{"id":192972,"date":"1999-05-07T00:00:00","date_gmt":"1999-05-06T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/b-r-enterprises-etc-etc-vs-state-of-u-p-and-grs-etc-etc-on-7-may-1999"},"modified":"2015-11-01T16:20:57","modified_gmt":"2015-11-01T10:50:57","slug":"b-r-enterprises-etc-etc-vs-state-of-u-p-and-grs-etc-etc-on-7-may-1999","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/b-r-enterprises-etc-etc-vs-state-of-u-p-and-grs-etc-etc-on-7-may-1999","title":{"rendered":"B.R. Enterprises Etc, Etc vs State Of U.P. And Grs. Etc: Etc on 7 May, 1999"},"content":{"rendered":"
Supreme Court of India<\/div>\n
B.R. Enterprises Etc, Etc vs State Of U.P. And Grs. Etc: Etc on 7 May, 1999<\/div>\n
Bench: K Venkataswami, A.P.Misra<\/div>\n
           CASE NO.:\nAppeal (civil)  2747 of 1999\n\nPETITIONER:\nB.R. ENTERPRISES ETC, ETC.\n\nRESPONDENT:\nSTATE OF U.P. AND GRS. ETC: ETC.\n\nDATE OF JUDGMENT: 07\/05\/1999\n\nBENCH:\nK VENKATASWAMI & A.P.MISRA\n\nJUDGMENT:\n<\/pre>\n
JUDGMENT<\/p>\n
1999 (2) SCR 1111<\/p>\n
The Judgment of the Court was delivered by<\/p>\n
MISRA, J. Special leave granted in all the special leave petitions. We are
\nwitnessing in this case exhibition of Federalism in true spirit. Contrary
\nto the usual pouring in of citizen’s writ petitions for vending their
\ngrievances against the States, here we are drawn to decide issue inter se
\nbetween two distinct sets of States, one challenging and the other
\nupholding certain provisions of The Lotteries (Regulation) Ordinance 1997
\n(Ordinance No. 20 Of 1997) (hereinafter referred to as the “Ordinance No
\n20″) and now the Lotteries (Regulation) Act, 1998 (hereinafter referred to
\nas the ” 1998 Act”). The Union Government, of course has joined this issue
\nwith one such set of States for upholding its Act. The issue here is
\nconfined to the State lotteries under Entry 40, List I of the Seventh
\nSchedule of the Constitution of India. As a consequence of the order passed
\nby the State of U.P. banning State lotteries of other States by virtue of
\npower entrusted under Section 5 of the impugned Ordinance Act, various
\naffected States, challenged the provisions in different High Courts. In
\nsome of them, interim orders were passed and in others, the High Courts
\nfinally disposed of the petitions. The Gujarat High Court upheld the
\nvalidity, while the Guwahati High Court struck down some of its provisions
\nas ultra vires. Against all the aforesaid orders and Judgments, the
\naforesaid appeals have been filed. One writ petition under Article 32 has
\nalso been filed raising the same issue. Some of the aforesaid petitions are
\ntransfer petitions seeking transfer of petitions pending in the various
\nHigh Courts raising similar issues. We permitted learned counsel for the
\npetitioners in these transfer petitions to argue the common points which,
\nif fact, is the bone of contentions of all the parties. As in all these
\npetitions, common issues are raised, we are disposing of all, after hearing
\nlearned counsel for the parties, by this composite judgment. Apart from the
\ncommon issues, we are not disposing of nor propose to dispose of any of the
\nindividual residuary points, if any, remain after pur this adjudication.\n<\/p>\n
In order to adjudicate issues in this case, one of the fundamental question
\nraised is, what is the character of State lotteries. If lotteries are
\ngambling in nature, does it loose its character as such when it takes on
\nthe cloak of State lotteries? Whether such cloak dissolves its character as
\nres extra Commercium? In any case, even it is legalised, would it qualify
\nto be or can it be held to be a trade within the meaning of Chapter XIII of
\nthe Constitution of India? If it is a trade, are the provisions of the
\nimpugned Act violative of the Articles of Chapter XIII? Challenge to some
\nof the provisions are based on the ground of it being discriminatory and
\narbitrary, hence violative of Article 14 of the Constitution. Finally;
\nentrustment of power to the States under Section 5 is attacked as it being
\nunbridled without any guideline thus liable to be struck down,<\/p>\n
Before taking up for consideration the various points raised, it is
\nnecessary to dwell Certain bare facts to reveal the resulting cause of
\nfiling of various petitions in the various High Court is before finally
\nreaching this Court for adjudication. The whole gambit of sale of lottery
\ntickets in India, both private and State lotteries, from the very inception
\nis drawing with concern attention of various authorities and Government
\nincluding courts, as to how to control the evil effects of lotteries on its
\npeople at large, more so, when in complete banning, it effects in times of
\nneed, the Very useful source of State revenue. Basically, lotteries are
\ngambling and its business is res extra commercium; but to shed off this,
\nthe State in the interest of State revenue has been finding avenues to
\nlegitimate it through some legitimisation under the law to eliminate the
\nimpediments in collecting the State revenue and dilute, if possible, the
\nexploitation of the people. The details of which we shall be referring
\nhereinafter. The immediate reference to which we are concerned is Ordinance
\nNo. 20 of 1997 which was issued on 1st October, 1997, which came into force
\non 2nd October, 1997 which restricted the lottery business organised by the
\nStates and enabled the State Government to prohibit sale of tickets of
\nlotteries of other States. Under the said Ordinance, the State of U.P.
\nissued notification dated 7th October, 1997 banning sale of lottery tickets
\nof the State of Nagaland in the State of U.P- This notification and the
\naforesaid Ordinance was challenged by the State of Nagaland in the Gauhati
\nHigh Court in Civil Rule No, 4986 of 1997. The High Court stayed this
\nnotification. This Ordinance was also subject matter of challenge in the
\nHigh Court of Gujarat where in Special Civil Appeal No. 7903 of 1997 ( The
\nGujarat Lottery Sellers Association v. The State of Gujarat and another),
\nthe High Court upheld this Ordinance and the notification of Gujarat
\nGovernment which banned the State lotteries within the State of Gujarat.
\nAgainst this, Civil Appeal arising out of SLP (C) No, 22423 of 1997 has
\nbeen filed which we are considering and disposing of by means of this
\njudgment. The State of U.P. filed Civil Appeals arising out of SLP(C) Nos.
\n21304-21307 of 1997 as against the aforesaid interim; order passed by the
\nGuwahati High Court staying the Ordinance in which this Court directed the
\nState of U.P. to move the Gauhati High Court. This order was passed as an
\ninterim measure. In a Writ Petition No. 2200 of 1997 filed before the
\nAllahabad High Court (Lucknow Bench) by M\/s. Ganga Agencies (Manipur State
\nLotteries), the High Court ordered that so long the interim order of the
\nGauhati High Court is operative the sale of lottery tickets shall be
\npermitted to be sold in U.P. this Court finally disposed of SLP (C) Nos.
\n21304-21307 of 1997 (Civil Appeal No. 8858-8861 of 1997) by observing that
\nGauhati High Court is free to dispose of the petition pending before it in
\naccordance with law, since hearing had already completed. As the Ordinance
\nNo. 20 was lapsing, Ordinance No. 31\/97 (second Ordinance) was promulgated.
\nUnder it, the notification dated 29th October, 1997 of the State of U.P.
\nwas also stayed by the Guwahati High Court. Against this order, also SLP
\n(C) No, 4710-4712 of 1998 State of U.P. v. State of Mizoram and otters, was
\nfiled in this Court. Finally, the Guwahati High Court declared the
\nOrdinance No. 20 to be unconstitutional on the ground that Ordinance was
\nnot legislation by the Parliament within Article 298 of the Constitution of
\nIndia, hence it could not restrict executive powers of the State to carry
\non lottery business. It also held Section 5 to be ultra vires the Central
\nLegislative powers on the ground of excessive delegation and also violative
\nof Articles 301 and 303 of the Constitution. It further held mat Section
\n4(a), (f) and (g) imposes unreasonable restrictions, therefore,
\nunconstitutional. Against this, the State of U.P. filed Civil Appeals
\narising out of SLP (C) No. 5224-28 of 1998 and the Union of India filed
\nCivil Appeals arising out of SLP (C) Nos. 5081-5085 of 1998, which is also
\nthe subject matter of consideration through this judgment.\n<\/p>\n
In order to maintain the continuity, the Central Government issued the
\nLotteries (Regulation) Ordinance, 1998 (No. 6 of 1998) (third Ordinance) on
\n23rd April, 1998. This last Ordinance was also challenged along with
\nNotification dated 29th October, 1997 of State of U.P. in Civil Rule 2315
\nof 1998 Ms. Jyoti Agencies & Anr. v. Union of India & Ors. before the
\nGauhati High Court which was also stayed by means of interim order dated
\n22nd May, 1998. Civil Appeal arising out of SLP (C) No. 15978 of 1998 has
\nbeen filed against this order by the State of U.P. The Ordinance No. 6 of
\n1998 (third ordinance) has finally rolled into the Lotteries (Regulation)
\nAct, 1998 (No. 17 of 1998) (hereinafter referred to as `1998 Act’). This
\nAct along with Notifications dated 29th October, 1997, 17th March, 1998 and
\n20th April, 1998 of the State of U.P. were challenged in Civil Rule No.
\n3296 of 1998 State of Nagaland v. Union of India & Ors. before the Guwahati
\nHigh Court, The Guwahati High Court by order dated 10th July, 1998 stayed
\nthe provisions of Section 4(a), (g), (h), (j) Sections 5 and 6 of the 1998
\nAct and also the aforesaid notifications issued by the State of U.P. : Even
\nSLP against this order has been filed before this Court being SLP (C) No.
\n17566 of 1998. The Gujarat Lottery Sellers’ Association has challenged the
\nconstitutional validity of the Ordinance No. 20 promulgated on 1st October,
\n1997 and also challenged the Notification dated 30th September, 1997,
\nissued by Government of Gujarat, banning the instant lotteries within the
\nState w.e.f. 1st November, 1997. One of the grounds raised by the
\npetitioner before the Gujarat High Court was that the State notification
\ndated 30th September, 1997 was issued even before the Ordinance which came
\ninto force on 2nd October, 1997, hence without authority of law. The
\nGujarat High Court by its judgment and order dated 24th. October, 1997
\ndismissed the petition holding that instant lottery is gambling and can be
\nrestrained by the State Government. The High Court held the Ordinance No,20
\nto be valid. Aggrieved by this, the aforesaid Civil Appeal raising out of
\nSLP(C) No, 22423 of 1997 was filed. Similar matter also came in the Delhi
\nHigh Court, when it, by means of interim order dated 3rd December, 1997 in
\nCivil Writ Petition No. 5105 of 1997 disagreed with the view of the
\nGuwahati High Court and agreeing with the view of the Gujarat High Court,
\ndeclined to stay the impugned Ordinance. Hence, the Stale Ordinance
\nremained in operation within the National Capital Territory of Delhi. The
\nGuwahati High Court on 30th March, 1998 in Miscellaneous Case No. 310 of
\n1998 in C.R. No. 31 of 1998 State of Nagaland  v. U.O.I. and Others stayed
\nme order of the Government of Delhi directing implementation of the
\naforesaid order passed by the Delhi High Court. Thereafter, on 30th April,
\n1998 the Delhi High Court observed that the Delhi Government may move the
\nappropriate forum against this order of the Guwahati High Court, This led
\nto filing of Transfer Petition by the National Capital Territory of Delhi
\nin this Court being Transfer Petition No. 670 of 1998.\n<\/p>\n
A Writ Petition (C) No. 226 of 1998 is also filed in this Court by the
\nGovernment Lottery Agencies and Sellers Association (Regid.) and another
\nchallenging the aforesaid Ordinances 20 and 31 of 1997 including the
\nnotification issued by Government of National Capital Territory of Delhi
\npursuant to the power conferred under Section 5, During the pendency, the
\nParliament enacted the Lottery (Regulation) Act 17 of 1998 repealing\/
\nsubstituting the earlier Lottery (Regulation) Ordinance of 1997.
\nThereafter, various State Governments including the State of Arunachal
\nPradesh and Nagaland as Weil as other distributors filed writ petition
\nchallenging the legality and validity of Section 4(a), (f), (g), (i),
\nSection 5 and Section 7 of the said 1998 Act being ultra vires. On 17 July,
\n1998 the High Court of Guwahati observed that the provisions, under
\nchallenge, of this Act as well as provisions of the Ordinances being pairi
\nmateria and since provisions of the Ordinances have already been struck
\ndown by that Court, hence, granted stay of the aforesaid provisions
\nincluding the notification of the Government of National Capital Territory
\nof Delhi and other States. In the aforesaid writ petition filed by the
\nGovernment Lottery Agencies and Sellers Association (Regd.) and others, an
\namendment was sought to challenge the aforesaid 1998 Act as it substituted
\nthe earlier Ordinance. Except for Section 5 of the Ordinance, in which some
\nmodification was brought through this Act, to which we shall be referring
\nto later, other provisions remained the same.\n<\/p>\n
Civil Appeal arising out of S.L.P c No. 10356 of 1997 (B.R. Enterprises V.
\nState of UP, & Anr.,) is against the order of the Allahabad High Court
\ndismissing the writ petition filed by an agency of State lottery Manipur
\nholding such dispute between the State of Manipur and State of U.P. could
\nonly be decided by the Supreme Court. It held, so far manipur lotteries,
\nunless it was declared to be State lottery, the petitioner has no locus
\nstandi, hence writ was dismissed. Another Civil Appeal arising out of SLP c
\nNo. 10357 of 1998 is filed by the State of U.P. against an order passed by
\nthe Allahabad High Court confirming the interim stay order. Civil Appeal
\narising out of SLP c No. 15978 of 1998 is filed by the State of U.P.
\nagainst an interim order of Guwahati High Court staying the Ordinance No.
\n6\/98. Civil Appeals arising Out of  SLP @ Nos. 16021, 16617, 17566 and
\n17782 of 1998 are all filed against the interlocutory orders passed by the
\nGuwahati High Court staying Section 4 (a), (g), (h), Sections 5 and 7 of
\nthe Central Act No. 17\/98. The first and third Of these SLPs are filed by
\nthe State of U.P. and the second by Government of N.C.T. of Delhi.
\nRemaining petitions are transfer petitions seeking transfer of the cases
\nfrom Madras High Court, Karnataka High Court. Andhra Pradesh High Court and
\nDelhi High Court to this Court. These also challenge either the Ordinances
\nor Lotteries (Regulation) Act, 1998 (ActNo. 17\/98) (hereinafter referred to
\nas `Lotteries Act’). They all raise the same issues, as aforesaid. For
\nproper appreciation of the submissions of learned counsels for the parties,
\nwe herewith quote Sections 4, 5 and 7 of the Act, which are the subject
\nmatter of challenge :\n<\/p>\n
“4. A State Government may organise, conduct or promote a lottery subject
\nto the following conditions, namely :-\n<\/p>\n
(a) prizes shall not be offered on any preanounced number or on the basis
\nof a single digit;\n<\/p>\n
(b)  the State Government shall print the lottery tickets bearing the
\nimprint and logo of the State in such manner that the authenticity of the
\nlottery ticket is ensure;\n<\/p>\n
(c) the State Government shall sett the tickets either itself or through
\ndistributors or selling agents;\n<\/p>\n
(d) the proceeds of the sale of lottery tickets shall be credited into the
\npublic account of the State,<\/p>\n
(e)  the State Government itself shall conduct the draws of all the
\nlotteries;\n<\/p>\n
(f) the prize money unclaimed within such time as may be prescribed by the
\nState Government or not otherwise distributed, shall become the property of
\nthat Government;\n<\/p>\n
(g)  the place of draw shall be located within the state concerned; (h) no
\nlottery shall have ntore than one draw in a week;\n<\/p>\n
(i) the draws of all kinds of lotteries shall be conducted between such
\nperiod of the day as may be prescribed by the State Government;\n<\/p>\n
G) the number of bumper draws of a lottery shall not be more than six in a
\ncalendar year;\n<\/p>\n
(k) such other conditions as may be prescribed by the Central Government.\n<\/p>\n
5. A State Government may, within the State prohibit the sale of tickets of
\na lottery organised, conducted or promoted by every other State.\n<\/p>\n
7(1) Where a lottery is organized, conducted or promoted after the date on
\nwhich mis Act receives the assent of the President, in contravention of the
\nprovisions of this Act, by any Department of the State Government, the Head
\nof the Department shall be punishable with rigorous imprisonment for a term
\nwhich may extend to two years or with fine or with both ;\n<\/p>\n
Provided that nothing contained in this section shall render such Head of
\nthe Department liable to any punishment if he proves that the contravention
\nwas committed without his knowledge or that he exercised all due diligence
\nto prevent the commission of such contravention.\n<\/p>\n
(2) Notwithstanding anything contained in sub-section (1) where a
\ncontravention under this Act has been committed by a Department of
\nGovernment and it is proved that the contravention has been committed with
\nthe consent or connivance of, or is attributable to any neglect on the part
\nof, any officer, other than the Head of the Department, such officer shall
\nalso be deemed to be guilty of that contravention and shall be liable to be
\nproceeded against and punished accordingly.\n<\/p>\n
(3) If any person acts as an agent or promoter or trader in any lottery
\norganised, conducted or promoted in contravention of the provisions of this
\nAct or sells, distributes or purchases the ticket of such lottery, he shall
\nbe punishable with rigorous imprisonment for a term which may extend to two
\nyears or with fine or with both.\n<\/p>\n
There are some changes in the various sub-clauses of Section 4 and Section
\n7, and also in Section 5 from what was contained in the Ordinance.\n<\/p>\n
Before we proceed to consider the issues, we herewith refer to the short
\nsubmissions poured by learned counsel for the parties. The first we refer
\nto such set of submissions who challenge either the Ordinance or the Act.
\nLearned senior counsel, Shri K.K. Venugopal, appearing on behalf of the
\nState of Sikkim, submits that when there is sale of lottery tickets by the
\nState it looses its pernicious nature, hence it is no more res extra
\ncommercium: Attacking Section 5 of the Act, he submits that it violates
\nArticle 303 of the Constitution as this authorizes the State Government to
\ngive preference to one State over the other. It can ban the lotteries of
\nother States though it can run its own lotteries. Clause 2 of Article 303,
\nwhich is only an exception to Article 303(1) would not be attracted as it
\nis restricted to a situation arising from scarcity of goods in any part of
\nthe territory of India, Repelling submission on behalf of the Union of
\nIndia that Section 5 safeguards the interest of such State Governments
\nwhich as a matter of policy do not desire to have such lotteries in their
\nown State to stop sale of lotteries of other Governments within its
\njurisdiction. Submission is that it may though reduces the extent of
\ndiscrimination to a great extent but would not completely neutralise the
\nviolation of Article 303(1) of the Constitution. In the counter affidavit
\nof the Union, it is not sought to establish any public interest in banning
\nsuch State lotteries specially when such lotteries contribute towards State
\nrevenue. This, in fact, ameliorates poverty and funding welfare projects,
\nespecially so far the State of Sikkim is concerned which is an industrially
\nbackward State and has very little source of revenue. It is violative of
\nArticle 302 of the Constitution. A reference was made to the case of
\nNataraja Mudaliar v. State of Madras, [1968] 3 SCR 829 at p. 852-853, a
\ndecision by the Constitution Bench, that burden under Article 302 to
\nestablish public interest is on the State. He further submits that stand
\nfor the Union that even a lottery organized by the Union of India or a
\nState is res extra commercium does not stand for the following reasons :\n<\/p>\n
(a) “The concept of res extra commercium applies when a right is claimed
\nagainst a State so that the Court looks into the nature of the right and
\nholds that if such claim relates to a trade in noxious goods or a trade
\nwhich is essentially vicious, it cannot be elevated to the status of a
\ntrade or business. This can have no application whatsoever when the state
\nitself is running that business or trade,<\/p>\n
(b)  The purpose for which the venture is undertaken is of significance for
\ndeciding whether the venture is a trade or is res extra commercium. A
\ncitizen runs a lottery for his private pecuniary benefit while the State
\nruns for public good for raising revenues for funding welfare projects. The
\nState’s endeavour in raising revenues for the benefit of its citizens would
\ninvolve public interest which would be absent in the case of a citizen
\nundertaking the same business or trade. What is not trade or business in
\nthe trade or business in the hands of the citizen would, therefore, for
\nthis reason be a trade or business in the hands of the State.\n<\/p>\n
(c)  When the State undertakes any such venture, as State, it would ensure
\nthat sufficient safeguards are imposed on the carrying on of the trade by
\nitself so that larger public interest is sub-served while reducing its
\ndeleterious effect to the extent necessary to safeguard public interest.
