PETITIONER: STATE OF HARYANA Vs. RESPONDENT: SUMAN ENTERPRISES DATE OF JUDGMENT21/04/1994 BENCH: VENKATACHALLIAH, M.N.(CJ) BENCH: VENKATACHALLIAH, M.N.(CJ) JEEVAN REDDY, B.P. (J) SAWANT, P.B. YOGESHWAR DAYAL (J) MOHAN, S. (J) CITATION: 1994 SCC (4) 217 1994 SCALE (2)844 ACT: HEADNOTE: JUDGMENT:
ORDER
TAMIL NADU MATTERS
Writ Petition (C) Nos. 739, 756, 982, 1019, 1054, 1057, 1204
and 1205 of 1990, SLP (C) Nos. 9238, 11611 and 11613 of
1990, TC Nos. 70, 66, 67 and 68 of 1990, WP (C) No. 1121 of
1990
1. There is an executive order No. GOMs No. 1101 dated 6-
10-1989, promulgated by the State of Tamil Nadu prohibiting
the sale of lottery tickets of other States. The relevant
part of the said order reads thus:
“2. The lotteries mainly fall under five
different categories.
(a) Lotteries organised by the Government of
India.
(b) Lotteries organised by the Government of
Tamil Nadu.
(c) Lotteries organised by other State
Governments.
(d) Private Lotteries authorised by
Government of Tamil Nadu, and
(e) Private Lotteries authorised by other
Governments but not authorised by this
Government.
Government have decided, in view of the reasons referred to
in para 1 above that the sale of lottery tickets of the
Government of Tamil Nadu and the lotteries organised by
Government of India or other State Governments alone will
henceforth be permitted within the State of Tamil Nadu.
Private Lotteries of any kind are not authorised to be sold
within the State of Tamil Nadu.”
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2. The order clearly implies if it did not, it would
have required the order to be read down to mean that
prohibition does not extend to the sale of lottery tickets
of lotteries ‘organised’ by other States. This is the
implication arising out of a proper construction of Entry 40
of List I and Entry 34 of List 11 of the Seventh Schedule.
The said Entry 34 of List II provides “Betting and
Gambling”. Entry 40 of List I provides “Lotteries organised
by the Government of India or the Government of a State”.
3. In the present case we have examined, prima facie,
whether the lottery claimed to have been ‘organised’ by the
State of Sikkim can be said to be a lottery ‘organised’ by
the State of Sikkim and not merely authorised by it
authorising the so-called ‘Agents’ themselves to organise
the lottery. We have examined this in the context of the
question whether the earlier interim order granted by this
Court should continue or not till the final disposal of the
main cases. Prima facie, it appears to us that the concept
of a lottery ‘organised’ by a State would require certain
basic and essential concomitants to be satisfied as, indeed,
members of the public when investing their money in such a
lottery proceed on a trust and on certain assumptions as to
the genuineness, bona fides, safety, security, the rectitude
of administration etc. associated with governmental
functioning. If some of the basic functions characterising
a State-organised lottery are delegated or abdicated by the
State this public trust is impaired. The first of those
requirements is that the tickets which bear the imprint and
logo of the State must be printed by or directly at the
instance of the State Government so as to ensure their
authenticity and genuineness and further to ensure that any
possibility of duplication of the tickets and sale of fake
tickets is provided against and rendered impossible.
Secondly, the State itself must sell the tickets though, if
it thinks necessary or proper so to do, through a sole
distributor or selling agent or several agents or
distributors under terms and conditions regulated by the
agreement reached between the parties. The sale proceeds of
the tickets either sold in retail or wholesale shall be
credited to the funds of the Government. Thirdly, the draws
for selecting the prize-winning tickets must be conducted by
the State itself, irrespective of the size of the prize
money. Fourthly, if any prize money is unclaimed or is
otherwise not distributed by way of prize, it must revert to
and become the property of the State Government. These,
prima facie, appear to us to be the minimal characteristics
of a lottery which can claim to be ‘organised’ by the State.
