TMI Blog2004 (4) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... with connected cases through a common judgment dated 17.11.2003. W.P.(C). No. 35253 of 2003 was disposed of by the learned Single Judge in the light of and in terms of the judgment in W.P.(C) No. 35368 of 2003 and connected cases. W.P.(C) No. 37260 of 2003 also was disposed of by the learned Single Judge on 5.12.2003 following the judgment in W.P.(C) No. 35368 of 2003 and connected cases. 3. Petitioners 1 to 3 in W.P.(C) No. 35368 of 2003 are marketing agents of computerised network of On-line Lotteries of the States of Sikkim and Karnataka. Petitioner No. 2 is the sub-distributor of Arunachal Pradesh On-line Lotteries. They claim to have executed valid agreements with the above mentioned States for the marketing of On-line Lotteries throughout India. They filed the Writ Petition challenging Sub-rule (3) of Rule 24 of the Kerala State Lotteries and On-line Lotteries (Regulation) Rules, 2003 (hereinafter referred to as the Rules ) and a public notice dated 8.11.2003. issued by the Director of State Lotteries, Kerala. According to Rule 24(3), no lottery shall be marketed until appropriate orders under Sub-rule (2) of Rule 24 are issued by the Secretary to Government, Taxes Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the respondents not to interfere in the sale of tickets of the various series of weekly lotteries organised and conducted by the State of Arunachal Pradesh when marketed by the petitioner, his agents, dealers or sellers within the State of Kerala except in accordance with law. As per judgment dated 1st December, 2003, the learned Single Judge disposed of the Writ Petition in the following terms:- Since similar issue is already decided in W.P.(C) No. 35368/03 and connected cases, this Writ Petition is also disposed of with the same observations and directions in the above cases . Aggrieved by the said judgment, the Writ Petitioner has filed W.A. No. 2079 of 2003. 6. The petitioners in W.P.(C). No. 37260 of 2003 are the State of Meghalaya and the All India Federation of Lottery and Allied Industries. They prayed for a declaration that Rules 3(3) and 24(3) of the Rules are ultra vires, void and unenforceable in law. They also challenged the public notice dated 3.11.2003 issued by the Director of State Lotteries, Kerala. Rule 3(3) of the Rules provides that the Authority for the conduct of all or any particular lottery in the State of Kerala shall also be vested with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also for a limited period, since this received condemnation even for this limited purpose. All this gives clear picture of the nature and character of lottery as perceived through the conscience of the people, as revealed through ancient scriptures, also by various Courts of the countries . The above nature and character of lottery have to be borne in mind while considering and deciding the issues raised in these Writ Appeals. 9. In view of the provisions contained in Article 246 of the Constitution of India, the Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I of the Seventh Schedule to the Constitution, which is referred to as the Union List and the Legislature of any State has exclusive power to make laws for such State or a part thereof with respect to any of the matters enumerated in List II of the Seventh Schedule to the Constitution, which is referred to as the State List . Entry 40 in the Union List is Lotteries organised by the Government of India or the Government of a State . Hence only the Parliament has got power to make laws with respect to Lotteries organised by the Government of India or the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of U.P. and Ors. (supra), the Honourable Supreme Court, while upholding the constitutional validity of Section 5 of the Act, held that a State could exercise the power under Section 6 to prohibit the sale of tickets of a lottery organised or conducted or promoted by other States only if it decided not to have any lottery within its territory including its own lottery. The provision contained in Section 5 of the Act was read down to the above extent by the Supreme Court. Admittedly, the State of Kerala is conducting its own lotteries. Hence, it cannot be disputed that the State of Kerala cannot invoke the power under Section 5 of the Act to prohibit within the State the sale of tickets of a lottery organised or conducted or promoted by other States. Apart from S.5, there is no other provision in the Act conferring power on a State Government to prohibit within the State the sale of tickets of a lottery organised or conducted or promoted by other States. 12. However, Section 6 of the Act confers power on the Central Government to prohibit a lottery organised, conducted or promoted in contravention of the provision of Section 4 or where tickets of such lottery are sold in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and details mentioned in the said Sub-rule, before starting the sale through On-line Lottery/other Lotteries. As per. Sub-rule (2) of Rule 24, the Secretary to Government, Taxes Department shall decide as to whether the scheme satisfies all the provisions of the Act and pass appropriate orders. As per Sub-rule (3), no lottery shall be marketed until appropriate orders under Sub-rule (2) are issued by the Secretary to Government, Taxes Department and Enforcement Agency may seize such tickets marketed before passing any order in this regard. As per Sub-rule (10) where the Government either suo motu or on a complaint in that behalf