\nQualitatively, therefore, there is a difference between the same venture or
\nenterprise being undertaken by the individual or the citizen, solely with
\nprofit motive, as against the State which has no profit motive but has the
\ninterest of its citizens at heart by raising revenue for the welfiare of
\nits citizens.\n<\/p>\n
(d) Entry 34 of List II “betting and gambling” conferred authority on the
\nState legislatures to ban gambling, based on the morality aspect and based
\non the vice of gambling, for protecting its citizens against such a vice.
\nBy Entry 40 of List I the Constitution has carved out lotteries of a
\nparticular nature even though they constitute gambling, namely, lotteries
\norganised by the States so as to prevent a State legislature from using the
\nmorality or the vice aspect of gambling to interfere with the right of the
\nstate to raise revenues for the benefit of its own citizens. As a result,
\nEntry 40 of List I recongnizes the right of the Union and of the states to
\nrun lotteries without the morality or the vice aspect affecting such
\nlotteries subject, of course, to regulation by laws made by Parliament. In
\nother words, the Entry 40 of List I itself is proof of the fact that a
\nlottery run by the Union of India or by the States is not affected by the
\naspect of morality or vice which is present only in Entry 34 of List II and
\nis, therefore, not res extra commercium.\n<\/p>\n
(e) This would also follow from Article 298 of the Constitution which
\nextends the executive power of the Union and each State to carrying on any
\ntrade or business, without limitation, except to the extent of the provisos
\ntherein which are not relevant for the present purpose. In other words, the
\nentirety of the executive power of the State is exhausted by Article 162 of
\nthe Constitution and Article 298 and there is no third category of
\nexecutive power covering the carrying on of a venture or enterprise which
\nis res extra cotnmercivm. If so the concept of trade in Article 298 has to
\nbe the same as the trade in Part XIII of the Constitution.\n<\/p>\n
(f)  The judgment of this Court in Fateh Chand’s, case [1977] 2 SCC 670,
\nbrings out the difference between money lending in the traditional sense,
\nby money lenders who exploit the borrowers, and money lending by
\ninstitutions including Banks. It is this difference which would equally
\napply to lotteries carried on by individuals and lotteries carried on by
\nthe State.\n<\/p>\n
(g)  This issue is no more res integra by reason of the decision in the
\nKhoday case [1955] 1 SCC 574 being the judgment of a Constitution Bench of
\nthis Hon’ble Court, where the judgment of the RMDC case has also been
\nconsidered and wherein paras 9, 24,35, 30, 41,55,60, 62 and 63 this Hon’
\nble Court has held that the carrying on of trade in liquor would be a
\nlegitimate business and not illegal when carried on by the State.\n<\/p>\n
(h) Even on the interpretation by the Union of India of Section 5 of a
\nselection ban which could be imposed only by those States which have
\nthemselves given up the right to carry on the lottery business, there would
\nbe a violation of Article 303 of the Constitution of India as the State of
\nSikkim and other States, which are covered by Entry 40 of List I, can carry
\non the lottery business only in some States and not in others, thus
\nimpeding the free flow of goods for a reason which is not traceable to
\nclause (2) of Article 303 of the Constitution. The only exception to
\nArticle 303 (1) of the Constitution is a situation arising out of scarcity
\nof goods. The concept of reasonable classification present in Article 14
\nwould have no relevance to a preference or discrimination under Article 303
\nof the Constitution.\n<\/p>\n
, (i) Lotteries run by the States as a means of raising revenues have
\nalways been recognised as early as 1935 as seen in Entry 48 of List I of
\nthe 7th Schedule of the Government of India Act, 1935 covered under “State
\nLotteries” while Entry 36 of List II of the 7th Schedule of the 1935 Act
\ncovered “Betting and gambling”. Consequent upon the Government of India
\nAct, 1935 the adoption of Laws Order 1937 has included in Section 294-A of
\nthe Indian Penal Code, 1860 an exception to the offence of keeping a
\nlottery office by excluding from the scope thereof “any lottery not being a
\nState lottery.” It is submitted that a State lottery always stood on a
\ndifferent footing from a lottery run by an individual for private profit,
\nwhich alone would be the lottery covered by the RMDC judgment (See: [1957]
\nSCR 874.)”\n<\/p>\n
Next, challenging the validity of Section 5, he submits that the power
\nconferred on the State for banning the lotteries of every other States is
\nbereft of any guidelines and, therefore, a piece of excessive delegation.
\nIt is an uncanalised power conferred on a State at its whim and fancy.
\nThere is nothing in the objects, preamble, or any other provisions of the
\nAct from which guideline could be collected specially that it is only a
\nState which does not fun its own lottery, can impose such a ban on every
\nother State. For this, he relied on the case of Hamdard Dawakhana (Wakf)
\nLal Kuan, Delhi & Anr, v. Union of India & Ors.,<\/a> [1960] 2 SCR 671 at P.
\n696, and 697. Further, Section 5 is capable of being exercised arbitrarily,
\nState of West Bengal v. Amvar Ali Sarkar,<\/a> [1952] SCR 284 at 314.\n<\/p>\n
Shri F.S. Nariman, learned senior counsel for the State of Nagaland,
\nsubmits that carrying on State organised lottery is permitted by the
\nConstitution fay placing it within the exclusive competence of Parliament
\n(Item 40 of List I of the Seventh Schedule). A distinction is drawn between
\nState organised lotteries and State authorised lotteries in State of
\nHaryana v. Suman Enterprises,<\/a> (1994) 4 SCC 217 (5 Judges). A reference was
\nalso made to Article 298, the executive power of the State which extend to
\ncarry on any trade or business, even beyond its territory. It is only
\nbecause of Article 298 and the premise implicit therein that the business
\nof organising State lotteries by the State was comprehended within its
\nextended executive power.\n<\/p>\n
He further submits that State lotteries are legitimized and run with
\nauthority of the law hence it is no more pernicious. This can be traced
\nback to the year 1844 when the India Act 5 of the 1844 was first enacted.
\nThe historical account of this is referred in Sesha Ayyar V. Krishna Ayyar,
\nAIR (1936) Madras 225 (Full Bench). This referred to the English Lotteries
\nAct, 1823 and its preamble, the underline public policy which declared the
\nlotteries to be common public nuisances, because they promoted gambling and
\nspeculation to draw great sums from servants, children and unwary persons
\nto the great impoverishment and utter ruin of many families. Reference of
\n1844 Act was also made which is quoted hereunder :\n<\/p>\n
“Whereas great mischief has been found to result from the existence of
\nlotteries : (1) it is hereby enacted, that in the Territories subject to
\nthe Government of the East India Company, all lotteries not authorised by
\nGovernment, shall from and after 31st day of March 1844, be deemed, and are
\nhereby declared common and public nuisances and against law: (2) and it is
\nhereby enacted, that from and after the day aforesaid, no person shall in
\nthe said Territories, publicly or privately, keep an office or place for
\nthe purpose of drawing any lottery not authorised by Government, or shall
\nhave any such lottery drawn, or shall knowingly suffer any such lottery to
\nthe drawn in his or her house; and any person so offending shall for every
\nsuch offence, upon conviction, before a justice of the Peace, or
\nMagistrate, be punished by fine not exceeding Rs. 5000.”\n<\/p>\n
He referred to this judgment to make distinction between the State
\nlotteries and other lotteries. He also referred to the amendment brought in
\nthe Indian Penal Code through Act 27 of 1870 (Section 10) by introducing
\nSection 294 A. This excludes the State lotteries from its penal purview, in
\ncontrast to the other lotteries. Similar distinction is to be found under
\nthe Government of India Act 1935, when the Government lotteries were placed
\nunder Entry 48 of List I while betting and gambling (other forms of
\nlotteries) was placed under Entry 36 of List II. Referring back to the
\nState of Bombay v. R.M.D. Chamarbagwala,<\/a> [1957] SCR 874 (RMDC case) case,
\nit was submitted that it was a case of a private lotteries and not State
\norganised lotteries. It was on these facts it held that it was opposed to
\npublic policy (private lotteries were in fact opposed to public policy)
\ncould not be characterised as trade or business or trade, commerce or
\nintercourse. Repelling further submission of Union with reference to the
\nAustralian case cited in RMDC case (supra), he submits that even these
\ncases made a distinction between private lotteries and lotteries conducted
\nunder the authority of the Government. Hence, the fact that the private
\nlotteries are pernicious and had to be suppressed and were suppressed in
\nIndia right from the year 1844, docs not mean that lotteries organised by
\nthe State could be similarly stigmatised as pernicious. The ratio of RMDC
\ncase (supra) has to be read with another decision of the Constitution Bench
\nof five Judges in Fateh Chand case (supra). This decision holds that there
\nare `aspects of business or trade’ which in one sense may be noxious when
\nconducted by a given class of persons and in another would be permissible.
\nHe also referred to a ease of H. Anraj & Ors. v. State of Maharashtra,<\/a>
\n[1984] 2 SCC 292, (hereinafter referred to as “Anraj case-I”), also
\nreferred by other counsel. In paras 5 and 9, this Court held that the right
\nto conduct lotteries by States in India was a part of the right to carry on
\nbusiness granted under Article 298 of the Constitution, hence it could
\nhardly be said that it would be outside the purview of trade, commerce or
\nintercourse under Articles 301 to 303. He also referred to H. Anraj & Ors.
\nv. State of Maharashtra,<\/a> [1986] 1 SCC 414, (hereinafter referred to as
\n“Anraj case-II”), in which notification issued by the Tamil Nadu under the
\nSales Tax Act was struck down on the ground that it violated Article 304\n<\/p>\n
(a). This case further holds that lottery tickets in respect of lotteries
\norganised by a State were “goods”. It is significant that a note of caveat
\nof Sabyasachi Mukherjee, J. inAnraj case-II, (Para 46) is recorded :\n<\/p>\n
“It should, however not be understood to accept the position that if
\nprivate lotteries are permissible and legal, a point which need not be
\ndecided in these cases, in such cases sale of goods was involved or not.”\n<\/p>\n
Next, he challenged Section 5 to be violative to Articles 301, 302 and 303
\nof the Constitution. Article 302 is an exception to Article 301 under which
\na Parliament is permitted to impose such restriction on freedom of trade,
\ncommerce or intercourse between one State and another as may be required in
\nthe public interest. He placed reliance on the case of Parag h it was held
\nthat the restrictions contemplated by Article 302 must bear a reasonable
\nnexus with the need to serve public interest. He contested the stand of the
\nUnion as referred in para 5 of the letter dated 27th November, 1998,
\nreference of which is quoted hereunder :\n<\/p>\n
“Consequently, the Central Government decided to enact an appropriate
\nlegislation to regulate the conduct of lotteries so as to protect the poor
\nand gullible persons….”\n<\/p>\n
He submits the discrimination on one hand Union through statutes controls
\nthe State lotteries (Section 4) but in contra distinction as revealed by
\nUnion’s letter dated 2nd March, 1955, free trade and commerce without
\ncontrol of the Bhutan lottery were permitted for a period of ten years
\nunder the Treaty. This Treaty falls under Entry 14 of List I is an
\nexclusive Union subject. Thus, no law of a State can legitimately impinge
\nupon the implementation of a Treaty entered into by the Union Government
\nwith any foreign State. Further, repelling the affidavit of Union of India
\nin para 7 with reference to Section 5 of the Act that :\n<\/p>\n
“Section 5 may be invoked by the State Government for prohibiting sale of
\nlottery tickets of other States even if they fulfill all the conditions
\nlaid down in section 4. However, the ban shall be applicable to the
\nlotteries of all the States uniformly. Hence, the State Government cannot
\ndiscriminate in any way.”\n<\/p>\n
This submission is contrary to the plain language of Section 5 under which
\nthe State Government may continue to sell its own lotteries still prohibit
\nthe sale of lotteries organised by other States. No public interest is
\nshown nor any reasonable nexus disclosed between the restriction and the
\nneed to serve public interest, hence, it violates Article 302. Thus, he
\nconcludes that Section 5 is invalid enabling discriminatory preference by
\none State over the other. Thus, he submits that the sale of Bhutan
\nlotteries unrestricted in the States of India, while prohibiting State
\norganised lottery would amount to discrimination and violative of Article
\n14 and Article 303  of  the  Constitution. He also attacked sub-Section (g)
\nof Section 4. The place of draw should only be in the State concerned,
\ncannot be said to be in “public interest”. He specifically referred to the
\ncondition as prevailing in Nagaland, there being grave problem of law and
\norder, hence the discrimination set up in Section 4(g) so far in relation
\nto the State of Nagaiand cannot be said to be in public interest In the
\nlast, it is submitted that condition imposed under Section 4 (g) is not to
\nbe construed as mandatory.\n<\/p>\n
Learned senior counsel, Shri Shanti Bhushan, on behalf of the State of
\nNagaland, also supported the aforesaid submissions. He made three main
\nsubmissions. Point No.l. The whole Act in its entirety is a discriminatory
\npiece of legislation contravening Article 14 of the Constitution, Though
\nthe impugned Act imposes restrictions on the lotteries organised by the
\nState but does not impose any restrictions on the lotteries organised by a
\nforeign government (Bhutan lotteries). Section 4 reveals itself with its
\nopening words that the restrictions contained thereunder are to a State
\norganised lotteries, instead of restricting the lotteries organised by the
\nGovernment of Bhutan, the Union has promoted its lotteries. He referred to
\nthe treaty dated 28th February, 1995, to remain in force for a period of 10
\nyears. He referred to the circular dated 20th January 1998 by Government of
\nIndia which refers that Section 5 applies to the State lotteries and not to
\nthe lotteries of Bhutan. He submits that the reason to justify the placing
\nof restriction on lotteries organised by the State Government should
\nequally be applicable to the lottery organised by a foreign Government. It
\ncannot be said that sale of lottery tickets by the State causes mischief or
\nharm to the people of India but would not cause mischief or harm in case it
\nis organised by a foreign Government. No defence could be made in meeting
\nthe challenge of discrimination under Article 14 that there is difference
\nbetween the Government of Indian State and the Government of foreign State,
\nsince this has no rational or nexus with the object sought to be achieved.
\nThis clearly demonstrates hostile discrimination about which the State
\nGovernment can complain to this Court. He repelled fee submission for the
\nUnion that State could prohibit restrictions on Bhutan lotteries under
\nEntry 34, List II. He submits mat such acceptance of such proposition would
\ntotally upset the constitutional scheme of allocation of subjects between
\nthe Parliament and the State. He made reference to Entry 14 which refers to
\nTreaty, Entry 41 to trade and commerce with foreign countries and Entry 97
\nto the residuary power of the Union under List 1. His point No. 2. is the
\nchallenge of Section 5 viz.- (1) the legislature has delegated its
\nessential legislative powers without laying down any policy; (2) it
\nauthorises the State Government to prohibit that sale of lottery tickets
\norganised by every other State, thus, per se discriminates between its own
\nlotteries and lotteries of other State; and (3) it also contravenes the
\nprovisions of Article 301 read with Article 303 of the Constitution when it
\ngives preference to one State over the other. His submission is, it is
\nimpossible to discern from any provision of the impugned Act as to what is
\nthe policy in regard to the prohibition of the sale of tickets of a lottery
\nin a particular State. This policy has to be laid down by the parliament.
\nIn the absence of any policy, there has been total abdication of
\nlegislative power by the Parliament and it is a naked delegation of a
\nlegislative power to the State Governments. In support of this
\ndiscrimination, he referred to the State of Tamil Nadu where the State has
\nprohibited the sale of lottery tickets of all other States but continues to
\nsell its own lotteries. If the State Government prohibits the sale of
\nlottery tickets of other States and promotes sale of its own lottery, it
\nviolates Article 301 read with Article 303. With reference to Article 298,
\nthe submission is mat the State gets right to organise the business of
\nlottery only because State lottery is trade or business. If State lotteries
\nare not, no State Government would have right to organise and conduct its
\nown lotteries. The last point No. 3 is challenge to sub-clauses (a), (g),\n<\/p>\n
(h) and (j) of Section 4 as they are unreasonable and arbitrary The special
\nreference was made with emphasis on clause (g). This clause requires that
\nplace of draw shall be located within the State concerned. With reference
\nto State of Nagaland, it was submitted that in view of the situation
\nprevailing there, it is not safe to draw lotteries within the State of
\nNagaland itself.\n<\/p>\n
Mr. R.F. Nariman, appearing for the respondent in Civil Appeal arising out
\nof SLP c No, 16021 of 1998, with reference to Article 301, submits that
\ntrade, commerce and intercourse is free throughout the territory of India.
\nArticle 302 is an exception but only in public interest. Article 303 puts
\nan embargo both on the Parliament and the legislation of the States not to
\nmake any law giving preference to one State over another with respect to
\nany Entry relating to trade and commerce in the Seventh Schedule. Thus,
\nSection 5 of the impugned Act which enables the State to prohibit the
\nlotteries of others amount to restrict free trade and commerce hence
\nviolative both of Articles 301 and 303 of the Constitution. It also
\ndiscriminates inter se between one State and the other wherein the State
\nwhich prohibits lotteries in its territory may have liberty to do trade and
\nbusiness of the sale of lottery tickets throughout the territory of India
\nwhile others will have territorial limitation to sell lotteries hence
\nviolative of Article 303 of the Constitution of India. In support, he
\nrelied on the case of Atiabari Tea Ca. Ltd. v. The State of Assam & Ors.,<\/a>
\n[1961] I SCR 809, and also the case of Automobile Transport (Rajasthan)
\nLtd. v. The State of Rajasthan & Ors.,<\/a> [1962] 1 SCR 491, where the
\nrestrictive interpretation given to Article 303, namely, to be limited to
\nthe Entries relating to trade and commerce in any of the List in Seventh
\nSchedule, namely, Entries 41 and 42 of List 1, Entry 26 of List II and
\nEntry 33 of List III was rejected. In these cases even the impediment of
\nthe movement of vehicle or taxation on vehicle on the given facts was held
\nto be a barrier in a free trade within the meaning of Article 301 of the
\nConstitution. Hence, the submission was, Section 5 entrusting the State to
\nprohibit the sale of lottery tickets organised by every other State, would
\nfall within the mischief of the principle laid down in the aforesaid
\ndecisions, hence it impede free trade within the territory of India thus
\nviolative of Article 301 and 303 of the Constitution.\n<\/p>\n
Learned senior counsel, Shri S.S. Ray, appearing for the State of Nagaland,
\nsubmits that organizing lotteries by the Government of India by any State
\nGovernment is a legitimate business activities. He drew this inference in
\nview of Article 40, List I of the Seventh Schedule and Article 298 of the
\nConstitution. He relied and referred to the case of Anraj case-I (supra),
\nthat the Government of every State had the unrestricted right to organise
\nlotteries of its own (in the absence of legislation by the Parliament on
\nthe subject). The executive power of a State by virtue of Article 298
\nextends to lotteries organised by itself but not to lotteries organised by
\nthe other States. Next, he referred to Anraj case -II (supra) that the
\nlegislative competence of the States to levy a tax on the sale of lottery
\ntickets is under Entry 54, List II and not under Entry 34, List II. There
\ncannot be discriminatory taxes imposed by a State between lottery tickets
\norganised by other States and sold within the taxing State, and Lottery
\ntickets organised and sold by the taxing state itself. Such discrimination
\nwould be violative of Articles 301 and 304 (a) of the Constitution. He also
\nreferred to the case of Ms. Suman Enterprises & Ors., (supra) in which a
\ndistinction between lotteries organised by the State and lotteries
\nauthorised by the States has been made out. Lotteries organised by the
\nState would fall under Entry 40, List I and will not fall under the
\nregulatory power of other States under Entry 34, List II. It lays down
\ncertain conditions which would be essential for the lotteries organised by
\nthe State. He also made reference to Khoday Distilleries Ltd. & Ors. v.
\nState of Karnataka & Ors.,<\/a> [1995] I SCC 574. The question raised therein
\nwas, whether the State could create monopoly for the manufacture, trade or
\nbusiness in liquor? In this case the argument was that the State cannot
\ncarry on trade in liquor in view of Article 47 of the Constitution.
\nSubmission in this case was, if a citizen has no fundamental right to do an
\nact including any trade, then Article 19 (6) cannot confer such right on
\nthe State. What a citizen cannot do under Article 19(1), the State cannot
\ndo under Article 19(6). Further, the State power to carry on trade in
\nliquor dehors Article 19 (6) and Article 298 of the Constitution cannot be
\nextended to trade in liquor. This is so because Union of India has no
\nexecutive power to trade in a commodity which under Article 47 is enjoined
\nto prohibit. This submission was rejected and it was held:\n<\/p>\n
“… that the State’s power to regulate and to restrict the business in
\npotable liquor impliedly includes the power to carry on such trade to the
\nexclusion of others. Prohibition is not the only way to restrict and
\nregulate the consumption of intoxicating liquor. The abuse of drinking
\nintoxicants can be prevented also by limiting and controlling its
\nproduction, supply and consumption. The State can do so also by creating in
\nitself the monopoly of the production and supply of the liquor. When the
\nState does so, it does not carry on business in illegal products…
\nregulated in the interests of the health, morals and welfare of the
\npeople.,. When the State permits trade or business in the potable liquor
\nwith or without limitation, the citizen has the right to carry on trade or
\nbusiness subject to the limitations, if any and the State cannot make
\ndiscrimination between the citizens who are qualified to carry on the trade
\nor business.\n<\/p>\n
The State can carry on trade or business in potable liquor notwithstanding
\nthat it is an intoxicating drink and Article 47 enjoins it to prohibit its
\nconsumption. When the State carries on such business, it does so to
\nrestrict and regulate production, supply and consumption of liquor which is
\nalso an aspect of reasonable restriction in the interest of general public.
