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Saturday, November 7, 2015

whether the State Government can discriminate between the paper lottery and online lottery in pursuance of the provision of Section 5 of the Act.=State of Kerala was well within its rights to prohibit the sale of online or internet lotteries in its State and there is no fault in it. It is well within the powers conferred on it under Section 5 of the Act. A State Government can organize, conduct or promote a lottery subject to conditions mentioned in Section 4 and if there is any violation of the conditions mentioned in Section 4, it would be always open to the State Government to prohibit such lottery and that would be within the legislative power vested with the State under Section 5 of the Act as in that case the State would be only complying with the provisions of the Act made by the Parliament. The learned Single Judge while examining the facts of the case, manner and method in which the sale of online lotteries are conducted, has already held that it violates the provisions contained in Section 4 of the Act. In fact, during the course of arguments, no effort was made to dislodge the findings recorded by the courts below. The view adopted from the observation made by this Court in B.R. Enterprises (supra), in any case, is possible. In our considered opinion, learned single Judge of the High Court rightly mentioned in his judgment that “in fairness, it must be conceded that Section 5, in the light of the interpretation in B.R. Enterprises (supra), admits two interpretations. One is that the State can prohibit any form of lottery, if only it is not running any lottery at all. The second interpretation is that the State can prohibit a particular form of lottery, if it is not running that form of lottery, even if it is running other types of lotteries. The Act has been designedly made to suppress the mischief of lottery. Therefore, we feel that an interpretation, which advances the object of the Act, should be favoured. That means, the State can prohibit online lotteries, if it is not running the said type of lotteries. The decision in B.R. Enterprises (supra), which was dealing with the prohibition of paper lotteries, does not stand in the way of accepting such an interpretation. Accordingly, the main challenge against the impugned notification that it violates Section 5 of the Act is repelled.


                  REPORTABLE


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

1                         CIVIL APPEAL NO. 3518 OF 2007


All Kerala Online Lottery Dealers
Association                                           .... Appellant(s)

            Versus

State of Kerala & Ors.                                    ....
Respondent(s)

WITH

2     CIVIL APPEAL NO. 3519 OF 2007



3 WITH


4     CIVIL APPEAL NO. 3520 OF 2007


5


6 WITH


7 WRIT PETITION (C) NO. 641 OF 2007


8  AND


9 WRIT PETITION (C) NO. 233 OF 2010


                                     10

                               J U D G M E N T

R.K. Agrawal, J.

Civil Appeal Nos. 3518-3520
1)    These appeals are directed  against  the  common  final  judgment  and
order dated 23.05.2006 passed by the Division Bench of  the  High  Court  of
Kerala at Ernakulam in Writ Appeal Nos. 2011, 2012 and 2235 of 2005  whereby
the High Court dismissed the appeals filed by the appellants herein  against
the judgment and order dated 27.07.2005 passed by learned  single  Judge  of
the High Court in Writ Petition (C) Nos. 14495, 16063 and 19582 of 2005.
2)    Brief facts:
(a)   The State of Kerala,  by  notification  dated  13.01.2005,  issued  in
exercise of the power conferred by Section 5 of the  Lotteries  (Regulation)
Act, 1998, (in short ‘the Act’), prohibited the  sale  of  all  computerized
and online lottery tickets marketed and operated through  vending  machines,
terminals, electronic machines and tickets  sold  through  internet  in  the
State with immediate effect and declared that Kerala shall be  a  free  zone
from online and internet lotteries.
(b)   By a subsequent notification dated 27.01.2005,  the  State  of  Kerala
decided to prohibit the  sale  of  all  lotteries  organized,  conducted  or
promoted by the State as well as by every  other  State  Government  in  the
State of Kerala with immediate effect and  declared  that  the  State  shall
hereafter be a Lottery Free Zone.
(c)  The State of Kerala, in partial modification of the notification  dated
27.01.2005, issued a subsequent notification  dated  22.04.2005,  permitting
the sale of paper lotteries organized, conducted or promoted by every  State
Government including the State of Kerala and the prohibition imposed on  the
sale of computerized and on-line lottery  tickets  organized,  conducted  or
promoted by every State Government continued to remain  in  force  declaring
the  territory  of  the  State  of  Kerala  to  be  online,   internet   and
computerized lotteries free zone.
(d)        Being   aggrieved   by   the   notification   dated    22.04.2005
discriminating between the paper lotteries and  online  lotteries,  the  All
Kerala Online Lottery Dealers Association, State of Sikkim and one  Sreekala
and others filed Writ Petition (C) Nos.  19582,  14495  and  16063  of  2005
respectively before the High Court.
(e)   A learned single Judge of the High Court, by judgment and order  dated
27.07.2005, dismissed the writ petitions.
(f)   Being aggrieved by the decision  of  the  learned  single  Judge,  the
petitioners therein preferred Writ Appeal Nos. 2011, 2012 and 2235  of  2005
before the Division Bench of the High Court.
(g)   The Division Bench, by a common judgment and order  dated  23.05.2006,
dismissed the appeals.
(h)   Against the said order, the appellants have  preferred  these  appeals
by way of special leave before this Court.

Writ Petition (C) Nos. 641 of 2007 and 233 of 2010
(a)  One  Bibhash  Karmakar-the  petitioner  herein  has  filed  the   above
petitions in public interest alleging that the States  of  Sikkim,  Nagaland
and Goa are running lottery business contrary to the provisions of  the  Act
which is detrimental to the society as a whole.
(b)   This Court, by order dated 27.11.2009 in Writ Petition (C) No. 641  of
2007, directed the State to explain as to whether the  State  of  Sikkim  is
running lottery business contrary to the provisions  of  Section  4  of  the
Act.  In response to the above, the  State  Government  filed  an  affidavit
dated 10.12.2009  before  this  Court  denying  all  the  irregularities  as
claimed by the petitioner herein and cited various provisions of the Act  as
well as the Sikkim Online Network Lottery  Rules,  2001  to  show  that  the
lottery business in the State is in consonance with the  pre-existing  rules
and regulations.
(c)   This Court, by order dated 21.06.2010, tagged Writ  Petition  (C)  No.
233 of 2010 with Writ Petition (C) No. 641 of 2007.

3)    Heard the  arguments  advanced  by  learned  senior  counsel  for  the
parties and perused the records.  Since a common question of law  and  facts
arise in these appeals and petitions, they are being  disposed  of  by  this
common judgment.
Points for Consideration:
4)    The sole question for consideration before this Court is  whether  the
State Government can discriminate  between  the  paper  lottery  and  online
lottery in pursuance of the provision of Section 5 of the Act.
Rival Submissions:
5)      Learned senior counsel for  the  appellants  contended  before  this
Court that online lottery is also a lottery, as defined under  Section  2(b)
of the Act.  So, if the State Government intends to prohibit  the  same,  it
has to prohibit all the lotteries whether paper or  online.   The  selective
prohibition of the sale of online lottery tickets is impermissible,  in  the
light of Section 5 of  the  Act,  as  interpreted  by  this  Court  in  B.R.
Enterprises vs. State of U.P. and Others (1999) 9 SCC 700.  The  distinction
drawn by the State Government between paper lottery and  online  lottery  is
discriminatory and violative of Article 14 of  the  Constitution  of  India.
Learned senior counsel further contended that the impugned  notification  is
vitiated by mala fides.  It was further alleged that  the  State  Government
is being controlled by the paper lottery mafia and under its  influence  the
sale of online lottery tickets has been prohibited.   The  State  Government
does not have the competence to issue  the  impugned  notification.   Though
the State Government is competent to legislate on  lotteries  by  virtue  of
Item 34 of List II concerning betting and gambling, the power  to  legislate
on lotteries organized by the Government of India or  the  Government  of  a
State is the exclusive preserve of the Parliament by virtue of Entry  40  of
List I of  the  Seventh  Schedule.   So,  the  State  Government,  which  is
incompetent to legislate on lotteries run by other States, has no  power  to
issue the impugned notification.  The State Government, without  legislative
competence, has  ventured  to  prohibit  online  lottery  which  is  totally
fraudulent and colourable exercise of the power.
6)    Learned senior counsel for the appellants  further  pointed  out  that
the contention that online lottery was  not  in  the  contemplation  of  the
Parliament or the Court, cannot be accepted.  The Act has to be  interpreted
to adapt it to the changing times.  According  to  learned  senior  counsel,
the Parliament was well aware about the growing advancement of  science  and
technology and the use of electronic media  in  future  days  to  come  and,
therefore, when it defined ‘lottery’ under  Section  2(b)  of  the  Act,  it
included also the online lottery or internet lottery  which  may  come  into
existence in future.  It was further submitted that the provision  contained
in Section 5 of the Act would empower the State Government to  prohibit  the
sale of tickets of all the lotteries and it cannot  be  restricted  only  to
online or internet lotteries.  He further submitted that  if  it  is  to  be
taken that the online lottery is a class of lotteries for  which  the  State
Government is empowered to prohibit then it is  only  the  Parliament  which
can classify the same and the State  of  Kerala  has  no  power  to  do  so.
According to him, the Central Government framed the  Lotteries  (Regulation)
Rules, 2010 (in short ‘the Rules’) under sub-section (1) of  Section  11  of
the Act and defined online lotteries under Rule 2(e) of the Rules  that  too
for the first time in the year 2010, therefore, the State Government had  no
right or jurisdiction to prohibit the online lottery in the year 2005.   The
principles laid down in B.R. Enterprises (supra) will apply to all types  of
lotteries and a judgment of this Court cannot be ignored  merely  by  saying
that it failed to consider some point or other.
7)    Learned senior counsel further contended  that  this  Court,  in  B.R.
Enterprises (supra), has read down Section 5 of the Act,  to  save  it  from
the vice of unconstitutionality, emanating from conferring  unbridled  power
on  the  State,  which  may  be  termed  as  abdication  of  the   essential
legislative function, by failing to provide guidelines for the  exercise  of
that power.  In the said decision, in paragraphs 84 and 87, it was  held  as
follows:

