Madras High Court
State Of Sikkim vs State Of Tamil Nadu on 15 November, 2012
Author: C.S.Karnan
Bench: C.S.Karnan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.11.2012 CORAM THE HONOURABLE MR.JUSTICE C.S.KARNAN W.P.No.44756 of 2002 State of Sikkim rep.by it's Director, Sikkim State Lotteries, Government of Sikkim, Gangtok. ... Petitioner vs. 1.State of Tamil Nadu rep.by it's Secretary, Department of Home (Court-II), Fort St.George, Chennai-600 009. 2.The Director General of Police, Kamaraj Salai, Mylapore, Chennai-600 004. ... Respondents PRAYER: Writ Petition filed under Article 226 of the Constitution of India for a Writ of Declaration to declare the Rule-21 of the Tamil Nadu State On-line Lotteries (Regulation) Rules, 2002, as ultra vires the Constitution, the provisions of Sections 5, 6 and 12 of the Lotteries (Regulation) Act, 1998 and illegal, null and void ab initio, in so far as the petitioner is concerned. For Petitioner : Mr.R.Palanisamy for Mr.Rajnish Pathiyil For Respondents : Mr.S.P.Prabhakar Additional Government Pleader * * * * * O R D E R
The prayer in the writ petition is for issuance of a writ of declaration to declare the Rule-21 of the Tamil Nadu State On-line Lotteries (Regulation) Rules, 2002, as ultra vires the Constitution, provisions of Sections 5, 6 and 12 of the Lotteries (Regulation) Act, 1998 and illegal, null and void ab initio, in so far as the petitioner is concerned.
2. The short facts of the case are as follows:
The petitioner submits that the Government of Tamil Nadu is seeking to assume power to pick and choose the lotteries organized by the States other than Tamil Nadu for the purpose of preventing the selected States from marketing the tickets of the lotteries organized by such States under the provisions of the Tamil Nadu State On-line Lottery (Regulation) Rules, 2002, (hereinafter, referred to as 'the Rules'), made under the purported exercise of power conferred by Section 12(1) & (2) of the Lotteries (Regulation) Act, 1998, (hereinafter, referred to as 'the Act'). Apart from being a provision without jurisdiction and without any authority of law and the Constitution of India, the provision in Rule 21 is specifically in contravention of Sections 5, 6 and 12 of the Act, enacted by the Parliament. Section 5 of the Act prohibits any State Government from preventing the sale of tickets of any State Government organized lotteries within their State. Further, even if the lotteries are organized by any State Government in contravention of Section 4 of the Act, it is the Central Government which can prohibit such lotteries under the exclusive powers conferred on the Central Government alone. In any view of the matter, the State Government has powers under Section 12 of the Act, to make Rules in respect of it's own lotteries so as to ensure compliance of Section 4 of the Act and other relevant provision by the administration in organizing the State lotteries, but not for lotteries organized by other States. In the present case, the Rule 21 is hit by all these provisions of the Act.
3. Further, the petitioner State submits that they are organizing, conducting and promoting lotteries like Sikkim State Lotteries in strict compliance with the conditions set out in Section 4 of the Act and they are following the conditions of Sections 4(a) to 4(k) of the Act in in it's letter and spirit. They are selling their tickets of their State lotteries through M/s.Tashi Delek Gaming Solutions Pvt., Ltd., who have been appointed as Marketing Agent under a written agreement, which is in operation and the said M/s.Tashi Delek appointed M/s.Playwin Infravest Pvt., Ltd., as their sole sub-agent to market lotteries on their behalf. Sikkim is a mountainous state bordering China on the north, Nepal in the west and Bhutan in the east. It has practically no natural resources for it to be viable to establish any industries. The State of Sikkim is solely dependent on the Central assistance for it's sustenance and it's development. It is a State, which joined the mainstream of the nation only in 1975 on a popular demand of the people of the State to fulfill it's democratic aspirations. That the only viable source of revenue for the State is tourism and manufacture of hydro electricity-both these resources are in the process of being tapped and are in it's nascent stage with a prolonged gestation period. One of the other main sources of revenue has been the State organized lotteries, which has been contributing immensely to the State's exchequer for meeting it's various financial requirements to meet the welfare programmes i.e., health, education, road, communications etc. The National Government adopting the policy of reduction in subsidies, grants-in-aid and other financial assistance to the States in order to encourage the States to generate it's own revenue, prompted the State of Sikkim to explore possibilities of augmenting it's revenue, took a decision to launch an online computerized lottery business as it found it to be a viable source of revenue after making sustained examination. They engaged in the business of State lotteries since 1979 and they earned very high goodwill in the market as a conductor of lottery, which has earned the confidence of the people. They engage themselves in the lottery business and also in online lotteries with a view to generate revenue for the State from all over the Country. They have limited source of revenue generation on account of various restraints on industrialization and other revenues. As such, the need to have business of lotteries is vital and is in the nature of important budgetary need and life line for the citizens of the State. Further, they submit that the State organized lotteries are now governed by the provisions of the Act, which came into force on and from 02.10.1997.
