lotteries or allow the sale of all lotteries in the State. Selective prohibition of a particular type of lottery is impermissible in the light of the above binding judgment. 8) In support of this submission learned senior counsel apart from the decision in B.R. Enterprises (supra) relied on the following decisions, viz., The Senior Electric Inspector and Others vs. Laxmi Narayan Chopra and Others 1962 (3) SCR 146, State (Through CBI/New Delhi) vs. S.J. Choudhary (1996) 2 SCC 428 and SIL Import, USA vs. Exim Aides Silk Exporters, Bangalore (1999) 4 SCC 567. 9) The learned senior counsel for the State of Kerala-the respondent herein supported the impugned notification by contending that the State Government is competent to prohibit a particular type of lottery. There is no fetter on the power of the Government under Section 5. Learned senior counsel further submitted that when the Parliament enacted the Act in the year 1998, there was nothing before it to presume that in times to come online lotteries will also .....

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..... tions of the society has been under scrutiny of the Government for quite some time. The continued prevalence of the popularly known single digit and instant lotteries and the temptation offered by them proved to be the undoing of many families, especially poor daily wagers and low income groups. In spite of the guidelines issued by the Central Government over a period of time as also the guidelines issued in the recent past by the Honourable Supreme Court. In the matter, the evil has not been totally eliminated and it is felt that a Central legislation to regulate the conduct of lotteries is necessary to protect the interest of the gullible poor. Section 2(b) defines lottery which reads as follows: 2 (b) lottery means a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets. 3. Prohibition of lotteries.-Save as otherwise provided in Section 4, no State Government shall organize, conduct or promote any lottery. Section 4 enumerates the conditions, subject to which a State Government may organize, conduct or promote a lottery, which reads as follows: .....

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..... out his knowledge or that he exercised all due diligence to prevent the commission of such contravention. (2) Notwithstanding anything contained in sub-section (1), where a contravention under this Act has been committed by a Department of Government and it is proved that the contravention has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any officer, other than the Head of the Department, such officer shall also be deemed to be guilty of that contravention and shall be liable to be proceeded against and punished accordingly. (3) If any person acts as an agent or promoter or trader in any lottery organized, conducted or promoted in contravention of the provisions of this Act or sells, distributes or purchases the ticket of such lottery, he shall be punishable with rigorous imprisonment for a term which may extend to two years or with fine or with both. 8. Offences to be cognizable and non-bailable.-The offence under this Act shall be cognizable and non-bailable. 11) From the above provisions, it can be seen that the tickets of a State- run lottery shall be printed by the State itself. Sale of tickets alone is permit .....

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..... ent from time to time. Government of Kerala Reg. No. KL/TV(N)/12/2003-2005 KERALA GAZETTE EXTRAORDINARY PUBLISHED BY AUTHORITY Vol.L Thiruvananthapuram 13th January, 2005 23rd Pousha 1926 GOVERNMENT OF KERALA Taxes (H) Department NOTIFICATION G.O.(P) No. 4/2005/TD dated, Thiruvanathapuram, 13th January, 2005. S.R.O. No. 34/2005 - In exercise of the powers conferred by Section 5 of the Lotteries (Regulation) Act, 1998 (Central Act 17 of 1998), the Government of Kerala hereby prohibit the sale of all Computerised and Online lottery tickets marketed and operated through vending machines, terminals, electronic machines and tickets sold through Internet in Kerala, with immediate effect and declare that Kerala shall be the free zone from Online and Internet By order of the Governor. P. MARA PANDYAN, Secretary to Government Explanatory Note (This does not form part of the Notification, but is intended to indicate its general purport). Government have decided to prohibit the sale of computerized and online lottery tickets in the State of Kerala with immediate effect This notification is intended to achieve the above objec .....

