An opinion has been sought by M/s Jengatron Gaming Private Limited (owning and operating the online gaming platform “Millionhere Play”) through Mr. Sachin Verma (hereinafter referred to as the “Querist”) regarding the legality of cognitive skill-based games in India and whether the cognitive skill-based gaming formats and/or models as proposed by the Querist can be offered in India.
The Querist has proposed a model through which Millionhere Play shall offer the registered users an opportunity to participate in tournaments of cognitive skill-based games for real money and prizes. The said cognitive skill-based games involve building up and combination of letters, words or figures forming puzzles and riddles which the Users need to solve within a fixed and pre-determined amount of time. The platform shall be available on the dedicated app, website and/or other medium and the users may access the platform through any compatible device.
The concept of ‘Millionhere Play’ is to provide the registered users an opportunity to participate, for free, in tournaments consisting of cognitive skill-based games and winning real money or product prizes. The Querist therefore, seeks to provide the above stated cognitive skill-based games without ‘stakes’ (without real money being put at stake/paid by users either in the form of an entry ticket or tournament fee) and without an entry fee from Users for each contest on the platform. Therefore, the platform ‘Millionhere Play’ shall ensure free entry and participation for all.
In light of the above facts, the Querist seeks our opinion on the following issues:
- What is the existing legal position for games of skill in India?
- Can the formats/models of Cognitive Skill Games as proposed by Querist be classified as a ‘game of skill’ and placed on the same footing as other games of skill such as Rummy and Horse Racing? Can they be offered without stakes [without a participation fee/entry ticket] for prize money and/or product prizes in India?
- What is the advertising/broadcasting and marketing law pertaining to Cognitive Skill Games services?
- Do Cognitive Skill Games as proposed by the Querist fall under the ambit of Casual/Social Gaming and the Prize Competition Act?
In order to comment on the legality of the Cognitive Skill Gaming models proposed by the Querist, the laws pertaining to gaming and the principles laid down by the courts in the case of horse racing, prize competitions and games of skill like rummy and fantasy sports have been analyzed.
- What is the existing legal position for games of skill in India?
- The Constitution of India under Article 246 divides the power of the Union Government and the State Government to legislate on certain issues/entries enumerated in Schedule VII of the Constitution. The entry pertaining to betting and gambling is entry 34 in List II which is the State List. Therefore, the primary responsibility of regulating physical premises-based betting and gambling is with the States in India.
- The Public Gambling Act 1867 (“PGA”) was the central act governing betting and gambling activities prior to the promulgation of the Constitution of India. However, post the promulgation of the Constitution; various states have adopted provisions of the PGA to formulate their own state betting and gambling acts. The Public Gambling Act prohibits gambling in all forms and prohibits a gambling house operation. However, the PGA has an exception, which classifies games of skill outside its ambit. Most states while adopting the principles of PGA have adopted this exception for a game of skill except Assam, Odisha (Orissa) and Telangana in addition to the state of Nagaland wherein games of skill operations can be carried out only by obtaining a license.
- The Hon’ble Supreme Court in the case of KR Lakshmanan v. State of Tamil Nadu, held that horse racing is a game involving substantial amount of skill, while terming it as an entertainment activity. The Supreme Court struck down the validity of the Madras Race Club (Acquisition and Transfer of Undertaking) Act, which purported to take over the management of the Madras Race Club and vesting it in the State or an Undertaking of the State, on the ground of alleged mismanagement of the Madras Race Club.
According to the Government, the management was not being carried on in the interest of the race going public and there had been several instances of irregularities and mal-practices in the management of the Madras Race Club.
“The judgments of this Court in the two Chamarbaugwala cases and in the Satyanarayana case clearly lay-down that (i) the competitions where success depends on substantial degree of skill are not `gambling' and (ii) despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of "mere skill". We, therefore, hold that the expression "mere skill" would mean substantial degree or preponderance of skill.
Racing is really a test of equine speed and stamina, the horses are trained to run and their form is constantly watched by experts… Betting on horse racing or athletic contests involves the assessment of a contestant’s physical capacity and the use of other evaluative skills…
There is nothing illegal in horse racing: it is a lawful sport. There is nothing illegal in betting per se… There is all the difference in the world between a club sweepstakes on the result of the Derby and a sweepstakes horse race as defined in the Rules of Racing. In each no doubt the winner is ascertained by the result of an uncertain event, but in the case of the former the winner is ascertained by chance, i.e., the luck of the draw not the result of the race (for the result is the same whether the draw is made before or after the race);in the case of the latter the winner is ascertained not by chance, but by merit of performance. The former is a lottery; the latter is not…
We have no hesitation in reaching the conclusion that the horse-racing is a sport which primarily depends on the special ability acquired by training…
In view of the discussion and the authorities referred to by us, we hold that the horse-racing is a game where the winning depends substantially and preponderantly on skill...”
- In declaring horse racing to be a game of skill the Hon’ble Supreme Court of India in K.R. Lakshmanan case held:
"Horse racing has been universally recognised as a sport. Horsemanship involves considerable skill, technique and knowledge and jockeys have to be specially trained over a period of years. Whether a particular horse wins at the race or not, is not dependent on mere chance or accident but is determined by numerous factors, such as the pedigree of the animal, the training given to it as well as the rider, its current form, the nature of the race, etc. Horse racing has been held judicially to be a game of skill unlike pure games of chance like Roulette or a Lottery."
- The Hon’ble Supreme Court also observed, in the K.R. Lakshmanan case, that dice games are a game of chance which are dependent purely on luck. The following is the relevant portion of the decision:
“3…………..A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. A game of skill, on the other hand - although the element of chance necessarily cannot be entirely eliminated.....”
- The Hon’ble Supreme Court of India in State of Andhra Pradesh v. K. Satyanarayana defined a ‘game of mere skill’ to mean a game “in which, although the element of chance necessarily cannot be entirely eliminated, success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player.” Applying this principle, the Hon’ble Supreme Court held that games of rummy and bridge are games of skill and thus outside the ambit of the Hyderabad Gambling Act.
- The rationale for holding rummy as a game of skill was that rummy requires certain amount of skill because the fall of cards has to be memorized and the ‘building up’ of rummy requires considerable skill in holding and discarding cards. The relevant extract from the judgment is being reproduced below:
"15.....Rummy.....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. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill."
- The decision of the Madras High Court in The Director General of Police, State of Tamil Nadu v. Mahalakshmi Cultural Association, the Bombay High Court in Jaywant Balkrishna and Others v. State of Maharashtra and the High Court of Andhra Pradesh in Krishna Kumar v. State of A.P are on similar lines to the Satyanarayana Judgment and have held that rummy and bridge are card games of skill and therefore outside the ambit of Chennai Police Act 1888, the Bombay Prevention of Gambling Act 1887 and Andhra Pradesh Gaming Act, 1974 respectively.
- The Karnataka High Court in Kirana S vs. State of Karnataka has held that even when a game of skill was played for certain commission, the same would be outside the ambit of the state gambling act. Further, the Karnataka High Court in the matter of S. Ananthaswamy Iyer vs. State of Karnataka held that:
“I am unable to accept this contention. In the first instance gambling involves playing a game of chance. Though according to the Sub-Inspector the information that he had before raiding the place was that the persons were playing such a game of chance, but what he found actually on going to the place was that the persons were playing game of Rummy with cards and not any game of chance. Therefore, it cannot be said the place was being used for any such purpose of gambling, or it was used as such as a gambling house. Even assuming accused-26 was collecting certain commission from the persons who were playing the game of Rummy in the premises of the Association, that collection by itself cannot make it either a gaming house or the accused can be said to have committed any such offence punishable under sections 79 and 80 of the Police Act. The allegation made by the Investigating Officer was that the accused were merely playing a game called Rummy by using the cards, but not any game of chance. As pointed out by the Supreme Court in the decision referred to above, it is commonly known that stacks have to be purchased and maintained for the use of the members and service is give, money is thus collected. Just as some fee is charged for the games of billiards, ping-pong, tennis, etc., an extra charge for playing cards (unless it is extravagant) would not show that the club was making a profit or gain so as to render the club into a common gambling house. The collection of some fees may become necessary to maintain the Association running. Therefore, if accused-26 was collecting some commission for allowing them to have the game the Rummy being played there, it cannot be said any such offence at all is made out.”
- In fact, the decision of the Andhra Pradesh High court in the case of Krishna Kumar v. State of A.P. has gone a step further and stated that game of skill, even when being played for stakes are outside the ambit of the Gambling Act:
“14. From the above clarification of the Division Bench of this Court also, it is clear that conducting card room where members and guests play the game of rummy (13 card game) with stakes/syndicate would not attract the provisions of the Act. That must be the reason why the writ petitioner club were permitted to run the card room for members and guests playing the game of rummy (13 card game) with stakes/syndicate, by the Division Bench.