4. The concept of ‘royalty’ being paid by the ‘agent’
would perhaps not be consistent with the idea of
relationship between the principal and agent. This Court in
Akadasi Padhan v. State of Orissa’ though in a different
context indicated what kind of transaction detracts from the
idea of an ,agency’. It was observed: (SCR pp. 721, 722))
“Clause provides that subject to other terms
and conditions, all charges and out goings
shall be paid by the agent and he shall not be
1 1963 Supp 2 SCR 691 : AIR 1963 SC’ 1047
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entitled to any compensation whatsoever for
any loss that may be sustained by reasons of
fire, tempest, disease, pest, flood, drought
or other natural calamity, or by any wrongful
act committed by any third party or for any
loss sustained by him through any operation
undertaken in the interest of fire
conservancy. This clause clearly shows that
the agent becomes personally liable to bear
the loss which, under the normal rules of
agency, the principal would have to bear. We
have not thought it necessary to refer to all
the clauses in detail because we are satisfied
that even if the agreement is broadly
considered, it leaves no room for doubt that
the person appointed under the agreement to
work the monopoly of the State is not an agent
in the strict and narrow sense of the terms
contemplated by Article 19(6)(ii). The agent
appointed under this agreement seems to carry
on the trade substantially on his own account,
subject, of course, to the payment of the
amount specified in the contract. If he makes
any profit after complying with the said
terms, the profit is his; if he incurs any
loss owing to circumstances specified in
clause 6, the loss is his. In terms, he is
not made accountable to the State Government;
and in terms, the State Government is not
responsible for his actions. In such a case,
it is impossible to hold that the agreement
‘in question is consistent with the terms of
Section 3 of the Act.”
It would, therefore, prima facie, seem that the idea of a
fixed sum of ,royalty’ paid by the ‘agent’ would be more
consistent with the idea of enfranchisement or farming out
of a right to organise a lottery than with the idea of an
“Agency”.
5. If the basic and essential features indicated above are
ensured, it might be possible to raise a presumption that
the lottery is one that could be said to have been
‘organised’ by the State itself and not one merely
authorised by the State under which the so-called ‘agent’
himself organises the lottery. In the present case, prima
facie we abstain from any final pronouncement of this
question which requires to be decided at the final hearing
some of these essential characteristics seem to be missing.
It will not be possible at the interlocutory stage to hold
that the Sikkim scheme is outside the State power of
regulation of “Betting and Gambling” and does not attract
the ban contemplated by the Tamil Nadu Government’s
Notification GOMs No. 1101 dated 6- 10- 19 89.
6. Shri K.K. Venugopal, teamed Senior Counsel appearing
for the State of Sikkim, however, made an impassioned plea
that a small border State of the country which has no
substantial independent economic resources of its own has
been deriving considerable income from these lotteries by
sale of tickets in other affluent parts of the country and
that the stopping the sale of the tickets in the State of
Tamil Nadu as now sought to be done, will have the effect of
cutting off the economic arteries sustaining the State.
7. While we appreciate the predicament of the State, we
cannot also overlook the power of the State to regulate the
sale of lottery tickets not
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organised by the Union or other States. If the State of
Sikkim or any other State organises its lottery which
satisfies the aforesaid essential features which can alone
qualify a lottery as one ‘organised’ by the State, it would
quite obviously be outside the regulatory power of any other
State under Entry 40 of List 11 and accordingly the
prohibition would not apply. It is open to the State of
Sikkim to evolve an appropriate and acceptable scheme and if
necessary seek the protection of its rights to sell the
tickets under that scheme by an appropriate application
before court.
8. The schemes of lotteries of the States of Mizoram,
Nagaland, Arunachal Pradesh, Goa and Kerala are more or less
similar. All interim and interlocutory orders of stay
granted in favour of the States of Sikkim, Mizoram,
Nagaland, Arunachal Pradesh, Goa and Kerala shall stand
vacated. However, in order that the rights of the
purchasers of tickets already sold in respect of the next
draw are not affected, the earlier order of stay shall
continue to operate till 5-5-1994.
MADHYA PRADESH MATTERS
O.S. No. 1 of 1993 and Writ Petition (C) No. 356 of 1993
9. The stay prayed for is refused.
10. We are prima facie of the view that the extant lottery
scheme of Mizoram does not satisfy the requirements
indicated in the order made today in Tamil Nadu matters.
If, however, a revised scheme which conforms to the minimal
requirements which render the scheme eligible to be
recognised as one organised by the State, the State may move
for appropriate protection of the right to sell the tickets
in the State of Madhya Pradesh. With these observations and
liberty so reserved, the stay application is dismissed.
Writ Petition (C) No. 356 of 1993
11. Petitioner claims to be an agent who is dealing with
lottery tickets of lotteries organised by various States.
Petitioner’s argument is that the law which imposes a
blanket ban on the sale of lottery tickets cannot operate
irrespective of the question whether the tickets are of
lotteries ‘organised’ by the State or of lotteries merely
authorised by the State. The contention of the learned
counsel for the petitioner is that the State has no power
under Entry 34 of List 11 to impose a ban on the sale of
tickets of lotteries ‘organised’ by the Union or other
States. Learned counsel says that the lotteries organised
by the States of Haryana, Rajasthan, West Bengal, Uttar
Pradesh, Delhi, Mizoram, Kerala, Karnataka and Tamil Nadu
are themselves instances in point. It is urged that the
tickets of the lotteries of these States cannot be
prohibited from being sold in the State of Madhya Pradesh.