“84.  In Section 2(b) lotteries are defined to be a Scheme for  distribution
of prizes by a lot or chance.  This definition itself recognizes  that  even
in State lotteries the prizes are to be  collected  by  chance  without  any
skill, hence  gambling  in  nature.   Section  3  prohibits  that  no  State
lotteries can be organized without the condition  stipulated  under  clauses
(a) to (k) of Section 4.  Section 4 provides the conditions to  be  complied
with by the State lotteries.  To initiate any State lottery it  is  left  to
the policy of each State, for this Act is silent.  The only control  is,  in
case it decides, then it must follow  the  conditions  as  laid  down  under
Section 4.  Next comes Section 5 which is subject matter of  challenge,  the
delegation of power to the State to prohibit the  sale  of  lottery  tickets
organized by every other State.  If a  State  desires  not  to  subject  its
people to the lottery gambling,  it  has  no  power  to  restrict  lotteries
organized by other States.  It is to remove  this  mischief  that  power  is
conferred through delegation to the States to do it in terms  of  their  own
policy.  By virtue of this, now the State Government can  prohibit  sale  of
lottery tickets of every other State within its territory.  Next, Section  6
seeks strict compliance with Section 4.  Under this the  Central  Government
may prohibit any State lottery which is being conducted in contravention  of
the conditions as laid down under Section 4 or Section 5.  Section  7  shows
the rigour of this Act by making it a penal  offence  as  against  all,  who
violate the provisions of this Act, be it is Head of the Department  of  the
Government or the agent, promoter or trader to be punishable with two  years
rigorous imprisonment.  Section 8 makes such an offence cognizable and  non-
bailable.  Similarly,  Section  9  deals  with  offences  committed  by  the
companies.  Section  10  entrusts  the  Central  Government  power  to  give
directions  to  the  State  Government  for  carrying  into  execution   the
provisions of this Act, Rule or Order.  Sections 11 and  12  are  the  rule-
making  power  entrusted  to  the  Central   and   the   State   Governments
respectively.  Section 13 repeals the Ordinance.  Thus, the whole Act  makes
clear that the subject it is  dealing  with  is  gambling  in  nature.   The
object of the Act is not to control the policy decision  of  each  State  to
start or to close its lotteries, but to regulate it in case a State  decides
to run its own lottery through modalities and conditions laid down  therein.
 Emphasis of the whole Act is to abide by the  conditions  strictly  if  you
want to run a lottery.  Thus, regulation is through conditions to  eliminate
even  the  remotest  possibility  of  malpractices  by  providing  stringent
measures for its compliance.  Perusal of the Act reveals, the scheme of  the
Act is limited in its application, and it admits the subject it  is  dealing
is gambling in nature.  As we have said, the decision to collect or  not  to
collect revenue through State lotteries is  exclusively  within  the  policy
decision of the State  and  for  this,  neither  the  Union  nor  Parliament
interferes nor is there any indication under the Act.   Thus,  the  question
which remains is, if any State decides that it does not want  any  lotteries
but if it feels helpless  as  having  no  jurisdiction  over  the  lotteries
organized by other States, what is the way out ?  This can only be  done  by
Parliament or by entrusting this power on such State desiring so, which  has
been done through Section 5.  In this background, for this  helplessness  of
a State as recorded in Anraj  case-I  [(1984)  2  SCC  292]  the  remedy  is
provided  by  entrusting  this  power  on  the  State  under  the   impugned
provision.  This helps such  State  to  achieve  its  objective  of  lottery
(gambling) free zone within its territory.  A well-concerned  remedy.   Next
question is what could have been the  guideline?   If  State  lotteries  are
gambling and it cannot be terms as ‘trade and commerce’ at  common  parlance
for any free right under the Constitution.   Such  right  though  recognized
under Article 298, so other States may continue to enjoy till prohibited  by
valid law, and if any State wants within its  State  lottery-free  zone  and
for which the power is entrusted to such State, it cannot be  said  in  this
setting and background and the nature of the subject that such a  delegation
is of its essential legislative power.   The  only  guideline  necessary  in
such delegation is to see that the State does not pick and choose one  State
from the other, which guideline is already provided  in  this  Section.   It
provides that such a ban could only be if  it  is  applied  to  every  other
State.  The only residual field of attack so far as  this  delegation  could
be, which has been attacked in this case, that the State could on  one  hand
ban lotteries of every other State but run its own lotteries.  It is  argued
that while a State  bans  lotteries  of  other  States  not  to  permit  any
gambling activity in the public interest as a policy but  this  very  public
interest is flouted by having lotteries of its own.  It is true that  unless
this provision is read down to mean a State can only ban lotteries of  other
States when it bans as a  policy  its  own  lotteries  it  is  bound  to  be
subjected to the vagaries as pointed out and on deeper scrutiny it  may  not
successfully stand.  But, by reading down the provision,  which  has  to  be
read that it is only that State which decides lottery-free zone  within  its
State can prohibit lotteries of other States clearly provides  the  guidance
for the exercise of such a  power.   It  is  inbuilt  and  inherent  in  the
provision itself in view of the scheme of the Act and nature of  subject  in
issue.  If interpretation as given on behalf of the State of Tamil  Nadu  is
accepted that delegation of power is  absolute,  then  the  submission  that
such delegation is unbridled without any  guideline  carries  great  weight.
Submission for the State  of  Tamil  Nadu  is  that  the  lotteries  may  be
prohibited in phases, viz. while running its own lotteries  yet  prohibiting
other lotteries, may  be  as  a  public  policy,  for  law  and  order,  for
political reasons, morality, etc.   For  surviving  such  an  interpretation
given by Mr. Ganguli, Parliament should have provided some guidelines.  Such
an  interpretation  falls  into  the  trap  of  the  submission  that   this
delegation  is  unbridled.   So,  if  there  are  two  interpretations,  the
interpretation which upholds the  validity  should  be  accepted.   So,  the
interpretation as given by Mr. Ganguli cannot be accepted.

      87.   We find on plain reading of Section 5,  it  empowers  the  State
Government within  its  State  to  prohibit  the  sale  of  tickets  of  the
lotteries organized by every other State.  There  is  also  nothing  in  the
language reading by  itself  so  as  to  say,  whether  such  power  can  be
exercised by the State while running its own lottery  or  can  be  exercised
only where such State does not run its  own  lottery.   This  leads  to  two
possible  interpretations,  as  referred  to  above.   In  view  of  settled
principle of interpretations, the interpretation given by the union to  read
down the provision has substance.  This would  mean  that  the  State  could
only exercise such discretion if it decides not to have any  lottery  within
its territory including its own lottery.  In this  situation,  the  delegate
is tied down by this limitation which itself is a clear  guide  to  a  State
hence cannot be said to be unbridled delegation.  So even to the first  part
it cannot be said to be arbitrary or unbridled.  So, we have  no  hesitation
to approve the interpretation given by the Union to uphold the  validity  of
Section 5.”

Relying on the above quoted  paragraphs,  learned  senior  counsel  for  the
appellants vehemently contended that the State  shall  either  prohibit  the
sale of all lotteries or allow the sale  of  all  lotteries  in  the  State.
Selective prohibition of a particular type of lottery  is  impermissible  in
the light of the above binding judgment.
8)    In support of this submission learned senior counsel  apart  from  the
decision in B.R. Enterprises (supra)  relied  on  the  following  decisions,
viz., The Senior Electric Inspector and Others vs. Laxmi Narayan Chopra  and
Others 1962 (3) SCR 146, State (Through CBI/New Delhi)  vs.  S.J.  Choudhary
(1996) 2 SCC 428  and  SIL  Import,  USA  vs.  Exim  Aides  Silk  Exporters,
Bangalore (1999) 4 SCC 567.
9) The learned senior counsel for the State of Kerala-the respondent  herein
supported the impugned notification by contending that the State  Government
is competent to prohibit a particular type of lottery.  There is  no  fetter
on the power of the Government under  Section  5.   Learned  senior  counsel
further submitted that when the Parliament  enacted  the  Act  in  the  year
1998, there was nothing before it to presume that in times  to  come  online
lotteries will also come into existence apart from the paper lotteries  and,
therefore, the provision of Section 5 which empowers  the  State  Government
to prohibit the sale  of  tickets  of  a  lottery  organized,  conducted  or
promoted by every other State necessarily relate  to  paper  lottery.   Even
otherwise, online lottery  is  different  from  paper  lottery  and  can  be
treated  as  a  class  in  itself.   The  State  Government  is,  therefore,
empowered under Section 5  of  the  Act  to  prohibit  the  sale  of  online
lotteries or internet lotteries in its State.   He  further  submitted  that
the Central Government itself treated online lotteries as a different  class
in  itself  and,  therefore,  framed  the  Rules  providing  the  rules  and
regulations for organizing paper lottery or online lottery or  both  subject
to certain terms and conditions.  Thus, the intention of the Parliament  was
to treat paper lotteries  and  online  lotteries  a  different  class.   The
decision  in  B.R.  Enterprises  (supra)  would  therefore  necessarily   be
understood to relate to paper lotteries only.  The said decision  cannot  be
construed as a precedent.  So, the declaration of law, made therein, is  not
applicable to online lotteries.  It is also submitted  that  prohibition  of
sale of online lotteries has been made bona fide and the  classification  is
reasonable and not arbitrary.   Learned  senior  counsel  further  submitted
that the scheme of Section 4 would show that the Act was framed with a  view
to deal with paper lotteries which were in  vogue  at  that  point  of  time
whereas the distributors of online lotteries do much more than  selling  the
tickets.  They decide and implement  the  lottery  schemes,  provide  infra-
structure and technology, print lotteries and participate in the conduct  of
draws.  Section 4(h) of the Act prohibits holding of draws, more  than  once
in a week.  This restriction has been made taking into account  the  conduct
of paper lotteries.  But, in online lotteries, 70  to  100  draws  are  made
every day in a week.  On  the  above  grounds  the  respondents  prayed  for
dismissal of the appeals.
Discussion:
10)   Before going into the validity of the  impugned  notification,  it  is
fruitful to refer to certain provisions of the Act.   The  relevant  portion
of the Statement of Objects and Reasons for framing this legislation  is  as
under:
“The conduct  of  certain  types  of  lottery  trade  in  the  country,  the
malpractices thereof and their impact on the poorer sections of the  society
has been under  scrutiny  of  the  Government  for  quite  some  time.   The
continued prevalence  of  the  popularly  known  single  digit  and  instant
lotteries and the temptation offered by them proved to  be  the  undoing  of
many families, especially poor daily wagers and low income groups.
In spite of the guidelines issued by the Central Government  over  a  period
of time as also the guidelines issued in the recent past by  the  Honourable
Supreme Court.  In the matter, the evil has not been totally eliminated  and
it is felt that a Central legislation to regulate the conduct  of  lotteries
is necessary to protect the interest of the gullible poor.”

Section 2(b) defines ‘lottery’ which reads as follows:
“2 (b)      ‘lottery’ means a scheme, in whatever form and by whatever  name
called, for distribution of  prizes  by  lot  or  chance  to  those  persons
participating in the chances of a prize by purchasing tickets.”

3. Prohibition of lotteries.—Save as otherwise provided  in  Section  4,  no
State Government shall organize, conduct or promote any lottery.

Section 4 enumerates the conditions, subject to  which  a  State  Government
may organize, conduct or promote a lottery, which reads as follows:
“4.   Conditions subject to which lotteries may be organized etc.:- A  State
Government may organize, conduct  or  promote  a  lottery,  subject  to  the
following conditions, namely:-
“(a)  prizes shall not be offered on any  pre-announced  number  or  on  the
basis of a single digit;
(b)   the State Government shall  print  the  lottery  tickets  bearing  the
imprint and logo of the State in such manner that the  authenticity  of  the
lottery ticket is ensured;
(c)   the State Government shall sell the tickets either itself  or  through
distributors or selling agents;
(d)   the proceeds of the sale of lottery tickets  shall  be  credited  into
the public account of the State;
(e)   the State Government  itself  shall  conduct  the  draws  of  all  the
lotteries;
(f)   the prize money unclaimed within such time as  may  be  prescribed  by
the  State  Government  or  not  otherwise  distributed,  shall  become  the
property of that Government;
(g)   the place of draw shall be located within the State concerned;
(h)   no lottery shall have more than one draw in week;
(i)   the draws of all kinds of lotteries shall be  conducted  between  such
period of the day as may be prescribed by the State Government;
(j)   the number of bumper draws of a lottery shall not be more than six  in
a calendar year;
(k)    such  other  conditions  as  may  be  prescribed   by   the   Central
Government.”

5. Prohibition of sale of ticket in a State.—A State Government may,  within
the State, prohibit the sale of tickets of a  lottery  organized,  conducted
or promoted by every other State.