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..... erala hereby make the following rules to repeal the Kerala State Lotteries (Regulation) Rules, 2003 issued in G.O.(P) No. 118/2003/TD dated the 16th July, 2003 and published as S.R.O.No 646/2003 in the Kerala Gazette Extraordinary No. 1278 dated the 16th July, 2003, as amended subsequently, namely:- Rules 1. Short title, application and commencement:- (1) These rules may be called the Kerala State Lotteries (Regulation) (Repeal) Rules, 2005. 2. These rules shall apply to the whole of the State of Kerala. 3. They shall come into force at once. 2. Repeal:- The Kerala State Lotteries (Regulation) Rules, 2003 is hereby repealed. By order of the Governor. P. MARA PANDYAN, Secretary to Government Explanatory Note (This does not form part of the Notification, but is intended to indicate its general purport). Government of Kerala by notification issued as G.O.(P)No.11/2005/TD dated 27th January, 2005 and published as S.R.O.No 73 in Kerala Gazette Extraordinary No. 169 dated 27th January, 2005 has prohibited the sale of lottery tickets organized, conducted or promoted by the Government of Kerala. Accordingly the Kerala State Lotteries (Regulation) Rules, 200 .....

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..... he sale of all Lottery Tickets in the State of Kerala and have decided to reintroduce Paper Lottery conducted by the State Government with the same pattern and prize Structure as it prevailed before 27th January, 2005. From a perusal of the Notification dated 13.01.20015, issued by the Government of Kerala, we find that the State had prohibited the sale of all computerized and online lottery tickets marketed and operated through vending machines, terminals, electronic machines and tickets sold through internet in Kerala. However, by notification dated 27.01.2005, the State had prohibited the sale of tickets of all lotteries in the State of Kerala. Vide notification dated 27.01.2005, the Government of Kerala made the Kerala State Lotteries (Regulation) (Repeal) Rules, 2005 which repealed the entire Kerala State Lotteries (Regulation) Rules, 2003. Vide another notification dated 22.04.2005, the Government of Kerala lifted the prohibition of sale of paper lotteries organized, conducted or promoted by every State Government including the State of Kerala. However, the prohibition imposed on the sale of computerized and online tickets continued to remain in force. 13) In the 2010 .....

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..... d Article 246 of the Constitution of India which are as under:- Entry 40 List I-Union List 40. Lotteries organized by the Government of India or the Government of a State. Entry 34 List II-State List 34.Betting and Gambling. Article 246 of the Constitution 246. Subject matter of laws made by Parliament and by the Legislatures of States.- (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List ). (2) Notwithstanding anything in clause (3), Parliament and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List ). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the State List ). (4) Parliament has power to make laws w .....

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..... The decision in B.R. Enterprises (supra) also dealt with the prohibition of sale of tickets of paper lotteries invoking power under Section 5 of the Act. Still, the general principles laid down by this Court in the abovementioned case, while interpreting Section 5, are binding. So, the power to prohibit sale of tickets is granted in relation to a particular lottery or particular type of lottery. That means, a particular lottery can be the subject-matter of prohibition. In other words, all types of lotteries need not be prohibited. But, going by that decision, a particular type of lottery can be prohibited, if only, the State Government also does not run that lottery. The online lottery is a particular lottery, which is not run by the State Government. So, going by the principles laid down in B.R. Enterprises (supra), the State Government can separately ban the sale of online lotteries as online lottery is a particular class of lottery, different and distinct from paper lotteries. 18) Learned counsel for the appellants also brought into notice para 21 of the Writ Petition filed before the High Court to show how the system of online lottery functions, which is as under: The O .....

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..... ne State, the Government lifted the prohibition partially by permitting the sale of paper lotteries and the prohibition imposed on the sale of computerized and online lotteries continued to remain in force declaring the territory of Kerala to be online, internet and computerized lottery free zone. The legislative competence in respect of State run lotteries vests exclusively with the Centre except where a State is a lottery free State and that only the Central Government will have the power to deal with the same. The notification dated 22.04.2005 was issued by the State on the ground that the State of Kerala shall be an online lottery free zone. 20) The State of Kerala is of the view that online lottery and conventional paper lotteries are to be dealt separately and are entirely different in every aspect by the nature and features inherent in it. The State of Kerala is of the view that online lottery does not characterize the features of a lottery as defined under the Act. In fact, the so-called online lottery is not a lottery as it is a widespread network using internet, cheating the public in a massive way in the absence of a proper regulatory system of the same standards. The .....

