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Report No. 276

A. Gambling and Betting- a Game of Chance or Skill?

3.21 The main test to determine whether a game amounts to gambling or not is, what dominates/preponderates, whether skill or chance. Games of chance are those where the winner is predominantly determined by luck; the result of the game is entirely uncertain and a person is unable to influence such result by his mental or physical skill.

The person indulging in game of chance wins or loses by sheer luck and skill has no role to play. On the other hand, the result of a game of skill is influenced by the expertise, knowledge and training of the player. In India, games of chance fall under the category of gambling, and are generally prohibited, while games of skill, falling outside the ambit of gambling are usually exempted.

3.22 In RMD Chamarbaugawala v. Union of India39, the Apex court relied on the 'skill test' to decide whether an activity is gambling or not. The court held that competitions which substantially involve skills are not gambling activities but are commercial activities, protected under Art. 19(1)(g).

3.23 Relying again on the 'skill test', the Supreme Court in State of Andhra Pradesh v. K. Satyanarayana & Ors.40, held that, rummy is preponderantly a game of skill and not of chance. The Court further observed that, "it requires certain amount of skill because the fall of the cards has to be memorised and the building up of rummy requires considerable skill in holding and discarding cards". The expression 'mere skill' means presence of skill of a substantial degree.

3.24 Distinguishing between the terms 'games of skill' and 'games of chance', the Supreme Court in K.R. Lakshmanan v. State of Tamil Nadu & Anr.41, stated:

[In a] game of skill [...] although the element of chance necessarily cannot be entirely eliminated, is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player.

3.25 In this case, the court was considering whether horse-racing was a game of skill or chance. It observed that the outcome in a horse race depends on several factors like form, fitness and inherent capacity of the animal, the ability of the jockey, the weight carried and the distance of the race, which are all objective facts capable of being assessed by persons placing the bets. Thus, unlike lottery, the prediction of the result of the race is an outcome of knowledge, study and observation.

3.26 In Pleasantime Products v. Commissioner of Central Excise, Mumbai-I42, the Supreme Court, while considering whether 'scrabble' is a puzzle or a game, held that scrabble is a game. It was also observed that, unlike puzzle where the outcome is fixed, scrabble is a game of skill as the skill of player influences the outcome.

3.27 In M.J. Sivani case43, the Supreme Court, while determining the issue of the legality of prohibition on video games, under Section 2 (7) of the Mysore Police Act, 1963, observed that, even if video games were considered to be games of skill, the outcome could be manipulated by tampering with the machines. Therefore, the court refused to grant protection to these games.

3.28 The Andhra Pradesh High Court in the case of D. Krishna Kumar v. State of Andhra Pradesh44, held that games of skill like rummy, even when being played for stakes, are outside the ambit of the Andhra Pradesh Gaming Act, 1974.

However, the Division Bench of the Madras High Court in the case of Director, Inspector General of Police v. Mahalakshmi Cultural Association45, had taken a contrary view holding that a game of skill for stakes falls within the definition of gaming under section 3 of the Madras City Police Act, 1888. However, the Supreme Court vide order dated 18th August, 2015 allowed the poker club Mahalakshmi Cultural Association to withdraw its Special Leave Petition as the members of the club had been acquitted of all the criminal charges in this regard by the trial court.

Further, in its order, the Court clearly mentioned that the writ petitions before the Madras High Court stood withdrawn and therefore observations contained in the High Court order did not survive.

3.29 In the case of M/s Gaussian Networks Private Limited v. Monica Lakhanpal and State of NCT46, an application was filed under Order XXXVI Rule 1 of Civil Procedure Code, 1908 before a District Court in Delhi, seeking the Court's opinion whether participants be allowed to play a game of skill for stakes with the intention of making profit. It was held that playing skill-based games for money in the virtual space, renders them illegal.

The degree of skill that is involved in playing these games in physical form cannot under any circumstances be equated with games played online. The Court held that since there was a possibility for manipulation of outcomes by cheating and collusion in online gambling, it can be assumed that the degree of chance would also increase. The court echoed the observations made by the Supreme Court in the M.J. Sivani case47.

On April 21, 2016 while the matter was still sub judice, Gaussian sought permission to withdraw both the Civil Revision Application and the original Order XXXVI Application, on the ground that in light of the decisions in State of Andhra Pradesh v. K. Satyanarayana & Ors.48 and K.R. Lakshmanan v. State of Tamil Nadu49, the position of law on the exemption for 'games of skill' is already clear.

Further, with the enactment of the Nagaland Act the position of online games of skill stands clarified. In light of the District Court Order, the right of Gaussian to offer online games of skill would have been limited even under the Nagaland Act. The request to withdraw the petitions was acceded to by the Delhi High Court, consequently the observations of the District Court did not survive50.

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