6. Prohibition of organization  etc.,  of  lottery.—The  Central  Government
may, by  order  published  in  the  Official  Gazette,  prohibit  a  lottery
organized, conducted or promoted  in  contravention  of  the  provisions  of
Section 4 or where tickets of such lottery are sold in contravention of  the
provisions of Section 5.

7.  Penalty.—(1) Where a lottery is organized, conducted or  promoted  after
the date on which  this  Act  receives  the  assent  of  the  President,  in
contravention of the provisions of this Act, by any Department of the  State
Government, the Head of the Department shall  be  punishable  with  rigorous
imprisonment for a term which may extend to two years or with fine  or  with
both:

Provided that nothing contained in this section shall render  such  Head  of
the Department liable to any punishment if he proves that the  contravention
was committed without his knowledge or that he exercised all  due  diligence
to prevent the commission of such contravention.

(2)  Notwithstanding  anything  contained  in  sub-section  (1),   where   a
contravention  under  this  Act  has  been  committed  by  a  Department  of
Government and it is proved that the contravention has been  committed  with
the consent or connivance of, or is attributable to any neglect on the  part
of, any officer, other than the Head of the Department, such  officer  shall
also be deemed to be guilty of that contravention and shall be liable to  be
proceeded against and punished accordingly.

(3) If any person acts as an agent or promoter  or  trader  in  any  lottery
organized, conducted or promoted in contravention of the provisions of  this
Act or sells, distributes or purchases the ticket of such lottery, he  shall
be punishable with rigorous imprisonment for a term which may extend to  two
years or with fine or with both.

8. Offences to be cognizable and non-bailable.—The offence  under  this  Act
shall be cognizable and non-bailable.”

11)   From the above provisions, it can be seen that the tickets of a State-
run lottery shall be printed by the State itself.  Sale of tickets alone  is
permitted through the agents  or  through  distributors.   The  entire  sale
proceeds have to be credited in the public account of the State.   Draws  of
all the lotteries have to be conducted by the State Government.  No  lottery
can have more than one draw in a week.  Bumper draws shall not be more  than
six in a calendar year.  The cumulative effect of sub-sections (h)  and  (j)
appears to be that a State can  run  only  52  ordinary  lotteries  and  six
bumper lotteries in a year.  Section 5  empowers  the  State  Government  to
prohibit the sale of tickets of lotteries organized, conducted  or  promoted
by every other State Government.  Section 6 empowers the Central  Government
to prohibit the  conduct  of  lotteries,  which  are  in  violation  of  the
provisions  of  Section  4  or  which  are  sold  in  contravention  of  the
prohibition imposed by the State Government  under  Section  5.   Section  7
provides the penalty for running a lottery in violation  of  the  provisions
of the Act.  The Head of the Department and other officers  responsible  for
the conduct of the lottery shall be punished with  imprisonment,  which  may
extend to two years or with fine or with both.  Similar  punishment  can  be
imposed on those who sell  or  purchase  the  tickets  of  such  a  lottery.
Section 8 makes the offences under  the  Act  cognizable  and  non-bailable.
Cognizable offence means an offence for which a police  officer  may  arrest
the  accused  without  warrant  (Section  2(c)  of  the  Code  of   Criminal
Procedure, 1973 (in short ‘the Code’).   In  this  background,  it  is  also
relevant to quote Section 4 of the Code which reads as follows:
“4.   Trial of offences under the Indian Penal Code  and  other  laws:-  (1)
All  offences  under  the  Indian  Penal  Code  (45  of   1860)   shall   be
investigated, inquired into, tried, and otherwise dealt  with  according  to
the provisions hereinafter contained.
(2)   All offences under any  other  law  shall  be  investigated,  inquired
into, tried, and otherwise dealt with according to the same provisions,  but
subject to any enactment for the time being in force regulating  the  manner
or place of investigating, inquiring into, trying or otherwise dealing  with
such offences.”

Since no provision is made for investigating the  offences  under  the  Act,
the provisions under the Code will apply to its investigation, by virtue  of
Section 4(2) of the Code quoted above.
12)   It is also relevant to mention the Notifications issued by  the  State
Government from time to time.
“Government of Kerala     Reg. No. KL/TV(N)/12/2003-2005
      2005
                               KERALA GAZETTE
                                EXTRAORDINARY
                           PUBLISHED BY AUTHORITY

Vol.L       Thiruvananthapuram    13th January, 2005
Volume 50        Thursday                               No. 77
            23rd Pousha 1926

                            GOVERNMENT OF KERALA
                            Taxes (H) Department
      NOTIFICATION
G.O.(P) No. 4/2005/TD dated, Thiruvanathapuram, 13th January, 2005.
      S.R.O. No. 34/2005 -  In exercise of the powers conferred  by  Section
5 of the Lotteries (Regulation) Act, 1998 (Central  Act  17  of  1998),  the
Government of Kerala hereby  prohibit  the  sale  of  all  Computerised  and
Online lottery tickets  marketed  and  operated  through  vending  machines,
terminals, electronic machines and tickets sold through Internet in  Kerala,
with immediate effect and declare that Kerala shall be the  free  zone  from
Online and Internet

                            By order of the Governor.
                                  P. MARA PANDYAN,
                              Secretary to Government




                              Explanatory Note

      (This does not form part of  the  Notification,  but  is  intended  to
indicate its general purport).
      Government have decided to  prohibit  the  sale  of  computerized  and
online lottery tickets in the State of Kerala with immediate effect
      This notification is intended to achieve the above object.”


“Government of Kerala     Reg. No. KL/TV(N)/12/2003-2005
      2005
                               KERALA GAZETTE
                                EXTRAORDINARY
                           PUBLISHED BY AUTHORITY

Vol.L       Thiruvananthapuram    27th January, 2005
Volume 50        Thursday              No. 169
                             7th Magga 1926

                            GOVERNMENT OF KERALA
                            Taxes (H) Department
                                NOTIFICATION
G.O.(P) No. 11/2005/TD dated, Thiruvanathapuram, 27th January, 2005.
      S.R.O. No. 73/2005 -  WHEREAS Notification II G.O. (P)  No.  4/2005/TD
dated 13th January, 2005 published as S.R.O. No 34/2005  in  Kerala  Gazette
Extraordinary No. 77 dated the 13th January, 2005 prohibiting  the  sale  of
computerized and online lottery tickets in the  State  of  Kerala  has  been
issued under Section 5 of the Lotteries Regulation Act,  1998  (Central  Act
17 of 1998).
      AND WHEREAS the Government of Kerala  have  decided  to  prohibit  the
sale of all lotteries organized, conducted  or  promoted  by  the  State  of
Kerala with immediate effect.
      AND WHEREAS the Government of Kerala  have  decided  to  prohibit  the
sale of tickets of all lotteries organized, conducted or promoted  by  every
other State Government also;
      NOW THEREFORE, in exercise of the powers conferred  by  Section  5  of
the Lotteries (Regulation) Act, 1998 (Central Act 17 of 1998) and all  other
powers enabling for it, the Government of Kerala hereby  prohibit  the  sale
of tickets of all lotteries organized, conducted or promoted by every  other
State Government including lotteries organized,  conducted  or  promoted  by
the Government of Kerala in the State of Kerala with  immediate  effect  and
declare that the State of Kerala shall hereafter be a Lottery Free Zone.

                            By order of the Governor.
                                  P. MARA PANDYAN,
                            Secretary to Government


                              Explanatory Note

      (This does not form part of  the  Notification,  but  is  intended  to
indicate its general purport).
      Government of Kerala have decided  to  make  the  State  of  Kerala  a
Lottery Free Zone.
      This notification is intended to achieve the above object.
                                     II
G.O.(P) No.11/2005/TD dated, Thiruvananthapuram, 27th January, 2005.
       S.R.O.No.  74/2005,  -   In  exercise  of  the  powers  conferred  by
subsections (1) and (2) of section 12 of  the  Lotteries  (Regulation)  Act,
1998 (Central Act 17 of 1998), the Government  of  Kerala  hereby  make  the
following rules to repeal the Kerala  State  Lotteries  (Regulation)  Rules,
2003 issued in G.O.(P)  No.  118/2003/TD  dated  the  16th  July,  2003  and
published as S.R.O.No 646/2003 in the Kerala Gazette Extraordinary No.  1278
dated the 16th July, 2003, as amended subsequently, namely:-
                                    Rules
1.    Short title, application and commencement:- (1) These  rules   may  be
called the Kerala State Lotteries (Regulation)    (Repeal) Rules, 2005.
      2.    These rules shall apply to the whole of the State of   Kerala.
      3.    They shall come into force at once.
2.    Repeal:-   The Kerala State  Lotteries  (Regulation)  Rules,  2003  is
hereby repealed.

                            By order of the Governor.
                                  P. MARA PANDYAN,
                            Secretary to Government





                              Explanatory Note

      (This does not form part of  the  Notification,  but  is  intended  to
indicate its general purport).
      Government of Kerala by notification  issued  as  G.O.(P)No.11/2005/TD
dated 27th January, 2005 and published as  S.R.O.No  73  in  Kerala  Gazette
Extraordinary No. 169 dated 27th January, 2005 has prohibited  the  sale  of
lottery tickets organized,  conducted  or  promoted  by  the  Government  of
Kerala. Accordingly the Kerala State Lotteries (Regulation) Rules, 2003  has
to be repealed.
      This notification is intended to achieve the above object.”

         “Government of Kerala       Reg. No.KL/TV(N)/12/2003-2005
      2005
                               KERALA GAZETTE
                                EXTRAORDINARY
                           PUBLISHED BY AUTHORITY

Vol.L       Thiruvananthapuram    22nd April, 2005
Volume 50        Friday                      No. 837
            2nd Vaisakha 1927

                            GOVERNMENT OF KERALA
                            Taxes (H) Department
                                NOTIFICATIONS
G.O.(P) No. 382/2005/TD dated, Thiruvanathapuram, 22nd April, 2005.
      S.R.O. No. 73/2005 -  WHEREAS Notification II G.O. (P)  No.  4/2005/TD
dated 13th January, 2005 published as S.R.O. No. 34/2005 in  Kerala  Gazette
Extraordinary No. 77 dated the 13th January, 2005 prohibiting  the  sale  of
computerized and online lottery tickets in the State of Kerala.
      AND WHEREAS, by Notification No. I  issued  as  G.O.  (P)No.11/2005/TD
dated 27th January, 2005  and  published  as  S.R.O.No.  73  in  the  Kerala
Gazette Extraordinary No. 169 dated the 27th January, 2005,  the  Government
of Kerala prohibited  the  sale  of  tickets  of  all  lotteries  organized,
conducted or promoted by every State Government including that of  State  of
Kerala and declared the State as a Lottery Free Zone.
      NOW THEREFORE, in exercise of the powers conferred  by  Section  5  of
the Lotteries (Regulation) Act,  1998  (Central  Act  17  of  1998)  and  in
partial modification of the Notification issued as S.R.O. No. 73/2005  dated
the  27th  January,  2005,  the  Government  of  Kerala  hereby   lift   the
prohibition partially by permitting the sale of paper  lotteries  organized,
conducted or promoted by every  State  Government  including  the  State  of
Kerala provided that the prohibition imposed on  the  sale  of  computerized
and online lottery tickets organized, conducted or promoted by  every  State
Government shall continue to remain in force and the territory of the  State
of Kerala shall be online, internet and computerized lotteries free zone.