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..... ch a manner that the transparency and credibility of the draw process is not at all established. According to Meghalaya rules, the presence of one Judge shall form the quorum. (d) The draws are conducted daily in a severe gambling fashion and in violation of Section 4(h) and prizes are offered on the basis of a single digit violating Section 4(a) of the Act. (e) There are clear similarities in the name of different lotteries and they follow the same prize pattern, obviously making an attempt to circumvent Section 4(h). It is then pleaded that in practice, the so-called online lotteries, mislead the general public by its mesmeric gambling instinct inherent in it. People are attracted to the modern technology used in these lotteries and the instantaneous nature of it. They spend all their time in front of the online outlets and spoil all their money. They are being trapped by the simple prizes they get and they invest the remaining part of their money in a hope to get more and more big prizes. This is a continuous process starting from early in the morning and extends too late in the night. The lotteries conducted by these online companies have draws in every 15 minutes. T .....

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..... count of the respective States, in violation of the provisions of the Act. The details of unclaimed money are not brought to the knowledge of the other State Governments, whereas the unclaimed prize money is being appropriated by the distributors and agents. The place of draw is not at all located within the other States, whereas the same is being conducted according to the convenience of the distributors. The lottery distributors and agents of other State Governments are resorting to such unscrupulous methods and conducting online lotteries in every 15 minutes from the lottery terminals. The Lottery Department of the State had detected the draws being conducted in lottery outlets for more than 49 draws in a day. 22) The provisions in respect of Sikkim State Lotteries was reported to the Ministry of Home Affairs, Government of India on 12.01.2004. The scheme of lotteries furnished by the Government of Sikkim revealed that they were not in conformity with the provisions of Section 4 of the Act. The irregularities/violations in respect of the Sikkim lotteries being sold in Kerala in the year 2004 were brought to the notice of the State Government earlier with a request for further .....

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..... It was also pointed out in the letter to the Government of India that Sikkim has delegated more rights and responsibilities to the Marketing Agents than what is statutorily permissible under the Act. However, regarding the appointment of Marketing Agents, the State of Sikkim has informed that they will discuss the matter with the legal wing. The State of Sikkim has admitted that the tickets are printed on PLAYWIN Stationery, clearly admitting violation of Section 4(b) of the Act. With regard to the allegation that Thunder Ball lottery is being organized on the basis of single digit, the State of Sikkim has not offered any reasonable explanation or furnished any document instead the State has merely refuted the same. Even though the State of Sikkim was requested to furnish details/documents/clarifications regarding the allegations raised, no reply was received from it. The Government of Sikkim was reminded on 11.05.2004 and 15.06.2004 to furnish the details called for earlier and also to provide details of the new lotteries introduced by them in Kerala. There has been no response from the State so far. Thus the violations and irregularities pointed out in respect of Sikkim State L .....

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..... tate of Sikkim does not have any control over its thousands of terminals all over India. As per Section 4(h) of the Act, the draw should be held once in a week. It means a fortune seeker, after purchasing the ticket, will get a week s cooling time to wait for the result of the draw. But, under the scheme of online lotteries, a number of lotteries run simultaneously. So, by holding several lotteries, there can be several draws with a gap of few minutes in a day and the gullible will remain glued and there is every likelihood of purchase of tickets repeatedly, till all his savings are exhausted. So, if the Government takes a decision in public interest to prohibit online lotteries, this Court should not interfere with the said decision unless there are compelling grounds. As held earlier, going by Section 5, as interpreted by this Court in B.R. Enterprises (supra), the sale of ticket of a particular lottery can be prohibited provided the concerned State Government is not running that lottery. While interpreting a Statute of this nature meant to suppress the mischief of gambling, this Court should accept the concept of purposive interpretation and if possible save the notification int .....