Power to give directions:-
The Central Government may give directions to the State Government as to carrying into execution in the State of any of the provisions of this Act or of any rule or order made thereunder.
Power of State Government to make Rules:-
(1) The State Government may, by notification in the Official Gazette, make rules to carry out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-
(a) Time to be fixed for claiming prize money under clause (f) of section 4;
(b) Period to be fixed for draws of all lotteries under clause (i) of section 4; and
(c) any other matter which is required to be, or may be, prescribed.
(3) Every rule made by the State Government under this section shall be laid, as soon as may be after it is made, before each House of the State Legislature where it consists of two Houses, or where such Legislature consists of one House, before that House.
4. The petitioner State further submits that the provisions of the aforesaid Act came to be considered by the Supreme Court in the case of M/s.B.R.Enterprises Ltd., v. State of U.P., and others, reported in 1999 (9) SCC 700, AIR 1999 SC 1867, wherein the Supreme Court has specifically considered the scheme of the Act and the powers of the State Government under Section 5 of the Act for the purpose of deciding the ambit of jurisdiction of a State Government in imposing ban on the lotteries organized by other State Government. The Supreme Court, after going into the issues at length, observed that only where any State decides to have any lottery within the territorial area of such State, that State is only made lottery free zone. This means that a State Government cannot stop or ban the marketing of lottery of any other State Government unless it decides to stop marketing it's own lottery within that State. Under Section 6 of the Act, the Central Government may, by order published in the Official Gazette, prohibit a lottery organized, conducted or promoted in contravention of the provisions of section 4 or where tickets of such lottery are sold in contravention of the provisions of section 5. Under Section 10 of the Act, the Central Government is authorized to give directions to the State Governments for the purpose of implementation of the Act or of any rule or order made by the Central Government under the powers conferred under Section 11 of the Act. These provisions of Sections 10 and 11 clearly indicate that it is the Central Government alone, which can make rules, orders and/or issue directions with regard to the carrying into execution in the State, any of the provisions of the Act. The relevant provisions of the aforesaid Act, which are required to be examined for the purpose of the present case are Sections 3, 4, 5, 6, 10 and 12, which are extracted hereunder for ready reference.
5. Further, the petitioner State submits that Sections 3, 4, 5, 6, 10 and 12 of the Act reads as follows:
3. Prohibition of Lotteries:- Save as otherwise provided in section 4, no State Government shall organize, conduct or promote any lottery.
4. Conditions subject to which lotteries may be organized, etc.- A State Government may organize, conduct or promote a lottery, subject to the following conditions, namely:-
a.prizes shall not be offered on any pre-announced number or on the basis of a single digit;
b.the State Government shall print the lottery tickets bearing the imprint and logo of the State in such manner that the authenticity of the lottery ticket is ensured;
c.the State Government shall sell the tickets either itself or through distributors or selling agents;
d.the proceeds of the sale of lottery tickets shall be credited into the public account of the State;
e.the State Government itself shall conduct the draws of all the lotteries;
f.the prize money unclaimed within such time as may be prescribed by the State Government or not otherwise distributed, shall become the property of that Government;
g.the place of draw shall be located within the State concerned;
h.no lottery shall have more than one draw in a week;
i.the draws of all kinds of lotteries shall be conducted between such period of the day as may be prescribed by the State Government;
j.the number of bumper draws of a lottery shall not be more than six in a calendar year;
k.such other conditions as may be prescribed by the Central Government.
5. Prohibition of sale of ticket in a State.- A State Government may, within the State, prohibit the sale of tickets of a lottery organized, conducted or promoted by every other State.
6. Prohibition of organization, etc., of lottery.- The Central Government may, by order published in the Official Gazette, prohibit a lottery organized, conducted or promoted in contravention of the provisions of section 4 or where tickets of such lottery are sold in contravention of the provisions of section 5.