                            By order of the Governor.
                                  P. MARA PANDYAN,
                            Secretary to Government


                              Explanatory Note

      (This does not form part of  the  Notification,  but  is  intended  to
indicate its general purport).
       Government  of  Kerala  by  notification  issued  as  G.O.  (P)   No.
66/2005/TD dated 20th April,  2005,  have  reconsidered  the  issue  of  the
prohibition imposed on the sale of all  Lottery  Tickets  in  the  State  of
Kerala and have decided to reintroduce Paper Lottery conducted by the  State
Government with the same pattern and prize Structure as it prevailed  before
27th January, 2005.”


From a  perusal  of  the  Notification  dated  13.01.20015,  issued  by  the
Government of Kerala, we find that the State had prohibited the sale of  all
computerized and  online  lottery  tickets  marketed  and  operated  through
vending machines, terminals, electronic machines and  tickets  sold  through
internet in Kerala.  However, by notification dated  27.01.2005,  the  State
had prohibited the sale of tickets of all lotteries in the State of  Kerala.
 Vide notification dated 27.01.2005,  the  Government  of  Kerala  made  the
Kerala State Lotteries (Regulation) (Repeal) Rules, 2005 which repealed  the
entire Kerala  State  Lotteries  (Regulation)  Rules,  2003.   Vide  another
notification  dated  22.04.2005,  the  Government  of  Kerala   lifted   the
prohibition of sale of paper lotteries organized, conducted or  promoted  by
every  State  Government  including  the  State  of  Kerala.   However,  the
prohibition  imposed  on  the  sale  of  computerized  and  online   tickets
continued to remain in force.
13)   In the 2010 Rules, framed by the Central  Government,  online  Lottery
has been defined under Rule 2(1)(e) which is as under-
“‘online lottery’ means a system  created  to  permit  players  to  purchase
lottery tickets generated by the computer or online machine at  the  lottery
terminals where the information about the sale of a ticket and the  player’s
choice of any particular number or combination of numbers is  simultaneously
registered with the central computer server;”

Rule 3 permitted the State Government to organize a paper lottery or  online
lottery or both subject to the conditions specified in  the  Act  and  these
rules.   Thus from the Rules, it is  clear  that  online  lottery  is  being
treated as a separate lottery from paper  lottery  and  it  is  a  class  in
itself.
14)   In the case on hand, we are mainly concerned with  the  provisions  of
Section 5 and Section 6 of the Act.   These  two  Sections  cover  different
fields.  Section 5 deals  with  prohibition  of  sale  of  tickets,  whereas
Section 6 deals with prohibition of conduct  of  the  lottery  itself.   So,
Section 5 enables the State Government to prohibit the sale  of  tickets  of
lotteries run by  every  other  State  Government.   The  grounds  on  which
prohibition of sale of tickets can be made are not  detailed  under  Section
5.  But, the same can be gathered from other provisions of the Act and  also
by reference to the Object and Scheme of the Act.  Going by  the  scheme  of
the Act, it appears that violation of any of  the  conditions  contained  in
Section 4 could be a ground for the State Government to  prohibit  the  sale
of tickets of a particular lottery, organized, conducted or promoted by  any
other State Government.  If the State  Government  thinks  it  fit,  it  may
prohibit the sale of all lottery tickets in the State and make it a  lottery
free zone.  Section 6 empowers the Central Government to prohibit a  lottery
run by the State  Government.   The  Central  Government  can  prohibit  the
running of a lottery by a State Government if it is found that the  same  is
in violation of the provisions of Section 4.   The  Central  Government  can
also prohibit the running of a lottery if it is found that  the  tickets  of
that lottery are sold in a State, where  the  sale  of  the  same  has  been
prohibited by the concerned State Government under Section 5.
15)   In view of the above, it is relevant to mention Entry 40 under List  I
and Entry 34 in List II of the Seventh  Schedule  and  Article  246  of  the
Constitution of India which are as under:-
Entry 40 List I-Union List
“40.  Lotteries organized by the Government of India or the Government of  a
State.”

Entry 34 List II-State List
“34.Betting and Gambling.”
Article 246 of the Constitution
“246. Subject matter of laws made by Parliament and by the  Legislatures  of
States.—(1) Notwithstanding anything in clauses (2) and (3), Parliament  has
exclusive power to make laws with respect to any of the  matters  enumerated
in List I in the Seventh Schedule (in this Constitution referred to  as  the
“Union List”).

(2) Notwithstanding anything in  clause  (3),  Parliament  and,  subject  to
clause (1), the Legislature of any State also, have power to make laws  with
respect to any of  the  matters  enumerated  in  List  III  in  the  Seventh
Schedule (in this Constitution referred to as the “Concurrent List”).
(3) Subject to clauses (1)  and  (2),  the  Legislature  of  any  State  has
exclusive power to make laws  for  such  State  or  any  part  thereof  with
respect to any of the matters enumerated in List II in the Seventh  Schedule
(in this Constitution referred to as the “State List”).
(4) Parliament has power to make laws with respect to  any  matter  for  any
part of the territory of India not included in a State notwithstanding  that
such matter is a matter enumerated in the State List.”

It is common case that the Parliament, by virtue of Entry 40  under  List  I
of the Seventh Schedule, has got  exclusive  power  to  legislate  on  State
lotteries,.  By virtue of Entry 34 in the  State  List,  concerning  betting
and gambling, State Legislatures have the power to legislate  on  lotteries,
other than State Lotteries because it is also one of the forms  of  gambling

16)   The State of Sikkim, in its trading  capacity,  has  been  organizing,
conducting and promoting online lotteries in accordance with the  provisions
of the Act and lottery tickets are being sold  in  various  lottery  playing
States in India including the State of Kerala.   The  State  of  Sikkim,  as
pleaded before this Court, substantially depends on the  revenue  raised  by
the sale of lottery tickets.  It is a north eastern State  with  no  avenues
of industrialization.  It is the case of the appellants  that  they  started
the business of online lottery in the State of  Kerala  in  the  year  2003.
Online lottery is a tamper proof lottery which has been designed  using  the
aid of modern technology that eliminates all the ills of paper  lottery  and
has greater transparency and is universally recognized  as  a  tamper  proof
and safe method of conducting lotteries.   Modernization  led  to  spurt  of
computerization, satellite and internet connectivity  which  bears  a  great
impact on every aspect of life, made things easier and  faster  and  brought
in more transparency.  Thus began lottery in another form, popularly  called
“online lottery.”  The difference in the lotteries  of  this  form  is  that
“online” is free from possibility of any duplication, tamper  etc.,  and  is
totally transparent.
17)   Online lotteries became popular in our  country,  only  recently.   It
made their presence felt in India from 2000-2001 onwards.  Though all  types
of lotteries are meant to be  covered by  the  Lotteries  (Regulation)  Act,
1998, the deleterious effect of paper lotteries was uppermost  in  the  mind
of the Central Government while bringing forth the above legislation as,  at
the relevant time, paper lotteries were most popular among the people.   The
various sub-sections of Section 4 will reveal  that  the  irregularities  in
the conduct of paper lotteries were  mainly  in  the  contemplation  of  the
Parliament.  The decision in B.R. Enterprises (supra) also  dealt  with  the
prohibition of sale of tickets  of  paper  lotteries  invoking  power  under
Section 5 of the Act.  Still, the  general  principles  laid  down  by  this
Court  in  the  abovementioned  case,  while  interpreting  Section  5,  are
binding.  So, the power to prohibit sale of tickets is granted  in  relation
to a particular lottery or  particular  type  of  lottery.   That  means,  a
particular lottery can be  the  subject-matter  of  prohibition.   In  other
words, all types of lotteries need not be prohibited.  But,  going  by  that
decision, a particular type of lottery  can  be  prohibited,  if  only,  the
State Government also does not run that lottery.  The online  lottery  is  a
particular lottery, which is not run by the State Government.  So, going  by
the principles laid down in B.R. Enterprises (supra), the  State  Government
can separately ban the sale of online  lotteries  as  online  lottery  is  a
particular class of lottery, different and distinct from paper lotteries.
18)   Learned counsel for the appellants also brought into  notice  para  21
of the Writ Petition filed before the High Court to show how the  system  of
online lottery functions, which is as under:
“The Online lottery involves  installation  of  a  Central  Server,  various
terminals, which  are  connected  to  the  said  Central  Server  through  a
satellite and all this  involves  huge  expenses  running  into  hundred  of
crores.  In this online lottery form, there are no  pre-printed  tickets  as
such.  A person interested to purchase a ticket of online lottery  comes  to
the terminal, fills a play-slip with numbers selected by him  and  hands  it
over to the person manning the terminal.  This play-slip  is  put  into  the
terminal and numbers selected by the player are transmitted to  the  central
server, which registers the said numbers.  A person may not like  to  select
any numbers and may play lucky dip in which case the computers makes  random
generation of numbers itself and transmit them to the central server,  which
registers the said numbers.  In  either  of  the  cases  after  the  central
server has registered the numbers, it generates a ticket  and  commands  the
terminal, which acts like a fax on command and delivers  the  ticket,  which
is on an imported  thermal  paper.   The  ticket  besides  containing  these
numbers contains various codes, details as also  bar  codes,  which  ensures
against any possibility of any duplication  etc.   The  game  is  made  more
interesting and entertaining since the player has option to  choose  numbers
for himself.  Like paper lottery in this case also various  tickets  can  be
printed and sold as such, however, the same may not sell at all because  the
player does to like to lose the charm  of  selecting  the  numbers  himself.
However, whatever be the position, all the details regarding the  number  of
tickets sold, their respective playing numbers, the number to  tickets  sold
from each terminal etc. are  all  available  in  the  central  server.   The
generation of tickets for any particular scheme  closes  30  minutes  before
the holding of the draw and no retail terminal can  generate  a  ticket  for
such draw after such closing and at the time of draw  all  the  details  are
readily available to the authorities immediately before the draw.  The  draw
is held by the respective State themselves through  a  tamper  free  machine
and is telecast on the Zee Television Network and watched by the  public  at
large.”