- In view of Section 15 of the Act, the provisions of the Act do not apply to game of rummy, which is to be treated as a game of skill only. Therefore, the question whether the management of the club or the club is making profits, and what is the rate of profit that is being made from out of the game of rummy with 13 cards/syndicate may not be of any relevance. Therefore, even if the petitioners, who are running the club that was raided by the police, were making profits by allowing persons to use the premises for playing the game of rummy with 13 cards/ syndicate, they cannot be said to be running a 'common gaming house' as defined in Section 3 of the Act, because Section 3 of the Act, in view of Section 15 of the Act, does not apply to a place where Rummy is being played.”
- The Madras High Court in Director Inspector General of Police vs. Mahalakshmi Cultural Association, W.A. No. 2287 of 2011, held that the games of skill for stakes fall within the ambit of the Chennai City Police Act. The Madras High Court’s division bench in its decision had observed and held that:
"23……..(1) The game of rummy (13 cards) is only a game of skill even though an element of chance is also involved.
(2) In the event rummy is played by the members or the guests without stakes, the provisions of the Chennai City Police Act are not attracted.
(3) In the event rummy is played by the members or the guests with stakes, the provisions of the Chennai City Police Act are attracted.
(4) In the event the club/association either allows its members or guests to play rummy with stakes or make any profit or gain out of such gambling, the Police has the authority to invoke the provisions of the Chennai City Police Act.
(5) In order to ascertain as to whether the premises is used as a gaming house for gambling, the Police is entitled to invoke Section 23 of the Act."
- An appeal from this decision of the Madras High Court was filed before the Hon’ble Supreme Court of India in the case of Mahalakshmi Cultural Association v. Director Inspector General of Police and Others. However, the appeal was subsequently withdrawn as the criminal cases against the accused were dismissed. The Supreme Court, while allowing for the withdrawal of the writ petition, further held that, "since the writ petition is dismissed as withdrawn, the observations made by the Madras High Court in the writ petition or in the writ appeal filed by the State do not survive." In absence of a decision by the Supreme Court pertaining to games of skill, for stakes, a position of law for India pertaining to legality of ‘games of skill for stakes’ has not been determined and remains ambiguous.
- Accordingly, the judgment of the Division Bench of the Madras High Court in the Mahalakshmi case is no longer valid and applicable. The State of Tamil Nadu, in the above stated case before the Hon’ble Supreme Court of India on 14.08.2015, had taken a position that ‘till date the state had not taken any action against online games of skill for stakes operators, due to lack of clarity’.
- Recently, the Division Bench of the Hon’ble Madras High Court in the case of The Director General of Police & Ors. vs. S. Dillibabu adjudicated upon an appeal filed by the appellants challenging an order of the Single Judge which allowed the respondents to play rummy with stakes and directed the appellant to not disturb the respondents while doing so at their respective club premises. The Division Bench of the Hon’ble Madras High Court adjudicated upon the issue whether the said decision by the Single Judge was contrary to the decision of the Hon’ble Supreme Court of India in the Chamaurbagwala judgment. The Division Bench of the Hon’ble Madras High Court held that gambling is a social evil and the decision of the Single Judge allowing rummy for stakes is in violation of the Supreme Court decision in the Chamaurbagwala judgment and accordingly proceeded to strike down the said Single Judge order allowing rummy to be played for stakes. The following are the relevant paragraphs:
“6. Though all the directions (a) to (j) are under challenge in this Writ Appeal, the learned Special Government has confined his arguments only with regard to directions (a) & (e). During the argument, it is the contention of the learned Special Government Pleader that with regard to direction No. (a) viz., The petitioner association shall not indulge in any illegal activity other than playing Rummy (13 cards) with stakes by its members and guests; and as per the said direction, the respondent association can play the rummy with stakes and it amounts to gambling. As regards direction (e) viz., In the normal circumstances, there should be no interference in the lawful functioning of the Clubs, by the Police. It is not permissible for the police to enter the Club premises as a routine measure, so long as the Clubs are functioning within the frame work of law", the learned Special Government Pleader would submit that the respondent-Association by showing the order passed by the learned Single Judge, the respondent/writ petitioner cannot prevent the Police Personnel in performing their lawful duty. It is his further contention that the playing rummy is not an offence, however playing rummy to make money for gambling is an offence.
- We find much force in the contention of the learned Special Government Pleader that the respondent-Association by virtue of the order of the learned Single Judge cannot prevent the Police Personnel to do their lawful duty. Therefore, the order passed by the learned Single Judge with regard to directions (a) & (e) are unsustainable.
- Considering the fact that gambling is an evil and it is rampant, that gaming houses flourish as profitable business and that detection of gambling is extremely difficult. Further, in view of the Judgment of Constitution Bench of the Hon'ble Supreme Court in State of Bombay v. R.M.D. Chamarbagwala, (referred supra) and the reasons mentioned above, we are of the considered view that the order passed by the learned Single Judge insofar as the directions (a) & (e), are not sustainable and the same are set-aside and the other directions given by the learned Single Judge remain unaltered. With the above observation, the Writ Appeal is partly allowed. There is no order as to costs.”
- Fantasy sports/leagues have been classified as game of skill by the Hon’ble Punjab And Haryana High Court in the decision dated 18.04.2017 in the case of Varun Gumber vs. Union territory of Chandigarh and Ors., where the court while perusing the Respondent Company’s terms and conditions, game rules and the format of the league as presented by the Respondent Company and by referring & adhering to the landmark judgments of the Supreme Court in the cases of R Lakshmanan vs. State of Tamil Nadu, AIR 1996 SC 1153;R.M.D Chamarbaugwala & Anr vs. Union of India, AIR 1957 SC 628; and State of Andhra Pradesh vs. K. Satyanarayana & Ors, (1968) 2 SCR 387 held that Fantasy Sports are games of skill as they depend upon a substantial degree of skill and not chance. The Court stated that the law laid down by the Supreme Court in the above stated judgments also applies to playing fantasy games and therefore, playing fantasy sports is a game of skill as it requires considerable skill, judgment, adroitness and discretion.
- Justice Amit Rawal of the Punjab and Haryana High Court, in his decision in the Varun Gumber case, has held the following:
- That the competitions where success depends upon a substantial degree of skill are not gambling and despite there being an element of chance, if a game is preponderantly a game of skill it would nevertheless be a game of “mere skill”.
- That the law laid down in the Supreme Court judgments applies to playing fantasy games and therefore, playing fantasy sports is a game of skill as it requires considerable skill, judgment and discretion.
- Therefore, the activity/business of fantasy sports does not fall under the category of “gambling” and shall have the protection granted by Article 19 (1) (g) of Constitution of India on account of it being a legitimate business activity.
- The Hon’ble Punjab and Haryana High Court ruled in favour of the Respondent Company and accordingly dismissed the petition filed by the Petitioner.
- Imperatively, the decision of the Hon’ble Punjab & Haryana High Court in the Varun Gumber case, whereby Fantasy sports/leagues were adjudicated to be a game of skill, was appealed vide a Special Leave Petition to the Hon’ble Supreme Court of India. The Supreme Court vide order dated 15.09.2017 in the said appeal captioned as Varun Gumber vs Union territory of Chandigarh and Ors., Diary No. 27511/2017 dismissed the special leave petition in limine. It is important to state herein that the order dated 15.09.2017 of the Hon’ble Supreme Court, whereby the special leave petition was dismissed, is an “in limine non-speaking order” i.e. the Supreme Court has dismissed the special leave petition at the outset without going into the merits of the case and without giving any reasons for the said dismissal. It is settled law in India, that the dismissal of a special leave petition by the Supreme Court at the admission stage without giving reasons, does not lay down any binding principle under Article-141 of the Constitution to be followed by the High Courts. The dismissal of a special leave petition in limine by a non-speaking order does not therefore justify any inference that by necessary implication the contentions raised in the special leave petition on the merits of the case have been rejected by the Supreme Court. Therefore, the dismissal of the special leave petition by the Hon’ble Supreme Court in the Varun Gumber case vide its order dated 15.09.2017 does not, in any manner, mean that the Hon’ble Supreme Court has upheld and/or affirmed and/or confirmed the decision of the Hon’ble Punjab & Haryana High Court.