10. Power to give directions.- The Central Government may give directions to the State Government as to carrying into execution in the State of any of the provisions of this Act or of any rule or order made there under.
6. The petitioner State further submits that under Section 12 of the Act, the State Government is empowered to make rules to carry out the provisions of the Act as set out thereunder. The provisions of Section 12 of the Act are meant for the respective State Governments to make rules in respect of it's own lotteries so as to provide the mode, the scheme, the manner and other details for organizing the State Lotteries of the respective State Government in accordance with the provisions of the Act. The said rules are required to be laid before the legislature of the State. A number of States have made their own rules for the conduct of their lotteries and the same have been approved by the legislature of that particular State and their State has also framed their own, rules, namely, the Sikkim State Lottery Rules. The present petition is concerning the lottery rules framed by the State of Tamil Nadu called as Tamil Nadu State Online Lotteries (Regulation) Rules, 2002. The rules have been brought into effect by publication in the Tamil Nadu Government Gazette Extraordinary, dated 19.04.2002. However, the said rules were not made available to the public when the State of Tamil Nadu directed the petitioner State to furnish the information in compliance of Rule 21 of the said Tamil Nadu Rules, which reads as follows:
21.Sale of other State On Line lotteries in Tamil Nadu:-
(1) Any other State or Union Territory or Any country having bilateral Agreement or treaty with Government of India organizing, conducting or promoting Lottery as per Section 4 of the Act shall submit to Secretary, Home Department, Government of Tamil Nadu through the Authority, the following documents and details before starting the sale through online Lottery, namely,:-
(a) the details as per section 4 of the Act.
(b) Copy of the rules, if any, made under Section 12 of the Act.
(c) Specimen Ticket should be submitted with name of the online lottery and type of scheme, number of drawn along with details of the prize structure of every scheme any subsequent addition or deletion to the scheme and any subsequent addition or deletion on the scheme made from time to time.
(d) Details of the Agents, or selling agents appointed for selling it's lottery tickets in the State and the cancellation and fresh appointment thereof.
(e) Details of methodology for conducting the draw by the concerned State Government/Country and details of Prize Winners of each scheme.
(f) Details of the designated Authority or body entrusted to conduct the lottery drawn by the concerned State Government/Country.
(g) Details of the procedure for publishing the Lottery results.
(h) Any other relevant information as directed by the Authority so as to enable it to verify that the scheme is conducted as per the provisions of the Act.
In the absence of complete details the Authority may return the scheme to the concerned State Government/Country directing to furnish the complete details within the period of 15 days. Authority shall verify all the details furnished and send report to Secretary to Government Home Department, who shall assess the report independently taking into accounts various other information available with him from Commercial Tax Department, Police or any other source, if any, and decide as to whether the scheme satisfies all the provisions of the Act and pass appropriate orders.
(2) No lottery should be marketed until appropriate orders under sub-rule (1) above are passed by the Secretary to Government, Home Department, Enforcement Agency may seize such Tickets marketed before passing of orders under sub-rule (1) above.
Enforcement Agency may:-
(a) seize for the purpose of further examination or securing information or investigation any Lottery, thing, machine, document, account books or date excluding proprietary software, on or in such premises of facility, which has bearing on conduct of online lottery.
(c) Seal or otherwise secure any such premises, facility, thing or machine on or in which any document or date which has bearing on the conduct of online lottery is stored or captured.
(d) Take such legal action as per Act, which may be necessary to protect the integrity and conduct of online lottery.
(3) The other States or Union Territories or any country having bilateral Agreement or treaty with the Government of India while selling the Lottery Tickets, the State shall ensure the following, namely:-
(a) In lottery tickets issued by the Government of other States, the name of the Agents in any form or their logo shall not be printed.
(b) The results of the Prize winners should be announced by the Government of other States, which results alone shall be reproduced in the newspapers by the agents and the agents shall not publish the results on their own or in a form or method of their own.
(c) The particulars of the prize winners should be furnished every month to the Authority, after furnishing copy of the same to the Government of Tamil Nadu, Home (Courts-II) Department.
(4) Respective State Governments shall also obtain prior approval of the Authority for it's sub-agents/retailers for point of sales in the State by furnishing all relevant details. Such sub-agents/retailers shall satisfy following qualifications/requirements, namely:-
(a) He must have completed 18 years of age.
(b) Proof of credit worthiness should be furnished.
(c) No due certificate from competent authority of Sales Tax and Income Tax Department should be obtained.