are satisfied after verifying the necessary information that sale of tickets of a lottery organised, conducted or promoted by any other State is in contravention of the provisions of the Act or the Rules made thereunder, it may temporarily suspend the sale of such tickets within the State and report the matter to the Government of India seeking its final order in the matter under Section 6 of the Act. For the sake of convenience, Rule 24 of the Rules are extracted hereunder: 24. Sale of other State On-Line Lotteries and other Lottery Tickets in Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation or investigation any Lottery, thing, machine, document, account books or data excluding proprietary software, on or in such premises or facility which has bearing on conduct of On-line Lottery, (b) seal or otherwise secure any such premises, facility, thing or machine or in which any document or data which has bearing on the conduct of On-line Lottery is stored. (c) take such legal action as per the Act, which may be necessary to protect the integrity and conduct of On-line Lottery. (5) The Other States or Union Territories or any Country having bilateral Agreement or treaty with the Government of India while selling the Lottery Tickets in the States shall ensure the following, namely,- (a) In Lottery Tickets issued by the Government of other States, the name of the agents in any form or their logo shall not be printed. (b) The results of the prize Winners shall be announced by the Government of other States, which results alone shall be reproduced in the news papers by the agents and the agents shall not publish the results on their own or in a form or method of their own. (c) the particulars of the prize winners shall be furnished every mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selling their tickets in the State of Kerala shall use a name of prefix or suffix in the name of a Lottery (e.g. Kerala, name of the cities and town or any such other name which can be used as a prefix or suffix or otherwise) which could mislead people to believe that the said Lottery is organised, conducted or promoted by Government of Kerala and where the State Government is satisfied that such use is misleading or is likely to mislead people to believe that the lottery is run or conducted by the Government of Kerala, the Government may cause seizure of such Tickets, within the State of Kerala through its Enforcing Agency. (9) Any agent selling Lottery Tickets of any particular draw should have in possession, a copy of the certificate issued by the Assessing Authority to the effect that the licensing fee in respect of the draw has been paid to the Government and they shall show it to the Enforcement Agency whenever it is demanded. On non-production of such certificate, Enforcement Agency is empowered to seize such tickets. (10) Where the Government either suo-motu or on a complaint in that behalf are satisfied after verifying the necessary information that sale of tick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the State the sale of tickets of lottery organised, conducted or promoted by the other States. It is contended that the provision contained in Sub-rule (3) of Rule 24 amounts to prohibition of the sale of tickets of lotteries organised, conducted or promoted by other States, till appropriate orders are passed under Sub-rule (2) by the Secretary to Government, Taxes Department permitting the sale of tickets of those lotteries. It is also contended that Section 5 or any other Section of the Act does not authorise the Government of Kerala to impose such a prohibition and that, what is not authorised by the provisions of the Act cannot be done through the Rules made under Section 12 of the Act. However during the course of arguments learned counsel for the appellants stated that the appellants have no grievance about the provisions contained in Sub-rule (2) of Rule 24. According to Sub-rule (2) if the details furnished by any other State or Union Territory under Sub-rule (1) are not complete the Authority under the Rules may return the Scheme to the concerned State Government directing to furnish complete details within a period of 15 days. The Authority shall verify all the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (Regulation) Rules, 2003. Thus Rule 24 was made in respect of lotteries organised, conducted or promoted by the other States or Union Territories or countries having bilateral agreement with the Government of India. Even according to the appellants they have no objection to the requirement of submitting necessary documents and details to the Taxes Department, Government of Kerala through the Director of State Lotteries before starting the sale through On-line lottery and other lotteries. They have also no objection to the provision enabling the Authority to return the Scheme to the concerned State Government directing to furnish the complete details within a period of 15 days. They have still no objection to the provision in Sub-rule (2) enabling the Secretary to Government, Taxes Department to decide as to whether the Scheme satisfies all the provisions of the Act and pass appropriate orders. Their objection is to the provision in Sub-rule (3) which says that no lottery shall be marketed until appropriate orders under Sub-rule (2) are issued by the Secretary to Government, Taxes Department. They contend that they are entitled to market the lottery in the State without any order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to discharge the said duty that the provisions of