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..... stress or to a man with a bursting desire to become wealthy overnight it draws them into the magnetic field of lotteries with crippling effect. More often than not, such hopes with very remote chance encourages the spirit of reckless prosperity (sic propensity) in him, ruining him and his family. This encouraging hope with the magnitude of prize money never dwindles. Losses and failures in lotteries instead of disencouragement increases the craze with intoxicating hope, not only to erase the losses but to fill his imaginative coffer. When this chance mixes with this utopian hope, he is repeatedly drawn back into the circle of lottery like a drug addict. Inevitably, the happiness of his family is lost. He goes into a chronic state of indebtedness .. 29) Article 246(1) of the Constitution of India deals with exclusive power of the Parliament to make laws with respect to matters enumerated in List I (Union List) in the Seventh Schedule. As per Article 246(2), Parliament and the Legislature of any State also have power to make laws with respect to any of the matters enumerated in List III (Concurrent List) in the Seventh Schedule. The Legislature of the State has, however, exclusiv .....

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..... thout any policy or bereft of the guidelines and that there was total abdication of the legislative power of the Parliament which was a naked delegation, hence, violative of Article 14 of the Constitution of India. The counter contention raised by the States and, in particular, the State of Tamil Nadu which had banned lotteries of other States, but continued to have its own, was that on a plain reading of Section 5, a State without banning its own lotteries can ban lotteries organized by other States. The Union of India and also the State of U.P. had raised a contention that Section 5 should be read as to entitle only such State to ban which, as a policy, does not permit its own lottery to run. If this be so, possibly there could be no discrimination as it would apply uniformly to all the States. On the respective contentions of the learned counsel as mentioned above, this Court framed the question as follows: 81. The legal principle which emerges, as submitted, is that delegation of essential legislative power of the principal to the delegatee would amount to abdication of its legislative power and if it is bereft of any guidelines then it is unsustainable in the eye of the la .....

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..... ecognizes that even in State lotteries the prizes are to be collected by chance without any skill, hence gambling in nature. Section 3 prohibits that no State lotteries can be organized without the condition stipulated under clauses (a) to (k) of Section 4. Section 4 provides the conditions to be complied with by the State lotteries. To initiate any State lottery it is left to the policy of each State, for this Act is silent. The only control is, in case it decides, then it must follow the conditions as laid down under Section 4. Next comes Section 5 which is subject matter of challenge, the delegation of power to the State to prohibit the sale of lottery tickets organized by every other State. If a State desires not to subject its people to the lottery gambling, it has no power to restrict lotteries organized by other States. It is to remove this mischief that power is conferred through delegation to the States to do it in terms of their own policy. By virtue of this, now the State Government can prohibit sale of lottery tickets of every other State within its territory. Next, Section 6 seeks strict compliance with Section 4. Under this the Central Government may prohibit any S .....

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..... erritory. A well-concerned remedy. Next question is what could have been the guideline? If State lotteries are gambling and it cannot be terms as trade and commerce at common parlance for any free right under the Constitution. Such right though recognized under Article 298, so other States may continue to enjoy till prohibited by valid law, and if any State wants within its State lottery-free zone and for which the power is entrusted to such State, it cannot be said in this setting and background and the nature of the subject that such a delegation is of its essential legislative power. The only guideline necessary in such delegation is to see that the State does not pick and choose one State from the other, which guideline is already provided in this Section. It provides that such a ban could only be if it is applied to every other State. The only residual field of attack so far as this delegation could be, which has been attacked in this case, that the State could on one hand ban lotteries of every other State but run its own lotteries. It is argued that while a State bans lotteries of other States not to permit any gambling activity in the public interest as a policy but this .....

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..... a State wants to have lottery- free zone in its State, then such a delegation to ban lottery of every other State cannot be said to be invalid. To the first part, there are two interpretation, one on the plain reading of Section 5, a State may run its own lottery yet may prohibit the sale of lotteries of other States. This construction leads to discrimination and opens for criticism of unbridled delegation. The submission further is, if the ban of sale of lottery tickets of every other State is as a public policy, affecting the morality and resultant ill effect on its subject then there is no justification that the State may run its own lottery affecting the very subject for which the power is exercised prohibiting the lotteries of other states. It is true, if such an interpretation is accepted then this submission has a force. On the other hand, on behalf of the Union the submission is that the language of the section has to be read down. The decision to have its lottery or not to have its lottery has to be in the public interest. Every decision to have either lotteries authorized by the State or organized by the State has to be in public interest. May be for collection of public .....