\nThe State cannot on that account be said to be carrying on an illegitimate
\nbusiness.”\n<\/p>\n
In Ch. Khazan Singh& Ors. v. State of  U.P. & Ors., [1974] 1 SCC 295, it
\nwas held that Article 298 envisages carrying on of trade and business by a
\nState without any territorial limitations and the restriction, if any, on
\nthe executive power of the State is contained in clause (b) of the proviso
\nto Article 298. Learned counsel, Mr. Ray, submitted even if it could be
\nsaid that lotteries are social evil, the same can be regulated or
\nrestricted, keeping with public policy or public interest It cannot be
\nplaced as a crime which is universally condemned or punished. Even in the
\npast the proceeds of lotteries have been utilized for welfare,
\ndevelopmental or growth activities by the State, especially when the
\neconomic and social evolution of the State is at a nascent stage. He
\nreferred that proceedings of State lotteries have been contributed
\nsubstantially in building of major European and American cities, even Art
\nGalleries in U.K. Hence, it cannot be submitted that State lotteries are
\nwholly against public morality or public conscience. He referred to 38,
\nA.M. Jur. 2nd, p; 152,57:\n<\/p>\n
“57. Generally-… But experience demonstrated the evil tendency and effect
\nof such schemes and the need for public control and regulations. At the
\npresent day, both state and private lotteries are forbidden, or at least
\nregulated in some manner, by constitution or statute, or both, in many, if
\nnot all, states. Congress has closed the mails against them.\n<\/p>\n
Most of the governments of the continent of Europe have at different
\nperiods raised money for public purposes by means of lotteries, and a small
\nsum was raised in America during the Revolution by a lottery authorised by
\nthe continental Congress. He also referred to Halsbury’s Laws of England,
\n(4th Ed.) Vol. 4, paras 142, 143 and 144:\n<\/p>\n
“142. Offences in connection with unlawful lotteries. All lotteries in
\nGreat Britain which do not constitute gaming are, with the exception of
\nthose subsequently mentioned, unlawful.\n<\/p>\n
1.43. Statutory defences. It is a defence to the person charged with any
\noffence in connection with a lottery to prove that it was one declared by
\nstatute not to be an unlawful lottery, and that, at the date of the alleged
\noffence, he believed and had reasonable-ground for believing that none of
\nthe statutory conditions required to be Observed in connection with the
\npromotion and conduct of the lottery had been broken.\n<\/p>\n
It is also a defence to prove that the lottery in question was not promoted
\nwholly or partly outside Great Britain and constituted gaming as well as a
\nlottery.\n<\/p>\n
144. Art unions. There are certain exceptions to the general rule that
\nlotteries are illegal. An art union is permitted to hold lotteries, under
\ncertain conditions, and is made a lawful association, and the members,
\nsubscribers and contributors are exempted from penalties as are all persons
\nacting under their authority or on their behalf.”\n<\/p>\n
He also referred to the Betting, Gambling and Lotteries Act, 1963 at page
\n539 of the Halsbury’s Statutes of England 3rd Ed. Vol. 14 in particular
\nSection 41 at page 583 that subject to the provisions of mis Act, all
\nlotteries are unlawful. He also referred to Section 45 which exempts
\ncertain small lotteries conducted for charitable, sporting or other
\npurposes.\n<\/p>\n
Next, while dealing with challenge to Section 5, he submits that in Suman
\nEnterprises case (supra) lotteries were divided into five different
\ncategories and on the facts of the present case, there would be sixth
\ncategory, namely, lottery organised by a foreign State. The position which
\nemerges is that Government of India and the Bhutan Lotteries can be
\norganised and conducted anywhere in India without any conditions while
\nState lotteries can only be organised in other States only if those States
\ndo not prohibit them by virtue of Section 5. Even if a State prohibits the
\nlotteries of other States it can organise its own lotteries in its State.
\nHe referred to Section 8 of the U.P. Unauthorized Lottery (Prevention) Act,
\n1995 which gives the U.P. State Government power to grant permission to
\nprivate persons to conduct lotteries in certain cases and under certain
\nconditions. Challenging the power given under Section 5 to a State
\nGovernment to prohibit lotteries of every other State, he submits that
\nthere is no rational basis or policy behind such  empowerment. There is no
\nnexus, reasonable or otherwise between the object of the prohibition and
\nthe actual prohibition. Hence, it is unreasonable, arbitrary and
\ndiscriminatory. He also reiterates the submissions by other counsel that
\nSection 5 confers an unauthorised delegation of an essential legislative
\nfunction without any guidelines. Negativing the submission by the Union and
\nthe State of U.P. that the State which as a policy prohibits sale of its
\nown lottery tickets, could only prohibit the sale of lotteries of every
\nother State, refers to the stand taken by the State of Tamil Nadu which
\nthough supports Union for upholding the provision but differ on
\ninterpretation that power under it is not conditional but absolute. It is
\nopen to a State to bring the prohibition of sale of lotteries in phased
\nmanner, hence while running its own lotteries could prohibit lotteries of
\nother States. This reveals the sphere of discrimination which is absolute
\nand remains as unguided delegation. Thus, this Section is violative of
\nArticle 14. Apart from this, it is also not in public interest. Further,
\nsale of such lottery tickets are trade and business falling under Part XIII
\nof the Constitution and is violative of Article 301 and 303 of the
\nConstitution.\n<\/p>\n
He drew our attention that on one hand granting right to Bhutan to organise
\nand sale its lotteries everywhere in India while prohibiting Indian States
\nexercising such right is violative against pubic policy. On the contrary, a
\npublic policy demands that no Indian States can be denied of prohibited
\nentry into any Indian market where a foreign State is allowed. Hence, Union
\nGovernment instead of spelling out public interest for any public policy
\nits act constitutes contrary to public interest, public good, public
\nwelfare, subvert societal goals and contrary to the social milieu of the
\ncountry today. He refers to some decisions of the Courts in England, USA
\nand India on the meaning and scope of “public policy”. In Central Inland
\nWater Transport Corporation & Anr. v. Brojo Nath Gangly & Anr., AIR<\/a> (1986)
\nSC 1571; 17 Am. Jur. 2nd P. 533, 534, it held that there must be no injury
\nor harm to the public interest, public good, and public welfare; in Rattan
\nChand Hirai Chand v. Askar Nawaz Jurig<\/a>(dead) by Lirs. & Ors,, [1991] 3 SCC
\n67, it held that Public policy must not subvert societal goals or endanger
\nthe public good. What constituted an injury to public interest or welfare
\nwould depend upon the times and climes. The social milieu in which the
\ncontract is sought to be enforced would decide the factum, the nature, and
\nthe degree of me injury. Courts must move in to fill the lacuna if the
\nlegislature fails to keep pace with the changing needs and values; Courts
\nmust promote the goals of society; must be tethered to the ethos of society
\nand furnish the felt necessities of the time, Rattan Chand Hira Chand case
\n(supra); Doctrine of public policy extends not only to harmful acts, but
\nhas to be applied to harmful tendencies, Fender v. St. John-Mildmay, (1938)
\nAC 1, Gherulal Parakh v. Mahadeodas,<\/a> [1959] Suppl. 2 SC R 406; It is
\ncommunity’s common sense and common conscience. Black’s Law Dictionary (6th
\nd.) p. 1231; Public policy is the public law equivalent to private law
\nequitable principles such as that which states that no person can benefit
\nfrom his own wrong. Thus, the courts will presume that Parliament did not
\nintend to imperil the welfare of the State or its inhabitants, De Smith-
\nJudicial Review of Administrative Action (5th Ed.) p. 329, R. v. Registrar
\nGeneral, Exparte Smith, (1991) 2 All ER 88<\/p>\n
Next, learned senior counsel, Shri Rajeev Dhawan, appearing for the
\nrespondents in Civil Appeal arising out of SLP C No. 15196 of 1998 and
\nTransfer Petition (civil) Nos 806-807 of 1998, reiterated the submissions
\nmade by the preceding senior counsel. He submits that there could be no
\ndispute that the lottery tickets are `goods’ hence res commercium. The
\nlotteries can be conducted by the State, subject to the four conditions as
\nlaid down in the case of Suman Enterprises (supra). Till Parliament makes
\nthe law it can do so under Article 298 of the Constitution of India, The
\nlotteries are commercial activity, therefore, commercium which attract
\nsales tax and the States are not competent to regulate its own State
\nlotteries in their States. This power vests exclusively with the union. The
\nexclusionary principle, like res extra commercium have the effect of
\neliminating the invocation of a fundamental right at the threshold which
\nhas to be used rarely and always with circumspection and must be narrowly
\nconstrued as a principle of public policy. The principle of constitutional
\nunworthiness is that certain kind of rights are so morally repugnant that
\nthey are not entitled to constitutional protection at all. The effect of
\nthe principle of constitutional unworthiness has a devastating effect. It
\nnarrows the scope of fundamental right. It takes out certain claims from
\nthe protection of the constitution at the threshold, and since it is
\nrejected at the threshold, such right is not even tested for
\nreasonableness. He referred to the case of Krishna Kumar Narula v. The
\nState of Jammu and Kashmir & Ors.,<\/a> [1967] 3 SCR 50 at 54 in which this
\nCourt refused to accept the broad argument. The reliance is placed on the
\nfollowing passage:\n<\/p>\n
“,,..that dealing in noxious and dangerous goods like liquor was dangerous
\nto the community and subversive of its morals….Such an approach leads to
\nincoherence in thought arid expression. Standards of morality can offer
\nguidance to impose restrictions, but cannot limit the scope of the right,”\n<\/p>\n
This Court held that right to trade in liquor was business; However, a
\ncontrary view was taken by this Court in the case of Khodav Distilleries,
\n(supra) in which it was held that the right to trade in liquor was not
\nconstitutionally protected. After taking note of the Krishna Kumar’s case,
\n(supra), the Court did make three exceptions, namely, {a) trade in alcohol
\nis not per se prohibited for medicinal and industrial goods; (b) even
\nthough trade in potable alcohol was res extra commercium, the State itself
\nmay sell potable alcohol, set up a monopoly business for that purpose and
\nmaximise its revenue by any mode of sales; and (c) the State may on a non-
\ndiscriminatory bases permit sale of the alcohol by private parties. Next,
\nhe submits that the RMDC case (supra) is limited in its scope confined to
\nprivate lotteries, He referred to the case of Gherulal Parekh v. Mahadeodas
\nMalya,<\/a> [1959] Suppl, 2 SCR 406, that in it, a narrow interpretation was
\ngiven to the said RMDC case (supra). Hence, in the case of State lotteries,
\nthe principle decided therein would not be applicable. The State lotteries
\nare a distinct constitutional class. He referred to the ancient text, to
\nsubstantiate the legitimacy of the State lotteries and consequently
\nexercise of its power by showing that even in the ancient time the
\nlotteries under the Government were sanctioned by the Rings which yielded
\nrevenue which is an important part of the ancient Indian jurisprudence.
\nThus, he submits that since the State lotteries and activities connected
\nthereto are a permissible trade and not res extra commercium, Part XIII of
\nthe Constitution is attracted. With reference to Article 303 he submits
\nthat neither the Union nor the State can discriminate between one State and
\nthe others. This constitutional prohibition is absolute with only one
\nexception under Article 303(2), namely, scarcity of goods. Meeting the
\ninterpretation of the Union with reference to Section 5 that it permits the
\ntotal ban which is non-discriminatory, he submits that it is not the form
\nbut the substance which has to be considered. The effect of total ban could
\nmean, it would affect some State more than others; it would affect the
\nNorth Eastern States to make their lotteries unviable; and in any case this
\naffects the free trade and public interest. Article 301 confers freedom of
\ntrade and it could only be curtailed for public interest under Article 302
\nwhich the Union of India has not shown, pleaded and proved. With reference
\nto Bhutan lotteries he submits that validity and scope of Bhutan lotteries
\nis not in issue. The State has no power under the Act or the Constitution
\nto regulate Bhutan lotteries. Finally, with reference to the challenge of
\nsome of the provisions of the Act, it is submitted that the Act has to be
\nread as a whole, hence Sections 3,4,5 and 6 are to be read together and
\nSection 5 is not to be read independently. In the configuration from
\nSections 3 to 6, Section 5 is placed between Sections 4 and 6. Thus this
\nSection vests the power to the States to prohibit non-conforming lotteries
\n(lotteries which do not conform to the requirement of Section 4). This
\nSection is only a declaration of a prohibition and not a prohibitory effect
\nThis section suffers from excessive delegation, lack of guidelines etc., as
\nsubmitted by other counsel.\n<\/p>\n
Shri P.K. Gowami, learned senior counsel, appearing for the State of
\nArunachal Pradesh, adopted the arguments raised by other learned senior
\ncounsel He also made references to sub-section (1) of Section 4 which
\nprohibits the `single digit’ lottery which is said to be arbitrary as there
\nis no rational nexus for this restriction. The submission is that the
\ncontinuance of the single digit lottery does not have an adverse affect on
\nthe purchasers.\n<\/p>\n
Learned senior counsel, Shri G.L. Sanghi, also appearing for the State of
\nNagaland in Civil Appeals arising out of SLP c Nos. 5081-5085 of 1998,
\nsubmitted that with reference to Bhutan lotteries, the effect of treaty is
\nthat the Bhutan lotteries can be sold throughout India without fulfilling
\nany obligations under the Lotteries Act without complying with the
\nconditions under Section 4 of the Act, on the other hand, State organised
\nlotteries has to comply with the conditions and cannot be sold through its
\nterritory by virtue of exclusion, if any, by the order of the State. The
\nLotteries Act in question which is intended to control and prevent the
\nearnings through lotteries results in conferring complete monopoly in
\nfavour of a foreign lottery, thus the evil sought to be arrested is let
\nloose in most irrational, objectionable and arbitrary manner, hence
\nviolative of Articles 14 and 302 of the Constitution. He submits that the
\nParliament should not have under Section 5 given a carte blanche to the
\nexecutive of all the States to decide, whether any restrictions be imposed
\non lotteries organised by other States, This delegation of power is
\narbitrary, unbridled and also in breach of Articles 302 and 303 of the
\nConstitution. He referred to the case of Hamdard Dawakhana, (supra) and
\nalso in Arminder Singh v. State of Punjab. [1979] 1 SCR 845 at 855-856. He
\nalso made reference to the invalidity of the sub-section(g) of Section 4 of
\nthe Act, this refers to the place of draw to be located within the State
\nconcerned,<\/p>\n
Mr, Rakesh Dwivedi, learned senior counsel appearing for the State of
\nManipur in Civil Appeals arising but of SLP Nos. 5224-28 of 1998, submits
\nby posing a question, namely, whether it is permissible to the Parliament
\nunder Article 298 to delegate power to the State Government Vide Section 5
\nof the impugned Act to impose ban on the state organised lottery of other
\nStates? Secondly, as has been submitted by other counsel, whether state
\nOrganised lottery can be said to be res extra commercium? He referred to
\nthe Government of India Act, 1935 and also to the draft Constitution before
\nthe Constituent Assembly and also the debate which led to bring in Article
\n298 in the present from. His submission is that the draft Article 266 which
\nis now Article 289 provided for trade and business of States being subject
\nmatter of union taxation. To this, Provinces protested which led to the
\ninsertion of Article 298 as a compromise to enable the States to carry on
\ntrade and business throughout the country, even with respect to subject
\nmatter in List I for earning more revenue. This expanded power was made
\nsubject to legislation by the Parliament. He referred to the case of S.R.
\nBommai & Ors. v. Union of India & Ors.,<\/a> [1994] 3 SCC 1 at page 216, to
\ncontend that federalism is a basic feature of our Constitution and thus
\nArticle 298 should be understood in the light of federalism. Proviso (b) to
\nArticle 298 is not merely a repetition of the Article 248 read with List I
\nentries of Seventh Schedule. This was with a purpose to enhance the revenue
\nearning power of the States. Thus,  he  submits  that  the Parliament
\ncannot make a law empowering the State Government of one State to perform
\nthe functions with respect to another State or with respect to an acquired
\nforeign territory (with reference to Bhutan lotteries). One State
\nGovernment cannot be delegated the power to increase or diminish the area
\nof the activity of another State. He also referred to Articles 292 and 293
\n(1), namely, borrowing by the Government of India and borrowing by States
\nrespective. Articles 269(3) and 286(3) refer to the faxes levied and
\ncollected by the Union but assigned to the States and restrictions as to
\nimposition of tax on the sale or purchase of goods respectively and finally
\nArticle 289(3) which refers to the exemption of property and income of a
\nState from Union taxation just to show the demarcation under the
\nConstitution and the distribution of revenue between Union and the States,
\nThus, he submits that the power to totally prohibit the carrying on of any
\ntrade or business by the State executives is only with the Parliament and
\nit must be done by legislation. The carrying on of business or the non-
\ncarrying on are both comprehended under Article 298. This cannot be
\ndelegated to any State executive. His submission is that Article 298 has
\nalso to be interpreted in the light Of the basic feature of federalism
\nunder which all the States are co-equal. One State cannot be sub-ordinated
\nto another State with respect to the matters which are in the Central List.
\nRepelling the argument on behalf of the State of Uttar Pradesh by Shri R.N.
\nTrivedi, learned Additional Solicitor General, that Article 258 empowers
\nthe Parliament to delegate powers and duties upon the State or its officers
\nor authorities of the State, he submits that under Article 258(1) the
\nPresident can only entrust power to the State Government with the consent
\nof the State Government. This starts with the words, “notwithstanding
\nanything in this Constitution”. But Article 258(2) does not begin with the
\nnon-obstante clause thus, if Article 298 inhibits delegation of powers to
\nthe State Government, then Article 258(2) cannot be used by the Parliament
\nfor delegating the power to the State Government.\n<\/p>\n
Next, Shri A.K, Ganguli, learned senior counsel on behalf of the State of
\nTamil Nadu in Transfer Petition Nos. 806-807 of 1998, supported the
\ninterpretation of Section 5 of the Act by Union of India for upholding its
\nvalidity but differed partly its interpretation that the State Government
\ncan only exercise power to ban State lotteries of other States, if it does
\nnot have its own lottery tickets for sale. Submission is that on plain
\nreading of Section 5, once power is delegated to the State it can still be
\nexercised even while having its own lottery. He submits that lotteries are
\na form of gambling hence such transaction does not belong to the commercial
\nbusiness of the country. He supported the submission made on behalf of the
\nUnion that such activities cannot be said to come within the purview of
\nfree trade, commerce and intercourse.\n<\/p>\n
To repeal and withstand the storm of submissions by one set of parties, as
\naforesaid, the submission on behalf of the Union of India by Mr, C.S.
\nVaidainathan, learned Addl, Solicitor General of India, and on behalf of
\nthe State of Uttar Pradesh by Mr. R,N. Trivedi, learned Addl. Solicitor
\nGeneral of India, is that the lotteries, whether organised by the State or
\notherwise partakes the vice of betting and gambling and is thus res extra
\ncommercium. Lotteries are inherently pernicious. Dealing in any such
\nlotteries does not have the protection of Articles 14, 19(1) (g) or 301.
\nSubmission was that all sorts of betting and gambling which includes State
\nlotteries are outside the pale of protection of Article 19(1) (g) as well
\nas of Part XIII of the Constitution, as betting and gambling is neither
\n“trade” nor “commerce” and when the Parliament enacts the law under Entry
\n40 of List 1 as the impugned Act, no State can invoke the provisions of
\nArticles 301,302 or 303 of the Constitution since the source of the power
\nunder Entry 40, List I is really betting and gambling, J. Bharati v. State
\nof Maharashtra,<\/a> [1985] 1 SCR 201 at 203, Lotteries Organised by the
\nGovernment of India or by a Government of State, in fact, is taken out of
\nEntry 34 of List II arid placed under Entry 40 of List 1 must likewise be
\nheld to be neither trade or commerce. The sheet anchor in support of this
\nsubmission is the decision by the Constitution Bench of the RMDC case
\n(supra). Running of the lotteries unless authorised by the State is an
\noffence under Section 294A, IPC, The executive power of the State under
\nArticle 162 read with Article 246(3) and Entry 34 of List II extends to
\nprohibiting Bhutan lotteries. The submission is that crime could not be a
\nbusiness which could receive the protection of Article 19(l)(g). Section 5
\nshould be so read and interpreted as to entitle only such State which does
\nnot permit its own lottery to be sold before it could prohibit lotteries of
\nevery other States and, if this is interpreted so, neither there would be
\nany violation of Article 14 nor Article 301, Further, Article 298 does not
\nconfer any plenary right on any State to carry on any trade or business.