(d) Place of business should not be in the near vicinity of educational institutions/religious institutions like temple, church, mosque and the like.
(e) Place of business should be with clear title on ownership or lease or rent.
(f) He should not have been blacklisted by Government of Tamil Nadu in last three years.
(g) Person should not have been convicted for any criminal offences in last three years for any offence with imprisonment of six months or fine of Rs.5,000/- (Rupees five thousands only) or both.
The Authority shall obtain report from the District Collector. Based on the report of District Collector and after satisfying that all above conditions are complied, the Authority may approve such sub-agent/retailer for sale of on line lotteries of other State in Tamil Nadu.
(5) If any other state online lottery is approved by the Government for sale within the State, it shall require respective State, their agent or it's sub-agent/retailer to allow the Authority or any officer authorized by him or enforcement agency to:-
(a) enter into any premises or facility belonging to or under the control of the Agent or a member of the management of the Agent or any sub-agent/Retailer or Employee or Contractor of the Agent or premises to which Agent has a right of access, at any reasonable time, if such entry is necessary for the public interest or protection of the integrity and interest of the online lottery.
(b) Examine or inspect any thing, machine, document or date captured in any form excluding proprietary software, found on or in the premises or facility and make copies of or make extracts from that thing, machine, document or date.
(c) To take copies of any document, including any information kept by the Agent or sub-agent or retailer relating to the online lottery or all other ancillary activity within the State.
(d) Assist to inspect and take copies of the information in a visible and legible form from the computer or to inspect and check the operation of any computer, and any associated apparatus or materials, that is or has been in use in connection with the keeping of the information.
(6) No other State selling their tickets in the State of Tamil Nadu shall use a name of prefix or suffix in the name of a lottery (e.g., Tamil or Tamil Nadu, name the cities and towns or any such other name which can be used as a prefix or suffix or otherwise), which could mislead people to believe that the said Lottery is organised, conducted or promoted by Government of Tamil Nadu and where the State Government is satisfied that such use is misleading or is likely to mislead people to believe that the lottery is run or conducted by the Government of Tamil Nadu, the Government can cause seizure of such Tickets within the State of Tamil Nadu through it's enforcing Agency.
(7) Any agent selling lottery tickets of any particular draw should have in possession, a copy of the certificate issued by the Assessing authority to the effect that the States Tax in respect of the draw has been paid to the Government and they should show it to the enforcement agency, whenever it is demanded. On non-production of such certificate, enforcement agency is empowered to seize such online lotteries and tickets.
(8) Where the Government either suo motu or on a complaint received in that behalf are satisfied, after verifying the necessary information that sale of tickets of a lottery organised, conducted or promoted by any other State, in the State, is in contravention of the provisions of the act or the rules made thereunder, it may temporarily suspend the sale of such tickets within the State and report the matter to the Government of India seeking it's final order in the matter under Section 6 of the Act.
7. The petitioner State further submits that prior to the said Rules, the Government of Tamil Nadu prescribed a format and sent it to the States vide letter, dated 27.09.1999. This format and the conditions of Rule 21 in the new rules are the same except two additional conditions, which are as under:-
(a) Supply of copy of Rules of the State framed under Section 12 of the Lotteries (Regulation) Act, 1998.
(b) Supply of specimen tickets of the lotteries organized by that State.
The petitioner State, without prejudice to their rights and contentions, submitted to the respondent State the required information under Rule 21.
8. Further the petitioner submits that without prejudice to their rights and contentions, they have furnished all the relevant information and documents required under Rule 21 of the Rules to the respondent State as a measure of good gesture between two States and to respect the request of the respondent State Government though the petitioner State submits that they were not bound to furnish the same as the respondent State has no power to call for such information in the eyes of law. The respondent State has ulterior motives in framing Rule 21 of the Rules. In order to avoid competition and prohibit the sale of tickets of lotteries organized by other State Governments within the State of Tamil Nadu and in particular the lotteries organized by the petitioner State since the petitioner State's lotteries are professionally managed lotteries in compliance with the provisions of the Act and the public has full faith resulting in higher sales in the State. They have come to know that there is an effort to pass an order to erroneously hold the lotteries of their State as not in compliance with the provisions of the Act and then ban the sale of online lottery tickets of lotteries organized by the petitioner State within the State of Tamil Nadu.