- In declaring Rummy to be a game of skill, the Hon’ble Supreme Court in State of Andhra Pradesh v. K. Satyanarayana held:
"15…………………The game of Rummy is not a game entirely of chance like the 'three-card' game mentioned in the Madras case to which we were referred. The 'three card' game which goes under different names such as 'flush', 'brag' etc. is a game of pure chance. Rummy, on the other hand, 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. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill…………………………………"
- The Hon’ble Supreme Court of India in K. R. Lakshmanan v. State of Tamil Nadu held that golf, chess and rummy are games of skill because there are hardly any games which can be classified to be games of pure skill or of pure chance. Therefore, the Hon’ble Supreme Court laid down a basic principle for classification of games: a ‘game of chance’ is one in which the element of chance predominates over the element of skill and a ‘game of skill’ is one in which the element of skill predominates over the element of chance. It is therefore the dominant element of either ‘skill’ or ‘chance’ which determines the character of the game. The relevant paragraphs have been reproduced below:
“3..................Gambling in a nut-shell is payment of a price for a chance to win a prize. Games may be of chance, or of skill or of skill and chance combined. A game of chance is determined entirely or in part by lot or mere luck. The throw of the dice, the turning of the wheel, the shuffling of the cards, are all modes of chance. In these games the result is wholly uncertain and doubtful. No human mind knows or can know what it will be until the dice is thrown, the wheel stops its revolution or the dealer has dealt with the cards. A game of skill, on the other hand - 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.Golf, chess and even Rummy are considered to be games of skill. The courts have reasoned that there are few games, if any, which consist purely of chance or skill, and as such a game of chance is one in which the element of chance predominates over the element of skill, and a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element - "skill" or "chance" - which determines the character of the game.
- The judgments of this Court in the two Chamarbaugwala cases and in the Satyanarayana case clearly lay-down that (i) the competitions where success depends on substantial degree of skill are not 'gambling' and (ii) despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of "mere skill". We, therefore, hold that the expression "mere skill" would mean substantial degree or preponderance of skill.”
- In the case of J. Sivani and Ors. vs. State of Karnataka and Ors. the primary question raised before the Hon’ble Supreme Court of India was whether video games require to be regulated under the respective Mysore Police Act, 1963 and the notifications issued thereunder and the Madras City Police Act, 1888 and the orders of the Tamil Nadu Government in GOMS No. 166-0 dated January 18, 1993 and the allied. The Hon’ble Supreme Court held that:
- Video gaming may be a game of skill, game of chance or mixed game of chance and skill and the said classification shall differ from case to case.
- Video games which are a game of chance or mixed game of chance and skill fall within the definition of ‘gaming’ and shall be governed by the Madras City Police.
The following are the relevant paragraphs of the decision:
“10. Gaming, therefore, is an inclusive definition which includes a game of chance and skill combined or a pretended game of chance or of chance and skill combined. Gaming house would mean any house, room, tent etc. whether enclosed or open or any place whatsoever in which the instruments of gaming are kept or used for profits or gain by the person occupying, using or keeping such house, room, tent etc. whether by way of charge or otherwise. The instrument of gaming would include any article used or intended to be used as a subject of means of gaming, any document used or intended to be used as a register or record or evidence of gaming, the profits of any gaming or any winnings or prizes in money or otherwise distributed or intended to be distributed or money's worth in gaming. Place would include a building or a tent etc. whether permanent or temporary or any area whether enclosed or open. Place of public amusement means any place where any gain or means of carrying on the gain is provided in which the public are admitted includes a road or a street or a way whether a thorough fare or not a landing place in which the public are granted access or have a right to resort or over which they have a right to pass. The element of gaming are the presence of prizes or consideration, chance and prizes are reward and games includes a contrivance which has for its object to furnish sport, recreation or amusement. Amusement would mean diversion, pastime or enjoyment or a pleasurable occupation of the senses, or that which furnished it. A common gaming house is a place or public place kept or used for playing therein any game or chance, or any mixed game of chance and skill, in which the organiser keeps one or more of the players. It is also a place in which any game is played, the chances of which are not alike favourable to all the players. Gaming is to play any game whether of skill or chance for money or money's worth and the act is not less gaming because the game played is not in itself unlawful and whether it involved or did not involve skill.
- Where in a certain game, certain operations are to be performed to enable the gamester to play the game, the persons taking part in such operations must be deemed to be 'gaming' or actually assisting in the gaming. "To game", therefore, is to play any game, whether of skill or chance, for money or money's worth. It is playing of the game for money or money's worth whether the game be lawful or not. No game can be a game of skill alone. In any game in which even great skill is required, chance must play a certain part. Even a skilled player in a game of mere skill may be lucky or unlucky, so that even in a game of mere skill chance must play its part. But it is not necessary to decide in terms of mathematical precision the relative proportion of chance or skill when deciding whether a game is a game of mere skill. When in a game the element of chance strongly preponderate, it cannot be game of mere skill. Therefore, it is not practicable to decide whether particular video game is a game of skill or of mixed skill and chance. It depends upon the facts, in each case.
- The primary questions that emerge are whether video game is a game and whether it is a game of skill or chance and liable to be regulated under the relevant Act, notification or regulations or orders issued thereunder. The word "gaming" defined under the Acts is an inclusive definition to bring within its ambit diverse games as held earlier.
- Some of the video games are operated with two way or four-way joy-sticks, push buttons, a volume control with a staring wheel and accelerator, gun trigger control or potentiometer etc. etc. Every video game is operated by an electronic machine. In all the games, tokens are actually used by the player by inserting into the machine before the play actually begins. The tokens are required to be purchased for cash at the counter and are exchangeable for cash. In the Tamil Nadu cases, in the counter affidavit filed by the Commissioner, it was stated and accepted by the High Court that Super Continental game has four vertical pathways on the screen, The first containing figures of apples, second contains grapes, third contains bells and fourth contains stars. On pressing the button, these stripes move fast and after some time come to stop. The points are given in the figures appearing in groups for example three apples or three grapes or the order as indicated in the machine. The player can either lose the amount or win if he makes more points than the bet. Similarly, Five Line game is the same as that of Super Continental except that this game has got only three stripes. Other games lie High-low, Black Jack, Packer Double UP, Skill Ball, Pac Man, Golden Derby, have been explained, the details of play are not material for decision. If the player presses the button without knowing the outcome i.e. the nature of cards that would be turned, it is only a game of chance for the card opened contains a numerical of either higher or lower denomination. Video gaming, therefore, is associated with stakes or money or money's worth on the result of a game, be it a game of pure chance or of mixed skill or chance.
- For a commoner or a novice, it is difficult to play video game with skill. Ordinary common people who join the game can hardly be credited with skill for success in the game. The forecast is nothing better than a shot at a hidden target. Whether a particular video game is a game of skill or a game of chance, or mixed chance or skilled requires to be determined on the main element, namely, skill or chance. If it is a game of pure chance or mixed chance and skill, it is a gaming. Even if the game is for amusement or diversion of a person from his usual occupation for entertainment, it would constitute "gaming." The object of the relevant Act, notification or Orders made thereunder is to regulate running of the video games and for that licence is required from the licensing authority.
- The licencing authority, therefore, is conferred with discretion to impose such restrictions by notification or Order having statutory force or conditions emanating therefrom as part thereof as are deemed appropriate to the trade or business or avocation by a licence or permit, as the case may be. Unregulated video game operations not only pose danger to public peace and order and safety; but the public fall a prey to gaming where they always stand to lose in playing in the games of chance. Unless one resorts to gaining regularly, one can hardly be reckoned to possess skill to play the video game. Therefore, when it is a game of pure chance or manipulated by tampering with the machines to make it a game of chance, even acquired skills hardly assist a player to get extra tokens. Therefore, even when it is a game of mixed skill and chance, it would be a gaming prohibited under the statute except by regulation. The restriction imposed, therefore, cannot be said to be arbitrary, unbridled or uncanalised. The guidance for exercising the discretion need not ex facie be found in the notification or orders. It, could be gathered from the provisions of the Act or Rules and a total consideration of the relevant provisions in the notification or order or conditions of the licence. The discretion conferred on the licencing authority, the Commissioner or the District Magistrate, cannot be said to be arbitrary, uncanalised or without any guidelines. The regulations, therefore, are imposed in the public interest and the right under Article 19(1)(g) is not violated.
- It is true that the owner or person in charge of the video game, earn livelihood assured under Article 21 of the Constitution but no one has right to play with the credulity of the general public or the career of the young and impressive age school or college going children by operating unregulated video games. If its exhibition is found obnoxious or injuries to public welfare, it would be permissible to impose total prohibition under Article 19(6) of Constitution. Right to life under Article 21 does protect livelihood, but its deprivation cannot be extended too far or projected or stretched to the avocation, business or trade injurious to public interest or has insidious effect on public morale or public order. Therefore, regulation of video games or prohibition of some of video games of pure chance or mixed chance and skill are not violative of Article 21 nor is the procedure unreasonable, unfair nor unjust.”
- Under the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act 2016 (“Nagaland Gambling Act”), Section 2(1), betting and wagering on games of skill has been excluded from the ambit of gambling. Further ‘Games of Skill’ has been defined under Section 2(3) of the Nagaland Gambling Act of 2016 as:
“Games of skill- shall include all such games where there is preponderance of skill over chance, including where the skill relates to strategising the manner of placing wagers or placing bets or where the skill lies in team selection or selection of virtual stocks based on analyses or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.
