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1. Gambling License Application
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4. Online Gambling Licenses Cost

Over the past few days, I had received numerous queries on obtaining licenses in Sikkim and also whether Indians can place wagers on these websites. We now have clarity on various issues concerning Sikkim licenses. The Sikkim government has issued Letter of intent (LOI) in favour of various companies. An LOI can be converted into a Provisional license (on payment of a fee of Rs. 1 lakh) by issuing a Rs. 5 crore bank guarantee in favour of the Sikkim government (which is the minimum yearly assured taxes to the Sikkim government).

The provisional license is issued for 120 days to enable companies to set-up the necessary infrastructure for setting-up the website after which an application for the actual license can be made on payment of a fee of Rs. 5 lakhs. The term of the license is 5 years with an option to renew it thereafter.

• What is a Casino. A Casino can be simply defined as a public room or building where gambling games are played. What is The Central Gambling Law. In India, the Public Gambling Act of 1867 prohibits running or being in charge of a public gaming house or a ‘Casino’. The penalty for breaking this law is a fine of Rs.200 or imprisonment of up to 3 months.
• The amendment in 2008 was necessary because the National Gambling Act of 2004 did not allow for interactive gambling or online gambling, with specific reference to casino games, poker, and bingo. Online gambling for horse racing and also online bookmaking was considered legal as long as the valid licenses are in place and the rules adhered to.
• The penalty for being caught gambling online has been a fine of ₹ 90,000 per day since 2009. Online gambling is in its infancy in India, but Sikkim planned to offer three online gambling licences in 2010. This failed despite India being the most sought out country for online gambling.

A few companies, representing the Sikkim government have been issued Letter of Intent’s for the online gaming activities and want investors to purchase equity in the company and start the process of building the infrastructure for the online gaming licenses. The average price for giving 100% equity in the company having Letter of Intent to carry out the online gaming business is Rs. 10-15 crores.

I would now clear certain fundamental doubts relating to investing in Sikkim licenses and the online gaming business:

Investment by foreign companies: Any foreign Direct Investment (FDI) including technical collaboration for gaming, businesses is prohibited in India; however given the considerable interest of foreign gaming companies and the cutting-edge foreign gaming technology; businesses would like to have some sort of an arrangement with fordeign entities. Some businesses are confidant that transactions can be innovatively structured to allow foreign companies to share technical expertise and/or hold a stake in the license-holding company.

Participation from other states and payment gateways: Businesses would be able to market their websites in most states in India in the absence of any explicit ban. In fact, sources tell me that the Central government and certain State governments have given informal permission to allow gambling activities to be carried on. Thus, customers would be able to wager through numerous payment options like cash cards, cheques, etc. Requests are also pending with the Reserve Bank of India Winnings could also be transferred to the customers bank accounts.

In fact some of these websites are likely to start operations in a few months after the required infrastructure is set up and formalities are completed.

Online Gaming/Gambling laws in India prohibit betting or wagering and any act which is intended to aid or facilitate the same. Gaming/Gambling being a State subject, gaming/gambling in India have laws which differ from state to state . This would mean what is permitted in one State may be an offence in another. The Public Gambling Act, 1867, is the central enactment on the subject, which has been adopted by certain states of India like Uttar Pradesh, Punjab, Madhya Pradesh etc. The other States have enacted their own legislation to regulate gaming / gambling in India activities within its territory. It is to be noted that State Legislations have been enacted prior to the advent of virtual / online gambling in India and therefore references of gaming/gambling in India, in respective state legislatures are in relation to physical premises only, barring Sikkim and Nagaland which are the only States who have introduced regulations pertaining the online gaming.

After going through the State gambling laws for online gambling in India, it is found that, except the State of Orissa and Assam, most of the States have excluded ‘games of skill’ from applicability of its respective gaming/gambling laws. Further, playing certain games including ‘Poker’, both online and offline, is permitted under the laws of West Bengal, Nagaland and Sikkim subject to licence from the appropriate State Authorities. But this would be applicable only in the territorial limits of the respective State. In Goa, gambling is permitted only in Government permitted places operated as casinos.

The issue of online gambling in India laws in India still remains a grey area which is yet to be adjudicated by Courts of India. Having said that, necessary inferences can be drawn from orders passed by the Court while deciding the issue of whether a particular game is a ‘game of skill’ or a ‘game of chance’. But the issue of whether a ‘game of chance’, if played like a sport without stakes amount to gambling or not? still remains largely undecided.

Game of Skill v. Game of Chance:

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There has been a substantial discussion by Supreme Court and High Court on what constitutes a ‘game of skill’ and a ‘game of chance’. What is adduced from the judgments is that a game where there is preponderance of skill over chance is a ‘game of skill’ and vice-versa.

By taking the above ratio into account, SC in the matter of State of AP v. K.Satyanarayana(1968) held the game of Rummy to be a ‘game of skill’. However, the Court in its judgment has indicated that if there is gambling or if the gambling house is making profit from the game of rummy, then it could amount to an offense under the laws of AP. It was further observed by SC that the three card game which goes under different names such as flush, brag, etc. is a game of pure chance. This was relied upon by SC in another its other judgments viz. M.J.Sivani v. State of Karnataka (1995) and Dr. K.R. Lakshmanan vs State Of Tamil Nadu And Anr (1996).