Rule 24 were incorporated in the Rules. The said duty of the Government of Kerala has been recognised by Parliament while incorporating Section 12 in the Act, by which power is conferred on the State Government to make rules to carry out the provisions of the Act. It is to be noted that Rules 3 to 23 have been incorporated in the Rules to ensure that even the lottery of the Government of Kerala is conducted strictly in accordance with the provisions of the Act. Rule 24(3) does not confer on the State Government any power or function which is not recognised by or is inconsistent with the provisions of the Act. We are also of the view that the provisions of Rule 24 are not arbitrary or unreasonable and that such regulatory provisions are necessary to enforce the provisions of the Act and to ensure that no lottery is conducted in violation of the provisions of the Act. As already stated, the provision that no lottery shall be marketed until appropriate orders under Sub-rule (2) are issued by the Secretary to Government, Taxes Department is only to prevent any contravention of the provisions of the Act. The power conferred by Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sub-rule (3) of Rule 24. Sub-rule (3) of Rule 24 only provides that before another State/Union Territory markets its lottery and starts the sale of tickets within the State of Kerala it shall convince the Secretary, Taxes Department, Government of Kerala that the scheme of its lottery satisfies all the provisions of the Act. As stated earlier, it is only a regulatory measure to ensure that, no lottery is organised, conducted or promoted without complying with the conditions mentioned in Section 4 of the Act. In other words, it is a regulatory provision in furtherance of the provision in Section 3 which directs that no State Government shall organise conduct or promote any lottery otherwise than in accordance with Section 4 of the Act. Once the State Government concerned satisfies the Secretary to Government, Taxes Department, Government of Kerala that its scheme satisfies all the provisions of the Act, the Secretary to Government, Taxes Department, Government of Kerala is legally bound to pass appropriate orders permitting the concerned State Government to market its lottery and to sell the lottery tickets within the State of Kerala. Hence it is not correct to say that what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no specific challenge as such against Rule 24(10). However we are inclined to deal with the said contention of the learned counsel since such a contention is specifically raised in W.P.(C). No. 418 of 2004 which also was heard along with these Writ Appeals. The grievance raised by the learned counsel is against the provision in Sub-rule (10) which confers a power on the State Government to temporarily suspend the sale of tickets within the State if, after verifying the necessary information, the Government are satisfied that sale of tickets of a lottery organised, conducted or promoted by any other State is in contravention of the provisions of the Act or the Rules made thereunder. The suspension contemplated under Rule 24(10) is only a temporary measure and it will be in force only till the Government of India gets sufficient time to consider the report of the State Government and takes a final decision under Section 6 of the Act. If the Central Government is not satisfied that there is contravention of the provisions of Section 4 or Section 5 the Central Government will drop further action in the matter and the suspension will be automatically lifted. Thus the provision cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in nature. Gambling activities are in its very nature and essence extra commercium. They were considered to be a sinful and pernicious vice by the ancient seers and law givers of India. They have been deprecated even by the laws of England, Scotland, United State of America and Australia. Even when the lottery was State sponsored it was looked down upon as an evil. Right from the ancient time till now all expressed concern to eliminate this evil, even when it was legalised for raising revenue either by the King or in the modern times by the State. Even this legitimisation was for the sole purpose of raising revenue and the legitimisation was for a limited period, since the legitimisation received condemnation even for the said limited purpose. As further pointed out by the Hon'ble Supreme Court in paragraph 70 of the above decision, what makes lottery pernicious is its gambling nature. Even in the State lotteries the element of chance remains with no skill. It remains within the boundaries of gambling. The stringent measures and the conditions imposed under the State lotteries are only to inculcate faith to the participant of such lottery, that it is being conducted fairly wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in exercise of its power under Section 11 of the Act. Merely because another State Government is required to satisfy the Secretary to Government, Taxes Department, Government of Kerala that the Scheme satisfies all the provisions of the Act, no violation of the principles of federalism is involved. Federalism does not mean that one State can organize or conduct activities in another State in violation of the provisions of the Act and that its activities cannot be subjected to scrutiny or monitoring by the other State to ensure that the provisions of the Act are complied with. The provision contained in Sub-rule (3) of Rule 24 directing that no lottery shall be marketed