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..... rritory including its own lottery. In this situation, the delegatee is tied down by this limitation which itself is a clear guide to a State hence cannot be said to be unbridled delegation. So even to the first part it cannot be said to be arbitrary or unbridled. So, we have no hesitation to approve the interpretation given by the Union to uphold the validity of Section 5. 32) From the observations made by this Court, as extracted above, learned counsel representing the appellants contended that the State of Kerala could not prohibit any form of lottery as long as it was running other forms of lottery of other States as also of the State of Kerala. After having given anxious thought to the rival contentions, we are not inclined to accept the contention raised by learned senior counsel for the appellants. 33) It may be reiterated that the question that came to be framed by this Court on the rival contentions raised by the counsel for the parties in B.R. Enterprises (supra) was as to whether the delegation of essential legislative power of the principal to a delegatee would amount to abdication of its legislative power and if it is bereft of any guidelines then is it unsustain .....

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..... not a case of abdication of legislative power and would not be bereft of any guidelines if the legislation banning lotteries was applied uniformly. We, on the interpretation of the point on the issue of delegation of essential legislative power bereft of any guidelines, hold that it is not a case of abdication of the legislative power of the Centre and further that if the ban on the online lottery applies uniformly, it would not be a case of exercising power by a delegatee without any guidelines. 35) In the case of The Senior Electric Inspector (supra), this Court, while considering as to whether the doctrine of contemporanea expositio can be applied in construing Acts which are comparatively modern, held as under:- The legal position may be summarized thus:-The maxim contemporanea expositio as laid down by Coke was applied to construing ancient statutes but not to interpreting Acts which are comparatively modern. There is a good reason for this change in the mode of interpretation. The fundamental rule of construction is the same whether the court is asked to construe a provision of an ancient statute or that of a modern one, namely, what is the expressed intention of the L .....

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..... Constitution is regarded as a living Constitution , so an ongoing British Act is regarded as a living Act . That today s construction involves the supposition that Parliament was catering long ago for a state of affairs that did not then exist is no argument against that construction. Parliament, in the wording of an enactment, is expected to anticipate temporal developments. The drafter will try to foresee the future, and allow for it in the wording. * * * An enactment of former days is thus to be read today, in the light of dynamic processing received over the years, with such modification of the current meaning of its language as will now give effect to the original legislative intention. The reality and effect of dynamic processing provides the gradual adjustment. It is constituted by judicial interpretation, year in and year out. It also comprises processing by executive officials. 37) Similarly, in SIL Import USA (supra), this Court has again reiterated as follows:- 16. Francis Bennion in Statutory Interpretation has stressed the need to interpret a statute by making allowances for any relevant changes that have occurred, since the Act s passing, in law, social .....

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..... ld be within the legislative power vested with the State under Section 5 of the Act as in that case the State would be only complying with the provisions of the Act made by the Parliament. The learned Single Judge while examining the facts of the case, manner and method in which the sale of online lotteries are conducted, has already held that it violates the provisions contained in Section 4 of the Act. In fact, during the course of arguments, no effort was made to dislodge the findings recorded by the courts below. The view adopted from the observation made by this Court in B.R. Enterprises (supra), in any case, is possible. 39) In our considered opinion, learned single Judge of the High Court rightly mentioned in his judgment that in fairness, it must be conceded that Section 5, in the light of the interpretation in B.R. Enterprises (supra), admits two interpretations. One is that the State can prohibit any form of lottery, if only it is not running any lottery at all. The second interpretation is that the State can prohibit a particular form of lottery, if it is not running that form of lottery, even if it is running other types of lotteries. The Act has been designedly mad .....

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