\nAlthough, Article 298 does not provide specifically but in substances it is
\nsubject to the other provision of the Constitution. Thus, a State cannot
\nwithout obtaining licence under the provisions of the Industries
\nDevelopment Regulation Act start an Industry mentioned in the Schedule of
\nthe Industries Development Regulation Act. Similarly, a State cannot insist
\nas a matter of right to sell liquor in another State where there is
\ncomplete prohibition., Thus, the extended executive power of the State to
\ncarry on any trade or business for any purposes should only be such trade
\nor purpose, which, under the scheme of the Constitution, is permissible and
\nnot prohibited. Article 298 is subject to the Parliamentary legislation,
\nthus, is subject to provisions of Articles 245 and 246. The provisions of
\nArticle 298 should be read to be subject to the provisions of Articles 53
\nand 258 of the Constitution. A State can carry on a trade, subject to the
\nexecutive power of the Union under Article 53 and any entrustment made
\nunder Article 258. The submission was that Article 298 is subject to the
\naforesaid limitations and it does not refer to trade or business which are
\nnot so recognised under Article 19(1) (g). Thus, lotteries organised by the
\nState would not be lawful in the absence of legislation by the Parliament
\nor entrustment by Union under Article 298. Thus, Article 301 would not be
\napplicable in the present case. Even if applicable, the Parliament can
\nimpose restrictions in public interest. However, this Article cannot be
\nextended for dealing in lotteries as it is neither trade nor commerce. In
\nthe present case, the public interest is writ large and is implicit in view
\nof the nature of the activity, namely, trade in pernicious matter. He
\nreferred to pars 6 and 8 of the counter affidavit filed by the Union, the
\nStatement of Object and Reasons, and the Debates. Reference was made to the
\nAnraj case-II (supra). Relevant portion of the paragraph 27 is quoted
\nhereunder:\n<\/p>\n
“.,.. transfer of the right to participate in the draw which takes place on
\nthe sale of a lottery ticket would be transfer of beneficial interest in
\nmovable property to the purchase and therefore amounts to transfer off
\ngoods and to that extent, it is not transfer of an actionable claim to the
\nextent that it involves a transfer of the right to claim a prize depending
\non a chance, it will be an assignment.”\n<\/p>\n
Based on that, it was submitted that there are two rights which flow from
\nsale of lottery tickets, right to participate and right to claim a prize,
\nthe right to participate would be sale of goods covered by Entry 54 of List
\nII but if both the rights were subject to sales tax, namely, the right to
\nparticipate and claim a prize, it would be covered by Entry 62 of List II.
\nThe inference is, therefore, the sale of lottery tickets is sale of goods
\nper se is not justified as it is only the right to participate which fell
\nfor consideration in Anraj case-II (supra).\n<\/p>\n
Next submission is that the provisions of Section 5 should be read down, as
\nsubmitted earlier, as it would be incongruous that a State, which, as a
\npolicy and in public interest, does not permit sale of its own lotteries
\nhas to permit sale of lotteries of other States. Thus, it is only when a
\nState as a policy, decides not to sale its own lottery in public interest
\nwould be entitled to prohibit sale of lotteries of other States, Next, that
\nSection 5 does not suffer from any vice of excessive delegation of
\nessential legislative policy as public interest and public policy is
\nimplicit in exercise of power by me State. Guidelines can be found from the
\nsubject matter of the Act itself. It can also be deduced from the objects
\nand reasons of the Act. The circumstances leading to legislation can also
\nbe taken into account. So far as Bhutan lotteries are concerned they are
\nnot covered by the present Act. This lottery not being the lottery
\norganised by the State, would not fall under Entry 40, List I, but under
\nEntry 34 of List II. That is not a conscious legislation referable to Entry
\n10 of List I or Entry 14 of List I. the treaty itself is subject to laws in
\nforce in the territory of India. It would also be subject to legislation by
\nthe State so long as there is no legislation made by the Parliament with
\nreference to Entries 10 or 14 of List 1. At present, in the State of Uttar
\nPradesh there is a legislation prohibiting the sale of lotteries which
\nwould also apply to Bhutan lotteries as they are not State organised
\nlotteries. Defending the attack, it is submitted, Section 12(3} does not
\namount to effacement or abdication of the powers by the Parliament.
\nConferment of rule making power on the State does not amount to exercise of
\nlegislative powers by the State but it acts as delegate of the Parliament
\nReliance is placed on the cases of Jayantilal Amrit Lal Shodhan v. F.N.
\nRana & Ors,<\/a> [1964] 5 SCR 294, and Tripura  v. Sudhir Ranjan,<\/a> [1997] 3 SCC\n<\/p>\n
665. Augmentation of revenues by a State by sale of lottery tickets, cannot
\noverride the interest of another State which does not permit sale of any
\nlottery tickets.\n<\/p>\n
Within the parameter of the aforesaid submissions, now we proceed to decide
\nissues of great importance, namely, the nature and character of lotteries,
\nwhether they by their very nature even if legitimised could be classified
\ncommercium hence trade and business at the common parlance? or it is
\ndistinct class by itself, legalised for a limited purpose, for achieving
\nspecialised objectives to be used for a temporary period. What is the
\nreason for gambling to the legitimized, if in a given situation it has to
\nbe for a wider and purposeful objectives which leads to imposing conditions
\nto reduce its evil consequences as suggested by this Court through Suman
\nEnterprises (supra), adopted through Section 4 of the impugned Act, does it
\nloose its original character of being pernicious. Even if it could be said
\nto have diluted it, could it still be classified as commercium and equated
\nwith every other form of trade and commerce? Its effect on its citizens has
\nbeen cause of concern which had drawn attention of the kings and his
\nsubject since ancient time, the Government and the courts of various
\ncountries including ours. On the one hand, sometimes justifying for the
\nbenevolent and good cause like charitable purpose and public benefit, but
\nlater reiterating even from this stand on account of its pernicious effect
\non the public at large on account of its condemnation to such a magnitude
\nthat it resulted into complete banning of such lotteries. Justification, as
\nin the present case, is for the augmentation of public revenue which swells
\nthrough voluntary contributions contrary to the exaction through compulsion
\nas in the cases of taxes. This scenario was in the past and is going on not
\nonly in this country but other countries pf the world also.\n<\/p>\n
In this background, now we proceed to consider first, what is the nature
\nand character of the lotteries? What changes, if any, is brought in when
\nlottery becomes State lottery? So far as lotteries are concerned, it can
\nneither be denied nor has been denied that lotteries are form of gambling.
\nThe question next is, whether a lottery, which is not a State lottery, if
\nit is gambling, does it loose its character as such when it becomes a State
\nlottery? The lotteries as such are pernicious in nature cannot be denied.
\nHowever, the submission is, when it cloaks itself with the linen of State
\nauthority and is presented as State organised lottery, it looses its
\npernicious character and what could be said before he puts on the cloak to
\nbe res extra commercium becomes commercium. Hence, for this we have to
\nunderstand what is trade and business, and what is lottery? Unless their
\ntrue nature and character is understood, submissions could not be properly
\nappreciated. We are also conscious, the resultant conclusion of it would
\nnot be proper if based on views of one or two individual judges but has to
\nbe based on what was and is understood at the common law. For this, we have
\nto turn our pages to the ancient history to gather wholesome view as to
\nwhat was understood then and what is understood now, which is revealed
\nthrough the ancient texts and various decisions of our courts and courts of
\nother countries.\n<\/p>\n
In this context, we may first refer-to the Constitution Bench decision of
\nthis court in the RMDC case (supra), which is a leading case, which has
\ntruly dwelled on this subject at some length. It holds that gambling
\nactivities are in its very nature and essence extra commercium. They were
\nconsidered to be a sinful and pernicious vice by the ancient seers and law
\ngivers of India. It also records that it has been deprecated even by the
\nlaws of England, Scotland, United States of America and Australia, In
\nsupport, it quoted what seers and law givers of India in (he ancient time
\nlooked upon gambling. A reference was made of Hymn XXXIV of the Rigveda
\nwhich proclaims the demerits of gambling and quoted verses 7, 10 and 13. It
\nreferred to Mahabharata which deprecates gambling by depicting the woeful
\nconditions of the Pandavas who had gambled away their kingdom. Manu in
\nverse 221 advises the king to exclude from his realm gambling and betting,
\nsince these two vices cause the destruction of the kingdom of princes.
\nVerse 226 describes a gambler as secret thieves who constantly harass the
\ngood subjects by their forbidden practices. Verse 227 referred to the
\ngambling as a vice causing great enmity and advises wise men not to
\npractice it even for amusement. As is the present case, even in the ancient
\ntime, inspite of condemnation of gambling, Yajnavalkya permitted it is
\nunder State control. Vrihaspati on this subject records that gambling had
\nbeen totally prohibited by Manu because it destroys truth, honesty and
\nwealth while some other law givers permitted it when conducted under the
\ncontrol of the State so as to allow the king a share of every stake.
\nHowever, the Supreme Court of America as far back as in 1850 considered
\nthis issue as recorded in Phalen v. Virginia, case (1850) 49 U.S. 163; 12L
\nEd. 1030, 1033, for useful appreciating its adjudication is quoted
\nhereunder:-\n<\/p>\n
“Experience has shown that the common forms of gambling are comparatively
\ninnocuous when placed in contrast with widespread pestilence of lotteries,
\nthe former are confined to a few persons and places, but the latter infests
\nthe whole community; it enters every dwelling it reaches every class; it
\npreys upon the hard earnings of the poor; it plunders the ignorant and the
\nsimple.”\n<\/p>\n
The observations were quoted, with approval in Douglas V. Kentucky. After
\nquoting the passage from Phalen case (supra) judgment proceeded:\n<\/p>\n
“Is the state forbidden by the supreme law of the land from protecting its
\npeople at all times from practices which it conceives to be attended by
\nsuch ruinous results. Can the Legislature of a State contract away its
\npower to establish such regulations as are reasonably necessary from time
\nto time to protect the public morals against the evils of lotteries?”\n<\/p>\n
In die said decisions, a reference was made to the decision of Australian
\nHigh court in The King v. Connare, [1939] 5I CLR 596 Evatt, J. did not
\nthink that lottery tickets can be regarded as goods or commodities entitled
\nfor protection of Section 21 of the common wealth of Australian
\nConstitution Act. He held at page 628:\n<\/p>\n
“If they are goods or commodities they belong to a very special category,
\nso special in the interests of its citizens the state may legitimately
\nexile them from the realm of tirade, commerce of business. The
\nindiscriminate sale of such tickets may be regarded as causing business
\ndisturbance and loss which, on general grounds of policy, the State is
\nentitled to prevent or at least minimize.”\n<\/p>\n
In the same decision, McTiernan J. held :\n<\/p>\n
“Some trades are more adventurous or speculative than others, but trade or
\ncommerce as a branch of human activity belongs to an order entirely
\ndifferent from gaming or gambling. Whether a particular activity falls
\nwithin the one or the other order is a matter of social<\/p>\n
opinion rather than jurisprudence………. It is gambling to buy a ticket<\/p>\n
or share in a lottery. Such a transaction does not belong to the commercial
\nbusiness of the country. The purchaser stakes money in a scheme for
\ndistributing prizes by chance. He is a gamester.”Mc Tiernan J. reiterated
\nhis view in another case in King v. Connare (1938) 61 CLR 59<\/p>\n
“It is important to observe the distinction that gambling is not trade,
\ncommerce and intercourse within the meaning of S. 92 otherwise the control
\nof gambling in Australia would be attended with constitutional
\ndifficulties.”\n<\/p>\n
In the same decision the view of Taylor J.. is also quoted hereunder:\n<\/p>\n
“No simple legislative expedient purporting to transmutes trade and
\ncommerce: into something else will remove it from the ambit of S. 92. But
\nwhilst asserting the width of the field in which S.92 may operate it is
\nnecessary to observe that not every transaction which employs the forms of
\ntrade and commerce will, as trade and commerce, invoke its protection,”\n<\/p>\n
With reference to the history of lotteries in England, the learned judge
\nquoted:\n<\/p>\n
“The foregoing observations give some indication of the attitude of the law
\nfor over two and a half centuries towards the carrying on of lotteries. But
\nthey show also that, in this country, lotteries were, from the moment of
\nits first settlement, common and public nuisances and that, in general, it
\nwas impossible to conduct them except in violation of the law. Indeed it
\nwas impracticable for any person to conduct a lottery without achieving the
\nstatus of a rogue and a vagabond.”\n<\/p>\n
It is significant that American congress faced with the difficulty to
\ninclude gambling activity within the commerce clause of Article 1, Section
\n8 sub-section 3 of the Constitution of the United States in the interests
\nof controlling its activity including ban or penalising a person,
\ninterpreted the commerce clause to include gambling activity. The relevant
\nportion as recorded in RMDC case is quoted hereunder :\n<\/p>\n
“Congress having made law regulating gambling activities which extended
\nacross the State borders, the question arose whether the making of the law
\nwas within the legislative competence of the Congress, that is to say
\nwhether it could be brought within the commerce clause. The question
\ndepended for its answer on the further question whether the gambling
\nactivities could be said to be commerce amongst the States. If it could,
\nthen it was open to congress to make the law in exercise of its Legislative
\npowers under the commerce clause. More often than not gambling activities
\nextend from State to State and in view of the commerce clause, no State
\nLegislature can make a law for regulating inter-state activities in the
\nnature of trade. If betting and gambling does not fall within the ambit of
\nthe commerce clause, then neither the Congress nor the State Legislature
\ncan in any way control the same. In such circumstances, the Supreme Court
\nof America thought it right to give a wide meaning to the word ` commerce’
\nso as to include gambling within the commerce clause and thereby enable the
\nCongress to regulate and control the same. Thus in Champion v.Ames, (1903)
\n188 US 321;47 L, Ed. 492 the carriage of lottery tickets from one State to
\nanother by an express company was held to be inter-State commerce and the
\ncourt upheld the law made by Congress which made such carriage an offence.”\n<\/p>\n
We have summarised the relevant portions of the various decisions given by
\nthe Australian, American and English Courts to show how they have received
\nthe lotteries in their countries, its nature, impact on public at large,
\ntheir concern about its regulation and control. There can be no doubt, on
\nthe perusal of the said decisions that these courts considered lottery as
\ngambling and even where such lotteries were permitted under the regulating
\npower of the state but were not given the status of `trade and commerce” as
\nunderstood at common parlance. It is significant, within the fertile arid
\nexclusive zone of interpretation, when situation arose, to interpret the
\nword `commerce’ which normally would not have included `gambling’ within
\nit, in the wider public interest as to bring jurisdiction to the
\nlegislature to control or restrict `betting and gambling1 interpreted this
\nalso to come within commerce clause. This wider definition to the commerce
\nclause was given by the American Court with an objective to control such
\nlotteries rather giving absolute freedom to trade in it. Thus, the law in
\nChampion case (supra) penalising even carriage of lottery tickets from one
\nState to another was upheld. In cases United States v. Kahriger (1953)345
\nU.S.22; 97 L, Ed. 754 and lewis v. United States, (1955) 348 U.S.419; 99 L
\nEd. 475, the Supreme Court Of United states held that there is no
\nconstitutional right to gambling.\n<\/p>\n
We have referred to some of the quotations in ancient Dharmasastra as
\nreferred in RMDC case, we are shortly giving few more of the views in
\nDharmasastra on this point in issue. Kautilya in III-20 referred to in
\nChapter 26 of the Dyutasamahvaya, allowed gambling in a central place under
\nStates supervision as it led to the detection of thieves. According to the
\nview of some others it was also allowed to be carried in the presence of
\nmaster of the gambling hall and provided it yielded revenue to the king, If
\nthey indulge in gambling openly but gives to the king share in the stakes
\nthen such a person does not incur in punishment, Rigveda Chapter X Verse 34
\nrecords :\n<\/p>\n
“Gambling is One of the most ancient vices,<\/p>\n
Brahmapurna condemns it in the strong language. It says that the gambler’s
\nwife is always in distress and the gambler on seeing the condition of his
\nwife is also worried. Some of the historical background of the lottery is
\nrecorded in Encyclopedia Britannica 1980 Ed. at page 327-328 which is
\nquoted hereunder :\n<\/p>\n
“Lottery a scheme for the distribution of prizes to be determined by
\nchance, was reputedly and invention of the Romans………. Lottery in the
\nmodem sense originated in Italy during the middle ages spreading to France,
\nGermany and Austria where rulers used them to raise revenue……….First
\nEnglish tottery was drawn in 1569………. However, lotteries encouraged
\nmass gambling and fraudulent drawing and after they had been attacked
\n.,……….. Parliament provided for their discontinuance in 1823.
\nThereafter  large scale lotteries contrived to inhibit prosecution by
\ngiving large sums to charities………… A century later following
\nagitation for legalised lotteries, the betting and Lotteries Act, 1934
\nadopted the recommendation of royal commission and continued the
\nprohibition on all lotteries.”\n<\/p>\n
In United States it records :\n<\/p>\n
“American colonial lotteries on the English pattern were used to raised
\nmoney for public improvements and to insist in the financing of colleges
\nincluding Colukmbia, Harvard, Dutmouth and Williams. In 1762 the
\nPennsylvania Provincial assembly denounced lotteries, declaring they were
\nresponsible for vice and idleness and were injurious to trade………….
\nIn 1833 legislation enacted in Massachusetts, New<\/p>\n
York and Pennsylvania outlawed lotteries and early in 1834 similar action
\nwas taken by Ohio, Vermont, Maine, New Jeersey, New Hampshire and Illinois,
\nProvisions prohibiting legislatures from authorising lotteries in the
\nfuture were inserted in many state constitutions………… Congress
\nresponded by enacting legislation making it a federal crime to deposit
\nlottery matter in the United States mails. In the Louisiana election of
\n1982, the lottery was the sole issue in the governor’s contenst. The
\nantilottery candidate won and the lottery was outlawed.”\n<\/p>\n
In the Lotteries, Revenues and Social Costs ; A historical examination of
\nState-Sponsored gambling, it records in Boston College Law Revenue Vol.34:
\n11 at page 12:\n<\/p>\n
“Two hundred years ago, government sanctioned lotteries were common
\nthroughout America. Lacking a strong central government and burdened with a
\nweak tax base, early Americans viewed lotteries as legitimate vehicles for
\nraising revenue. Lottery proceeds were used to build cities, establish
\nuniversities, and even to help finance the Revolutionary War, They were
\ngradually abandoned throughout the 1800s as governments developed better
\nforms of taxation. Lottery fraud became a concern and social problems
\nstemming from excessive gambling developed. In 1893, the Librarian of
\nCongress wrote of a general public conviction that lotteries are to be a
\nregarded, in direct proportion to their extension, as among the most
\ndangerous -and prolific sources of human misery. Soon thereafter, federal
\nlegislation brought an end to the last remaining legal American lottery.”\n<\/p>\n
At page 22 if further records :\n<\/p>\n
“Front 1709 until 1826, the English Government conducted annual lotteries
\nto raise revenue. These were so popular that they soon became a matter of
\nconcern. English lotteries were attacked for `weakening the habits of
\nindustry,’ diminishing  `permanent sources of the public revenue,’
\nencouraging other forms of gambling, and being<\/p>\n
`injurious in the highest degree, to the morals of the
\npeople………………….\n<\/p>\n
Finally, in 1823, at about the same time that lotteries were beginning to
\nbe phased out in America, England abolished lotteries in that country,”\n<\/p>\n
At page 32 it further records ;\n<\/p>\n
“Until the early 1800s, there was little opposition to state conducted
\nlotteries, State regulation, including bonding of operators and supervision
\nof receipts, quieted opponents. Churches usually benefited from lotteries,
\nso they were not quick to condemn. As the country’s dependency on lotteries
\nincreased, however, so did the opportunity for abuse. Serious lottery
\nopposition began to mount in the early to mid-l800s as part of general
\nsocial reform that included movements for temperance, peace, women’s
\nrights, educational reform, prison reform and abolition of slavery. As one
\nauthority has noted :\n<\/p>\n
In 1842, Democrats swept to power because of their opposition to lotteries.