19)   It was also contended before  this  Court  that  in  exercise  of  the
powers conferred by Section 5 of the Act and in partial modification of  the
notification issued earlier declaring Kerala a lottery free zone State,  the
Government lifted the prohibition partially by permitting the sale of  paper
lotteries and the prohibition  imposed  on  the  sale  of  computerized  and
online lotteries continued to remain in force  declaring  the  territory  of
Kerala to be online, internet  and  computerized  lottery  free  zone.   The
legislative competence in respect of State run lotteries  vests  exclusively
with the Centre except where a State is a lottery free State and  that  only
the Central Government will have the power  to  deal  with  the  same.   The
notification dated 22.04.2005 was issued by the State  on  the  ground  that
the State of Kerala shall be an online lottery free zone.
20)    The  State  of  Kerala  is  of  the  view  that  online  lottery  and
conventional paper lotteries are to be dealt  separately  and  are  entirely
different in every aspect by the nature and features inherent  in  it.   The
State of Kerala is of the view that online  lottery  does  not  characterize
the features of a lottery as defined under the Act.  In fact, the  so-called
online lottery is not  a  lottery  as  it  is  a  widespread  network  using
internet, cheating the public in a massive way in the absence  of  a  proper
regulatory system of the same standards.  The online  companies  are  merely
‘gaming’, but not conducting any lottery as per the guidelines issued  under
the Act.  It is further pleaded  that  though  it  is  claimed  that  online
lotteries  are  universally  recognized  as  tamper  proof   lotteries,   in
experience, it is felt that the so-called  online  lotteries  were  cheating
the massive gullible public  by  misusing  the  advancement  of  information
technology in the field of economy.  The Government of Kerala  has  detected
and established before the Union Government that online lotteries  organized
by the State of Sikkim are blatantly violating the provisions of  Section  4
of the Act.  It was further contended that the Central Act  was  enacted  by
the Parliament on 07.07.1998.  At the time  of  formulating  the  Act,  only
conventional paper lottery was being conducted in the  country.   No  online
lottery existed at the time of enactment of the Act.  The  Central  Act  did
not envisage or took into account the online  lotteries  in  the  definition
clause  while  stipulating  conditions  under  section  4  of  the  Act  for
organizing, conducting or promoting a lottery by a  State  Government.   The
conditions stipulated therein are only intended  to  cover  the  conduct  of
paper lotteries.   The  Government  of  Kerala  has  detected  the  flagrant
violations and fraud inherent in the online lotteries and also  the  illegal
activities of the appellants which  directly  affects  more  than  15  lakhs
people of Kerala who have already been deceived and are  being  continuously
cheated on minute to minute basis.  The ill effects of these  lotteries  had
assumed major dimensions in the State.   The  newspaper  reports,  petitions
from the public and reports from the police reveal the magnitude of its  ill
effects, which include suicides, divorces,  starvation  and  murders.   This
created more hardship to the respondent-State.
21)   The violations in terms of the Act in the case  of  Meghalaya,  Sikkim
and Nagaland State lotteries  have  already  been  furnished  to  the  Union
Government on 12.01.2004 and 23.08.2004, some  of  which  mentioned  by  the
Division Bench of the High Court in the judgment are as follows:-
“(a) The online lottery tickets of Meghalaya,  Sikkim  and  Nagaland  States
are printed by the terminal in violation of Section 4(b)  of  the  Lotteries
(Regulation) Act, 1998
(b) The tickets of these States are printed in the stationery of  the  Sole-
selling agent.
(c) The draws are conducted in such  a  manner  that  the  transparency  and
credibility of the draw process is not at  all  established.   According  to
Meghalaya rules, the presence of one Judge shall form the quorum.
(d) The draws are conducted daily  in  a  severe  gambling  fashion  and  in
violation of Section 4(h) and prizes are offered on the basis  of  a  single
digit violating Section 4(a) of the Act.
(e) There are clear similarities in the  name  of  different  lotteries  and
they  follow  the  same  prize  pattern,  obviously  making  an  attempt  to
circumvent Section 4(h).”
It is then  pleaded  that  in  practice,  the  so-called  online  lotteries,
mislead the general public by its mesmeric  gambling  instinct  inherent  in
it.  People are attracted to the modern technology used in  these  lotteries
and the instantaneous nature of it.  They spend all their time in  front  of
the online outlets and spoil all their money.  They  are  being  trapped  by
the simple prizes they get and they  invest  the  remaining  part  of  their
money in a hope to get more and more  big  prizes.   This  is  a  continuous
process starting from early in the morning  and  extends  too  late  in  the
night.  The lotteries conducted by these  online  companies  have  draws  in
every 15 minutes.  Technically, they call it ‘weekly lotteries’ in order  to
circumvent the objectives of the Act, but in result  they  are  ridiculously
setting aside the spirit of the Act.  As a technical argument, each  lottery
has only one draw in a week.  The draw of one lottery repeats  only  in  the
next week.  But, the tactics followed by  these  States  is  that  they  are
conducting more than 100 lotteries with very strange names and by  assigning
pseudonyms.  The  online  lotteries  running  in  Kerala  were  in  flagrant
violation of the provisions of the Act and this fact  was  detected  by  the
State of Kerala.  The State of Kerala has made known this fact to the  Union
Government twice. The findings of the Government  of  Kerala  revealed  that
the other States, on whose behalf  the  lotteries  are  being  conducted  in
Kerala, have least control over them and major source of income  from  these
gambling type of lotteries siphoned by the so-called middlemen who  acts  in
the name of ‘sole selling agents’.  Similarly, the States of  Karnataka  and
Arunachal Pradesh have stopped the sale of online  lotteries  as  they  have
admitted the  violations  pointed  out  by  the  State  of  Kerala.   Online
lotteries are being conducted under the name  of  other  State  Governments,
circumventing  the  provisions  of  the  Act,  and  also  the  single  digit
lotteries through dubious methods adopted by their distributors and  agents.
 In some cases, some lotteries except one digit all  other  digits  will  be
pre-fixed and the buyer has to choose only a single digit.   In  some  other
cases, one digit of two digit number  or  of  three  digit  number  will  be
changing continuously, but in a pre-determined cyclic  manner,  which  shows
that the draw is held only for one digit.  It was detected from the  lottery
terminals that the tickets of States of Meghalaya  and  Nagaland  are  being
printed one after another from the same terminal and the  same  pool  in  an
unbroken manner.  Several tickets without the  imprint  and  logo  of  other
State Governments and even without signature of the  authorized  officer  of
those States have been found being sold in the State  of  Kerala.   Standard
set of rules are printed on the reverse side of the stationery  and  tickets
of more than one States are being printed on the same material, by the  same
terminal in unbroken strips.  The proceeds of the sale of  online  lotteries
are rather shared by the distributors and agents without  crediting  in  the
public account of the respective States, in violation of the  provisions  of
the Act.  The details of unclaimed money are not brought  to  the  knowledge
of the other State Governments, whereas the unclaimed prize money  is  being
appropriated by the distributors and agents.  The place of draw  is  not  at
all located within the other States, whereas the  same  is  being  conducted
according to the convenience of the distributors.  The lottery  distributors
and agents of other State Governments are  resorting  to  such  unscrupulous
methods and conducting  online  lotteries  in  every  15  minutes  from  the
lottery terminals.  The Lottery Department of the  State  had  detected  the
draws being conducted in lottery outlets for more than 49 draws in a day.
22)   The provisions in respect of Sikkim State Lotteries  was  reported  to
the Ministry of Home  Affairs,  Government  of  India  on  12.01.2004.   The
scheme of lotteries furnished by the  Government  of  Sikkim  revealed  that
they were not in conformity with the provisions of Section  4  of  the  Act.
The irregularities/violations in respect of the Sikkim lotteries being  sold
in Kerala in the  year  2004  were  brought  to  the  notice  of  the  State
Government earlier with  a  request  for  further  documents/clarifications.
Some of these violations/ irregularities are briefly mentioned below:
“i.   On a perusal of the agreement between the  Government  of  Sikkim  and
M/s. Tashi Delek Gaming Solutions Pvt. Ltd.,  the  Marketing  Agent,  it  is
seen that the agreement with the marketing  agent  is  executed  seven  days
before the Sikkim Online Network Lottery Rules came into effect.

ii    The Marketing Agent is vested with powers more than what  the  Lottery
Regulation Act permits.  The State of Sikkim was  asked  to  offer  specific
remarks on this.

iii.  Since a detailed description of the method of draw was  not  furnished
by the State of Sikkim, the same was called for from this office.



iv.   As per rule 12 of the Sikkim Online Network Lottery Rules,  2001,  the
tickets will be printed on pre-printed ticket material.  On perusal  of  the
tickets of Super-Lotto and Thunder Ball it is seen that  the  specimen  play
slips furnished by the Director of Lotteries, Sikkim bear  the  imprint  and
logo of PLAYWIN.  This shows that the tickets are instantly printed  at  the
retail  computer  terminal,  violating  Section  4(b)   of   the   Lotteries
Regulation Act, 1998.



v.    The contractual agreement between  the  Play  Win  sub-agent  and  the
distributors was not furnished.  So  also  the  names  of  distributors  for
certain districts in Kerala were not furnished.



vi.   The Government  has  furnished  the  details  of  926  retail  outlets
operating  in  the  State.   But  the  contractual  agreement  between   the
distributor and these retail outlets were not submitted.



vii.  The marketing Agent under the Sikkim State Lotteries is  empowered  to
set-up the required infrastructure  and  use  of  technology  for  the  draw
purpose.  It is clearly more than  what  is  statutorily  permissible  under
Section 4(c) of the Act.



viii. As per Section 4(e) of the Central Act, ‘the State  Government  itself
shall conduct the draws of all the lotteries.’  But actual  conduct  of  the
draws is done by the  Marketing  Agent,  reducing  the  role  of  the  State
Government to  that  of  a  mere  spectator,  thereby  violating  the  above
provision.



ix.   The Thunderball, the last prize amount of Rs.20/- is  ‘when  one  main
number and the Thunder ball (fixed) are matched.’  Until  clarifications  to
the contrary are provided with evidence, it has to be presumed that this  is
a camouflaged single digit lottery  specifically  prohibited  under  Section
4(a) of the Central Act.”