12. The essential question is whether under the various
schemes sponsored by the other States the lotteries can be
said to be those ‘organised’ by the State as distinct from
those merely authorised by them. In the course of our order
made today in Tamil Nadu matters we have indicated though
as a prima facie indication at the interlocutory stage
what prima facie
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appeals to us to be the minimal criteria which render a
lottery to be eligible to be called one ‘organised’ by a
State. We do not propose to examine the details of the
schemes of the various States referred to by the petitioner.
However, the petitioner shall be at liberty to make an
appropriate application before the State of Madhya Pradesh
urging that the lotteries organised by the States referred
to are immune from the State’s regulatory power and that the
petitioner is entitled to sell the tickets of the lotteries
of these States in the State of Madhya Pradesh. The State
Government will examine the representation in the light of
the criteria indicated in our order made today in Tamil Nadu
matters and make appropriate order whether, in its opinion,
the schemes of lotteries of the aforesaid States qualify for
being reckoned as lotteries ‘organised’ by those States. If
it comes to that conclusion, it shall declare and notify
that the tickets in respect of those lotteries are outside
the ban contemplated by Madhya Pradesh Lottery Pratibandh
Act, 1993. The State shall make a speaking order and
dispose of the representations within four weeks from the
day the representation is submitted.
13. Shri S.K. Agnihotri, learned standing counsel for the
State of Madhya Pradesh states that the Director of
Lotteries in the State will be the authority who will
examine and dispose of the representation. This submission
is placed on record.
BIHAR MATTERS
Civil Appeal Nos. 2144-47 of 1994
14. We have heard Shri M.L. Verma, learned Senior Counsel
for the State of Bihar and Shri Gopal Subramaniam, learned
Senior Counsel for the respondents.
15. Before the High Court the respondents assailed the
constitutional validity of the Bihar Ban on Lottery
Ordinance, 1993, which sought to prohibit the sale of
lottery tickets in the State of Bihar. The preamble of the
Act reads as under:
“Whereas detrimental impact of the lottery
business has been noted on social and economic
condition of people particularly on the poorer
section of the society;
And whereas there has been a serious adverse
effect on public order on account of the said
lottery business;
And whereas in view of the above it is
intended to stop all the lotteries in the
State;
And whereas the State Legislature is not in
session and the Governor of Bihar is satisfied
that circumstances exist which render it
necessary for him to take immediate action to
ban the sale of lottery tickets in the State
of Bihar.”
Section 3 of the Act provides:
“Ban on Lottery.- Notwithstanding any
agreement or contract entered into by the
State Government with any person no person
shall be
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permitted to deal within the trade or business
of lottery or be an agent or promoter in
respect of any lottery nor shall he sell,
distribute or purchase any lottery ticket
within the territory of Bihar State.”
.LM0
16. Prima facie, the High Court correctly
recognised the distinction and the effects
that flow from that distinction between
lotteries ‘organised’ by the State and those
merely authorised by the State. In para 10.6
the High Court observed as under:
“A new case has been sought to be made on the
written statement on the question as to what
is meant by ‘organised’. However, I have made
it quite clear that the Act: so far it deals
with cases of lotteries not organised’ by the
Central Government or any State Government, is
valid and the State would be at liberty to act
according to the said Act to that extent.
Accordingly, in a given case where it is
organised or not, shall be determined and it
is not for us to deal with the same in view of
the limited scope or our judgment as stated
hereinabove, i.e., the question of legislative
competency only.”
The State has now come up in appeal by special leave. It
also seeks a stay of the operation of the judgment under
appeal.
17. We stay the operation of the judgment under appeal
pending final disposal of the appeals. However, it is open
to the respondents to apply to the State Government pointing
out that the tickets of the lotteries in the business of
sales of which they are engaged, are of lotteries
‘organised’ by the State and that, therefore, such sales
should not be prohibited in the State of Bihar. If such an
application is made, the State Government will examine the
matter and make a speaking order whether in its opinion the
schemes of the lotteries are such as to render the lotteries
‘organised’ by the States concerned or merely lotteries
authorised by the States. In doing so the State of Bihar
shall take into account and apply the criteria indicated in
our order made today in Tamil Nadu matter.
18. Shri Verma, learned Senior Counsel for the State says
that the matte will be examined by the Secretary, Finance
Department, Government of Bihar. That authority shall
dispose of the representation within 4 weeks from the dates
they are made.
19. The stay granted of the operation of the judgment under
appeal shall, however, operate from 12-5-1994 onwards so
that any arrangement made in the meanwhile should not be
dislocated. No tickets for any draws to be made after 11-5-
1994 shall be sold from 12-5-1994 onwards, except to the
extent permitted by the specific order of the Finance
Secretary.
Court Masters
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