\nThe lotteries in turn were portrayed merely as an adjunct to a corrupt
\nmonopolistic banking system dominated by the wealthy Whig power elite.”\n<\/p>\n
At page 70 it further records :\n<\/p>\n
“Because legalized gambling leads to increased illegal gambling state-
\nsponsored lotteries inevitably increase crime. Legalized gambling’s impact
\non criminal behaviour, however, is not limited to an increase in illegal
\ngambling. Perhaps the most serious concern is that legal gambling creates
\nproblem gamblers, and problem gamblers often turn to more serious criminal
\nactivity to support their habits.”\n<\/p>\n
From the references from Dharamshastra, opinions of distinguished authors,
\nreferences in the Encyclopedia of Britannica and Boston Law Review and
\nothers, we find that each concludes, as we have observed, lottery remains
\nin the realm of gambling. Even where it is state sponsored still it was
\nlooked down as an evil. Right from ancient time till the day all expressed
\nconcern to eliminate this, even where it was legalised for raising revenue
\neither by the king or in me modern times by the State. Even this
\nlegitimisation was for the sole purpose of raising revenue, was also for a
\nlimited period, since this received condemnation even for this limited
\npurpose. All this gives clear picture of the nature arid character of
\nlottery as perceived through the consciences of the people, as revealed
\nthrough ancient scriptures, also by various courts of the countries. It is
\nin this background now we proceed to examine, if lotteries are goods, could
\na contract for sale of such goods be conferred the status of trade and
\ncommerce as used in Chapter XIII of our Constitution.\n<\/p>\n
Thus, now we proceed to examine what are lottery tickets? What are the
\ningredients of a contract of sale of lottery tickets? Whether its
\ningredients constitute it to be trade and to be such trade as to receive
\nprotection under our Constitution? In other words, could such trade qualify
\nto be fundamental right or a right conferred by a Statute? If it is a right
\nout of creature of a Statute could it not be regulated, curtailed or banned
\nby the same Statute? Whether a right spoken of “free trade” under Article
\n301 speaks about fundamental right or does it include trade Of the nature
\nwe are concerned? Whether mere legalisation of a transaction by itself
\nbecomes `commercium’ of the nature as to qualify to be a trade as
\nunderstood under Article 301.\n<\/p>\n
In the Anraj case-l (supra), sale of lottery tickets was held to be
\n`goods’, hence liable for sales tax. It holds :\n<\/p>\n
“A sale of a lottery ticket confers on the purchaser thereof two rights (a)
\na right to participate in the draw and (b) a right to claim a prize
\ncontingent upon his being successful in the draw. Both would be beneficial
\ninterests in movable property. Lottery tickets, not as physical articles,
\nbut as slips of paper or memoranda evidence not one but both these
\nbeneficial interest in movable property which are capable of being
\ntransferred, assigned or sold and on their transfer, assignment or sale
\nboth these beneficial interest are made over to the purchaser for a
\nprice……………………… The right to participate in the<\/p>\n
draw under a lottery ticket remains a valuable right till the draw takes
\nplace and it is for this reason that licensed agents or wholesalers or
\ndealers of such tickets are enabled to effect sales thereof till the draw
\nactually takes place and as such till then the lottery tickets constituted
\ntheir stock-in-trade and therefore a merchandsie and goods, capable of
\nbeing bought or sold in the market.”\n<\/p>\n
In this case, neither there was any issue nor any contest, whether the sale
\nof such lottery tickets would be a `trade and commerce’ or not within the
\nmeaning of Chapter XIII of our Constitution. This decision proceeded as if
\nit is trade and commerce, hence after applying various decisions of this
\nCourt, right from Atiabari Tea Co. Ltd., (supra) to the later decisions on
\nthe touch stone of principle laid down therein on a question whether these
\n`lottery tickets’ of others when subjected to sales tax while not imposing
\nsales tax on the lottery tickets sold by the State of Tamil Nadu, are
\nviolative of Article 301 read with Article 304 (a) of the Constitution
\nbeing discriminative or hot was held to be so. Hence, this case does not go
\nbeyond holding lottery tickets as `goods’ for the purpose of adjudicating
\nthe issue before us. It does not test nor there is any issue, whether sale
\nof such `goods’ viz,, lottery tickets would or would not be a `trade or
\ncommerce’ within the meaning of Chapter XIII of the Constitution.\n<\/p>\n
So, now we proceed to examine what is `lottery’, what would be the
\ningredients in the `sale of lottery tickets’ and then to equate with other
\nforms of contract pertaining to trade and commerce. Whether there is any
\nstriking difference between the two? The `lottery” is defined as :\n<\/p>\n
In Words and Phrases (Permanent Edn.) Vol. 25A at 439 :\n<\/p>\n
“A `lottery’ is a species of gambling.” At Page 444 :\n<\/p>\n
“The lottery statutes were enacted to suppress the widespread evil of
\ngambling in lotteries and to allay and rub the gambling spirit of the
\npublic and thus prevent waste of money needed for more  substantial
\npurposes, the term `lottery’ as popularly and generally used referring to a
\ngambling scheme in which chances are sold or disposed Of for value and the
\nsums thus paid are hazarded in the hope of winning a much larger sum, a
\nscheme for the distribution of prizes by chance.”\n<\/p>\n
At Page 445 :\n<\/p>\n
“The term `lottery’ in law is of wide signification. In Homer v. United
\nStates, 1.3 S.Ct. 409, 147 U.S. 449, 37 L,.Ed 237, Mr. Justice Blatchford
\ndiscussed various definitions of lottery, and among others approved that
\nfound in Worcester’s Dictionary, in which it is defined to be “game of
\nhazard in which small sums are ventured with the chance of obtaining a
\nlarge value, either in money or other articles.”\n<\/p>\n
At Page 491 :\n<\/p>\n
“The term “tickets” when speaking of the sale of lottery tickets, in
\nequivalent to “Chances”.\n<\/p>\n
At the same page :\n<\/p>\n
“In a general sense, “lottery tickets” are more in the nature of chooses in
\naction than merchandise, being in some respects memoranda of conditional
\npromises to pay.”\n<\/p>\n
State v. Mabrey, 60 N.W. 2d 889, 8i93 :\n<\/p>\n
“Generally, to constitute `lottery’ there must be a prize awarded by chance
\nfor a consideration with no infusion of skill. ”\n<\/p>\n
Common Wealth v. Luad, 15A.2d 839, 840, 841, 843, 845 :\n<\/p>\n
“An artifice, no matter how new, is within the condemnation of the law
\nagainst lotteries if it, in effect, embodies the principle of a `lottery’
\nand operate as such.”\n<\/p>\n
In Law Lexicon, P. Ramanatha Aiyar, 1997 Edn., at 1151 :\n<\/p>\n
“Scheme for the disposal or distribution of property by chance. The term
\n“lottery” has not technical meaning in the law distinct from its popular
\nsignification. A lottery is a scheme for the distribution of prizes by
\nchance,” In Words and Phrases, Butterworths, 3rd Edn. at P.70 :\n<\/p>\n
“A lottery has been described as a scheme for distributing prizes by lot or
\nchance.”\n<\/p>\n
At P. 71 ;\n<\/p>\n
“….. It must not been entirely forgotten in the construction of<\/p>\n
these Acts Parliament [see now the Lotteries and Amusements Act, 1976] that
\nthe evil which the lottery law has sought to prevent was the evil which
\nexisted where poor people with only a few pence to feed their children
\nwould go and put these few pence into a lottery and lose them, and this
\nsociologically was a bad thing…”\n<\/p>\n
In Stroud’s Judicial Dictionary, 5th Edn., Vol 3 at p. 1507 :\n<\/p>\n
“In Webster’s Dictionary a lottery is defined to be `A distribution of
\nprizes by lot or chance’-and a similar definition is given in Johnson. Such
\ndefinitions are, in our opinion, correct.”\n<\/p>\n
In Black’s Law Dictionary, 6th Edn., at p. 947 :\n<\/p>\n
“A chance for a prize for a price, A scheme for the distribution of a prize
\nor by lot or chance, the number and value of which is determined by the
\noperator of lottery.”\n<\/p>\n
So, we find three ingredients in the sale of lottery tickets, namely, (i)
\nprize (ii) chance and (iii) consideration. So, when one purchases a lottery
\nticket, he purchases for a prize, which is by chance and the consideration
\nis the price of the ticket. The holder of such ticket knows, the
\nconsideration which he has paid, may be for receiving nothing, However,
\nthere are few who may be lucky to receive the prize which is just by
\nchance. The question is, could such transaction be termed as trade or
\ncommerce? Part XIII of our Constitution deals with trade, commerce and
\nintercourse within the territory of India. It does not define `trade and
\ncommerce’. Thus, we have to take word `trade’ as it is understood in common
\nparlance: Municipality of Chopda v. Motilal Manakchand, AIR (1958) Bom.
\n487, 489; ILR (1945) Kar. 409 “The connotation of `trade’ is not only
\nlimited to an occupation which primarily concerns itself with sale and
\npurchase of goods. Pursuit of a skilled employment with a view to earn
\nprofit, such employment not being in the nature of a learned professions or
\nagriculture must be regarded as engaging in `trade’ within the meaning of
\nArticle 276 of the Constitution. A skilled occupation which involves the
\napplication of manufacturing processes to a commodity submitted to the
\nperson carrying on the occupation must be regarded as trade.”\n<\/p>\n
`Trade’ is defined in Balck’s Law Dictionary, 6th Edn, At page 1492 ;\n<\/p>\n
“Trade. The act or the business of buying and selling for money; traffic’
\nbarter. May. Sloan, 101 U.S. 231, 25 L.Ed. 797. Purchase and sale of goods
\nand services between businesses, states or nations. Trade is not a
\ntechnical word and is ordinarily used in three senses: (I) in that of
\nexchanging goods or commodities by barter or by buying and seeling for
\nmoney; (2) in that of a business occupation generally; (3) in that of a
\nmechanical employment, in contradistinction to the learned professions,
\nagriculture, or the liberal arts. People v. Polar Vent of America, Inc. 10
\nMisc. 2d 378, 174 N.Y.S, 2d 789, 793,<\/p>\n
An occupation or regular means of livelihood and is business one practices
\nor the work in which one engages regularly. One’s calling; occupation,
\ngainful employment; means of livelihood. People v, Carr. 163 Cal. App. 2d
\n568, 329 P2d 746, 752. Transaction involving purchase and sale of Stocks,
\nbonds, or other securities.”\n<\/p>\n
Since it is relevant for the purpose of interpretation of Chapter XIII of
\nthe Constitution as it uses both the words “Trade and commerce’ to refer to
\nthe word `commerce’. The Black’s Law Dictionary, 6th Edn. at p. 269 the
\nword `commerce’ is defined :\n<\/p>\n
“The exchange of goods, productions,, or property of any kind; the buying,
\nselling and exchanging of articles .”\n<\/p>\n
On the other hand, `trade’ is an exchange of any article either by barter
\nor for money or for service rendered. In other words, it is exchange
\nbetween two parties one who tenders the consideration and the other who
\nreturns for this consideration, goods, money service or such other thing.
\nParty paying consideration in any trade is aware for what he is paying the
\nconsideration. He receives for the consideration an ascertained thing or
\nService. It is neither hypothetical nor it is a contract for any
\nunasceratined thing. In any case, there is no element or ingredient of
\nchance under any `trade.’ This element of chance makes the lottery a
\ngambling. On the other hand, an absence of chance inherently attached to
\nany contract coupled with some skill makes it to be a `trade.’ So, trade is
\nalways associated with some skill while in lottery there is absence of
\nskill predominantly and essentially with the ingredient chance. Thus, in
\nnutshell in `lottery’ there is no skill and element of chance, in `trade’
\nit is for exchange of something for consideration where there is absence of
\nchance and inherently with element of skill.\n<\/p>\n
While deciding the validity of Section 21 of a New South Wales Statute
\ncalled the Lotteries and Art Unions Act, 1901-1929, qua Section 92 of the
\nCommonwealth of Australia Constitution Act, as aforesaid, the learned Evatt
\nJ. with reference to sale of lottery tickets held :\n<\/p>\n
“If they are goods or commodities they belong to a very special category,
\nso special that in the interests of its citizens the State may legitimately
\nexile them from the realm of trade, commerce or business.”\n<\/p>\n
Mc Tiernan, J. as aforesaid on the same subject further recorded :\n<\/p>\n
“,… It is gambling to buy a ticket or share in a lottery. Such a
\ntransaction does not belong to the commercial business of the country…,”\n<\/p>\n
Taylor, J. held :\n<\/p>\n
“.. But whilst asserting the width of the field in which S.92 may operate
\nit is necessary to observe that not every transaction which employs me
\nforms of trade and commerce will, as trade and commerce, invoke its
\nprotection….”\n<\/p>\n
Learned counsel for the States challenging the validity of the Act submits,
\nsince there is marked difference between our Constitution and the
\nAustralian Constitution and Constitution of the United States of America,
\nhence we should not apply the principles of the decision of those Courts.
\nIt was pointed out, there is nothing in the American Constitution
\ncorrespoding to Article 19(l)(g) or Article 301 as in our Constitution.
\nSimilarly, in the Australian Constitution there is no provision as we have
\nin our Articles 19(6) or Articles 302, 304 in contrast Section 92 of the
\nAustralian Constitution is free without any such limitations. This
\nsubmission was taken note by our Court in the case of KMDC (supra). The
\nreference Of these judgments of these foreign Courts were only to take the
\nstock of the view as to with what vision they judged and what they meant
\nand understood while dealing with the sale of lottery tickets. Neverthless
\nthis apart, if reasoning of these: decisions are to be tested, qua, our
\nconstitutional provisions, they should of course, be tested with
\ncircumspection. As said, we have referred to these decisions, not for
\ninterpreting the provisions of our Constitution but only to know the nature
\nand character of lotteries as understood in those countries to which we
\nfind there is no difference than what is understood in our country. It is
\nin this background, this Court in RMPC (supra), after recording the
\nactivities of lotteries which is condemned in this country from the ancient
\ntimes and also taking note of views of the courts of other countries, found
\nthat they equally condemned, discouraged and looked it down with disfavour,
\nviz.,, in England, Scotland, the Unites of America and in Australia. Our
\nCourt records:\n<\/p>\n
“… that those activities which encourage a spirit of reckless propensity
\nfor making easy gain by lot or chance, which lead to the loss of the hard
\nearned money of the undiscerning and improvident common man.,.could
\npossibly have been intended by our Constitution makers to be raised to the
\nstatus of trade, commerce or intercourse and to be made the subject matter
\nof a fundamental right guaranteed by Art. 19 (l)(g). We find it difficult
\nto persuade ourselves that gambling was ever intended to form any part of
\nthis ancient country’s trade, commerce or intercourse to be declared as
\nfree under Art. 301,”\n<\/p>\n
It further recorded :\n<\/p>\n
“…We are, however, clearly of opinion that whatever else may or may not
\nbe regarded as falling within the meaning of these words, gambling cannot
\ncertainly be taken as one of them. We are convinced and satisfied that the
\nreal purpose of Arts. 19(l)(g) and 301 could not possibly have been to
\nguarantee or declare the freedom of gambling. Gambling activities from
\ntheir very nature and in essence are extra-commercium although the external
\nforms, formalities and instruments of trade may be employed and they are
\nnot protected either by Art. L9(l)(g) or Art. 301 of our Constitution, ”\n<\/p>\n
So this decision concludes that our constitutional makers could never have
\nintended, with reference to the transaction of lottery tickets, to raise it
\nto the Status of trade, commerce or intercourse. The purpose of Articles
\nl9(l)(g) and 301 could not possibly have been to guarantee freedom of
\ngambling. To dissolve principle laid down in RMDC case (supra), on behalf
\nof such States challenging the validity of the Act, it is submitted that
\nthe RMDC case was concerned with the lotteries covered by Entry 34, List II
\nand not the lotteries organised by the State which is covered by Entry 40,
\nList I, hence it would have no application. In addition, they referred to
\nthe case of Gherulal Parekh (supra) to submit that what is recorded in RMDC
\ncase (supra) was narrowly interpreted in this case. The question in
\nGherulal case was, whether an agreement of partnership with the object of
\nentering into wagering transactions was illegal within the meaning of
\nSection 23 of the Indian Contract Act? It was held that although a wagering
\ncontract was void and unenforceable under Section 30  of  the  Contract
\nAct,  it  was not forbidden by law and an agreement collateral to such a
\ncontract was not unlawful within the meaning of Section 23 of the Contract
\nAct. What is narrowed down, if at all, was with reference to morality
\naspect based on ancient scriptures. It holds after referring the RMDC case
\n:\n<\/p>\n
“The moral prohibitions in Hindu Law texts against gambling were not
\nlegally enforced but were allowed to fall into desuetude and it was not
\npossible to hold that there was any definite head or principle of public
\npolicy evolved by courts or laid down by precedents directly applicable to
\nwagering contracts.”\n<\/p>\n
This decision has not diluted the law laid down with respect to the finding
\nthat gambling would not fall within the meaning of word `trade’ under
\nArticle 301 of the Constitution or to have diluted that such transaction
\nwould not get protection under Article 19(1)(g). What is said is that moral
\nprohibitions in Hindu Law text against gambling were not legally enforced.
\nIt is true, within the moral format, in a strict sense, if it was to be
\nlegally enforced there could hot have been any legalised gambling. But it
\ncannot be doubted and it is recognised by all the countries that gambling
\nby its very nature promises to make poor man a rich man, to quench the
\nthirst of a man in dire economic distress or to a man with bursting desire
\nto become wealthy overnight draws them into the magnetic field of lotteries
\nwith crippling effect. More often than not, such hopes with very remote
\nchance encourages the spirit of reckless prosperity in him, ruining him and
\nhis family. This encouraging hope with the magnitude of prize money never
\ndwindles. Losses and failures hi lotteries instead of discouragement
\nincreases the craze with intoxicating hope, not only to erase the losses
\nbut to fill his imaginative coffer. When this chance mixes with this
\nUtopian hope, he is repeatedly drawn back into the circle of lottery like
\ndrug addicts. Inevitably, the happiness of his family is lost. He goes into
\na chronic state of indebtedness. In this context, it is said that how the
\nConstitution makers could ever have conceived to give protection to
\ngambling under Article 19(l)(g) or Article 301 of our Constitution.\n<\/p>\n
Before considering the submission, the difference between the lottery
\norganised by the State and other lotteries, on which basis the
\napplicability of the principle of RMDC case (supra) is sought to be
\ndistinguished, we would like to refer to another realm of State activity,
\nthe transaction which is in the nature of trade, viz., the manufacture and
\nsale of potable liquor, but still this Court held it to be res extra
\ncommercium. In the Krishan Kumar Narula v. The State of Jammu & Kashmir &
\nOrs.,<\/a> [1967] 3 SCR 50 at p. 54, the submission was that potable liquor is
\nnoxious and dangerous to the community and subversive of its morals. With
\nreference to potable liquor a challenge was made, the Court held;\n<\/p>\n
“…that dealing in noxious and dangerous goods like liquor was dangerous
\nto the community and subversive of its morals..,. Such an approach leads to
\nincoherence in thought and expressions: Standards of morality can offer
\nguidance to impose restrictions, but cannot limit the scope of the right.”\n<\/p>\n
The Court held that right to trade in liquor was business. However, in
\nKhoday Distilleries (supra) it reversed the decision of Krishan Kumar case
\n(supra) by holding that right to trade in liquor was not constitutionally
\nprotected. However, the Court in this case clearly made three exceptions,<\/p>\n
(a) trade in alcohol is not per se prohibited for medicinal and industrial
\nuses;\n<\/p>\n
(b) even though trade in potable alcohol was res extra commercium the State
\nitself may sell potable alcohol, set up a monopoly business for that
\npurpose and maximise its revenue by any mode of sale; and (c) the state may
\noh a non-discriminatory bases permit sale of alcohol through private
\nparties. In Khoday Distilleries (supra) this Court held:\n<\/p>\n
“The right to practice any profession or to carry on any occupation, trade
\nor business does not extend to practising a profession or carrying on an
\noccupation, trade or business which is inherently vicious and pernicious,
\nand is condemend by all civilised societies. It does not entitle citizens
\nto carry on trade or business in activities which are immoral and criminal
\nand in articles or goods which are obnoxious and injurious to health,
\nsafety and welfare of the general public, i,e., res extra commercium,
\n(outside commerce). There cannot be business in crime.\n<\/p>\n
Potable liquor as a beverage is an intoxicating and depressant drink which
\nis dangerous and injurious to health and is, therefore, an article which is
\nres extra commercium being inherently harmful. A citizen has, therefore, no
\nfundamental right to do trade or business in liquor. Hence the trade or
\nbusiness in liquor can be completely prohibited. For the same reason,
\nagain, the State can impose limitations and restrictions on the trade or
\nbusiness in potable liquor as a beverage which restrictions are in nature
\ndifferent from those imposed on the trade or business in legitimate
\nactivities and goods arid articles which are res commercium. The
\nrestrictions and limitations on the trade and business in potable liquor
\ncan again be both under Article 19(6) or otherwise. The restrictions and
\nlimitations can extend to the State carrying on the trade or business
\nitself to the exclusion of and elimination of others and\/or to preserving
\nto -‘itself the right to sell licences to do trade or business in the same,
\nto others.\n<\/p>\n
The State can carry on trade or business in potable liquor notwithstanding
\nthat it is an intoxicating drink and Article 47 enjoins it to prohibit its
\nconsumption. When the State carries on such business, it does so to
\nrestrict and regulate production, supply and consumption of liquor which is
\nalso an aspect of reasonable restriction in the interest of general public.
