Online gambling Act is fully within the legislative competence of the State, Tamil Nadu govt. asserts before Madras High Court

Home Secretary P. Amudha files a counter-affidavit through Advocate-General R. Shunmugasundaram contending that rummy and poker, when played in online format, can be classified only as games of chance and not as games of skill

Updated - November 09, 2023 07:09 pm IST

Published - July 03, 2023 12:11 am IST - CHENNAI

A view of the Madras High Court. File

A view of the Madras High Court. File | Photo Credit: K. Pichumani

The Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, is intra vires (within the legal powers) the legislative competence conferred on the State legislature by the Constitution and not ultra vires as contended by All India Gaming Federation and others, the State government has asserted before the Madras High Court.

Filing an exhaustive counter-affidavit through Advocate-General R. Shunmugasundaram, the government said the 2022 law was enacted in valid exercise of the powers conferred upon the State legislature under Articles 245 (power to make laws for the whole or part of a State) and 246 (power to enact laws on any of the subjects in the State list) of the Constitution.

The government denied the charge that the Act purported to apply extra territorially or that it would produce legal effects beyond the territory of Tamil Nadu. It said the law would be valid as long as it passed the test of territorial nexus by proving that the connection between what was sought to be achieved and the territory of the State was real and not illusory.

Filing the counter on behalf of the Chief Secretary, the Law Secretary, the Director-General of Police and herself, Home Secretary P. Amudha said subsections (f) and (g) of Section 2 of the Act distinguish between local and non-local online game providers. She stated that the penal provisions would not apply to non-local companies which provide geo-blocking in the State.

Details of suicides reported in Tamil Nadu since 2020 due to online gaming addiction and consequent loss of money.

Details of suicides reported in Tamil Nadu since 2020 due to online gaming addiction and consequent loss of money. | Photo Credit: Source: Counter affidavit filed by Tamil Nadu government before Madras High Court

“The definition of due diligence under Section 14(3) is tailor-made to align with the territorial nexus test and ensures that the provisions of the impugned (under challenge) Act are not applied to any online games provider unless it reaches into the territory of the State or reaches out to persons within the State,” the counter-affidavit read.

Given that the object of the Act was to protect persons within Tamil Nadu from harms associated with online gambling and online gaming addiction, it stands to reason that the Act only applies to non-local online games providers whose activities were likely to lead to such harm on account of their failure to exercise due diligence or geo-blocking, the government said.

Three subjects

It also said the law was enacted with respect to three subjects — public order, public health and betting and gambling — found in entries 1, 6 and 34 respectively of List II (State list) of the Seventh Schedule to the Constitution. It also qualifies as a law made with respect to the subject of ‘criminal law’ under entry 1 of List III (concurrent list).

“The object of the Tamil Nadu legislature in enacting the impugned Act was to remedy the public disorder which has resulted from an unchecked spread of online gaming addiction and online gambling in the State,” the government said, pointing out that addictive gamers had incurred debts and committed suicide. Many families had been pushed to financial distress, it added.

Stating that ‘public health’ also includes mental health, the government pointed out that online gaming addiction had been recognised as a health concern even by the World Health Organization (WHO) and therefore, the 2022 Act provides for the constitution of an Online Gaming Authority to regulate the online games and safeguard the mental health of the people.

Even rummy and poker, when played in online format, could be classified only as games of chance and not as those of skill. Such a classification under the 2002 Act was perfectly lawful and valid and the State legislature was empowered to make laws governing betting not only on games of chance but also those of skill, the Home Secretary said.

Previous verdict

Referring to a 2021 verdict of the High Court striking down a similar law enacted when the AIADMK was in power, the government said that the verdict was per incuriam (delivered without due regard to legal position) since it was contrary to the law declared by the Supreme Court that the entries in the Seventh Schedule must be given a wide interpretation.

In the 2021 judgment, the High Court had observed that betting on a game of skill was itself an activity in which success depends on the skill of the player. However, disagreeing with such an observation, the government, in the present counter, said, “It is respectfully submitted that the same is not universally true.”

