Need of the hour: A central law to regulate online games of skill | The Financial Express

Need of the hour: A central law to regulate online games of skill

India is very well positioned and is now at the cusp of enacting a central law that would provide the boost that this industry really requires as part of the booming sunrise sector

Need of the hour: A central law to regulate online games of skill
Arguably, constitutional provisions empower Parliament to be the legislating authority for online games of skill.

By Ranjana Adhikari

There has been a long debate on the distinction between online skill gaming formats like online fantasy sports and online rummy on the one hand and games of chance such as betting and gambling on the other. Judicial intervention has been able to delineate the two activities as completely distinct. As early as in 1957, the Supreme Court of India held that competitions that require a preponderance of skill to be successful are not gambling activities. Thereafter, in multiple judgements over the years on rummy and online fantasy sports, the Supreme Court of India has reiterated this view in favour of online skill gaming platforms, categorically stating that they are a legitimate business activity protected as a fundamental right under Article 19 (1) (g) of the Constitution of India. Various High Courts across multiple States have time and again held the same view.

In the light of this delineation between skill gaming and gambling, as provided by the judiciary at multiple junctures, it should now be amply clear that the difference between both the activities in questions is like chalk and cheese. However, the erroneous interpretation of certain laws has been a hindrance in the operation of platforms catering to online skill gaming. Entry 34 of List II of the Seventh Schedule to the Constitution of India contains the enabling provisions for State Governments to legislate on matters solely covering the ambit of ‘betting and gambling’. However, attempts have been made by various State Governments in the form of amendments or ordinances promulgated against the online skill gaming sector or bans on their operations under this provision. High Courts have, rightfully, in such states quashed these legislations forthwith on the ground of, inter alia, lack of legislative competence.

Arguably, constitutional provisions empower Parliament to be the legislating authority for online games of skill. Article 246 of the Constitution, read with Entry 31 of List I of the Seventh Schedule to the Constitution exclusively grants legislative competence to Parliament to enact laws for forms of communication such as wireless, telecom and broadcasting. Platforms for online gaming are internet-based and may have features akin to that of ‘intermediaries’ under the Information Technology Act, 2000 including services such
as interaction through chat features between users, etc.

Similarly, on the point of inter-state trade and commerce, the territorial jurisdiction of the centre and the States is also clearly demarcated in the Constitution of India. Article 245 of the Constitution empowers Parliament to enact laws for the whole or any part of the territory of India, whereas the States are restricted to making laws governing only the state. Notably, in cases such as Narinder Batra v. Union of India (Delhi High Court, 2009) and Zee Telefilms v. Union of India (Supreme Court, 2005) courts have held that the States cannot exercise
extra-territorial jurisdiction on any subject and thereby rejected the erroneous exercise of extra-territorial jurisdiction by the States in the field of sports and entertainment in the said cases.

The activity relating to providing an online platform for conducting online games of skill has a necessary concomitant of having a majority of its transactions in the nature of inter-state supplies of services (though not all transactions may have an inter-state element). In this regard, it is relevant to highlight that the Integrated Goods and Services Tax Act, 2017, which provides for levy of taxation on inter-state supplies, has a specific provision which pertains to services whose delivery is mediated by information technology over the internet
and is essentially automated involving minimal human intervention (‘online information data access and retrieval’ – OIDAR), and specifically covers ‘online gaming’ thereunder.

Additionally, under the Services Accounting Codes (SAC) classification that is applicable for classification of services under GST in India, online gaming is covered within the scope of telecommunication, broadcasting and information supply service. This classification is similar to the words used under Entry 31 of List I of the Seventh Schedule to the Constitution. Apart from the arguments of legislative competence and taxation policies being in favour of the centre as far as making laws for the online skill gaming sector is concerned, there are constitutional doctrines too that bolster the argument further. The constitutional law doctrine of ‘Pith and Substance’ states that the legislative competence to enact a law has to be adjudged on the basis of where the pith and substance of the enacted or proposed law lies. Arguably, the pith and substance of a law on online skill gaming will correspond with the matters enumerated under Entry 31 of List I of the Seventh Schedule to the Constitution.

Further, Article 254 of the Constitution (which deals with the ‘Doctrine of Repugnancy’) states that if Parliament has enacted a law which it is competent to enact under the provisions of the Constitution, then such a law shall prevail and the law made by the State Legislature shall, to the extent of the repugnancy with the central law, be void.

The path and the clarity that the judiciary has provided for the skill gaming industry has now made it convenient for the central government to step in and implement the judicial principles laid down in various cases to support the online skill gaming industry in India. India is very well positioned and is now at the cusp of enacting a central law that would provide the boost that this industry really requires as part of the booming sunrise sector.

The author is partner, technology, media and gaming at IndusLaw

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