The issue of whether rummy if played with stakes amounts to gambling or not has not been decided by Supreme Court. However, Andra Pradesh High Court in D. Krishna Kumar And Anr. vs State Of A.P.(2002) (Annexure-2) relying upon the SC decision of 1968 held that till such time the state gambling Act is amended to lay down that playing Rummy with stakes is 'gaming', playing Rummy with stakes is not 'gaming' within the meaning of the Act and is therefore allowed.

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Delhi District Court: Gaussian Network Pvt. Ltd. Vs. Monica Lakhanpal

The issue of Online Gaming/gambling laws in India was discussed in detailed in the above case when the issue was put up before the Court under Order 36 Rule(1) of CPC by the parties. The Court held the following:

• Game of skills, if played with stakes does not amount to gambling;
• Playing games of skill for money is only legal in the real form, online games cannot be compared to real games;
• Attracting business or enticing players by alluring them with prize money is illegal;
• Gaming sites partaking a slice on the winning hand are illegal as they amount to a virtual gambling house.

Having said that, the said ruling was rendered infructuous as during the final arguments in the Revision petition, parties sought to withdraw the petition. So the effect being there is no ruling which can be treated as a precedent as regards online gambling.

Gujarat High Court on Poker:

The issue whether Poker is a ‘game of skill’ or a ‘game of chance’ was never discussed in detail by any Court in India until the recent decision/order dated December 4, 2017 passed by Gujrat High Court in Dominance Games Pvt. Ltd. V. State of Gujarat, wherein, the said issue was extensively pondered upon. The Court in its said decision held that Poker is a ‘game of chance’ and therefore amounts to gambling under Gujarat Prevention of Gambling Act, 1887. While arriving at the aforesaid decision, the Court inter alia observed the following:

• That the game of poker originated from ‘flush’ or ‘Indian teenpatti’ which has been observed by SC as a game of chance in its 1968 judgment and consequently, as a corollary, the game of poker is also to be construed as a game of chance;
• The game of poker involves a process wherein the players have no control or say on the cards received by them and the final outcome is based on mere luck or chance depending upon how the cards are received by the player. Poker face to bet, would be a part of bluffing or deception and the so-called strategy, cannot be considered as a skill. The outcome also depends on the ability of a player to spend money and how deep are his pockets. It is a game of deceiving, bluffing and duping other players;
• The game of Rummy is different than Poker. While poker involves betting or wagering, rummy has nothing to do with stakes and betting or wagering is not essential to the game of rummy;
• The Court while noting the ills of gambling and impact of gambling on the moral fibre of society noted that ‘one must not overlook the ground realities in India or the country like India, where the majority of the population is struggling for the basic necessity and there is lack of awareness amongst the people and if they are permitted by betting in the craze of easy money, they do not know what to do if the things go wrong.’

Mr. K.N Suresh, Secretary of Indian Poker Association has filed an appeal against the said order, being Letters Patent Appeal No. 2625 of 2017 before the Division Bench of Gujarat High Court. The bench after hearing the matter briefly on December 28, 2017 issued notice to the state government and other respondents, and till date the matter is not heard finally. Having said that, since no ad-interim/interim reliefs are granted presently, the Single Judge order stands valid and enforceable.

Though the order does not specifically make any observation on Poker, if played as a sport and/or without stakes, however, while differentiating between rummy and poker, the Hon’ble Court at para 60 of the said order makes a presumption that wagering or betting is an inseparable part of the game of poker and therefore would involve stake. The Court while holding Poker to be a ‘game of chance’ has also predominantly relied upon moral religious and social grounds. In the absence of the said order being overruled and the issue being addressed specifically, the game of poker, even if played as a sport and/or without stakes remains a grey area which is then left at the discretion of police authorities.

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POSITION:

Online Gambling Licenses Cost

Though the issue of Poker was considered by Gujarat High Court in view of the provisions of Gujarat Prevention of Gambling Act, 1887, in arriving at the decision of Poker being a ‘game of chance’, the court made several observations like how the game is played, origin of the game, reference to ancient Indian literature, moral and religious grounds, etc. which may be applied by other states/state machinery having similar gambling laws. The issue is likely to be clarified by Division Bench of Gujarat High Court, once the appeal is finally heard.

In view of the above, it is clear that if a game is considered to be a ‘game of chance’ under the state laws and rulings by the Courts and is played with stakes, would constitute gambling under the respective state laws with exception pertaining to a few states as mentioned above. If an entity is able to show that a particular online game or a particular on-ground gaming activity has preponderance of skill over chance and/or is played as a sport without stakes, it may fall within the exception of gaming/gambling under the state gambling laws. It is pertinent to note however that if online gaming is illegal in any State, the promotion of the same in such State would amount to violation of ASCI Code as well as Cable TV Network Regulation Act, 1994.

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