It was also pointed out in the  letter  to  the  Government  of  India  that
Sikkim has delegated more  rights  and  responsibilities  to  the  Marketing
Agents than  what  is  statutorily  permissible  under  the  Act.   However,
regarding the appointment of Marketing  Agents,  the  State  of  Sikkim  has
informed that they will discuss the matter with the legal  wing.  The  State
of Sikkim has admitted that the tickets are printed on  PLAYWIN  Stationery,
clearly admitting violation of Section 4(b) of the Act.      With regard  to
the allegation that ‘Thunder Ball’ lottery is being organized on  the  basis
of single digit,  the  State  of  Sikkim  has  not  offered  any  reasonable
explanation or furnished any document instead the State has  merely  refuted
the same.  Even  though  the  State  of  Sikkim  was  requested  to  furnish
details/documents/clarifications regarding the allegations raised, no  reply
was received from it.  The Government of Sikkim was reminded  on  11.05.2004
and 15.06.2004 to furnish  the  details  called  for  earlier  and  also  to
provide details of the new lotteries introduced by them  in  Kerala.   There
has been no response from  the  State  so  far.   Thus  the  violations  and
irregularities pointed out in  respect  of  Sikkim  State  Lotteries  as  in
January, 2004 continue unabated.  This shows that the Government  of  Sikkim
is not inclined to address the serious issues pointed out by the  Government
of Kerala with regard to the  illegalities  and  violations  connected  with
Sikkim State Lottery tickets which  are  being  sold  among  the  public  in
Kerala.
Conclusion:
23)   The conduct of certain types of lottery  trade  in  the  country,  the
malpractices thereof and their impact on the poorer sections of the  society
have been under scrutiny  of  the  Government  for  quite  some  time.   The
continued prevalence  of  the  popularly  known  single  digit  and  instant
lotteries and the temptation offered by them proved to  be  the  undoing  of
many families, especially poor daily  wagers  and  low  income  groups.   In
spite of the guidelines issued by the Central Government over  a  period  of
time as also the guidelines issued in the recent past  by  this  Court,  the
evil has not been totally eliminated.
24)   The relevant provisions of  the  Act  clearly  demonstrate  that  even
though all types of lotteries are meant to be regulated  by  the  said  Act,
online lotteries were not under the contemplation of the Central  Government
at the time when the Act came into  force.   It  is  otherwise  also  not  a
disputed fact that online lotteries  became  popular  insofar  as  India  is
concerned only recently and in any case after the  enforcement  of  the  Act
and that is why the  Government  of  India  while  framing  the  2010  Rules
specifically defined ‘online lotteries’.  Having this  background  in  mind,
the Scheme of the Act would clearly show that the Government at  that  stage
was concerned with paper lotteries of all kinds.  From the preamble  of  the
Act spelled out from the Statement of Objects  and  Reasons  as  re-produced
hereinbefore, the necessity to bring about  legislation  in  the  matter  of
regulating lotteries was felt on account of continued prevalence  of  single
digit and instant lotteries.  It was primarily done to curb malpractices  in
the conduct of such lotteries which at that time were paper  lotteries  only
when the Act came into force.
25)   With regard to the contention regarding the  function  of  the  online
lottery, we are of the considered view that any type of manipulation can  be
done in the printing of tickets at the terminal.  The customer  cannot  know
whether the ticket is printed at the terminal based on the command from  the
central server or not.  The State of Sikkim does not have any  control  over
its thousands of terminals all over India.  As per Section 4(h) of the  Act,
the draw should be held once in a week.  It means a  fortune  seeker,  after
purchasing the ticket, will get a  week’s  cooling  time  to  wait  for  the
result of the draw.  But, under the scheme of online lotteries, a number  of
lotteries run simultaneously.  So, by holding several lotteries,  there  can
be several draws with a gap of few minutes in a day and  the  gullible  will
remain  glued  and  there  is  every  likelihood  of  purchase  of   tickets
repeatedly, till all his savings  are  exhausted.   So,  if  the  Government
takes a decision in public  interest  to  prohibit  online  lotteries,  this
Court  should  not  interfere  with  the  said  decision  unless  there  are
compelling grounds.  As held earlier, going by Section 5, as interpreted  by
this Court in B.R. Enterprises (supra), the sale of ticket of  a  particular
lottery can be prohibited provided the concerned  State  Government  is  not
running that lottery.  While interpreting a Statute of this nature meant  to
suppress the mischief of gambling, this Court should accept the  concept  of
purposive interpretation and if possible save the notification intending  to
save the people from the vice of gambling.
26)   It is common case that lottery is a species of gambling.  Gambling  is
considered as a  pernicious  vice  by  all  civilized  societies  from  time
immemorial.   The  Rigvedas,  Smritis  and  Arthashastras   have   condemned
gambling as a vice.  Several Judges and learned  authors  are  unanimous  in
their condemnation of gambling.  Experience has shown that the common  forms
of gambling  are  comparatively  innocuous  when  placed  in  contrast  with
widespread pestilence of lotteries.   The  former  are  confined  to  a  few
persons and places, but the latter infests the whole  community;  it  enters
every dwelling; it reaches every class; it preys upon the hard  earnings  of
the poor; it plunders the ignorant and the simple.
27)   In Words and Phrases, Butterworths, 3rd Edition  at  page  71,  it  is
stated as follows:
“It must not be entirely forgotten in the  construction  of  these  Acts  of
Parliament (see now the Lotteries and Amusements Act, 1976)  that  the  evil
which the lottery law has sought to  prevent  was  the  evil  which  existed
where poor people with only a few pence to feed their children would go  and
put these few pence into a lottery and lose them,  and  this  sociologically
was a bad thing…”


28) Even in B.R. Enterprises (supra), this Court has held as under:
“47. From the  references  from  Dharmashastra,  opinions  of  distinguished
authors, references in the Encyclopaedia Britcannica and Boston  Law  Review
and others, we find that  each  concludes,  as  we  have  observed,  lottery
remains in the realm of gambling.  Even where it  is  State-sponsored  still
it was looked down upon as an evil.  Right from ancient time  till  the  day
all expressed concern to eliminate this, even where  it  was  legalized  for
raising revenue either by the king or in the  modern  times  by  the  State.
Even this legitimization was for the sole purpose of  raising  revenue,  was
also for a limited period, since this received condemnation  even  for  this
limited purpose.   All  this  gives  a  clear  picture  of  the  nature  and
character of lottery as perceived through the conscience of the  people,  as
revealed  through  ancient  scriptures,  also  by  various  courts  of   the
countries.”

This Court further added:
“59…..But it cannot be doubted and it is recognized  by  all  the  countries
that gambling by its very nature promises to make a poor man a rich man;  to
quench the thirst of a man in dire economic distress or  to  a  man  with  a
bursting desire to become wealthy overnight it draws them into the  magnetic
field of lotteries with crippling effect.  More often than not,  such  hopes
with very remote chance encourages the spirit of  reckless  prosperity  (sic
propensity) in him, ruining him and his family.  This encouraging hope  with
the magnitude of  prize  money  never  dwindles.   Losses  and  failures  in
lotteries instead of disencouragement increases the craze with  intoxicating
hope, not only to erase the losses  but  to  fill  his  imaginative  coffer.
When this chance mixes with this utopian hope, he is repeatedly  drawn  back
into the circle of lottery like a drug addict.   Inevitably,  the  happiness
of his family is lost.  He goes into a chronic state of indebtedness…..”

29)   Article 246(1) of the  Constitution  of  India  deals  with  exclusive
power of the Parliament to make laws with respect to matters  enumerated  in
List I (Union List)  in  the  Seventh  Schedule.   As  per  Article  246(2),
Parliament and the Legislature of any State also have  power  to  make  laws
with respect to any of the matters enumerated in List III (Concurrent  List)
in the Seventh  Schedule.   The  Legislature  of  the  State  has,  however,
exclusive power to make laws with respect to matters enumerated in  List  II
(State List)  in  the  Seventh  Schedule,  as  per  Article  246(3)  of  the
Constitution.  Also, there being a specific entry  dealing  with  lotteries,
the power to legislate on lotteries would be in the exclusive domain of  the
Parliament, even though it is a form of  gambling  and  would  be  generally
covered under Item No. 34 of List  II  (State  List).   The  Parliament,  in
exercise of the power vested in it to enact law on  lotteries  as  per  Item
No. 40 of List I (Union  List),  enacted  the  Lotteries  (Regulation)  Act,
1998.  Section 3 of the Act ordains  that  save  as  otherwise  provided  in
Section 4, no State  Government  shall  organize,  conduct  or  promote  any
lottery.  A State Government has been authorized  to  organize,  conduct  or
promote a lottery, subject to the conditions enumerated in Section  4  which
has already been re-produced earlier.  It  is  absolutely  clear  that  even
though the power to  legislate  on  lotteries  vests  exclusively  with  the
Parliament, the respective States have been delegated  this  power,  but  it
has to be subject to conditions enumerated in Section 4.  By virtue  of  the
provisions contained in Section 12  of  the  Act,  the  Government  may,  by
notification  in  the  Official  Gazette,  make  rules  to  carry  out   the
provisions  of  the  Act.   Exercising  the  powers  vested  in  it  by  the
provisions contained in Section 12, the  State  of  Kerala  has  framed  the
“Kerala Paper Lotteries (Regulation) Rules, 2005.”
30)   Provisions of the Act, in particular, Section 12 of  the  Act  clearly
manifest that even though the power to legislate on the subject  ‘lotteries’
is in the exclusive domain of the Parliament,  the  power  to  legislate  as
well has been delegated by the Parliament to the respective  States  in  the
country and as mentioned above, it is in exercise of that  power  the  State
of Kerala has indeed framed  the  Rules  of  2005.   It  is  significant  to
mention that Section 5 further authorizes a  State  Government  to  prohibit
the sale of tickets of the  lottery  organized,  conducted  or  promoted  by
every other State.  Section 5 of the  Act  was,  however,  under  a  serious
challenge  in  B.R.  Enterprises  (supra).  Framed  in  somewhat   different
language, the challenge to Section 5 was that the delegation  to  the  State
to decide to prohibit the sale of lotteries organized by other States  is  a
delegation by Parliament of its essential  legislative  power,  without  any
policy or bereft of the guidelines and that there was  total  abdication  of
the legislative power of  the  Parliament  which  was  a  naked  delegation,
hence, violative of Article 14 of the Constitution  of  India.  The  counter
contention raised by the States and, in particular, the State of Tamil  Nadu
which had banned lotteries of other States, but continued to have  its  own,
was that on a plain reading of Section 5, a State without  banning  its  own
lotteries can ban lotteries organized by other States.  The Union  of  India
and also the State of U.P. had raised a contention that Section 5 should  be
read as to entitle only such State to ban  which,  as  a  policy,  does  not
permit its own lottery to run.  If this be so, possibly there  could  be  no
discrimination as it would apply  uniformly  to  all  the  States.   On  the
respective contentions of the  learned  counsel  as  mentioned  above,  this
Court framed the question as follows:
“81. The legal principle which emerges, as submitted, is that delegation  of
essential legislative power of the principal to the delegatee  would  amount
to abdication  of  its  legislative  power  and  if  it  is  bereft  of  any
guidelines then it is unsustainable in the eye of the law…..”

While dealing  with  the  question  aforesaid,  this  Court  first  recorded
reasons as to why the power had been delegated by the Union to  the  States.
It was inter alia observed as follows:-

“83. As revealed from Anraj case-I some of the States sought  permission  of
the Union as a policy to raise their revenue through these lotteries,  which
was conferred by the Presidential Order  under  Article  258(1),  though  it
records, the State could have exercised their  discretion  as  a  policy  to
have their own lotteries without such permission in  view  of  its  extended
executive power under Article 298.   It  further  reveals,  till  Parliament
makes any law, the  decision  to  start  its  lottery  or  to  close  it  is
exclusively within the executive power of each State.  This  is  because  it
is the policy decision of a  State  which  has  to  decide  as  a  principle
whether it desires to collect in this form the revenue or not.  The  benefit
of Article 298 is, it is extraterritorial, applicable beyond its  territory,
it is for this State lotteries are places in Entry  40  List  I.   So  in  a
federal structure, Union has to play a role to coordinate between one  State
with the other.  So by regulation it has to subserve  the  objectives.   The
Union cannot force a State to gamble if  such  a  State  does  not  want  to
gamble.  To run its own lotteries or to close it is left on  the  discretion
of each State.  It is each State which has to decide its policy and  has  to
be concerned about its subject.  In any case, the  Union  cannot  force  any
State that it must run its own lotteries.  But control  of  State  lotteries
running in the territory of other States is left on the  Union.   The  State
cannot restrict sales of lotteries organized by other  States  even  in  its
territory unless authorized by the Union.  This difficulty was felt  by  the
State which is indicated in Anraj case-I.  That seems to be the reason  that
Parliament has delegated this power to the State under section 5…..”