\nThe State cannot on that account be said to be carrying on an illegitimate
\nbusiness. It carries on business in products which are not declared illegal
\nby ply of which is regulated in the interests of the health.; morals and
\nwelfare of the people. It does so also in the interests of the general
\npublic under Article 19(6).\n<\/p>\n
The mere fact that the State levies taxes or fees on the production, sale
\nand income derived from potable liquor whether the production, sale or
\nincome is legitimate or illegitimate, does not make the State a party to
\nthe said activities. The power of the State to raise revenue by levying
\ntaxes and fees should not be confused with the power of the State to
\nprohibit or regulate the trade or business in question. The State exercise
\nits two different powers on such occasions. Hence the mere fact that the
\nState levies taxes and fees oft trade or business in liquor or derives
\nincome from it, does not make the right to carry on trade or business in
\nliquor a fundamental right, or even a legal right when such trade or
\nbusiness is completely prohibited,”\n<\/p>\n
(Emphasis supplied)<\/p>\n
This decision clearly lays down and demonstrates that manufacture, sale,
\npurchase of potable liquor, which State carries on at common parlance is
\ntrade and is a good still held to be an article different from goods and
\narticle which are res commercium. This holds further that transactions in
\npotable liquor by sale and in spite of levy of taxes, fees on this trade or
\nbusiness, it is held to be res extra commercium. Such transactions are also
\nnot prohibited, rather authorised by law. Hence merely there is sanction in
\nlaw for a transaction or is legalised not prohibited, it would not by
\nitself make it to be commercium. Entry 62 of List II of the Seventh
\nSchedule refers to taxes on betting and gambling which inherently permits
\ngambling. Thus, it could be said that gambling is recognised and authorised
\nby law, may be through regulations, licences etc.. Thus, imposition of tax
\non gambling conceives of gambling, of course has to be legal to impose tax
\non it In this background, we proceed to examine State lotteries (gambling),
\nwhether could it still qualifies to be `trade of commerce’ within the
\nmeaning of Chapter XIII of our Constitution or could `trade’ or such
\ntransactions seek protection under the protective umbrella of
\nconstitutional provisions as it to be free `trade’?\n<\/p>\n
Next submission is, once the State lotteries are taken out of Entry 34,
\nList II it is no more in the realm of gambling; Not only, because the two
\ntypes of lotteries find place in two different Lists of the Seventh
\nSchedule of our Constitution, but it is also distinguished out as a crime
\nunder Section 294A, I.P.C., further it being organised by the sovereign
\nState by taking all conceivable measures to dismantle any distrust from the
\nmind of participants and its income goes to enhance State revenues. In
\nsupport, reference is made to the Suman Enterprises (supra) which laid down
\nthe conditions for organising State lotteries which ultimately, with some
\nmodifications and additions is incorporated in Section 4 of the Impugned
\nAct. This Act provides stringent measures for the compliance of its
\nconditions. The first step in this regard is Section 6 under which those
\nlotteries contravening the conditions would be prohibited by the Central
\nGovernment. This is followed by penal consequences to such of the Head of
\nthe Department, whose department of the Government is involved in
\ncontravention, with rigorous imprisonment for two years under Section 7(1).
\nPenal consequences similarly is also under sub-section (3) to the agents or
\ntraders contravening its conditions. It is submitted with this and it
\nhaving received the authority of law, such State organised lotteries no
\nmore remains in the realm of gambling and res commercium. In support,
\nreliance is placed on Fateh Chand case, (supra). Submission is that this
\ndecision on `money lending’ business holds that there are `aspects of
\nbusiness or trade’, which in one sense may be noxious when conducted by a
\ngiven class of persons but when entrusted to another who are well organised
\nit is rationalised and is no more noxious. Just as all `money lenders and
\nmoney lending’ would not necessarily be noxious or pernicious so also all
\nitems falling under betting and gambling (State lotteries is contrast with
\nother lotteries) would not be pernicious. This submission, in our
\nconsidered opinion, is misconceived. This case referred to the village
\nbased, age-old, feudal pattern of money-lending given to the labourer, the
\nmarginal filler and the broken farmer etc. with unvouched usurious interest
\nwhich brought such persons into perpetual labour, hereditary service etc,
\nof the lender. It is because of this it was said to be a pernicious species
\nof money lending flourishing in the rural and industrial areas of our
\ncountry; In contrast it was held that money lending when through recognised
\nfinancial institution, banks etc., it is legitimate and valid commercial
\ncredit and financial dealing which could not be said to be pernicious
\nSpecies of money lending. We do not find that there could be any equation
\nor parity with this decision and with the question to which we are
\nadverting to. This case itself records at page 850 :\n<\/p>\n
“We do not downright denounce all money-lenders but the law-makers have,
\nbased on socio-economic facts, picked out a special class of money-lenders
\nwhom they described as- unscrupulous.”\n<\/p>\n
When this decision referred to about pernicious species of money-lending,
\nit confined this adjective to a limited class of persons, but it did not
\nhold, the business of money-lending as such to be pernicious in nature. It
\nheld that pernicious because some class of money-lenders made the poor
\nartisan, bonded labourer etc. a perpetual debtors. Thus, the submission,
\nwhat otherwise was pernicious, was held in that case to be valid and
\nlegitimate when executed by well recognised financial institutions and
\nbanks, hence when lotteries conducted by one set of hand could be
\npernicious but when organised by the State with the carved out conditions
\nwith stringent check it no more remains pernicious or gambling, cannot be.
\naccepted.\n<\/p>\n
For this, let us examine, why lotteries have been held to be pernicious of
\ngambling and what element which constitute it to be is filtered out to take
\nit out of gambling jacket. In the matter of money-lending the very
\ntransaction of money-lending or borrowing is not held to be pernicious in
\nFateh Chand case (supra), but only the manner in which certain class of
\npersons were operating made it pernicious. Thus, this case would render no
\nhelp to the challenge. Next, the historical background was referred to
\ndistinguish between two forms of lotteries. The State lotteries are not
\npenal offence, which has been understood and recognised so since 1870 when
\nSection 294A, IPC was brought into the Indian Penal Code, 1860. This
\ndistinction has also been recognised even in the Government of India Act,
\n193 5 where the State lotteries have been separately place under Entry 48,
\nList 1 but other form of lotteries were placed under Entry 34t List II, and
\nthe same continues even in our Constitution when State lotteries fall under
\nEntry 40, List I while other lotteries fall under Entry 3 4, List II. Thus,
\nit is submitted that the State lotteries are a distinct class, and is run
\nunder the authority of law hence could neither be pernicious nor res extra
\ncommercium.\n<\/p>\n
For this, we revert to scrutinize as to what tirade lotteries gambling and
\nhow State lotteries cleanses this character. As we have already recorded,
\nthe difference between gambling and the trade that a gambling inherently
\ncontains a chance with no skill, while trade contains skill with no chance.
\nWhat makes lottery a pernicious is its gambling nature. Can it be said that
\nin the State organised lotteries this element of gambling is excluded?
\nThere could possibly be no two opinions that even in the State lotteries
\nthe same element of chance remains with no skill. It remains within the
\nboundaries of gambling. The stringent measures and the conditions imposed
\nunder the State lotteries are only to inculcate faith to the participant of
\nsuch lottery, that it is being conducted fairly with ho possibility of
\nfraud, misappropriation or deceit and assure the hopeful recipients of high
\nprizes that all is fair and safe. That assurance is from stage one to the
\nlast with full transparency; No doubt holding of the State lotteries for
\npublic revenue has been authorised, legalised and once this having been
\ndone it is expected from the State to take such measure to see that people
\nat large, faithfully and hopefully participate in larger number for the
\ngreater yield of its revenue with no fear in their mind. The Act further
\nensure by virtue of Section 4(d) that the proceeds of the sale of such
\nlottery tickets is credited to the public accounts of the State. This is to
\ngive clear message to the participants that the proceeds is not in the
\nhands of individual group or association but is ensured to be credited in
\nthe State accounts. But, as we have said, this by itself would not take it
\noutside the realm of gambling. It remains within the same realm. In this
\nregard there is no difference between lotteries under Entry 34, List II and
\na lottery organised by the State under Entry 4.0, List I When character of
\nboth the State organised lotteries and other lotteries remains the same by
\nmerely placing the apparel of the State with authority of law, would not
\nmake any difference, it remains gambling as element of chance persist with
\nno element of skill. Even other lotteries under Entry 34, List II could
\nonly be run under the authority of the State or the law of the State. Only
\ndifference is in one case, authority is that of State and in other, the
\nParliament. That is why, what is excluded from the penal consequences under
\nSection 294A, IPC is the lotteries authorised by the State not merely
\nlotteries organised by the State, So, on the reasoning as put forward even
\nlotteries under Entry 34, List II cannot be said to be pernicious. The
\nlotteries authorised by the State is also has a sanction in law. As we have
\nsaid, a gambling may be taxed and may be authorised for a specified
\npurpose, but it would not attain the status of trade like other trades or
\nbecome res commercium. No gambling could be commercium hence in our
\nconsidered opinion the principle of RMDC case (supra) would equally be
\napplicable even to the State organised lottery. In no uncertain terms the
\nsaid decision recorded that the constitutional makers could never have
\nconceived to give protection to gambling either under Article 19(l)(g) or
\nit as a trade Article 301 of the Constitution.\n<\/p>\n
Next it is submitted is that the executive power of the State extends not
\nonly to matters under Article 162 but also to the field of proviso (b) of
\nArticle 298 of the Constitution, thus confers extra territorial
\njurisdiction. But for Article 298 State could not have organised even its
\nown lotteries until Parliament enacts a law. Thus, when the State runs its
\nown lotteries under Article 298, it does only because it is `trade and
\nbusiness.’ The entrustment of executive power to the State is for carrying
\non any trade or business. Under the Constitution., the word `trade’ used in
\nArticle 298 should be given the same meaning as is given to it under
\nArticle 301, If Article 301 does hot encompass State lotteries as `trade’,
\nit would also not fall under Article 298 then the State would also have no
\npower to run its own lotteries, until the Parliament makes the law.
\nReference is made to the Anraj case-I (supra), in which holding of State
\nlotteries by the State under its executive power was held to fall under
\nArticle 298. Thus, it is submitted that the lotteries organised by the
\nState has to be treated as trade. Mr. Rakesh Dwivedi, learned counsel for
\nthe State of Manipur, further submits that under the Government of India
\nAct, 1935 and the draft Constitution by the Constituent Assembly there was
\nno provision like Article 298. Draft Article 266 (now Article 289) provided
\nfor trade and business of States being subject to Union Taxation. This led
\nin the Constituent Assembly a considerable debate. “The Provinces were
\nprotesting regarding this. As a consequence not only draft Article 266
\nunderwent modification, but during the last the stages Article 298 Was
\ninserted as a compromise. This was brought in, so that the States could
\ncarry on its `trade arid business’ throughout the country even with respect
\nto subject matter covered by list 1 and earn more revenue. He submits that
\nproviso(b) to Article 298 is riot merely a repetition of Article 246 read
\nwith entries of List I of the Seventh Schedule but was for a purpose to
\nenhance the revenue earning of the States. Mr. R.N. Trivedi, learned
\nAdditional Solicitor General, submitted that Article 298 does not confer
\nany plenary right On any State to carry to on any trade or business, even
\nthough this Article does not provide specifically, but in substance it is
\nsubject to other provisions of the Constitution, like a State cannot
\nwithout obtaining a licence under the provisions of the industries<\/p>\n
Development Regulation Act start an industry mentioned in its Schedule.
\nSimilarly, a State cannot insist as a matter of right to sell liquor in
\nanother State where there is complete prohibition. Thus, this extended
\nexecutive power of the State to carry on any trade or business for any
\npurpose should be a trade which falls under the scheme of the Constitution
\nand not what is impliedly prohibited. Article 298 is subject to
\nParliamentary legislation, it is also subject to provisions of Articles 245
\nand 246. He submits that the provisions of Articles 298 should be read down
\nto be subject to provisions of Articles 53 and 258 of the Constitution.
\nMeaning to the phrase `trade and business `under Article 298 should be
\ngiven with reference to Article 19(1 )(g). Thus, Article 298 does not refer
\nto `trade’ which are not so recognised under Article 19(1 Kg)- Mr.
\nR.P..Goel, learned Advocate General of U.P., also submitted to the sartie
\neffect. Repelling the part of the argument,, in respect of Article 258, it
\nis submitted by Mr. Dwivedi that under Article 258(1), the President can
\nentrust powers to the State Government only with consent of the State
\nGovernment and further it starts with the words “notwithstanding anything
\nin this Constitution” but there is no non-obstante clause under Article
\n258(2). Thus, Article 258(2) would be subject to Article 298. When Article
\n298 inhibits delegation of powers to State Government then Article 258(2)
\ncannot be used to submit entrustment of power by the Union to the State.\n<\/p>\n
To test the submission, it is necessary to examine Whether the words “trade
\nor business’ used in Article 298 should be given the same meaning as the
\nwords `trade and commerce’ used under Article 301.\n<\/p>\n
Before, we do, we proceed to examine the Anraj case-I (supra). There the
\nGovernment of Maharashtra and other States requested the Union to authorise
\nthem to conduct their lotteries, which was authorised, subject to the
\nconditions that their lottery tickets shall not be sold in another State
\nwithout express consent of the other State concerned. This was done through
\nPresidential order under Article 258(1), which also entrusted the
\nGovernment of Maharashtra the executive power of the Union, in respect of
\nlotteries. On this basis, the Government of Maharashtra banned the sale of
\nlottery tickets in its State or other States. This was challenged. This
\nCourt held that the Government of Maharashtra cannot purport to ban the
\nsale of lottery tickets of other States by virtue of entrustment of the
\nexecutive power of the Union under Article 258(1). This case records;\n<\/p>\n
“It appears that the Government of Maharashtra and various other State
\nGovernments requested the Union Government to authorise them to conduct
\nlotteries for the purpose of “finding funds for financing their development
\nplans”. Such authorisation was, of course, strictly not necessary in the
\nabsence of a law made by Parliament pursuant to Entry 40 of List I of the
\nSeventh Schedule to the Constitution. Article 298 of the Constitution
\nextends the executive power of the Union and each State to the carrying on
\nof any trade or business and the acquisition, holding and disposal of
\nproperty and the making of contracts for any purpose, with the stipulation
\nthat if the trade, business or purpose is not one with respect to which
\nParliament may make laws, the said executive power of Parliament shall be
\nsubject in each State to legislation by the State..,.”\n<\/p>\n
[emphasis supplied] It further records :\n<\/p>\n
“…,.. Reading and considering Articles 73 and 298 together, as they
\nshould indeed be read and considered, it is clear that executive power of a
\nState in the matter of carrying on any trade or business with respect to
\nwhich the State Legislature may not make laws is subject to legislation by
\nParliament but is not subject to the executive power of the Union. That is
\nwhy we mentioned earlier that the Government of a State is not required to
\nobtain the permission of the Union Government in order to organise its
\nlotteries, in. the absence<\/p>\n
of Parliamentary legislation. “.—–\n<\/p>\n
(Emphasis supplied)<\/p>\n
This merely records that there was no need for a State to Obtain the
\npermission of the Union for organising State lotteries, they could have
\ndone so under Article 298. Here there was no issue, whether the words
\n`trade and commerce’ is used under Article 30) and the words `trade and
\nbusiness’ used under Article 298 should be given the meaning or whether
\nState lotteries are gambling or if it is gambling, would it still be
\ncovered by the words `trade and commerce’ Under Article 301, In view of
\nwhat is held in this Anraj Case-I, there could be no doubt that the State
\ncould organise its own lotteries by virtue of its executive power under
\nArticle 298 until law is made .by the Parliament<\/p>\n
In other words, the question raised is, once it is covered by proviso(b) to
\nArticle 298, necessarily it would fall under Chapter XIII of the
\nConstitution. Reply is that Article 298 does not confer any plenary right
\non any State to carry on any trade or business but it is subject to other
\nprovisions of the Constitution and for the other provisions, he referred to
\nArticles 53 and 258 to submit that Union can entrust power to the State
\nGovernment with the consent of the State Government under Article 258(1).
\nWe feel that it is not necessary to go into this as this was considered in
\nthe Anraj case-l (supra). in that case, though the Presidential Order war
\nissued under Article 258(1), it was held that this Presidential Order
\nconferring the State to run its own lotteries was not necessary, as State
\ncould have exercised its executive power under Article 298 and the State
\ncannot prohibit lotteries of other States under the executive power
\nentrusted to it by the President,<\/p>\n
This bring us back to Article 298 to see whether there is any significant
\ndifference between the words used under Article 298 and Article 301. This
\ndifference could indicate the scope and periphery of the field of operation
\nof these two Articles. Relevant portion of Article 298 is quoted hereunder
\n:\n<\/p>\n
“298. Power to carry on trade, etc. -The executive power of the Union and
\nof each State Shall extend to the carrying on of any trade or business and
\nto the acquisition, holding and disposal of property and the making of
\ncontracts for any purpose: provided that –\n<\/p>\n
(a)  xxx                                xxx<\/p>\n
(b) the said executive power of each State shall, in so far as such trade
\nor business or such purpose    is not one with respect to which the State
\nlegislature may make laws, be subject to legislation by Parliament,”\n<\/p>\n
[Emphasis supplied]<\/p>\n
The executive power of the State is referable in terms of words used
\ntherein “to the carrying on of any trade or business…. and the making of
\ncontracts for any purpose.” Title of this Article significantly is “Power
\nto carry on `trade’, etc.”\n<\/p>\n
Article 301 is quoted hereunder :\n<\/p>\n
“301. Freedom of trade, commerce and intercourse – Subject to the other
\nprovisions of this Part, trade, commerce and intercourse throughout the
\nterritory of India shall be free.”\n<\/p>\n
[Emphasis supplied]<\/p>\n
In difference, we find that the words used under this Article is “trade,
\ncommerce and intercourse.” We find Article 30) is confined to trade and
\ncommerce while Article 298 refers to trade and business and to the making
\nof contracts for any purpose. The use of the words `business’ and
\n`contracts for any purpose’ and its title”,.,.;.,,,trade, etc:” makes the
\nfield of Article 298 wider than Article 301 Significantly, the different
\nuse of words in the two Articles is for a purpose, if the field of two
\nArticles are to be the same, the same words would have been used. It is
\ntrue, as submitted, that since `trade’ is used both in Article 298 and 301,
\nthe same meaning should be given. To this extent, we accept it to so but
\nwhen the two Articles use different words, in a different set of words
\nconversely, the different words used could only be to convey different
\nmeaning. If different meaning is given then the field of the two Articles
\nwould be different. So, when instead of the words `trade and commerce’ in
\nArticle 301, the words `trade or business’ is used it necessarily has
\ndifferent and wider connotation than merely `trade and commerce’.
\n`Business’ may be of varying activities, may or not be for profit, but it
\nnecessarily includes within its ambit `trade and commerce’ so sometime it
\nmay be synonymous but its field stretches beyond `trade and commerce.’<\/p>\n
The word “Business” is defined as :\n<\/p>\n
In Stroud’s Judicial Dictionary, 5th Edn. ;\n<\/p>\n
“Business has a more extensive meaning than the words `trade,”\n<\/p>\n
In Words and Phrases, Butterworths, 3rd Edn. ;\n<\/p>\n
” `Business’ is a wider term than `trade’, and not synonymous with it and
\nmeans almost anything which is an occupation as distinguished from a
\npleasure; However, the term must be construed according to its context. (47
\nHalsbury’s Laws (4th Edn.) para 2).\n<\/p>\n
`Business1 includes a professional practice and includes any activity
\ncarried on by a body of persons, whether corporate or unincorporate.\n<\/p>\n
(Medicines Act 1968, s. 132.(1)).\n<\/p>\n
`Business’ includes a profession and the activities of any government
\ndepartment (including a Northern Ireland department) or local or public
\nauthority. (Sale of Goods Act 1979, S. 61 (1).”\n<\/p>\n
Law lexicon, 1997 Edn. :\n<\/p>\n
“The word business is of large signification, and in its broadest sense
\nincludes nearly all the affairs in which either an individual or a
\ncorporation can be actors.” “Business” and “Trade”.\n<\/p>\n
” ….. There may, however, be a “Business” without pecuniary profit being
\nat all contemplated. In such a connection, “Business” is a very much larger
\nword than “trade” and the word “business” is employed in order to include
\noccupations which would not strictly come within the meaning of the word
\n“Trade”, The words “Trade” and “business” do not mean the same things.,…
\nThe word “trade” is often confined to buying and selling commodities. Where
\nto draw the line between what is a profession and what is a trade is a
\nmatter which it is not possible to deal with any general definition.