Explanation: For the purposes of this Act:-
All Games provided in Schedule A of this Act shall fall under the category of “Games of Skill”.
‘Games’ which have been declared or determined to be ‘games of skill’ by Indian or international courts or other statutes, or games where there are domestic and international competitions and tournaments, or games which can be determined to be ‘games of skill’ shall further be entitled to be included in Schedule A.”
Games of skill may be (a) Card based and (b) action / virtual sports / adventure / mystery and (c) calculation / strategy / quiz based.”
- Schedule A of the Nagaland Gambling Act 2016 lists down various other games such as poker, sudoku, chess, bridge, rummy, nap, virtual sports, virtual team selection games etc. within the ambit of skill games. Therefore, to conduct ‘Cognitive Skill’ games in Nagaland online, a license would be required.
- While the Nagaland Gambling Act shall not be binding on other states, it enunciates an interpretation of a provision, which other States of India have not considered. Since it clarifies the position pertaining to classification of games of skill, States where an exception for a game of skill does not exist, in those States a licensee from Nagaland cannot offer its skill games online.
- The Assam, Odisha (Orissa) and Telangana state legislations pertaining to gambling do not have an exception for ‘games of skill’. Games of skill for stakes are not excluded from the ambit of gambling in the State of Telangana and the state of Kerala and have been expressly classified as ‘gambling’ and a prohibited activity.
- Furthermore, under the Sikkim Online Gaming (Regulation) Act 2008, the service provider is required to obtain and possess a license in order to legally start sports betting and online gaming operations.
- In the case of Indian Poker Association and Ors. vs. State of Karnataka and Ors, the Karnataka High Court has held that in the state of Karnataka “if the game of poker is played as a game of skill, license is not contemplated”. Similarly, other games of skill being played like scrabble, carom, chess, darts also do not require a license.
- The Hon’ble High Court of Karnataka in Shankar Creation Association v. State of Karnataka has held that poker is a game of skill similar to games like Chess, Rummy, Dart, Carom etc. and therefore no license is required to conduct such activities in a premises under the Karnataka Police Act or the Licensing and Controlling of Places of Public Amusement Order, 1970.
- Recently, the Division Bench of the Hon’ble Kerala High Court in the case of K vs. Circle Inspector of Police Mallapuram District adjudicated upon a writ petition filed by the petitioner seeking for the issuance of a writ of mandamus or any other appropriate writ, order or direction directing the respondent not to interfere with the functioning of the club and not to make any frequent raid or book cases for playing rummy in the club of the petitioner. The Hon’ble Kerala High Court, among others, framed the following pertinent issues:
- Whether the game of rummy is a game of skill or chance liable to be regulated under the Kerala Gaming Act or rules framed thereunder?
- Whether playing rummy at the club is gambling as defined under the Kerala Gaming Act?
- Whether the game of rummy even if it is a game of mere skill is still prohibited under Sections 7 and 8 of the Kerala Gaming Act?
- Whether Sections 7 and 8 of the Kerala Gaming Act either expressly or impliedly exclude the game of rummy as a game of skill?
The Hon’ble Kerala High Court upon perusal of several judgments and hearing both parties refused to quash the proceedings against the petitioners and held that playing rummy for stakes is not excluded under the Kerala Gaming Act and that the same amounts to a ‘gambling activity’. The following are the relevant paragraphs:
“10. The primary questions that emerge are:
(1) Whether the game of rummy is a game of skill or chance liable to be regulated under the Kerala Act or rules framed thereunder?
(2) Whether the premises of a club known as 'Sopanam Arts and Sports Club' situated at Angadipuram were being used as a common gaming house?
(3) Whether the petitioner, who was the office bearer of the club, at the time of raid by the Police could be said to be instrumental in conducting common gaming house?
(4) Whether playing rummy at the club is gambling as defined under the Kerala Act?
(5) Whether the game of rummy even if it is a game of mere skill is still prohibited under Sections 7 and 8 of the Kerala Act?
(6) Whether Sections 7 and 8 of the Kerala Act either expressly or impliedly exclude the game of rummy as a game of skill?
(7) Whether the Police is competent to set the criminal law in motion in accordance with the Kerala Act, if a case is registered by the Police under Sections 7 and 8 of the Kerala Act based on credible information or reasonable doubt that the activities carried on by the club or its members are not in accordance with law and thereby indulging in unlawful activities or nuisance?
11……The important question arises as to whether the game of rummy, which depends to a substantial degree upon the exercise of skill, comes within the stigma of Sections 7 and 8 of Kerala Act. The judgments of the Apex Court (Constitution Bench) in the two Chamarbaugwala cases [State of Bombay v. R.M.D Chamarbaugwala and another (AIR 1957 SC 699) and R.M.D. Chamarbaugwala and another v. Union of India and another [AIR 1957 SC 628] had held that gambling is not a trade and as such, is not protected under Article 19(1)(g) of the Constitution of India. It was further held that the competitions, which involve, substantial skill are not gambling activities. Such competitions are business activities, the protection of which is guaranteed by Art.19(1)(g) of the Constitution. In the above backdrop, we have to examine the question whether game of rummy is a game of chance or a game involving substantial skill………………….In Satyanarayana's case (supra), the question considered by the Apex Court was whether the premises of a club known as “Crescent Recreation Club” situated in Secunderabad were being used as a common gambling house and whether the members, who were playing rummy for stakes at the time of raid, could be said to be gambling therein under the Hyderabad Gambling Act (2 of 1305 F) which follows in outline the provisions of the Public Gambling Act, 1867 in force in India. In Satyanarayana's case (supra), the Apex Court clearly stated in para 12 of the judgment that if there is evidence of gambling in some other way or that the owner of the house or club is making a profit or gain from the game of rummy or any other game played for stakes, the offence may be brought home.
- Learned Amicus Curiae placed reliance on the following decisions rendered by the Apex Court, the High Court of Kerala and the Madras High Court in [State of Bombay v. R.M.D Chamarbaugwala and another (AIR 1957 SC 699), R.M.D. Chamarbaugwala and another v. Union of India and another [AIR 1957 SC 628], Sindhi Lohona Choithram Parasram v. State of Gujarat [1967 KHC 714], Sugathan v. State of Kerala and another [2018(4) KHC 45(DB)], MJ Sivani and others v. State of Karnantaka and others [1995 KHC 982], Director General of Police, Chennai and others v. S.Dillibabu [2018 KHC 3340] and State of Tamil Nadu v. Thirukkural Perumal [(1995)2 SCC 449] and maintained that the offences under Sections 7 and 8 of the Kerala Act will be attracted, if the game of rummy is played for stakes. In other words, it is maintained that the stake involved in playing the game of rummy amounts to gambling.
- Going by the above decisions, it is very clear that in case the club is used as a gaming house for the purpose of playing rummy for stakes and all the persons physically present there are found playing rummy, then they are certainly accused in the eye of law provided the detecting officer has complied with Section 5 of the Kerala Act before making such raid or inspection in the club.
- Coming to the offences stipulated under Sections 7 and 8 of the Kerala Act, the learned Amicus Curiae pointed out that under Section 14A of the Kerala Act, the Government may, if they are satisfied that in any game the element of skill is more predominant than the element of chance, by Notification in the Gazette, exempt such game from all or any of the provisions of this Act, subject to such restrictions and conditions as may be specified in the notification. Admittedly, no notification was issued by the Government, exempting the game of rummy for stakes.
- 22. On a close analysis based on the decisions cited above, as has been rightly submitted by the learned Amicus Curiae, the definition contemplated under the Kerala Act with regard to common gaming house does not exclude rummy for stakes within the club, even if the club is not making profit from the business……………..As far as the issue regarding the registration of the FIR under Sections 7 and 8 of the Kerala Act is concerned, in case the court is satisfied that the game of rummy is played for stakes, in accordance with the search and seizure as contemplated under Section 5 of the Kerala Act, the court should be extremely cautious to interfere with the investigation of a criminal case and should not stall the investigation except when it is convinced beyond doubt that the FIR does not disclose commission of offence and that the continuation of the criminal prosecution under Sections 7 and 8 of the Act would amount to abuse of process of court.
- In view of the various decisions of the Apex Court, there cannot be any doubt that playing rummy for stakes within the club premises is an offence, provided the Police conducted search in accordance with Section 5 of the Kerala Act. We are in full agreement with the view that expressed by the Division Bench of the Madras High Court in Dili Babu's case (supra). Having heard the learned Amicus Curiae, learned counsel for the petitioner and the learned Senior Government Pleader, we are left in no doubt that playing rummy for innocent pastime is not an offence and is certainly a game of skill as held in Satyanarayana's case (supra).
