Report No. 276

1) Doctrine of res extra commercium

4.24 The doctrine of res extra commercium seeks to exclude certain activities from the ambit of freedom of trade and profession guaranteed under Articles 19(1)(g) and 301 of the Constitution of India. In State of Bombay v. RMD Chamarbaghwala72, the Apex Court observed that:

"We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient countries' trade commerce or intercourse to be declared as free under Article 301. 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 essence are extra commerciumal though the external forms, formalities and instruments of trade maybe employed and they are not protected either by Article 19(1)(g) or Article 301 of the Constitution."

4.25 The Court remarked that though these activities employ external forms, formalities and instruments of trade, they could not be considered commerce. It is pertinent to note that this distinction between activities that were protected under Article 19(1)(g) of the Constitution and those that were not, was made on the basis of whether the said activity involved substantial element of skill or chance. While the former have been afforded constitutional protection, the latter have been termed illegal.

4.26 However, the Supreme Court while referring to its earlier decision of State of Bombay v. R.M.D. Chamarbaugwala73 in R.M.D. Chamarbaugwala v. Union Of India74 observed that "trade commerce protected by Article 19(1)(g) and Article 301 are only those activities which could be regarded as lawful trading activities, that gambling is not trade but res extra commercium, and that it does not fall within the purview of these Articles".

4.27 A similar view was taken in M/s. B.R. Enterprises v. State of U.P. & Ors.75, observing that gambling is not a 'trade' within the meaning of Article 19(1)(g) or 301 of the Constitution, and is therefore not constitutionally protected. This is because gambling is inherently based on chance with minimum to no involvement of skill, while trade is predominantly skill-based. Interestingly, the Supreme Court also held lottery to be a form of gambling due to the overriding factor of chance and said that merely because lottery is run by State, it will not change its character as res extra commercium.

4.28 Further in K.R. Lakshmanan (Dr.) v. State of Tamil Nadu76, the Apex Court, once again, while relying on the two Chamarbaugwala judgments held that gambling was not trade and as such was not protected by Article 19(1)(g) of the Constitution.

4.29 It is clear that the courts in India while relying on State of Bombay v. R.M.D. Chamarbaugwala continue to hold that gambling does not fall within the ambit of trade, commerce etc. and therefore, does not enjoy the protection of Articles 19(1)(g) and /or 301. Accordingly, one can conclude that the two Chamarbaugwala cases77 lay down the prevailing law on this aspect of the subject. While analysing the decisions of the Supreme Court of India in the two Chamarbaugwala cases with reference to the doctrine of "res extra commercium", Mr. Arvind Datar78, tracing back the origin of the doctrine to Roman Law has commented to the effect:

1. The res extra commercium doctrine traces its conceptual roots to Roman law. Res in commercio, in Roman law, were things capable of ownership and hence, the subject of property rights, while res extra commercium were things incapable of ownership.

2. The Supreme Courts used this expression for the first time in State of Bombay v. R.M.D. Chamarbaugwala, (Supra). This case was concerned with the constitutional validity of the Bombay Lotteries and Prize Competition Control and Tax Act., 1948.

3. The incorrect usage of this expression, on the other hand, can be attributed to the judgment of the Supreme Court in R.M.D. Chamarbaugwalla v. Union of India(Supra), a case decided on the same day as State of Bombay v. R.M.D. Chamarbaugwala(Supra).

4. The Court, unfortunately interpreted the first judgment as holding that gambling was not trade but res extra commercium, when the said judgment had actually laid down that "gambling activities from their very nature and in essence are extra-commercium".

5. This expression has been wrongly used in the last sixty years by the Indian Courts. No activity can be called "res extra commercium". It is either permitted or not. Even if gambling is harmful to society, there is nothing that prohibits the State Government from allowing gambling casinos to function.

6. The erroneous view that Art. 19(1)(g) does not apply to noxious substances unduly widens the power of the State in two important respects. First, it is possible for the State to affect detrimentally the trade in such substances by the use of mere executive power. (Khoday Distilleries Ltd. v. State of Karnataka, (1995) 1 SCC 574.) Second, it is also possible for the State to impose reasonable restrictions on those employed in distilleries or in lottery agencies since they have no right to be there.

4.30 Further, the law laid down in the two Charmbaugwala cases falls vulnerable under the Prevention of Money Laundering (Amendment) Act, 2013, a special enactment. Section 2 (1)(sa) now defines "a person carrying on a designated business or profession" to include "a person carrying on activities for playing games of chance for cash or kind, and includes such activities associated with casino". Therefore, under the aegis of the Prevention of Money Laundering Act, 2002 gambling and casino activities, having deemed to be designated businesses/professions ought to enjoy protection under Articles 19(1)(g) and 301.