31)   After taking into consideration the background leading  to  delegation
of power by Union to the States, the question as to whether  the  delegation
could be construed to be such as amounting to delegation  of  its  essential
legislative power and that too unguided  or  unbridled  was  examined.   The
question was answered as follows:-
“84.  In Section 2(b) lotteries are defined to be a scheme for  distribution
of prizes by a lot or chance.  This definition itself recognizes  that  even
in State lotteries the prizes are to be  collected  by  chance  without  any
skill, hence  gambling  in  nature.   Section  3  prohibits  that  no  State
lotteries can be organized without the condition  stipulated  under  clauses
(a) to (k) of Section 4.  Section 4 provides the conditions to  be  complied
with by the State lotteries.  To initiate any State lottery it  is  left  to
the policy of each State, for this Act is silent.  The only control  is,  in
case it decides, then it must follow  the  conditions  as  laid  down  under
Section 4.  Next comes Section 5 which is subject matter of  challenge,  the
delegation of power to the State to prohibit the  sale  of  lottery  tickets
organized by every other State.  If a  State  desires  not  to  subject  its
people to the lottery gambling,  it  has  no  power  to  restrict  lotteries
organized by other States.  It is to remove  this  mischief  that  power  is
conferred through delegation to the States to do it in terms  of  their  own
policy.  By virtue of this, now the State Government can  prohibit  sale  of
lottery tickets of every other State within its territory.  Next, Section  6
seeks strict compliance with Section 4.
Under this the Central Government may prohibit any State  lottery  which  is
being conducted in contravention  of  the  conditions  as  laid  down  under
Section 4 or Section 5.  Section 7 shows the rigour of this  Act  by  making
it a penal offence as against all, who violate the provisions of  this  Act,
be it the Head of the Department of the Government or  the  agent,  promoter
or trader, to be punishable with two years rigorous  imprisonment.   Section
8 makes such an offence cognizable and non-bailable.  Similarly,  Section  9
deals with offences committed by the companies.   Section  10  entrusts  the
Central Government power to give directions  to  the  State  Government  for
carrying  into  execution  the  provisions  of  this  Act,  Rule  or  Order.
Sections 11 and 12 are the rule-making power entrusted to  the  Central  and
the State Governments  respectively.   Section  13  repeals  the  Ordinance.
Thus, the whole Act makes clear that the  subject  it  is  dealing  with  is
gambling in nature.  The object of the Act is  not  to  control  the  policy
decision of each State to start or to close its lotteries, but  to  regulate
it in case a State decides to run its own  lottery  through  modalities  and
conditions laid down therein.  Emphasis of the whole Act is to abide by  the
conditions strictly if you want to  run  a  lottery.   Thus,  regulation  is
through  conditions  to  eliminate  even   the   remotest   possibility   of
malpractices by providing stringent measures for  its  compliance.   Perusal
of the Act reveals, the scheme of the Act is  limited  in  its  application,
and it admits the subject it is dealing is gambling in nature.  As  we  have
said, the decision to collect  or  not  to  collect  revenue  through  State
lotteries is exclusively within the policy decision of  the  State  and  for
this,  neither  the  Union  nor  Parliament  interferes  nor  is  there  any
indication under the Act.  Thus, the  question  which  remains  is,  if  any
State decides that it does not want any lotteries but if it  feels  helpless
as having no jurisdiction over the  lotteries  organized  by  other  States,
what is the way out?  This can only be done by Parliament or  by  entrusting
this power on such State desiring so, which has been  done  through  Section
5.  In this background, for this helplessness of  a  State  as  recorded  in
Anraj case-I [(1984) 2 SCC 292] the remedy is provided  by  entrusting  this
power on the State under the impugned provision.  This helps such  State  to
achieve its objective of lottery (gambling) free zone within its  territory.
 A well-concerned remedy.   Next  question  is  what  could  have  been  the
guideline?  If State lotteries are  gambling  and  it  cannot  be  terms  as
‘trade and commerce’ at  common  parlance  for  any  free  right  under  the
Constitution.  Such right though recognized  under  Article  298,  so  other
States may continue to enjoy till prohibited by valid law, and if any  State
wants within its  State  lottery-free  zone  and  for  which  the  power  is
entrusted to such State, it cannot be said in this  setting  and  background
and the nature of the subject that such a delegation  is  of  its  essential
legislative power.  The only guideline necessary in such  delegation  is  to
see that the State does not pick and choose one State from the other,  which
guideline is already provided in this Section.  It provides that such a  ban
could only be if it is applied to every  other  State.   The  only  residual
field of attack so far as this delegation could be, which has been  attacked
in this case, that the State could on one hand ban lotteries of every  other
State but run its own lotteries.  It is  argued  that  while  a  State  bans
lotteries of other States not to permit any gambling activity in the  public
interest as a policy but this very public  interest  is  flouted  by  having
lotteries of its own.  It is true that unless this provision  is  read  down
to mean a State can only ban lotteries of other States when  it  bans  as  a
policy its own lotteries it is bound to be  subjected  to  the  vagaries  as
pointed out and on deeper scrutiny it may not successfully stand.   But,  by
reading down the provision, which has to be read that it is only that  State
which decides lottery-free zone within its State can prohibit  lotteries  of
other States clearly provides the  guidance  for  the  exercise  of  such  a
power.  It is inbuilt and inherent in the provision itself in  view  of  the
scheme of the Act and nature of subject  in  issue.   If  interpretation  as
given on behalf of the State of Tamil Nadu is accepted  that  delegation  of
power is absolute, then the submission that  such  delegation  is  unbridled
without any guideline carries great weight.  Submission  for  the  State  of
Tamil Nadu is that the lotteries may be prohibited  in  phases,  viz.  while
running its own lotteries yet prohibiting  other  lotteries,  may  be  as  a
public policy, for law and order, for political reasons, morality, etc.  For
surviving such an interpretation given by  Mr.  Ganguli,  Parliament  should
have provided some guidelines.  Such an interpretation falls into  the  trap
of the submission that this delegation is unbridled.  So, if there  are  two
interpretations, the interpretation which upholds  the  validity  should  be
accepted.  So,  the  interpretation  as  given  by  Mr.  Ganguli  cannot  be
accepted.”
“85.  There are two parts of the attack of the delegation of  power  to  the
State under Section 5.  The latter part, by which it can  prohibit  sale  of
lottery tickets organized by every  State  which  leaves  no  scope  of  any
discretion on the States to discriminate from one State to other.  So if  it
decides no lottery tickets of any State  to  be  sold  it  cannot  pick  and
choose from one State to the other.
Once it, as a policy, decides to prohibit the sale  of  lottery  tickets  of
other States it must prohibit every other State, that is  to  say,  all  the
States and such a delegation cannot be said to be either abdication  of  the
legislative power of Parliament or to be unbridled or unguided.  As we  have
said looking to the nature of the subject and object of the Act which is  to
help each State in its endeavor to run State lotteries which  would  include
starting or closing its lotteries and when a State wants  to  have  lottery-
free zone in its State, then such a  delegation  to  ban  lottery  of  every
other State cannot be said to be invalid.  To the first part, there are  two
interpretation, one on the plain reading of Section 5, a State may  run  its
own lottery yet may prohibit the sale of lotteries of  other  States.   This
construction leads to discrimination and opens for  criticism  of  unbridled
delegation.  The submission further is,  if  the  ban  of  sale  of  lottery
tickets of every other State is as a public policy, affecting  the  morality
and resultant ill effect on its subject then there is no justification  that
the State may run its own lottery affecting the very subject for  which  the
power is exercised prohibiting the lotteries of other states.  It  is  true,
if such an interpretation is accepted then this submission has a force.   On
the other hand, on behalf of the Union the submission is that  the  language
of the section has to be read down.  The decision to  have  its  lottery  or
not to have its lottery has to be in the public  interest.   Every  decision
to have either lotteries authorized by the State or organized by  the  State
has to be in public interest.  May be for collection of  public  revenue  or
for a public purpose.  It has been held in Central  Inland  Water  Transport
Corporation Ltd. v. Brojo Nath Ganguly AIR para 93:
There must be no injury or harm to the  public  interest,  public  good  and
public welfare.
Thus, the decision to run State lottery has to be made with  the  conscience
(sic consciousness) of its evil consequences on its  subject.   Thus  before
deciding the State has to equate the public welfare with the injury  on  its
public.  It may be in a given case within the limitation  of  its  financial
capacity with the need of  the  hour  it  has  to  decide  to  run  its  own
lotteries to augment its revenue in the larger interest of the public  which
if weighed with the evil consequences on its  subject,  the  public  welfare
gains more by running it then the evil consequence on  its  subject  has  to
give way till the situation  changes  by  finding  a  better  way  for  this
additional  source  or  evil  consequences   inflicting   on   its   subject
overweighing.  This exercise has to be by each State, the Union  not  coming
in its way.  It is for each State to decide what is its public  welfare  and
what constitutes an injury to the public interest.  Rattan Chand Hira  Chand
vs. Askar Nawaz Jung holds, what  constitutes  public  interest  or  welfare
would depend upon the time.  The social milieu  in  which  the  contract  is
sought to be enforced would decide the factum, the nature and the degree  of
injury.
86.   So, whenever a State decides to run or not to run its lotteries it  is
the State which has to decide as a public policy  in  the  public  interest.
Once such a decision is taken to  have  its  State  lottery-free  zone,  the
entrustment of power by Parliament cannot be said to be ultra vires.
87.   We find  on  plain  reading  of  Section  5,  it  empowers  the  State
Government within  its  State  to  prohibit  the  sale  of  tickets  of  the
lotteries organized by every other State.  There  is  also  nothing  in  the
language reading by  itself  so  as  to  say,  whether  such  power  can  be
exercised by the State while running its own lottery  or  can  be  exercised
only where such State does not run its  own  lottery.   This  leads  to  two
possible  interpretations,  as  referred  to  above.   In  view  of  settled
principle of interpretations, the interpretation given by the union to  read
down the provision has substance.  This would  mean  that  the  State  could
only exercise such discretion if it decides not to have any  lottery  within
its territory including its own lottery.  In this situation,  the  delegatee
is tied down by this limitation which itself is a clear  guide  to  a  State
hence cannot be said to be unbridled delegation.  So even to the first  part
it cannot be said to be arbitrary or unbridled.  So, we have  no  hesitation
to approve the interpretation given by the Union to uphold the  validity  of
Section 5.”