- While we cannot agree with the point of playing rummy for stakes within the club premises by the professional gamblers as a game of skill, we are of the opinion that the issue has, however, to be looked at from the social perspective as well.”
- Therefore, a perusal of the decisions by the Division Benches of the Hon’ble High Court of Kerala in the K case and the Hon’ble High Court of Madras (Tamil Nadu) in the DilliBabu case makes it evident that rummy for ‘stakes’ has been held to be ‘gambling’ for the purpose of states of Kerala and Tamil Nadu.
- The Telangana State Gaming (Amendment) Ordinance, 2017, the Telangana State Gaming (Second Amendment) Ordinance, 2017 and the amendments introduced in the Telangana Gaming Act, 1974 by the Telangana Gaming (Amendment) Act, 2017, prohibited the residents of Telangana from organizing, providing, participating and playing games of skill (including online games of skill) in and from the State of Telangana, for stakes.
- Therefore, from a perusal of the preceding paragraphs which elucidate the position of law and jurisprudence on gaming in India it can be concluded that:
- The basic principle for classification of games is whether the game is one of ‘chance’ or one of ‘skill’.
- A ‘game of chance’ is one in which the element of chance predominates over the element of skill.
- A ‘game of skill’ is one in which the element of skill predominates over the element of chance.
- The dominant element of either ‘skill’ or ‘chance’ shall determine the character of the game.
- Games of skill shall not be considered as ‘gambling’ and/or ‘betting’ and shall fall outside the purview of majority of the State gaming/gambling legislations whereas games of chance are considered as ‘gambling’ and/or ‘betting’ and are prohibited under majority of State gaming/gambling legislations.
- Therefore, in order to ascertain whether the Cognitive Skill Gaming services can be offered by the Querist, it is necessary to determine whether the Cognitive Skill Gaming models/formats as proposed by the Querists shall be considered to be ‘games of skill’.
- Can the formats/models of Cognitive Skill Games as proposed by Querist be classified as a ‘game of skill’ and placed on the same footing as other games of skill such as Rummy and Horse Racing? Can they be offered without stakes [without a participation fee/entry ticket] for prize money and/or product prizes in India?
- As seen from the above, games are classified into two categories:
- Games of Chance: Games 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 applying his mind to it. Such games usually fall under the head of gambling.
- Games of Skill: Games where skill plays a dominant role in determining the result of the game. The result of the game depends upon the knowledge, training, experience and ability of the player. Such games usually fall outside the ambit of gambling laws.
- For a game to be considered as a game of skill under Indian laws, the element of skill must dominate the element of chance in determining the outcome of the game. Thus, the extent to which skill is involved in a particular game in the key factor in the determination of whether or not a game falls under the ambit of gambling laws in India.
- The Hon’ble Supreme Court in State of Andhra Pradesh v. K. Satyanarayana has defined a game of mere skill as a game:
“in which, although the element of chance necessarily cannot be entirely eliminated, success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player.”
- Further, the requirements laid down by the Supreme Court of India in KR Lakshmanan v. State of Tamil Nadu, for horse raining to fall under the ambit of game of skill are:
- Ability of horses by training over a period of time.
- Training of Jockeys.
- Evaluation method of breed and form of horses.
- External factors like weather to taken into consideration.
- Ascertainment of the result by skill and not chance.
- Therefore, the position of law pertaining to classification of card games such as rummy and bridge as card games of skill as well as the tests and standards to determine whether a game is one of ‘skill’ or ‘chance’ has been settled by the Hon’ble Supreme Court of India in a catena of judgments as stated in the preceding paragraphs. However, the classification of Cognitive skill-based games has still not been directly contemplated by the Hon’ble Supreme Court.
- The Cognitive skill-based gaming models as proposed by the Querist require the User to exercise adroitness, mental action and understand the said gaming situations through thought, experience, and the senses i.e. cognition. The User must calculate and process the gaming equation and/or situation and/or problem rapidly and solve the said equations/situations/problems within the time restrictions that have been implemented within that particular gaming model. The User’s cognitive aptitude is tested across a variety of gaming options including but not limited to visual patterns, mathematical equations and logical brain-teasers. In order to achieve success in the Querist’s model, the User needs to perform satisfactorily across several factors such as reaction time, mental flexibility, spatial memory, attentional capacity, and visual processing. Therefore, in order to succeed in the Querist’s gaming model, the User has to exercise substantial degree of skill and as a result, the cognitive gaming models as proposed by the Querist shall in all likelihood be considered as a ‘game of skill’.
- Classification of cognitive games as a ‘game of skill’ would entail it to rights which are similar to other games of skills like horse racing, rummy and bridge. The Hon’ble Supreme Court of India in the case of M.D Chamarbaugwala v. Union of India has held that competitions where the success depends upon a substantial degree of skill are not gambling. Also, even if a game is preponderantly a game of skill which includes an element of chance, the same would nevertheless be classified as a game of 'mere skill'. This in turn would allow cognitive skill-based games played at any venue within India or on a website accessible to an Indian citizen, without attracting the provisions of the Gambling Acts of the states.
- Therefore, it can be reasonably stated that the Cognitive skill gaming formats of the Querist should be considered as a ‘game of skill’ since success in the said format is predominantly dependent on the skill and nous of the player and shall, in all likelihood, fall outside the ambit of ‘gambling’ and/or ‘betting’ prohibited by a majority of the State Gambling legislations. In light of the above stated decisions and interpretations laid down by the Indian Courts with respect to skill-based games, it is pertinent to state that Cognitive skill-based games are likely to be classified as ‘games of skill’ only if there is preponderance of skill over chance in the said game.
- The Hon’ble Supreme Court of India in M.D Chamarbaugwala v. Union of India; has observed that games of skill are business activities and shall be afforded the protection under Article 19(1)(g) of the Constitution of India. The Hon’ble Supreme Court observed and held:
“5......Following that decision, we must hold that as regards gambling competitions, the petitioners before us cannot seek the protection of Art. 19(1)(g), and that the question whether the restrictions enacted in Sections 4 and 5 and Rules 11 and 12 are reasonable and in the interest of the public within Art. 19(6) does not therefore arise for consideration.
- As regards competitions which involve substantial skill, however, different considerations arise. They are business activities, the protection of which is guaranteed by Art. 19(1)(g), and the question would have to be determined with reference to those competitions whether Sections 4 and 5 and Rules 11 and 12 are reasonable restrictions enacted in public interest…..
- 27. Applying these principles to the present Act, it will not be questioned that competitions in which success depends to a substantial extent on skill and competitions in which it does not so depend, form two distinct and separate categories. The difference between the two classes of competitions is as clear-cut as that between commercial and wagering contracts. On the facts, there might be difficulty in deciding whether a given competition falls within one category or not; but when its true character is determined, it must fall either under the one or the other. The distinction between the two classes of competitions has long been recognised in the legislative practice of both the United Kingdom and this country, and the courts have, time and again, pointed out the characteristic features which differentiate them. And if we are now to ask ourselves the question, would Parliament have enacted the law in question if it had known that it would fail as regards competitions involving skill, there can be no doubt, having regard to the history of the legislation, as to what our answer would be. Nor does the restriction of the impugned provisions to competitions of a gambling character affect either the texture or the colour of the Act; nor do the provisions require to be touched and re-written before they could be applied to them. They will squarely apply to them on their own terms and in their true spirit, and form a code complete in themselves with reference to the subject. The conclusion is therefore inescapable that the impugned provisions, assuming that they apply by virtue of the definition in s. 2(d) to all kinds of competitions, are severable in their application to competitions in which success does not depend to any substantial extent on skill.”
- The offering of games of chance is prohibited under various State Acts and is as such a banned activity unless a license is obtained for its conduct. It would not make a significant difference if the game of chance was being played with real money or without remuneration. Most legislations indicate that the proof of playing for a fee/stakes is irrelevant for conviction under the respective gambling laws, as most state acts (except the Sikkim Online Gaming (Regulation) Act, 2008 and the Goa, Daman, Diu Public Gambling Act, 1976) prohibit the offering of games of chance completely.
- Further, the Hon’ble Supreme Court and several High Courts have also held and observed in several judgments that a game where success is determined by skill, the adroitness & knowledge of a player and the element of skill dominating over the element of chance, then, such games shall not fall under the ambit of ‘gambling’ on account of being ‘games of skill’. Therefore, games of skill can be pursued as legitimate business activities unless specifically prohibited.
- Therefore, the activity/business of cognitive skill gaming ‘without stakes’ as intended by the Querist should not, in all likelihood, fall under the category of “gambling” and shall, in all likelihood, have the protection granted by Article 19 (1) (g) of Constitution of India on account of it being a legitimate business activity. Hence, it can be concluded that:
- Since games of skill are exempted under the Public Gambling Act, except in the states of Assam and Odisha (Orissa), cognitive skill-based gaming without stakes for prize money and/or product prizes can be offered across India except Assam and Odisha (Orissa).