It went on to explain: “Two scenarios ought to be distinguished. One, where a person playing a game of skill bets on the likelihood of his/her own success and another where a person bets on the likelihood that another person, who is playing a game of skill, will succeed. In the latter case, even though the game may be one of skill, the success of the person betting would depend on how accurately the result of the game can be guessed by someone who is not playing it.”

Information Technology Rules

On the petitioners’ contention that the 2002 Act was repugnant to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, the government said such a contention was “unpersuasive and untenable”. It said no repugnancy had resulted from the amendment of the Rules by the Centre on April 6 this year.

The State government contended that the 2022 State law as well as the Centre’s intermediary guidelines were entirely reconcilable and capable of operating together. It said Section 15 of the 2002 Act takes into account the issue of legislative competence with respect to Internet communication and provides for a mechanism to handle the issue.

The Act enables the Online Gaming Authority to make a recommendation to the State government for taking action against erring online gaming companies and the latter, in turn, would request the Centre to exercise its powers under Section 69A of the Information Technology Act, 2000, in respect of the offending gambling service, the government told the court.

The State also put forth an alternative argument that if a Central law, in pith and substance, was related to a subject in the State list, then such a law should be considered invalid for lack of legislative competence. If the intermediary guidelines were related to the subject of ‘betting and gambling’, it would be the guidelines, and not the State law, which would become invalid.

Right to business

Finally, the government denied in toto the argument that the 2022 Act violates the fundamental right, to carry on any business, guaranteed under Article 19(1)(g) of the Constitution. It said the online gaming companies or their federation could not claim themselves to be a “citizen of India” in order to claim fundamental rights.

Even assuming that the companies would qualify as a “citizen”, the government asserted that it could still impose reasonable restrictions on such business especially if there was a strong public interest behind such a move. It said businesses in the nature of providing gambling services would be res extra commercium (a thing outside commerce).

The court was also informed that the 2022 Act was enacted only after a thorough study of the issue by a committee led by Madras High Court’s retired judge K. Chandru who studied the potential harm caused to the finances and mental health of the vulnerable and underage gamers due to uninterrupted and unrestricted access to gambling platforms.

No other option

“No measure other than a prohibition on provision of online gambling services would be as effective for achieving the legitimate goal noted above. Regulating any entity that operates over the Internet is a complex matter and would involve disproportionate expenditure of finances and manpower which is not feasible for the State of Tamil Nadu,” the government said.

It claimed that the 2022 Act does not purport to overrule or had the effect of overruling any binding judgment of the Supreme Court or the High Court. “The impugned Act is a sui generis (unique) legislation on online gaming and gambling and there is no authoritative legal pronouncement on the character of any online game as a game of chance or a game of skill,” it said.

“The predominance or otherwise of the ‘skill’ element in an online game cannot be measured because the ‘chance’ element in an online game is not a true element of chance. A computer does not use a physical device for generating random outcomes. Computers deploy a software known as Random Number Generator (RNG),” the Home Secretary said.

She also quoted Professor Steven Ward from the Massachusettes Institute of Technology’s Computer Science and Artificial Intelligence Laboratory to have said that outcomes produced by the RNG software were merely pseudo random and that computers were not capable of producing truly random outcomes.

Scale of harm

Highlighting the scale of harm caused by online gaming addiction, the government said 32 suicides either due to hanging or consuming poison had been reported across the State since 2020 and the dead included daily wagers, unemployed youths, food delivery agents, painters, auto drivers, businessmen, a hotel manager and even a police constable.

“The tremendous stakes involved in online gaming business can be gauged from the established fact that several online games providers are offering ‘free bonuses’ worth ₹2,000-₹10,000 to lakhs of players via SMS messages in order to entice them to participate in the games. It can be reasonably assumed that no business would offer incentives on such a scale unless it is confident of being able to recoup such amounts,” the counter read.

(Assistance for overcoming suicidal thoughts is available on the State’s health helpline 104, Tele-MANAS 14416 and Sneha’s suicide prevention helpline 044-24640050)

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