until appropriate order under Sub-rule (2) are issued by the Secretary to Government, Taxes Department, does not affect the right of another State to organise, conduct or promote lottery and to sell its tickets outside the territory of Kerala. The regulation or restriction in Sub-rule (3) of Rule 24 applies only within the State of Kerala and, that too, to enforce the provisions contained in the Act made by Parliament and to ensure that the conduct of any lottery and the sale of its tickets within the State of Kera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and no action was taken against them, it does not mean that the Scheme of those lotteries satisfies all the provisions of the Act. After the coming into force of the Rules any other State or Union Territory organising, conducting or promoting the lottery is bound to comply with and is governed by the provisions contained in Rule 24 of the Rules. 27. Learned counsel for the appellants submitted that the Government of Kerala have collected huge amounts from the appellants towards sales tax and licence fee and therefore it is illegal and unjust to force the appellants to close down their business. Sales tax and licence fee are collected under the provisions of the relevant law. Payment of sales tax or licence fee does not authorise anybody to conduct business in violation of the provisions of the Act. The appellants can conduct their lotteries and market them in accordance with the provisions of Rule 24 of the Rules. 28. Learned counsel for the appellants submitted that in the case of existing lotteries no time is provided in Rule 24 to submit the documents and details mentioned in Sub-rule (1) and to obtain the order of the Secretary to Government, Taxes Department under Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the State commits an offence under Section 294A of the Indian Penal Code. Only State lotteries and lotteries authorised by the State are exempted under Section 294A I.P.C. The learned Advocate General submitted that the Director of State Lotteries had valid and sufficient reasons to think that most of the lotteries conducted by other States and marketed and sold in the State of Kerala are not actually organised or conducted or promoted by the State but are conducted by private individuals or companies. Learned Advocate General invited our attention to the order of the Supreme Court in State of Haryana v. Suman Enterprises and Ors. (1994) 4 SCC 217, in which the minimal characteristics of a lottery which can claim to be organised by the State were indicated by the Supreme Court. According to the Supreme Court, the concept of a lottery organised by a State would require certain basic and essential concomitants to be satisfied as, indeed, members of the public when investing their money in such a lottery proceed to a trust and certain assumptions as to the genuineness, bona fides, safety, security, rectitude of administration etc. associated with governmental functions. If some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Other States but by private individuals and companies, it is all the more necessary that there must be an authority and a procedure as contemplated in Sub-rules (1) and (2) of Rule 24 to decide as to whether the scheme satisfies all the provisions of the Act and to pass appropriate orders. It is also necessary in public interest that unless and until the Authority is satisfied that the scheme satisfies all the provisions of the Act, the marketing of the lottery should not be permitted within the State of Kerala. In the light of the averments contained in the counter affidavit filed on behalf of the State of Kerala and the Director of State Lotteries in W.A. No. 2044 of 2003 and the materials placed on record to substantiate the allegation that most of the lotteries are conducted in violation of the provisions of the Act, we are of the view that the question whether the lotteries marketed by the appellants are actually lotteries organised, conducted or promoted by other States as claimed and whether the scheme of the lottery satisfies all the provisions of the Act requires proper scrutiny and serious consideration by the authorities under Sub-rule (2) of Rule 24 of the Rules. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to submit their explanations. The above position was confirmed by the learned Additional Central Government Standing Counsel. The result is that in spite of the report of the Government of Kerala containing allegations and materials against the lotteries conducted in violation of the provisions of the Act , there has not been any effective action by the Central Government and on the strength of the interim orders passed in these cases, the appellants have been conducting the lotteries, allegedly in violation of the provisions of the Act, for several months. In view of the interim orders passed by this court, the Government of Kerala and its officers could not take any effective action under Sub-rules (3) and (10) of Rule 24 of the Rules. The above situation supports and strengthens the argument of the learned Advocate General that as provided in Sub-rule (3) of Rule 24, no lottery shall be allowed to be marketed until appropriate orders are passed by the Secretary to Government, Taxes Department under Sub-rule (2) of Rule 24 and that the Enforcement Agency should have the power to seize the tickets marketed before passing any order in this regard. 35. For the reasons stated a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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