- Since the Querist intends to offer cognitive games of skill ‘without stakes’, the same can be offered in the State of Telangana since the State of Telangana only prohibits the residents of Telangana from organizing, providing, participating and playing games of skill (including online games of skill) in and from the State of Telangana, for stakes i.e. ‘games of skill for stakes’ are within the ambit of ‘gambling’.
- In order to conduct online Cognitive skill-based games in State of Nagaland, a licence would be required since the Nagaland Gambling Act mandates a license if an operator intends to offer games of skill and earn revenue either by means of advertising revenue and/or charging a fixed fee for participation/membership and/or charging a percentage of winnings of the game-play. As a result, the requisite of a Nagaland License would apply to game of skill without stakes operations if the said operator intends to earn advertising revenue from the same. A license would also be required to operate in the State of Sikkim by virtue of the Sikkim Online Gaming (Regulation) Act, 2008.
- Cognitive skill-based games without stakes may be offered in the States of Kerala and Tamil Nadu since the High Court decisions, wherein a game of skill activity (rummy) ‘for stakes’ has been held to be ‘gambling’, shall, in all likelihood, not apply to such cognitive skill-based gaming without stakes.
- WHAT IS THE ADVERTISING/BROADCASTING AND MARKETING LAW PERTAINING TO COGNITIVE SKILL BASED GAMING SERVICES?
- While the advertisement of any kind of sport or a game of skill is not prohibited, the advertisement of a game of chance is prohibited. The regulatory framework in regard to the TV shows, advertisements and possible electronic dissemination of material projecting gaming and/or gambling is envisaged in the following legislations and guidelines.
- Self-Regulatory Content Guidelines for non-news channels and current affairs television channel of the Indian Broadcasting Foundation ("IBF"); and
- The Cable Television Network Rules, 1994.
- Self-Regulatory Content Guidelines for non-news channels and current affairs television channel ("Content Guidelines") of the IBF:
- The Content Guidelines extend to all mediums of transmission on the television and includes cable, terrestrial, satellite, DTH, IPTV, mobile and HITS. The guidelines lay down that the broadcaster shall abide by the relevant laws of India. A Broadcast Content Complaints Council ("BCCC") has been set up under the Content Guidelines and allows any person or a group of persons to file a complaint against any program broadcast on any of the IBF's member TV Channels. It specifically allows that a complaint can be made pertaining to a TV Program containing elements of gambling or against social values.
- A Cognitive Skill-based game would not fall within the ambit of gambling as it is unlikely to be classified as a game of chance, especially as if it fulfils all requisites for a game of skill that have been enumerated above.
- The Cable Television Network Rules, 1994:
- The Cable Television Network Rules, 1994 ("Rules") have been framed under the Cable Television Networks (Regulation) Act, 1995. The Rules regulate the operation of cable television network in India.
- Content/program related restrictions are provided under Rule 6 of the Rules whereas the advertising restrictions are provided for in Rule 7 of the above stated Rules. Further, Rule 6 prohibits a program to carry content which is against good taste or decency or encourages or incites the viewers against maintenance of law and order. Rule 7 on similar lines seeks to prohibit advertisements which tend to incite people to breach a law or exploits a social evil.
- The Program and Advertising Codes under the Cable Television Network Rules, 1994 and the Cable Television Networks (Regulation) Act 1995 have laid down certain standards for broadcasting content which are to be adhered to by all the Channels broadcasting content.
- In the landmark judgment of Bimalendu De and Ors vs. Union of India and Ors, the Division Bench of the Calcutta High Court, while deciding on the legality of broadcasting a cash prize-based quiz show (Kaun Banega Crorepati) held, that any entertainment activity where the result involves a substantial and preponderant degree of skill, would not fall within the purview of gambling.
- Further, the Hon’ble Calcutta High Court went on to state that since such entertainment and sporting/gaming activities do not fall within the purview of gambling, they do not violate the Program Code laid down under the Cable Television Networks (Regulation) Act 1995 and Cable Television Networks Rules 1994. The Court held:
“7. A perusal of the definition of gambling would clearly show that there should be an element of wagering or betting to be called it a gambling, that is totally missing in the present case. People across the country are picked up and ultimately chosen to sit on the hot chair, he has to answer the question out of four options provided for each question, this is a plain and simple case of skill and not chance. Out of four options given one answer is correct and that has to be picked up by the participant. There it depends upon the knowledge and skill of the participant to pick the correct answer. If his answer is wrong he is eased out from the competition with whatever money he has earned by answering correct questions. Such kind of game cannot be said to amount to gambling as defined in the aforesaid Act……………………………………………………………………………………………………..
- Therefore, in order to regulate such programme the Parliament has already framed Acts and Rules thereunder which lays down a Programme Code and if the Programme Code is not being followed then penal action can be initiated against the delinquent under the provisions of the Act. Therefore, nothing is left to the guessing as the Parliament in their wisdom has laid down Rules regulating the programme: the Programme Code. If the programme being exhibited in the television is in violation of that Code then the Government of India can certainly initiate proper action against the organizers…
- Therefore the present programme does not violate any of the codes of conduct laid down by the Government. Thus in our humble opinion the present programme does not involve any gambling. It is a case of mere skill which is not prohibited under any of the aforesaid provisions. Likewise, it is not against any of the provisions of the Act of 1995 or Rules of 1994 laying down the programme Code.”
- Programme Code under the Cable Television Networks Rules, 1994
Rule 6 of the Cable Television Network Rules, 1994 prescribes the Program code. The following are some of the key elements of the code:
- Rule 6(1) prescribes fifteen (15) conditions which need to be abided by in order for the content to be successfully aired. They include prohibitions on content containing material which is obscene/defamatory/lascivious, denigrates women and children, contains attack on religious communities, is likely to incite violence, contains aspersions of the integrity of the Nation and its symbols etc. and is unsuitable for unrestricted public exhibition.
- Rule 6(3) states that no cable operator shall carry any program in respect of which copyright subsists under the Copyright Act, 1957 unless he has been granted a license by the owners of the copyright.
- Rule 6 (6) states that no Cable Operator shall carry or include in his cable service any Television broadcaster channel, which has not been registered by the Central Government for being viewed within the territory of India.
- Cognitive Skill Games are likely to be considered as a game of skill, on the basis of the legal principles laid down by the High Courts and states legislatures as have been elucidated in the preceding paragraphs. Thus, the Querist’s model is likely to be outside the ambit of gambling and shall be an activity which is not prohibited under the laws in India. This would, in all likelihood, allow the Querist to freely develop content and advertise Cognitive Skill Game services.
- Advertising Code under the Cable Television Network Rules, 1994.
Rule 7 of the Cable Television Network Rules, 1994 prescribes the Advertisement Code. The following are some of the key elements of the code:
- Rule 7 (2) prescribes eight (8) conditions which need to be abided by in order for the content to be successfully advertised. It includes prohibition of content containing material which is obscene/defamatory/lascivious, denigrates women and children, contains attack on religious communities, is likely to incite violence, contains aspersions of the integrity of the Nation and its symbols etc. and is unsuitable for unrestricted public exhibition.
- Rule 7 (4) states that the goods or services advertised, shall not suffer from any defect or deficiency as mentioned in the Consumer Protection Act, 1986.
- Rule 7 (11) states that no program shall carry advertisements exceeding twelve minutes per hour, which may include up to ten minutes per hour of commercial advertisements, and up to two minutes per hour of a channel’s self-promotional programs.
- Advertisement Standard Council of India (ASCI) Code on Advertisements
- The Advertising Standards Council of India (ASCI) is committed to the cause of Self-Regulation in Advertising, ensuring the protection of the interest of consumers. ASCI seeks to ensure that advertisements conform to its Code for Self-Regulation, which requires advertisements to be legal, decent, honest and truthful and not hazardous or harmful while observing fairness in competition. ASCI is a voluntary Self-Regulation council, registered as a not-for-profit company under Section 25 of the Indian Companies Act.
- The ASCI Code 2016 has laid down a basic tenet which advertisements in India ought to adhere to. Clause 1.1 of the ASCI Code reads as under:
“Advertisements must be truthful. All descriptions, claims and comparisons which relate to matters of objectively ascertainable fact should be capable of substantiation. Advertisers and advertising agencies are required to produce such substantiation as and when called upon to do so by The Advertising Standards Council of India.”