\n“Business” is a much wider term than trade. The word “business” at least
\ncovers a continuous occupation involving liabilities to others. In re A
\nDebtor, (1927) 1 Ch 9-96 LJ(Ch)28(CA).”\n<\/p>\n
All this clearly indicates, the word `Business’ is wider than words `trade
\nand commerce*. This apart, Article 298 further uses the words “contracts
\nfor any purpose”, so far lottery tickets are concerned they are held to be
\n`goods’ and when they are sold it is under a contract between seller, the
\nState, or its agent and the purchaser buying for a consideration. The
\nconsideration is the price for which it is purchase. Thus, such a contract
\nwould qualify to be the `contract for any purpose’ used in Article 298. Use
\nof the words `business’ and `contract for any purpose’ widens the cope of
\nState’s activity under Article 298; This widening is for a purpose and not
\nto restrict only to `trade’. No doubt, it includes `trade’ also within its
\nfield of activity. So every `trade what is covered by Article 301 would be
\nwithin the field of Article 298, may be this Article was brought in as a
\ncompromise formula to widen the scope of the States revenue earning
\nactivities, as submitted by Mr. Dwivedi, but this cannot be said to be
\nconfined to the trade only, otherwise there was no need to use further
\nwords `business’ and `contract for any purpose’. Restrictive interpretation
\nof Article 298, firstly, would make these additional words superfluous and,
\nsecondly, it would curtail State executive activities which is intended to
\nbe enlarged. Thus, any other transaction or activity other than `trade’
\nwould be `business’ of that State, which would be apart from the `trade*
\nwhich thus in our opinion, would include activity, to run State lotteries.
\nThus, the sale of lottery tickets by the State Government, even if not
\ntrade as understood in common parlance as it is gambling, still it would be
\ncovered within the executive power of the State under Article 298 being
\nactivity in the nature of `business’ and would in any case also be covered
\nby the words `contract for any purpose,’ Hence the submission that the sale
\nof State lottery tickets is necessarily `trade and commerce’ as the word
\n`trade’ used under Article 301, the same meaning of this word `trade’ is to
\nbe given in Article 298 cannot be accepted. So if State lotteries are
\ngambling it would not be `trade’ in any case, would not qualify to be
\n`trade and commerce’, as used in Article 301 and if that be so, neither the
\nindividual, far less the State can seek enforcement of such right to he
\ndeclared free throughout the territory of India. If it is construed the
\nConstitution confers on it, would amount to conferring right to gamble
\nthrough out the territory of India. Thus, the right of sale of lottery
\ntickets, whether by the State or others could neither be a fundamental
\nright nor a right under Article 301. No one could seek it as a free `trade’
\nlike other `trades’, even though it may have the authority of law. This
\nauthorisation under the Act is solely for the purpose for the States to
\nearn revenue.\n<\/p>\n
So far as Anraj case-II (supra) is concerned, it held that’ lottery
\ntickets’ to be `goods’ and thus subject to sales tax. We have already held
\nthat there may be certain transactions or commodity which are goods and
\nsubject to sales tax but still it would not qualify to be `trade?. In this
\nAnrgj case-II (supra) also there was no issue, whether sale of such lottery
\ntickets would be trade and commerce within the meaning of Chapter XIII of
\nthe Constitution or not. Once it was held to be good, this case proceeded
\nto adjudicate whether by different measure to tax on the lottery tickets of
\nthe home State and of other States there is any violation of Article 304 or
\nnot Neither there was any occasion nor it has referred to the Constitution
\nBench decision of this Court in RMDC case., (supra). So far in the present
\ncase, neither we are concerned with any such taxation nor we are entering
\ninto that realm to test any violation of Article 304 as it is not an issue
\nhere.\n<\/p>\n
For the aforesaid reason, we have no hesitation to hold that sale of
\nlottery tickets organised by the State could not be construed to be trade
\nand commerce and even if it could be construed to be so, it cannot be
\nraised to the status of `trade and commerce’ as understood at common
\nparlance or `trade and commerce’ as used under Article 301. Hence, question
\nof violation of either Articles 301 and 303 does not arise. Strong reliance
\nwas placed on Khazan Singh case, (supra), if a State has a power to Carry
\non trade in its own State it can carry on the same in every part of India.
\nFor the finding we have recorded that State lotteries (Gambling) would not
\nbe `trade’, this case would have no application. Hence, for these reasons,
\nit is not necessary to go into various submissions pertaining to violation
\nof Articles 301 to 303 of<\/p>\n
Chapter XIII of the Constitution,<\/p>\n
Next submission challenges Section 5, to be discriminative and violative,
\nboth of Article 14 and Article 303 of the Constitution. The discrimination
\nis based on two counts, namely, (1) discrimination between the Bhutan
\nlotteries (Foreign) and the lotteries of the Indian States and (2)
\ndiscrimination between one State from another State. Challenge is also on
\nthe ground of excessive delegation of essential legislative power of the
\nParliament without any guidelines. Dealing with discrimination, it is
\nsubmitted, though it impose restrictions on the lotteries organised by the
\nState Government, it does not impose any restrictions on the Bhutan
\nlotteries. Reference was made to the treaty agreement dated 28th February,
\n1995 between the Government of India and the Kingdom of Bhutan which came
\ninto force with effect from 2nd March, 1995 and which is to remain in force
\nfor a period of 10 years. Next reference was to the Union circular letter
\ndated 20th January; 1998 sent to all the States and Union Territories
\nasserting that Section 5 covers only State Lotteries and would not extend
\nto Bhutan lottery. It also referred to the office memorandum of the
\nMinistry of External Affairs, Government of India, dated 27th April, 1998,
\nby which the Home Ministry was requested to advice the State Government and
\nthe Government of Union Territories to allow the sale of Bhutan lotteries
\nin their States. Para 47 of the affidavit of Union of India dated 27th
\nNovember, 1998 referred and records, “Consequently, the Central Government
\ndecided to enact an appropriate legislation to regulate the conduct<\/p>\n
of lotteries so as to protect the poor and gullible persons…..” The
\nsubmission<\/p>\n
is so far the sale of Bhutan lottery tickets, Union stand is clear that
\nBhutan lotteries are to be sold throughout India without any conditions
\ncontrary to the placing of stringent conditions on the Slate lotteries
\nwhich is discriminatory. On the one hand, under the garb of regulating
\nthese lotteries, power to ban lotteries was delegated to the `State’ so as
\nto protect the poor and gullible persons, on the other hand to permit
\nBhutan lotteries to be sold through out India without any condition clearly
\ndemonstrates that consideration for poor and gullible a lost sight.\n<\/p>\n
It is true that by perusal of these various office memorandum, circular
\nletters and the affidavit of Union of India depicts the state of
\nuncertainty in the Union and so took its oscillating stand, as it stood
\nthen and now. Then stand was, since Bhutan lottery is under a treaty, all
\nStates should permit its sale, now the stand is such lottery would fall
\nunder Entry 34, List II hence would be subject to the law of the State. So
\nfar the submission that Bhutan lottery cannot be controlled unfertile
\nimpugned Act has merit, Impugned Act is confined to the State organised
\nlotteries under Union list, under Entry 40, List 1. However, submission on
\nbehalf of the Union, which is also incorporated in its aforesaid affidavit,
\nis as per agreement, the sale of Bhutan lottery tickets in India and sale
\nof Indian Government\/State Government lottery tickets in Bhutan will be
\nsubject to the relevant laws as may be enforced in the territory of Kingdom
\nof Bhutan and India, as the case may be. Thus, under the terms of the
\npresent tready itself, the sale of Bhutan lotteries has been agreed and
\nsubjugated to be subject to the relevant laws in India. So far this treaty,
\nthere is no law yet framed by the Parliament under Entry 14, List I.
\nAdmittedly, Bhutan lottery does not fall under Entry 40, List 1. Thus, the
\nrestrictions and conditions imposed under the impugned Act would only apply
\nto the State lotteries and not to the lotteries of the Kingdom of Bhutan.
\nNext, it has to be seen that when the treaty makes it obligatory for the
\nBhutan lotteries to be subject to the Indian laws, and in the absence of
\nany law by the Parliament pertaining to the treaty under Entry 14, List I,
\nunder which class of lottery it would fall and to which law it would be
\nsubjected to. We also make it clear, in the present case, the aforesaid
\ntreaty with the Kingdom of Bhutan is not subject to any challenge. Let us
\nexamine first the relevant Entries of the list under Seventh Schedule of
\nthe Constitution. It is admitted that it does not fall under Entry 40, List
\nI. Another relevant Entry is Entry 14, List I which refers to treaty. This
\ntreaty could be under this Entry, but in the absence of any law by the
\nParliament it would be governed by the terms of the treaty itself, .Entry
\n41, List I refers to the trade and commerce with the foreign country. Even
\nif it falls under it, in the absence of law by the Parliament it would be
\ngoverned by the terms of the treaty. Entry 42, List I deals with inter
\nstate trade and commerce, under which it will not fall.\n<\/p>\n
The sale of lottery tickets of Bhutan but for the aforesaid stipulation in
\nthe treaty it possibly could have been said it cannot be subjected to the
\nlaws of lotteries in India. But once treaty itself stipulates it to be
\nsubject to any law in India, then if the sale of Bhutan lottery tickets are
\nnot State organised lotteries, it necessarily falls under other lotteries
\nunder Entry 34, List II. There is no other Entry pertaining to lottery.
\nThus, it necessarily follows that its sale within India will be subject to
\nthe laws of the State as is applicable under this Entry. In other words, if
\nthe State prohibits sale within its State not only sale of its own lottery
\nbut every other lottery, then the sale of lottery tickets of Bhutan will
\nhave to be subjected to the laws of that State. Thus, prohibition to other
\nlotteries will equally be applicable to the sale of Bhutan lottery. In the
\npresent case, learned Additional Solicitor General, Mr.. Vaidyainathan,
\nalso subscribed to this interpretation on behalf of the Union. As we have
\nsaid, in the absence of law by the Parliament^ so far the treaty with the
\nsaid stipulation, there could possibly be no other interpretation. This
\ninterpretation further eliminates possible discrimination which is subject
\nof attack in the present case. Thus, the Bhutan lottery could not be said
\nbe privileged or it, in any way, discriminates with other State lotteries.\n<\/p>\n
The second limb of argument pertains to discrimination between one State
\nand the other. We having held above, that the State lotteries cannot be
\nconstrued to be `trade and commerce’ within the meaning of Article 301,
\nthere could possible be no question any discrimination or violation of
\nArticle 303. Even under Article 14, there, possibly, could have been argued
\ndiscrimination, if the discretion was left on the States to choose as to
\nwhich State it likes to prohibit; but in the present case in Section 5 the
\nState could only exercise its discretion in case it decides to prohibit
\nsale of lottery tickets of every other States. If this is so, there could
\npossibly be no conceivable discrimination. Hence, we do not find that there
\nis any discrimination either on account of Article 303 or Article 14 of the
\nConstitution between States of the Union an the Bhutan lottery and from one
\nState to other State.\n<\/p>\n
The last submission in respect of challenge to Section 5 is that the
\ndelegation to the State to decide to prohibit safe of lotteries organised
\nby other States is a delegation by the Parliament of its essential
\nlegislative power, without any policy or bereft of the guidelines. Thus,
\nthere is total abdication of the legislative power of the Parliament, which
\nis a naked delegation, hence violative of Article 14.\n<\/p>\n
Further submission is, there is no rational or policy behind conferring the
\nunbridled power to prohibit the lotteries of other States. There is no
\nnexus, reasonable or otherwise, between the object and the actual
\nprohibition, It is wholly unreasonable, arbitrary and discriminatory. The
\ninterpretation of Section 5 given on behalf of the State of Tamil Nadu
\nclearly exposes and reveals the unguided nature of delegation of power to
\nthe State. The submission on behalf of the State of Tamil Nadu is that
\nentrustment of power to ban lotteries is unconditional though it supports
\nUnion on upholding validity of the Act So a contrary note is struck against
\nthe interpretation given on behalf of the Union that exercise of power to
\nban could only be when it decides to ban is own lottery. The lotteries of
\nother States were banned in Tamil Nadu though it continued to have its own
\nlotteries because that State felt the practical problems of law and order.
\nSubmission for Tamil Nadu is on plain reading of Section 5, a State without
\nbanning its own lottery can ban lotteries organised by Other States. This
\nmay be to create monopoly or in the name of law and order or of moral or
\nethical grounds or may also be for political reason. Thus, to this large
\ndiscretion left on the State is submitted it shows the delegation of
\nunbridled power hence violative of Article -14 Mr. Venugopal submits that
\neven though the interpretation sought to be given by the Union may reduce
\nthe extent of discrimination to a great extent but cannot neutralise the
\nviolation of Article 303(1) of the Constitution. There is nothing in the
\nAct or its preamble to interpret that, it is only the State which decides
\nnot to run its own lottery could impose such a ban. Learned counsel Mr.
\nShanti Bhushan also submitted that the State cannot take up a stand that
\nthe law which is applicable to other person would not apply to the State as
\nit would be inconsistent with the rule of law based on the doctrine of
\nequality which introduce discrimination. Reliance was placed on the case of
\nState of West Bengal v. Corporation of Calcutta,<\/a> [1967] 2 SCR 170 (Nine
\nJudges). So far the question of total abdication of legislative power by
\nthe Parliament to the State Government without any guideline or policy,
\nreliance is placed on cases Hamdard Dawakhana (supra); -Hari Shankar Bangla
\n& Anr, V. The State of Madhya Pradesh, [1955] 1 SCR 380; A.N. Parasuraman
\nv. State of Tamil Nadu,<\/a> [1989] 4 SCC 683 (685-688) and Rajnarain Singh v.
\nThe Chairman, Patna Administration Committee, Patna & Anr.,<\/a> [1955] 1 SCR
\n290 (301-304).\n<\/p>\n
For the State of Uttar Pradesh submission is the same as the Union that
\nSection 5 should be so read as to entitle only such State to ban which, as
\na policy, does not permit its own lottery to run, If this be so, there
\npossibly could be no discrimination as it applies unifromly to all the
\nStates. Thus, there would be no discrimination between one State and the
\nother. This delegation is on public interest which is writ large and is
\nimplicit, in view of the nature of activity. For interpreting any provision
\nStatement of Objects and Reasons and the debates can be looked into, Pepper
\nv. Hari, (1993) 1 All.E.R 42 (HL) and P.V. Narasimha Rao v. State, [1998] 4
\nSCC 626 para 8C to 87, Further submission on behalf of the Union is that
\nSection 5 should be read down as to mean only such State which bans its own
\nlotteries as it would be incongruous that a State which as a policy and in
\npublic interest does not permit sale of its own lotteries has to permit
\nsale of lotteries of other States. If a State wants to have “zero
\ntolerance” State so far as lotteries are concerned, it cannot be prevented
\nfrom doing so. In support of reading down, reliance is placed on :DTC v.
\nDTC Mazdoor Sabha, [1991] Supp. 1 SCC 600 paras 217, 219 and 244 to 246;
\nMaharao Sahib Shri Bhim Singhji v. Union of India & Ors,<\/a> [1981] 1 SCC 166
\nat 185; Philips India Ltd. v. Labour Court, Madras & Ors.,<\/a> [1985] 3 SCC 103
\nat 112 and State of Punjab v. Kailash Nath,<\/a> [1989] 1 SCC 321\/329-30; 231
\nITR 24; 1997 (228) ITR 68 at 78. Reference was also made to the case of
\nRegistrar, Trivandrum v. K. Kunjambu, [1980] 1 SCC 340, to support the
\nsubmission that guidelines can be found from the subject matter of the Act.
\nIt can also be deduced from the objects and reasons of the Act, [1997] 4
\nSCC 471. In fact, Section 5 is a piece of conditional legislation thus when
\na State wants to exercise such power, it is left to its wisdom having
\nregard to its policy in public interest, P. Orr. & Sons (P) Ltd. v.
\nAssociated Publishers (Madras) Ltd,<\/a> [1991] 1 SCC 301, (para 14).\n<\/p>\n
The legal principles which emerges, as submitted, is that delegation of
\nessential legislative power of the principle to the delegatee would amount
\nto abdication of its legislature power and if it is bereft of any
\nguidelines then it is unsustainable in the eyes of law. The authorities
\ncited by various learned counsel and the law on the subject, cannot be
\ndoubted. But this principle is to be tested by scanning the impugned
\nlegislation which may differ one from the other in its nature, setting up
\nor other circumstances which may have bearing to conclude. It is also well
\nsettled, first attempt should be made by the Courts to uphold the charged
\nprovisions and not to invalidate it merely because one of the possible
\ninterpretation leads to such a result, howsoever attractive it may be.
\nThus, where there are two possible interpretations, one invalidating the
\nlaw and the another upholding, the latter should be adopted. For this, the
\ncourts have been endeavouring, sometimes to give restrictive or expansive
\nmeaning keeping in view the nature of legislation, may be beneficial, penal
\nor fiscal etc. Cumulatively it is to subserve the object of the
\nlegislation. Old gold rule is of respecting the wisdom of legislature that
\nthey are aware of the law and would never have intended for an invalid
\nlegislation. This also keeps courts within its track and checks individual
\nzeal of going wayward. Yet in spite of this, if the impugned legislation
\ncannot be saved the courts, shall not hesitate to strike it down.
\nSimilarly, for upholding any provision, if it could be saved by reading it
\ndown, it should be done, unless plain words are so clear to be in defiance
\nof the constitution. These interpretations springs out because of concern
\nof the courts to salvage a legislation to achieve its objective and not to
\nlet it fall merely because of a possible ingeniously interpretation. The
\nwords are not static but dynamic. This infuses fertility in the field of
\ninterpretation. This equally helps to save an Act but also the cause of
\nattack on the Act. Here the courts has to play a cautious role of weeding
\nout the wild from the crop, of course, without infringing the constitution.
\nFor doing this, the courts have taken help from preamble, objects, the
\nscheme of the Act, its historical background, the purpose for enacting such
\na provision, the mischief if any which existed, which is sought to be
\neliminated. The Kingdom of interpretation is enriched by the Rule as laid
\ndown in Heydon’s case as far back in the 16th century. According to this,
\ncourts must see what was the law before the impugned provision, what was
\nthe mischief for which the then law did not provide, what is the reason to
\nremedy that mischief and what remedy the impugned provision has provided;
\n76 E.R. 63-(1584) 3 Co. Rep 7a P.76 This rule has been accepted by this
\ncourt in, Bengal Immunity Co. V State of Bihar, [1955] 2 SCR 603, AIR 1985
\nS.C. 1922 (l9l9).In Hamdard Dawakhana (WAKF) Lal, Kuan, Delhi and Anr. V.
\nUnion of India & Ors.,<\/a> [1960] 2 SCR 671, this Court held:\n<\/p>\n
“Therefore, when the constitutionality of an enactment is challenged on the
\nground of violation of any of the articles in Part III of; the
\nConstitution, me ascertainment of its true nature and character becomes
\nnecessary, i.e., its subject matter, the area in which it is intended to
\noperate, its purport and intent have to be determined. In order to do so it
\nis legitimate to take into, consideration all the factors such as history
\nof the legislation, the purpose thereof, the surrounding circumstances and
\nconditions, the mischief which it intended to suppress, the remedy for the
\ndisease which the legislature resolved to cure and the true reason for the
\nremedy; Bengal immunity Company v. The State of Bihar, [1955] 2 SCR 603,
\nRMD Chamarbaghwas v. The Unions of India, [1957] SCR 93 and Mahant Moti Das
\n& Ors v. S.P. Sahi, AIR<\/a> (1959) SC 942.\n<\/p>\n
Another principle which has to borne in mind in examining the
\nconstitutionality of a statute is that it must be assumed that the
\nlegislature understands and appreciates the need .of the people and the
\nlaws it enacts are directed to problems which are made manifest by
\nexperience and that the elected representatives assembled in a legislature
\nenact laws which they consider to be reasonable for the purpose for which
\nthey consider to be reasonable for the purpose for which they are enacted.