32)   From the observations made by this Court, as extracted above,  learned
counsel representing the appellants  contended  that  the  State  of  Kerala
could not prohibit any form of lottery as  long  as  it  was  running  other
forms of lottery of other States as also of  the  State  of  Kerala.   After
having given anxious thought to the rival contentions, we are  not  inclined
to  accept  the  contention  raised  by  learned  senior  counsel  for   the
appellants.
33)  It may be reiterated that the question that came to be framed  by  this
Court on the rival contentions raised by the  counsel  for  the  parties  in
B.R. Enterprises (supra) was as  to  whether  the  delegation  of  essential
legislative  power  of  the  principal  to  a  delegatee  would  amount   to
abdication of its legislative power and if it is bereft  of  any  guidelines
then is it unsustainable in the eyes of law.  This Court held  that  if  the
State decides that it does not want any lotteries but if it  feels  helpless
as having no jurisdiction over the lotteries organized by other  States,  it
can only be done by the Parliament or  by  entrusting  this  power  on  such
State desiring so, which has been done through Section  5.   The  remedy  is
provided by entrusting this power on the State under Section 5.  This  would
help the State to achieve its objective of ‘lottery free  zone’  within  its
territory.  While dealing with the guidelines, this Court  further  observed
that if a State may want it to be a lottery-free zone, it could not be  said
that such delegation would be of  essential  legislative  power.   The  only
guideline necessary in such a delegation is to see that the State  does  not
pick and choose one  State  from  the  other,  which  guideline  is  already
provided in the Section.  If the ban is applied to all the States  and  also
the State banning lotteries, the contention that delegation  was  excessive,
uncanalised and unbridled would lose its sting.  We are  satisfied  that  by
virtue of the provisions contained in Section 12 of the Act, the Centre  has
delegated its power to legislate with regard  to  lotteries  to  States  and
further that there is specific delegation with regard to  ban  of  lotteries
of other States by virtue of the provisions contained in Section  5  of  the
Act.   This  delegation  of  legislative  power  of  the  principal  to  the
delegatee would not amount to abdication of legislative power by the  Centre
and it would not be without any guidelines and would be sustainable  in  law
if the concerned State may ban a lottery in  its  own  State  and  of  other
States as well.  What is true with regard to the total ban of  lotteries  of
other States, in our view, would also be true with regard  to  a  particular
kind of lottery as the delegation of power has been held to be valid if  the
power by the delegatee may be used uniformly in its own State and also  with
regard to the other States.  In the context of the facts  and  circumstances
of the case as fully detailed above, we hold that when the State  of  Kerala
may prohibit a particular kind  of  lottery  from  its  own  State,  it  can
prohibit sale of such lottery from any other State and  that  would  not  be
unsustainable in the eyes of law nor it could be  against  law  as  held  by
this Court in B.R. Enterprises (supra).
34)   We also hold that it is not a case of abdication of legislative  power
and would not be  bereft  of  any  guidelines  if  the  legislation  banning
lotteries was applied uniformly. We, on the interpretation of the  point  on
the issue of  delegation  of  essential  legislative  power  bereft  of  any
guidelines, hold that it is not a case  of  abdication  of  the  legislative
power of the Centre and further that  if  the  ban  on  the  online  lottery
applies uniformly, it  would  not  be  a  case  of  exercising  power  by  a
delegatee without any guidelines.
35)   In the case of The Senior  Electric  Inspector  (supra),  this  Court,
while considering as to whether the doctrine of contemporanea expositio  can
be applied in construing  Acts  which  are  comparatively  modern,  held  as
under:-
“The  legal  position  may  be  summarized  thus:-The  maxim   contemporanea
expositio as laid down by Coke was applied to  construing  ancient  statutes
but not to interpreting Acts which are comparatively  modern.   There  is  a
good reason for this change in the mode of interpretation.  The  fundamental
rule of construction is the same whether the court is asked  to  construe  a
provision of an ancient statute or that of a modern  one,  namely,  what  is
the expressed intention of the Legislature.   It  is  perhaps  difficult  to
attribute to a legislative body functioning  in  astatic  society  that  its
intention was couched in terms of considerable breadth so as to take  within
its sweep the future development comprehended by the phraseology  used.   It
is more reasonable to  confine  its  intention  only  to  the  circumstances
obtaining at the time the  law  was  made.   But  in  a  modern  progressive
society it would be unreasonable to confine the intention of  a  Legislature
to the meaning  attributable  to  the  modern  Legislature  to  the  meaning
attributable to the modern Legislature  making  laws  to  govern  a  society
which is fast moving must be presumed to be aware  of  an  enlarged  meaning
the same concept  might  attract  with  the  march  of  time  and  with  the
revolutionary changes brought  about  in  social,  economic,  political  and
scientific and other field of human activity.   Indeed,  unless  a  contrary
intention appears, an interpretation should be given to the  words  used  to
take in new facts and situations, if the words are capable of  comprehending
them.”

36)   In State vs. S.J. Choudhary (supra), this Court in  paragraph  10  had
referred to a passage  contained  in  statutory  interpretation  by  Francis
Bennion, Second Edition for holding that the Indian Evidence  Act,  1872  is
by its very nature is an “ongoing Act”.  Paragraph 10  of  the  judgment  is
reproduced below:-

 (2) It is presumed that  Parliament  intends  the  court  to  apply  to  an
ongoing Act a construction that continuously updates its  wording  to  allow
for changes since the Act was initially framed (an  updating  construction).
While it remains law, it is to be treated as  always  speaking.  This  means
that in its application on  any  date,  the  language  of  the  Act,  though
necessarily embedded in its own time, is nevertheless  to  be  construed  in
accordance with the need to treat it as current law.
                                   *   *     *”
In the comments that follow it is pointed out that an ongoing Act  is  taken
to be always speaking. It is also, further, stated thus:
“In  construing  an  ongoing  Act,  the  interpreter  is  to  presume   that
Parliament intended the Act to be applied at any future time in such  a  way
as  to  give  effect  to  the  true  original  intention.  Accordingly   the
interpreter is to  make  allowances  for  any  relevant  changes  that  have
occurred, since the Act’s passing, in law,  social  conditions,  technology,
the meaning of words, and other matters. Just  as  the  US  Constitution  is
regarded as ‘a living Constitution’, so an ongoing British Act  is  regarded
as ‘a living Act’. That today’s construction involves the  supposition  that
Parliament was catering long ago for a state of affairs that  did  not  then
exist is no argument against that construction. Parliament, in  the  wording
of an enactment,  is  expected  to  anticipate  temporal  developments.  The
drafter will try to foresee the future, and allow for it in the wording.
                            *     *    *
An enactment of former days is thus to  be  read  today,  in  the  light  of
dynamic processing received over the years, with such  modification  of  the
current meaning of its language as will now  give  effect  to  the  original
legislative  intention.  The  reality  and  effect  of  dynamic   processing
provides  the  gradual   adjustment.   It   is   constituted   by   judicial
interpretation, year in and  year  out.  It  also  comprises  processing  by
executive officials.”

37)   Similarly, in SIL Import USA (supra), this Court has again  reiterated
as follows:-

“16. Francis Bennion in Statutory Interpretation has stressed  the  need  to
interpret a statute by making “allowances  for  any  relevant  changes  that
have  occurred,  since  the  Act’s  passing,  in  law,  social   conditions,
technology, the meaning of words, and other matters”.
17. For the need to update legislations, the courts have  the  duty  to  use
interpretative process to the fullest extent permissible by  the  enactment.
The following passage at p. 167 of the  above  book  has  been  quoted  with
approval by a three-Judge Bench of this Court in State v. S.J. Choudhary:
“It is presumed that Parliament intends the court to  apply  to  an  ongoing
Act a construction that  continuously  updates  its  wording  to  allow  for
changes since the Act  was  initially  framed  (an  updating  construction).
While it remains law, it is to be treated as  always  speaking.  This  means
that in its application on  any  date,  the  language  of  the  Act,  though
necessarily embedded in its own time, is nevertheless  to  be  construed  in
accordance with the need to treat it as current law.””

38)   With the ongoing development in the field of science  and  technology,
even though the online  lotteries  were  not  in  vogue  in  1998  when  the
Parliament had passed the Act, it came into existence at a  later  point  of
time.  The principles laid down by this Court in  B.R.  Enterprises  (supra)
would apply to the paper lotteries which were in existence at that point  of
time.   The  principles  laid  down  therein  would  also  apply  to  online
lotteries or internet lotteries by treating them as a separate  class.   The
principle laid down therein is that if the State Government has to  prohibit
any lottery organized, conducted or promoted by every other  State,  it  has
to prohibit the sale of its own lottery also.  Meaning thereby, if  a  paper
lottery is being prohibited by a particular State then  that  paper  lottery
has to be prohibited as a whole.  Likewise, if online  or  internet  lottery
is to be prohibited by a State then that online lottery or internet  lottery
of all States including that State also has to be prohibited.   Viewed  from
this angle, we are of the considered opinion that State of Kerala  was  well
within its rights to prohibit the sale of online or  internet  lotteries  in
its State and there is no fault  in  it.   It  is  well  within  the  powers
conferred on it under  Section  5  of  the  Act.   A  State  Government  can
organize, conduct or promote a lottery subject to  conditions  mentioned  in
Section 4 and if there is any  violation  of  the  conditions  mentioned  in
Section 4, it would be always open to the State Government to prohibit  such
lottery and that would be within  the  legislative  power  vested  with  the
State under Section 5 of the Act as in that case the  State  would  be  only
complying with the provisions of  the  Act  made  by  the  Parliament.   The
learned Single Judge while examining the  facts  of  the  case,  manner  and
method in which the sale of online  lotteries  are  conducted,  has  already
held that it violates the provisions contained in Section 4 of the Act.   In
fact, during the course of arguments, no effort was  made  to  dislodge  the
findings  recorded  by  the  courts  below.  The  view  adopted   from   the
observation made by this Court in B.R. Enterprises (supra), in any case,  is
possible.
39)   In our considered opinion, learned single  Judge  of  the  High  Court
rightly mentioned in his judgment that “in fairness,  it  must  be  conceded
that Section 5, in the light  of  the  interpretation  in  B.R.  Enterprises
(supra), admits two interpretations.  One is that  the  State  can  prohibit
any form of lottery, if only it is not running  any  lottery  at  all.   The
second interpretation is that the State can prohibit a  particular  form  of
lottery, if it is not running that form of lottery, even if  it  is  running
other types of lotteries.  The Act has been designedly made to suppress  the
mischief of lottery.   Therefore, we  feel  that  an  interpretation,  which
advances the object of the Act, should be favoured.  That means,  the  State
can prohibit online lotteries, if  it  is  not  running  the  said  type  of
lotteries.  The decision in B.R.  Enterprises  (supra),  which  was  dealing
with the prohibition of paper lotteries,  does  not  stand  in  the  way  of
accepting such an interpretation.  Accordingly, the main  challenge  against
the impugned  notification  that  it  violates  Section  5  of  the  Act  is
repelled.
40)   In view of the foregoing discussion, we do not find any  infirmity  in
the order passed by the Division Bench of the High Court  dated  23.05.2006,
consequently, the appeals and the writ petitions fail  and  are  accordingly
dismissed.  However, the parties are left to bear their own costs.
                                                      ...…………….………………………CJI.

          (H.L. DATTU)

.…....…………………………………J.
  (R.K. AGRAWAL)
.…....…………………………………J.
  (ARUN MISHRA)
NEW DELHI;
NOVEMBER 5, 2015.
ITEM NO.1A               COURT NO.11               SECTION XIA
(For Judgment)
               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS

                       Civil Appeal  No(s).  3518/2007

ALL KERALA ONLINE LOTTERY DEALERS ASS.             Appellant(s)

                                VERSUS

STATE OF KERALA & ORS.                             Respondent(s)

WITH
W.P.(C) No. 641/2007
C.A. No. 3519/2007
C.A. No. 3520/2007
W.P.(C) No. 233/2010

Date : 05/11/2015      These appeals and writ petitions were called on
            pronouncement of today.

For Appellant(s)       Mr. Nikhil Nayyar, AOR

                       Petitioner-in-person

For Respondent(s)      Ms. Liz Mathew, AOR

                       M/s Arputham Aruna & Co.

                       Mr. Gopal Singh, AOR
                       Mr. Rituraj Biswas, Adv.
                       Ms. Varsha Poddar, Adv.

                       Mr. Shreekant N. Terdal, AOR

                       Mr. T.C. Sharma, AOR

      Hon'ble Mr. Justice R.K. Agrawal pronounced  the  reportable  judgment
of the Bench comprising Hon'ble the Chief Justice, His Lordship and  Hon'ble
Mr. Justice Arun Mishra.
      The appeals and writ petitions are dismissed in terms  of  the  signed
reportable judgment.

      (R.NATARAJAN)                                 (SNEH LATA SHARMA)
       Court Master                                    Court Master
            (Signed reportable judgment is placed on the file)

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