- The ASCI Code further states that advertisements can he held to be misleading if they distort facts, mislead the consumers or contain claims that are so exaggerated that they can lead to widespread disappointment in the minds of consumers. Clause 1.4 and 1.5 of the ASCI Code clarifies this as stated below:
- Clause 1.4 of the ASCI Code states the following:
“1.4. Advertisements shall neither distort facts nor mislead the consumer by means of implications or omissions. Advertisements shall not contain statements or visual presentation which directly or by implication or by omission or by ambiguity or by exaggeration are likely to mislead the consumer about the product advertised or the advertiser or about any other product or advertiser.”
- Clause 1.5 of the ASCI Code states the following:
“1.5. Advertisements shall not be so framed as to abuse the trust of consumers or exploit their lack of experience or knowledge. No advertisement shall be permitted to contain any claim so exaggerated as to lead to grave or widespread disappointment in the minds of consumers.”
- The ASCI Code has stated that the advertisements are legal provided certain provisions are met. It is legal and permissible to make comparisons between two products in advertisements. However, such comparisons, as far as they relate to objective facts, should be true and capable of being substantiated by the advertiser.
“Advertisements containing comparisons with other manufacturers or suppliers or with other products including those where a competitor is named, are permissible in the interests of vigorous competition and public enlightenment.”
- The ASCI Code under Chapter IV has laid down the following guidelines that are to be adhered to in advertisements:
- There should be no likelihood of the consumer being misled as a result of any advertisement, whether about the product advertised or that with which it is compared. (Clause 4.1(d) of the ASCI Code);
- The advertisement should not unfairly denigrate, attack or discredit other products, advertisers or advertisements directly or by implication. (Clause 4.1(e) of the ASCI Code).
- In light of the position of law vis-à-vis the ASCI Code on advertisements, the following conclusions can be drawn:
- Advertisements are legal and permissible under the laws of India, as long as they relate to objective facts, are true, capable of being substantiated by the advertiser and adhere to the prescribed guidelines on disclaimers.
- A certain amount of puffing is permitted in advertisements. However, such advertisements cannot denigrate the rival products being compared by the advertiser.
- Advertisements should not contain deception or falsehood which is capable of misleading a substantial segment of potential consumer and influence their purchasing decisions.
- A claim made in an advertisement should be capable of being justified if called into scrutiny.
- Therefore, since a Cognitive Skill-based game would, in all likelihood, qualify as a ‘game of skill’, it will fall outside the ambit of gambling and, as a result, would not be a prohibited activity. This would allow the Querist to freely develop content and advertise the Cognitive Skill-based game.
- If a cognitive skill-based game is sought to be advertised on an internet platform, then the relevant provisions that need to be considered are:
- Provisions of the Information and Technology Act, 2000 ("IT Act");
- Provisions of Information and Technology (Intermediary Guidelines) Rules, 2011 ("IG Rules"); and
- Provisions of Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (“RSP Rules”)
- Provisions of the IT Act:
The provisions of Section 67 of the IT Act deal with punishment for publishing or transmitting obscene material in electronic form and they could be applied with respect to cognitive skill-based games where winnings and/or prize money are involved. This would only be covered if the court interprets that the activities/services being offered by the Querist are of the nature or contains material:
'which is lascivious or appeals to the prurient interest or if its effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances to see, read or hear the matter contained or embodied in it.'
It is unlikely that the court would interpret the advertisement of a skill-based Cognitive games as an activity which appeals to the prurient interest or depraves or corrupts the mind of those who may read/see/hear the material, the interpretation would be completely different if such an activity is classified as gambling/gaming in India.
- In addition to the above, the provisions of Section 69A of the IT Act read with Ministerial Order for blocking websites dated 07.07.2003 allows the Indian Computer Emergency Response Team (CERT-in) to block websites promoting:
"hate content, slander or defamation of others, promoting gambling........can be reasonably blocked since all such websites may not claim constitutional right to free speech. Blocking of such websites may be equated to balanced flow of information and not censorship."
- Hence, reading Sections 67 and 69A of the IT Act with the Ministerial Order would authorize CERT-in to block the services/activities of the Querist/broadcaster, only when such a game is classified as a gambling/gaming. The Supreme Court of India in State of Andhra Pradesh v. K. Satyanarayana has held that playing a game of skill does not constitute gaming or gambling. Therefore, if a skill-based Cognitive game is advertised online, it is likely to be classified as a game of skill and the CERT-In will not have the authority to block the online advertisement provider of the Querist.
- Websites are required and mandated to ensure compliance with the parameters of the IT Act 2000 including the IG Rules and RSP Rules, 2011. Websites are therefore duty bound to ensure compliance with the law pertaining to intermediaries in India.
- Furthermore, the IG Rules 2011 also mandate that the intermediary shall also not knowingly host or publish any information which has been prohibited under sub rule 3 (2) of the IG Rules 2011 and ‘related to and/or encouraging gambling’ is one of the activities prohibited by the IG Rules, 2011.
- The RSP Rules, 2011 lay down rules and regulations regarding sensitive and personal information of the users of computer resources. The RSP Rules lay down the following rules for intermediaries:
- The intermediaries shall strive to protect sensitive and personal information of the users at all times.
- The intermediaries shall also lay down the rules and policy for the manner in which user information will be collected and from where it will be collected. [Rule 5]
- The intermediaries shall state the manner in which they shall disclose user information to third parties and intermediaries are required to seek prior consent of the user before doing so. [Rule 6]
- The intermediaries are required to keep in place reasonable security practices and procedures to ensure protection of user information. [Rule 8]
- Other general precautions to be observed are that the broadcast and/or advertisement content of cognitive skill-based games should not violate the intellectual property particularly the copyright of another party. Section 31D of the Copyright Act, 1957 has been extended to include Internet Broadcasting under its ambit. The Ministry of Commerce and Industry and the Department of Industrial Policy and Promotion vide notification no. F.No. 14-35/2015-CRB/LU (IPR VII) issued on 05.09.2016 brought internet broadcast companies under the purview of the Statutory Licenses provisions of Section 31D of the Copyright Act, 1957.
- Clause 1 and 2 of Section 31D of the Copyright Act, 1957 state:
“31D (1) Any broadcasting organisation desirous of communicating to the public by way of a broadcast or by way of performance of a literary or musical work and sound recording which has already been published may do so subject to the provisions of this section.
31D (2) The broadcasting organisation shall give prior notice, in such manner as may be prescribed, of its intention to broadcast the work stating the duration and territorial coverage of the broadcast, and shall pay to the owner of rights in each work royalties in the manner and at the rate fixed by the Copyright Board.”
The rationale behind the aforementioned notification dated 05.09.2016 is that a ‘broadcasting organization’ which are desirous of ‘communicating to the public’ should not be restrictively interpreted to cover only radio and TV broadcasting. When the words ‘broadcasting’ and ‘communication to the public’ are read in harmony, they have a broader reach and thus include all kinds of broadcasting including internet broadcasting. Therefore, anyone carrying out the activity of internet broadcasting falls under the purview of Section 31D of the Copyright Act 1957.
Do Cognitive skill games fall under the ambit of Casual/Social Gaming and Prize Competition Act?
- Casual and Social Gaming refers to games likes puzzles, sports and action-based games, computer games, card or board games, adventure games, etc. They have always been popular amongst masses for entertainment purposes. Businesses like Facebook have further thrived on the success of games like Farmville and both Android and Apple based App Stores have seen an overwhelming number of downloads in the case of games like Candy Crush.
- Some of the laws governing Casual and Social Gaming are:
- Laws Preventing Violence: Young Persons’ (Harmful Publications) Act, 1956 which governs the printing, publication and distribution of any acts that depict acts that may be offences such as acts of violence that would corrupt the minds of children. Grand Theft Auto and PUBG are games which have been swimming in controversy with many contending that they make children violent and abusive. While games like ‘Call of Duty’ and ‘God of War’ may attract the provisions of this act, regular sports like cricket and football or usual games like quizzes do not. However, as on date we are not aware of any judicial decision prohibiting the offering of these games in India.
- Laws preventing Pornography and Obscenity: Both, the Indian Penal Code, 1860 and the Information Technology Act, 2000 penalize publication, distribution and transmission of obscene content. The Indecent Representation of Women (Prohibition) Act prevents women from being portrayed in derogatory manner. As cognitive skill-based games usually involve only problem and/or equation and/or riddle oriented graphical representations, they do not attract the provisions of these Acts. If the cognitive skill-based gaming offerings by the Querist involve graphical representations, the Querist shall ensure that the same does not carry pornography or obscenity, failing which, the provisions of these above stated Acts shall apply.