\nPresumption is, therefore, in favour of the constitutionality of an
\nenactment Charanjit Lal Chowdhuri v. The Union of India & Ors.,<\/a> [1950] SCR
\n869; The State of Bombay v. F.N. Btilsara,<\/a> [1951] SCR 682 and Mahani Moti
\nDas v, S.P. Sahi.”\n<\/p>\n
The following passage in Seervai, Constitution Law of India (3rd Edn.) page
\n119 found approval in Delhi Transport Corporation v, D.T.C. Mazdoor
\nCongress, [1991] (Suppl. 1) SCC 600. The Court held :\n<\/p>\n
“Seervai in his book Constitutional Law of India (3rd Edn.) has stated at
\npage 119 that :\n<\/p>\n
“;…. the courts are guided by the following rules in discharging their
\nsolemn duty to declare laws passed by a legislature unconstitutional:\n<\/p>\n
(1) There is a presumption favour of constitutionality and a law will not
\nbe declared unconstitutional unless the case is so clear as to be free from
\ndoubt; `to doubt the constitutionality of a law is to resolve it in favour
\nof its validity.’<\/p>\n
(2) A statute cannot be declared unconstitutional merely because in the
\nopinion of the court it violates one or more of the principles of liberty
\nof the spirit of the Constitution, unless such principles and that spirit
\nare found in the terms of the Constitution.”\n<\/p>\n
218. On a proper consideration of the cases cited herein before as well as
\nthe observations of Seervai in his book Constitutional Law of India and
\nalso the meaning that has been given in the Australian Federal
\nConstitutional Law by Colin Howard, it is clear and apparent that where any
\nterm has been used in the Act which per se seems to be without jurisdiction
\nbut can be read down in order to make it constitutionally valid by
\nseparating and excluding the part which is invalid or by interpreting the
\nword in such a fashion in order to make it constitutionally valid and
\nwithin jurisdiction of the legislature which passed the said enactment by
\nreading down the provisions of the Act<\/p>\n
(sic)”\n<\/p>\n
This principle of reading down, however, will not be available where the
\nplain and literal meaning from bare reading of any impugned provisions
\nclearly shows that it confers arbitrary, uncanalised on unbridled power.
\nThe Delhi Transport Corporation case (supra) was with reference to the
\nchallenge to the provisions relating to termination of service of a
\npermanent employee. In The Registrar of Co-operative Societies, Travandrum
\n& Anr. v. K.K. Kunjabmu & Ors.,<\/a> [1980] 1 SCC 340, this Court held :\n<\/p>\n
“…, The power to legislate carries with it the power to delegate. But
\nexcessive delegation may amount to abdication. Delegation unlimited may
\ninvite despotism uninhibited. So the theory has been evolved that the
\nlegislature cannot delegate its essential legislative function. Legislate
\nit must, by laying down policy and principle and delegate it may to fill in
\ndetail and carry out policy. The legislature may guide the delegate by
\nspeaking through the express provision empowering delegation or the other
\nprovisions of the statute such as the preamble, the scheme or even the very
\nsubject-matter of statute. If guidance there is, where it may be found, the
\ndelegation is valid. A good deal of latitude has been held to be
\npermissible in the case of taxing statutes and on the same principle
\ngenerous degree of latitude must be permissible in the case of welfare
\nlegislation, particularly those statute which are designed to further the
\nDirective Principles of State Policy.”\n<\/p>\n
This case holds that guidelines can be gathered from the subject-matter of
\nthe Act.\n<\/p>\n
Before entering to decide the rival contentions within the approved wide
\nfield of interpretation, we look back to the history of the law pertaining
\nto lotteries which is the subject matter for consideration. We have already
\nrecorded the concern, ill impact of these lotteries on the public at large
\nnot only in this country but all parts of the globe, where this subject
\nallured the public to bring miseries in their life except few lucky one’s
\nultimately leading to ban all forms of lotteries. It is true that some
\npermitted and protected lottery transactions under the garb of benefit for
\ncharitable purposes or arugmenting State revenue. Even in India this
\nlottery was looked down as evil of the Society, and diagnosed as pernicious
\nin nature. It is this which ultimately |ed to bringing in Section 294A of
\nthe IPC in the 19th Century making it a penal offence. It excluded from its
\npurview the State authorised lotteries, i.e., both falling under Entry 40,
\nList I and falling under Entry 34, List II. Collection of funds through
\nlotteries was never considered laudable or consicienceable but has been and
\nis resorted on the exigencies of the situations recognised for :a limited
\npurpose may be a limited period. Why not `laudable or conscienceable’ ?
\nBecause it is a gambling as we have held, How can gambling be held to be
\nconscienceable though it may he legitimised for limited objectives. So some
\nStates, some countries legitimize it for sometime. May be because of lack
\nof financial potentiality or expertise to achieve a desired financial
\ntarget. Some other records since gambling is so intoxicating as it goes so
\ndeep into the blood, it is difficult to eliminate, hence lotteries are
\nlegalised so that participants are not trapped in the clandestine lotteries
\nbut be confined to the controlled, regulated lotteries authorised, whether
\nby the State or Union. This eliminates or reduces to the minimum the
\nprospering clandestine lotteries. The State lotteries or State authorised
\nlotteries have been excluded from the purview of Section 294A IPC. They are
\nplaced in distinct entries in the lists of the Seventh Schedule, both in
\nthe Government of India Act and Constitution of India. In spite of all
\nthis, in India and in other countries this battle to overcome the effect of
\nits pernicious nature goes on which led to in some countries completely
\nbanning the lotteries. So, lotteries continue to be mark of interrogation
\nand never looked upon as a fair or universally accepted way to collect
\nfunds. It is true that for a public purpose it has been legalised but
\ncannot be equated with other trade or business. It is distinct and
\ndifferent kind in itself, i.e., a class of gambling. Thus, merely putting
\non the apparel of the State, the State lotteries cannot change from its
\nbasic character.\n<\/p>\n
As revealed from Anraj case-I (supra), some of the States sought permission
\nof the Union as a policy to raise its revenue through these lotteries,
\nwhich was conferred by the Presidential Order under Article 258(1), though
\nit records, the State could have exercised their discretion as a policy to
\nhave their own lotteries without such permission in view of its extended
\nexecutive power under Article 298. It further reveals, till the Parliament
\nmakes any law, decision to start its lottery or to close it is exclusively
\nwithin the executive power of each State. This is because it is the policy
\ndecision of a State which has to decide as a principle whether it desire to
\ncollect in this form the revenue or not. The benefit of Article 298 is, it
\nis extra territorial, applicable beyond its territory, it is for this State
\nlotteries are place in Entry 40 List I. So in a federal structure, Union
\nhas to play a role coordinate between one State with the other. So by
\nregulation it has to subserve the objectives. Union cannot enforce a State
\nto gamble if such a State does not want to gamble. To run its own lotteries
\nor to Close it is left on the discretion of each State. It is each State
\nwhich has to decide its policy and has be concerned about its subject. In
\nany ease, the Union cannot force any States that it must run its own
\nlotteries. But control of State lotteries running in the territory of other
\nStates is left on the Union. State cannot restrict sales of lotteries
\norganised by the other States even in its territory unless authorised by
\nthe Union. This difficulty was felt by the State which is indicated in the
\nAnraj case-I (supra). That seems to be the reason that the Parliament has
\ndelegated this power to the State under Section 5. In this background, we
\nhave to see, whether this delegation could be constituted to be such as
\namounting to delegation of its essential legislative power and that too
\nunguided or unbridled. As we have said to interpret a provision, its pith
\nand substance, its objects and reasons should be gathered, and it is that
\ninterpretation which subserve the object of the Act should be accepted. The
\nPreamble of the Act states :\n<\/p>\n
“to regulate the lotteries and to provide for matters connected therewith
\nan incidental thereto.” Thus, the object of this enactment is to regulate
\nthe State lotteries and other connected matter therewith. We have already
\nobserved above, once as a policy State embarks upon to collect revenue
\nthrough lotteries, it is necessary to regulate it in such a manner, as to
\ninfuse confidence to the participants. This has been done under this Act by
\nproviding strict compliance of the conditions imposed under it. In case of
\nviolation by any State or others, they brought to the books by penal
\nconsequences.\n<\/p>\n
In Section 2(b) lotteries are defined to be a scheme for distribution of
\nprizes by a lot or chance. This definition itself recognises that even in
\nState lotteries the prizes are to be collected by chance without any skill,
\nhence gambling in nature. Sections prohibits that no State lotteries can be
\norganised without the condition stipulated under sub-sections (a) to (k) of
\nSection 4. Section 4 provides, the conditions to be complied with by the
\nState lotteries. To initiate any State lottery it is left to the policy of
\neach State, for this the Act is silent. The only control is, in case it
\ndecides, then it must follow the conditions as laid down under Section 4.
\nNext comes section 5 which is subject matter of challenge, the delegation
\nof power to the State to prohibit the sale of lottery tickets organised by
\nevery other State. If a State desires not to subject its people to the
\nlottery gambling, it has no power to restrict lotteries organised by other
\nStates. It is to remove this mischief the power is conferred through
\ndelegation to the States to do it in terms of its own policy. By virtue of
\nthis, now the State Government can prohibit sale of lottery tickets of
\nevery other States within its territory. Next, Section 6 seeks strict
\ncompliance of Section 4. Under this the Central Government may prohibit and
\nState lottery which is being conducted in contravention of the conditions
\nas laid down under Sections 4 or 5. Section 7 shows the rigor of this Act
\nby making it a penal offence as against all, who violate the provisions of
\nthis Act, may be the Head of the Department of the Government or the agent,
\npromoter or trader, to be punishable with two years rigorous imprisonment.
\nSection 8 makes such an offence cognizable and non-bailable. Similarly,
\nSection 9 deals with offences committed by the Companies Section 10
\nentrusts the Central Government power to give directions to the State
\nGovernment for carrying into execution the provisions of this Act, Rule or
\nOrder. Sections 11 and 12 are the rule making power entrusted to the
\nCentral and the Government respectively. Section 13 repeals the Ordinance.
\nThus, the whole Act makes clear that the subject it is dealing is gambling
\nin nature. The object of the Act is not to control the policy decision of
\neach State to start or to close it lotteries, but to regulates it in case a
\nState decides to run its own lottery through modalities and conditions laid
\ndown therein. Emphasis of the whole Act is to abide by the condition
\nstrictly if you want to run a lottery. Thus, regulation’s through
\nconditions to eliminate even the remotest possibility of mal practices by
\nproviding stringent measures for its compliance. Perusal of the Act
\nreveals, the scheme of the Act is limited in its application, and it admits
\nthe subject it is dealing is gambling in nature. As we have said, decision
\nto collect or not to collect revenue through State lotteries is exclusively
\nwithin the policy decision of the State and for this, neither the Union nor
\nthe Parliament interferes nor there is any indication under the Act. Thus,
\nthe question which remains is, if any State decides that it does not want
\nany lotteries but if it feels helpless as having no jurisdiction over the
\nlotteries organised by other States, what is the way out? This can only be
\ndone by Parliament or by entrusting this power on such State desiring so
\nwhich has been done through Section 5. In this background, for this
\nhelplessness of a State as recorded in the Anraj case-1 (supra) remedy is
\nprovided by entrusting this power on the State under the impugned
\nprovisions. This help such State to achieve its objective of lottery
\n(gambling) free zone within its territory. A well concerned remedy. Next
\nquestion is what could have been the guideline? If State lotteries are
\ngambling and it cannot be termed as `trade and commerce’ at common parlance
\nfor any free right under the Constitution. Such right though recognised
\nunder Article 298 so other States may continue to enjoy till prohibited by
\nvalid law, and if any State want within its State lottery free zone and for
\nwhich the power is entrusted to such State, it cannot be said in this
\nsetting and background and the nature of the subject that such a delegation
\nis of its essential legislative powers. The only guideline necessary in
\nsuch delegation is to see State does not pick and choose one State from the
\nother, which guideline is already provided in this Section. It provides
\nthat such a ban could only be if it is applied to every other State. Only
\nresidual’ field of attack so far this delegations could be, which has been
\nattacked in this case, that State could on one hand ban lotteries of every
\nother State but run its own lotteries. It is argued while a State bans
\nlotteries of other State not to permit any gambling activity in the public
\ninterest as a policy but this very public interest is flouted by having
\nlotteries of its own. It is true that unless this provision is read drown
\nto mean a State can only ban lotteries of other States when it bans as a
\npolicy its own lotteries it is bound to be subjected to the vagaries as
\npointed out and on deeper scrutiny it may hot successfully stand. But by
\nreading down the provision, which has to be read that it is only that State
\nwhich decides lottery free zone within its State can prohibit lotteries of
\nother State clearly provides the guidance for the exercise of such a power.
\nIt is inbuilt and inherent in the provision itself in view of the scheme of
\nthe Act and nature of subject in issue. If interpretation as given on
\nbehalf of the State of Tamil Nadu is accepted that delegation of power is
\nabsolute, then the submission that such delegation is unbridled without any
\nguideline carries great weight. Submission for the Tamil Nadu is that the
\nlotteries may be prohibited in phases, viz, while: running its own
\nlotteries yet prohibiting other, may be as a public policy, for law and
\norder, for political reasons, morality, etc. For surviving such an
\ninterpretation given by Mr, Ganguli the Parliament should have provided
\nsome guidelines. Such an interpretation falls into the trap of the
\nsubmission that this delegation is unbridled. So if there are two
\ninterpretations, the interpretations which upholds the validity should be
\naccepted. So the interpretations as given by Mr. Ganguly cannot be
\naccepted.\n<\/p>\n
There are two parts of the attack of the delegation of power to the State
\nunder Section 5. The later part, by which it can prohibit sale of lottery
\ntickets organised by every other States which leaves no scope of any
\ndiscretion on the States to discriminate from one State to other. SO if it
\ndecides no lottery tickets of any State to be sold it cannot pick or choose
\nfrom one State to the other Once it, as a policy decides to prohibit the
\nsale of lottery tickets of other States it must prohibit every other State,
\nthat is to say, all the States and such a delegation cannot be said to be
\neither abdication of the legislative power of the Parliament or to be
\nunbridled or unguided. As we have said looking to the nature of subject and
\nobject of the Act which is to help each State in its endeavour to run State
\nlotteries which would include starting or closing its lotteries and when a
\nState want to have lottery free zone in its State, then such a delegation
\nto ban lottery of every other State cannot be said to be invalid. To the
\nfirst part, there are two interpretations, one on the plain reading of
\nSection 5, a State may run its own lottery yet may prohibit the sale of
\nlotteries of other States. This construction leads to discrimination and
\nopens for criticism of unbridled delegation. The submission further is, if
\nthe ban of sale of lottery tickets of every other State is as a public
\npolicy, affecting the morality and resultant ill effect on its subject then
\nthere is no justification that State may run its own lottery affecting the
\nvery subject for Which the power is exercised prohibiting the lotteries of
\nother States. It is true, if such an interpretation is accepted then this
\nsubmission has a force. On the other hand, on behalf of the Union the
\nsubmission is that language of the Section has to be read down. The
\ndecision to have its lottery or not to have its lottery has to be in the
\npublic interest. Every decision to have either lotteries authorised by the
\nState or organised by the State has to be in public interest. May be for
\ncollection of public revenue or for a public purpose. It has been held in
\nCentral Inland Water Transport Corp. Ltd. & Aw. v. Brojo Nath Ganguly &
\nAnr., AIR<\/a> (1986) SC 1571 para 93 :\n<\/p>\n
“There must be no injury or harm to the public interest, public good and
\npublic welfare:”\n<\/p>\n
Thus, the decision to run State lottery has to be made with the conscience
\nof its evil consequences on its subject, thus before deciding the State has
\nto equate the public welfare with the injury on its public. It may be in a
\ngiven ease within the limitation of its financial capacity with the need of
\nthe hour it has to decide to run its own lotteries to augment its revenue
\nin the larger interest of the public which if weighed with the evil
\nconsequence on its subject, the public welfare gains more by running it
\nthen the evil consequences on its subject has to give way till situation
\nchanges by finding better way for this additional source or evil
\nconsequences inflicting on its subject over weighing. This exercise has to
\nbe by each State, Union not coming in its way. It is for each State to
\ndecide what is its public welfare and what constitutes an injury to the
\npublic interest. Rattan Chand Hira Chand v. Askar Nawaz Jung,<\/a> [1991] 3 SCC
\n67 (Para. 17) holds, .what constitutes public interest or welfare would
\ndepend upon the time. The social milieu in which the contract is sought to
\nbe enforced would decide the factum, the nature and the degree of injury.\n<\/p>\n
So., whenever a State decides to run or not to run its lotteries it is the
\nState which has to decide as a public policy in the Public interest. Once
\nsuch a decision is taken to have in its State lottery free zone, the
\nentrustment of power by the Parliament cannot be said to be ultra vires.\n<\/p>\n
We find on plain reading of Section 5, it empowers the State Government
\nwithin its State to prohibit the sale of tickets of the lotteries organised
\nby every other States. There is also nothing in the language reading by
\nitself so as to say, whether such power can be exercised by State while
\nrunning its own lottery or can be exercised only where such State does not
\nrun its own lottery. This leads to two possible interpretation, as referred
\nto above. In view of settled principle of interpretations, the
\ninterpretation given by the Union to read down the provision has substance.
\nThis would mean State could only exercise such discretion if it decides not
\nto have any lottery within its territory including its own lottery. In this
\nsituation, the delegate is tied down by this limitation which itself is a
\nclear guide to a State hence cannot said to be unbridled delegation. So
\neven to the first part it cannot be said to be arbitrary nor unbridled. So,
\nwe have no hesitation to approve the interpretation given by the Union to
\nuphold the validity of Section 5: It is true, as submitted on behalf of
\nsome of the North-Eastern States, Nagaland etc. or the State of Sikkim that
\nin the exigencies they are placed with the lack of harnessing their
\nrevenue, if this right is curtailed it would badly affect their revenue. It
\nmay be true to some extent so: far as these States are concerned. However,
\nwe find that the impugned provision does not prohibit such State not to run
\nits own lotteries. Such State can continue to have their own lotteries.
\nOnly where any State decides not to have any lottery the territorial area
\nof such State is only curtailment. What would be the short fall of the
\nrevenue, if any, the figure of which has not been effectively placed before
\nus, whether there is going to be of any substantial loss, but if at all
\nthere is, it is for that State to find an alternative or for the Union to
\nlend support if that is essential Within its permissible limits. These
\nagain are matters in the realm of policy to which this Court tyas no
\njurisdiction to enter into. But this cannot mean to permit any such State
\nto have right to its lotteries (gambling) in other territory in spite of
\nother State prohibiting such activity in its territory. That right could
\nhave been if State Lotteries were trade as understood under Chapter XIII of
\nour Constitution.\n<\/p>\n
Lastly, the challenge is to Section 4(a), (g) and (h) of the Act. The main
\ncontention with some specific vehemence to which various counsel have
\nreferred to is Condition (g) of Section 4 which deals with place of draw to
\nbe located within the State concern. Argument is the condition of law and
\norder in the State of Nagaland is not such where a draw of any lottery
\ncould be held. We do not find any merit in the submission. It is again a
\nquestion of policy and it is for the State executive to take decision
\npertaining to law and order, for that reason no legislation can be held to
\nbe ultra vires or to be struck down. Similar condition of (a) that prizes
\nshall not be offered on any pre-announced number or on the basis of single
\ndigit or that no lottery shall have more than one draw in a week (h); or
\nother conditions in Section 4 are all those which cannot be said to be such
\nto hold these provisions to be ultra vires, or invalid. None of them are
\nsuch which would constitute to be violative of any provision of the
\nConstitution. Hence we have no hesitation to conclude that this last
\nsubmission is also without any merit.\n<\/p>\n
In view of the findings recorded by us above, holding lotteries organised
\nby the State is also gambling in nature, thus the principle as laid down in
\nRMDC case (supra) would equally be applicable to the case of State
\nlotteries. Thus, State lotteries cannot be construed to be a `trade and
\nbusiness’ within the meaning of Articles 301 to 303 of the Constitution of
\nIndia. We also hold that the impugned provisions are not violative of
\nArticle 14 nor the delegation of power by the Parliament to the State
\nGovernment could be said to be delegation of its any essential legislative
\npower or a delegation, which is unguided or unbridled. Thus, we uphold
\nSection 5 and various sub-clauses of Section 4 to be valid piece of
\nlegislation.\n<\/p>\n
Accordingly, the decision of the Guwahati High Court which holds the
\nprovisions of the Ordinance to be ultra vires and consequently staying the
\nprovisions of the impugned Act cannot be sustained which is hereby quashed.
\nAny decision of any Court or any interim order contrary to the decision, as
\naforesaid, are hereby set aside. The various petitions which have been
\ntransferred and which are subject matter of decision, as aforesaid, stand
\ndisposed of in terms of this decision. We will be failing in our duty if we
\ndo not express our gratitude to learned counsel for the parties whose
\ncontribution to this vexed issue has been commendable. Their contributions
\nhelped us greatly to decide this case.\n<\/p>\n
In view of the aforesaid findings, all the aforesaid matters stand disposed
\nof by upholding the impugned provisions and the Act to be valid.\n<\/p>\n
Costs on the parties.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India B.R. Enterprises Etc, Etc vs State Of U.P. And Grs. Etc: Etc on 7 May, 1999 Bench: K Venkataswami, A.P.Misra CASE NO.: Appeal (civil) 2747 of 1999 PETITIONER: B.R. ENTERPRISES ETC, ETC. RESPONDENT: STATE OF U.P. AND GRS. ETC: ETC. DATE OF JUDGMENT: 07\/05\/1999 BENCH: K VENKATASWAMI & A.P.MISRA JUDGMENT: JUDGMENT […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-192972","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nB.R. Enterprises Etc, Etc vs State Of U.P. And Grs. 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