- Intellectual Property Rights: The cognitive skill-based gaming operator shall avoid any copyright and/or trademark and/or any other third-party Intellectual Property Rights infringement. Almost all social games have their own characters and use their own themes, music, etc. to make the games appeal to the user and these characters, music, themes are protected under the Copyright Act, 1957. The conductor of Cognitive Skill based games in representation of games put forward must not merely copy-paste the cognitive skill problems and/or equations and/or riddles from elsewhere and shall instead create their own so as to avoid any copyright infringement as such data is protected under intellectual property rights. In addition, a disclaimer must be put on the Querist website that it does not purport to be an official website or use the official trademark or is affiliated or claims to be associated in any capacity with the entities/stakeholders involved with the sports event that may hold rights over its marks. Though such a disclaimer, cannot completely eliminate, it can to some extent mitigate the liability of Cognitive skill-based games.
- Image Rights: If the operator/conductor of the cognitive skill gaming platform uses a person’s and/or player’s or commentator’s voice or caricature or any other likeness for commercial benefit, prior permission of such player or commentator must be obtained. Image rights are not specifically protected under a particular law in India, however, they may draw liability under several acts like Indian Penal code for defamation or for “passing off” under the Trademark Act, etc.
Casual games are often theme based in nature and use pictures, musical notes, figures, characters etc. to add to the appeal of the games. Since all such works are subject to copyright protection in their own individual sense, the use of such copyrighted material in the games without taking adequate permissions / licenses from the owner of copyrighted material can trigger copyright infringement issued under the Copyright Act, 1957.
- Further, Section 52 of the Copyright Act 1957 provides exceptions for use of copyrighted works under the statutory fair dealing as well as under the judicially created fair use exception. Section 52 of the Copyright Act 1957 permits use of copyrighted works for the following purposes:
- private use, including research;
- criticism or review;
- reporting current events in any print media; or
- by broadcast or in a cinematographic film or by means of photographs;
- reproduction for the purpose of a judicial proceeding or of a report of a judicial proceeding;
- reproduction or publication of a literary, dramatic, musical or artistic work in any work prepared by the Secretariat of a Legislature or, where the Legislature consists of two Houses, by the Secretariat of either House of the Legislature, exclusively for the use of the members of that Legislature;
- the reproduction of any literary, dramatic or musical work in a certified copy made or supplied in accordance with any law for the time being in force;
- the reading or recitation in public of any reasonable extract from a published literary or dramatic work;
- the publication in a collection, mainly composed of non-copyright matter, bona fide intended for the use of educational institutions;
- the making of sound if made by or with the license or consent of the owner of the right in the work.
- The activity of providing cognitive skill-based games for prize money and/or product prizes shall be termed as a commercial business activity and therefore the exceptions under Section 52 of the Copyright Act shall not be applicable to the Querist platforms. Hence, if the Querist platforms choose to use any player/celebrity image and/or voice of the commentator or any other material that may be subject to Indian Copyright law, it shall be mandatory for the Querist platform to acquire necessary licenses to use the said copyrighted work.
- Further, in the case of Kartar Singh Giani v. Ladha Singh, the Court held that:
“two points have been urged in connection with the meaning of the expression fair, in fair dealing (1) that in order to constitute unfairness there must be an intention to compete and to derive profit from such competition and (2) that unless the motive of the infringer were unfair in the sense of being improper the dealing would be fair.”
- Section 2 (d) of the Prize Competition Act defines prize competition as “any competition (whether called a cross-word prize competition, a missing-word prize competition, a picture prize competition or by any other name) in which prizes are offered for the solution of any puzzle based upon the building up, arrangement, combination or permutation, of letter, words or figures”.
- The definition under 2(d) is very broad and if one is to confine the scope to this definition, vis-à-vis cognitive skill-based games, it is evident that cognitive skill-based games proposed by the Querist do involve some elements of building up, arrangement, combination or permutation of letters, words or figures.
- The Prize Competition Act prohibits prize competition in which the total value of the prize offered exceeds Rs. 1000 in a month and involves entries of over 2000 people. Any person intending to conduct a prize competition must also obtain a license to conduct the same.
- Imperatively, the definition of prize competition should be read with the clarification provided by the Bombay High Court decision in the matter of News Television India Ltd. And Others v. Ashok D. Waghmare and Another where the court held that “if any numerical, alphabetical figure is given and if any money or prize is offered for solving that puzzle such a competition would fall within the definition of the word "Prize Competition" as defined under Section 2(d) of the said Act.” The court observed and held under Paragraph 5 of the judgment:
“5. In view of the judgment of the Supreme Court (R.M.D.) and considering the facts in the present case, I am of the view that the programme "KaunBanegaCrorepati" would not fall within the definition of the word "Prize Competition" as defined under Section 2(d) of the said Act and I am also of the view that the petitioners have also not contravened any of the provisions of the Bombay Prevention of Gambling Act as the programme "Kaun Banega Crorepati" is essentially based on giving answers to questions on various topics such as history, geography, sport, music, politics, cinema, science and technology etc.”
- The Bombay High Court in the case of The State of Maharashtra And Anr. vs Bennett Coleman & Co. Ltd. And Anrhas stated in its judgment that:
“To bring a game under the ambit of game of skill the following two requirements have to be satisfied:
- whether it involves the exercise of skill,
- whether success in it depends to a substantial degree upon the exercise of skill.
Mere use of skill is therefore not sufficient to take a competition out of the scope of the Prize Competition Act.”
- The Hon’ble Supreme Court of India in the case of M.D. Chamarbaugwala and Anr. v. Union of India, has held that ‘any game which requires substantial degree of skill would not fall within the definition of prize competition’.
- Therefore, prize competition only regulates competitions when prizes are offered for building up, arrangement, combination or permutation, of letter, words or figures forming either a numerical or an alphabetical puzzle.
- Thus, since the Cognitive Skill game(s) proposed by the Querist, albeit predominantly skill-based, include some elements of building up, arrangement, combination or permutation, of letter, words or figures forming either a numerical or an alphabetical puzzle, the said Cognitive Skill based games may fall within the ambit of ‘Prize Competition’ and the Prize Competition Act, 1955.
- Further, the Tamil Nadu Prize Schemes (Prohibition) Act, 1979 bansthe prize schemes in the state of Tamil Nadu as they come under the ambit of the word lottery which amount to unfair trade practices. According to the Prize Schemes Act, a “prize scheme” is any scheme by whatever name called whereby any prize or gift (whether by way of money or by way of movable or immovable property) is offered, or is proposed to be given or delivered to one or more persons to be determined by lot, draw or in any other manner from among persons who purchase or have purchased goods or other articles from shops, centers or any other place whatsoever specified by the sponsors of the scheme or on any event or contingency relative or applicable to the drawing of any ticket, lot, number or figure in relation to such purchasers.
- Since the Querist is running a Cognitive skill-based game and not promoting a good or services which are sold, the provision of the Tamil Nadu Prize Schemes (Prohibition) Act, 1979 is unlikely to be applicable to the Querist’s game.
- The Cognitive skill-based gaming models proposed to be offered by the Querist are likely to be classified as game of skill, as per the principles laid down by the Hon’ble Supreme Court in the R Lakshmanan and K. Satyanarayan judgments.
- Online games of skill without stakes, including cognitive skill-based offerings, may be offered across India except in the States of Assam and Odisha (Orissa).
- Online games of skill without stakes, including cognitive skill-based offerings, may be offered in the State of Telangana since the State of Telangana only prohibits the residents of Telangana from organizing, providing, participating and playing games of skill (including online games of skill) in and from the State of Telangana, for stakes i.e. ‘games of skill for stakes’ are within the ambit of ‘gambling’.
- In order to conduct online games of skill without stakes, including cognitive skill-based offerings in the State of Nagaland, a license would be required since the Nagaland Gambling Act mandates a license if an operator intends to offer games of skill and earn revenue either by means of advertising revenue and/or charging a fixed fee for participation & membership and/or charging a percentage of winnings of the game-play. As a result, the requisite of a Nagaland License would apply to game of skill without stakes operations if the said operator intends to earn advertising revenue from the same.
- A license would also be required to operate in the State of Sikkim by virtue of the Sikkim Online Gaming (Regulation) Act, 2008.
- The position of law for online games in the State of Tamil Nadu, is ambiguous, considering the State government’s stand in the Supreme Court.
- Cognitive skill-based games without stakes may be offered in the States of Kerala and Tamil Nadu since the High Court decisions, wherein a game of skill activity (rummy) ‘for stakes’ has been held to be ‘gambling’, shall, in all likelihood, not apply to such cognitive skill-based gaming without stakes.
- Cognitive skill-based gaming services can be advertised and/or broadcasted pan India except in the event a State’s competent authority classifies cognitive skill-based gaming format, with or without stakes, as ‘gambling’ in which case the advertisement and broadcast of the same will have to be stopped in that State.
Privileged/Confidential information may be contained in this opinion and is intended for the use only by the addressee(s) named herein.
Scope Limitation: This opinion is based on facts made available to us in the request for opinion and on the statutory/legal position including the judicial and administrative interpretations thereof prevailing upto and inclusive of the date of this opinion.
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