9. The petitioner State further submit that these factors have weighed with the respondent State in framing the Rules. In the garb of framing Rules under Section 12 of the Act, the respondent State introduced Rule 21 without authority, without jurisdiction and with ulterior motives and has delved into the field specifically reserved and occupied by the Central Government and is outside jurisdiction of the State Government. Rule 21 of the Rules is not only without authority and without jurisdiction, but is ultra vires Sections 5, 6 and 12 of the Act and also the constitutional mandate on administrative matters between two States. The rules in question are purported to have been framed in exercise of powers conferred under Section 12(2) of the Act. The provisions of Sections 12(1) and 12(2) of the Act authorize a State Government to make rules in respect of carrying out the provisions of the Act regarding the organization of lotteries by that State and not in respect of lotteries organized by other State Governments. The power under Section 12 are for exercise in respect of lotteries of it's own State. Rule 21 specifically has been enacted for sale of lottery tickets of other State lotteries within State of Tamil Nadu and in the garb thereof, variety of information is called for from other State Governments to verify whether the other State Governments are complying with the terms of the act and to pass an order certifying the lotteries of other State Governments as in compliance with the provisions of the Act. A State Government has no power to prohibit the sale of lottery tickets within the State as long as that State Government has it's own lotteries, which are being sold within that State. Even if it is assumed for the sake of argument that lotteries of any State Government are not in compliance of the Act, the power to prohibit such a lottery has been conferred only upon the Central Government under Section 6 of the Act and not on the State Government. A State cannot do indirectly what it is prohibited from doing directly. The State in the garb of protecting its subject cannot firstly ban the lotteries of other State, when it's lottery is being sold freely throughout the State. Secondly, the State has no authority to prescribe qualification for sub-agents/retailers, who are selling lottery of the other States.
10. Further, the petitioner State submits that if the sale of lottery tickets is stopped suddenly, the online lotteries would get affected resulting into huge monetary loss running into several crores of rupees. Further, the provisions of rule 21 do not even provide for an opportunity of being heard to clarify the authority any doubts that they may have. It is a fundamental principle of law that before any order is passed against anyone adverse to its interest, the said person/party is entitled to be heard before passing of any such order. The mischievous and the mala fide motives of the respondent State are further apparent on a perusal of Rules 21(2) and 21(8) of the Rules. Under Rule 21(8), the State Government has cleverly provided that if lotteries of any other State Government is found to be not complying with the provisions of the Act, the State Government would recommend to the Central Government for prohibiting the sale of the lottery tickets of the other State Government under Section 6 of the Act, whereas under Rule 21(2), the State Government has already prohibited the sale of lottery tickets until the appropriate order under Rule 12(1) is passed. The net effect therefore is that the other State Government would not be able to sell until satisfying the respondent State about the compliance of their lotteries with the provisions of the Act and until the orders are passed. The easiest way to prevent the sale of tickets of other states is by not passing the order and keep on seeking information after information and thus preventing the sale of tickets of lotteries organized by other States and then recommend the prohibition of the sale of online lottery tickets to the Central Government. In the business of lottery, this will result in a virtual closure of lottery business in retail market. The constitution of India has not conferred a monopoly in favour of any particular State. As such Rule 21 is a device for creating monopoly in lottery business in the State of Tamil Nadu without any authority or sanction in law. The provisions of Rule 21 are thus illegal and are liable to be set aside. They apprehend that under the guise of exercising power under the Rule, the first respondent through the second respondent and his subordinates will start raiding the offices of the distributors/retailers of the petitioner and start seizing the lottery tickets and/or equipment of the petitioner and the stockists and sub-agents thus virtually banning the Sikkim lotteries without authority of law. Hence, the petitioner State, being apprehensive and to prevent any sudden closure of business, has filed this writ petition seeking the relief as stated above.
11. The highly competent counsel Mr.R.Palanisamy appearing for the petitioner submits that the petitioner is running its state organized lottery all over India. The petitioner has appointed a marketing agent for the Sikkim State On-line lottery under an agreement dated 24.08.2001 for the sale of its lotteries. As such, the petitioner can sell Sikkim lottery tickets in Tamilnadu.
12. The highly competent Additional Government Pleader appearing for the respondent submits that the Tamil Nadu Government itself has banned sale of lottery tickets in the State. This is Government Policy enacted in the interest of public. As such, the above writ petition is not maintainable.
13. On considering the facts and circumstances of the case and arguments advanced by the highly competent counsels on either side and on perusing the typed-set of papers, this Court does not find any force in the writ petition to allow the same. This Court further observes that the Tamil Nadu Government has banned sale of all lottery tickets in their State for the Public Welfare. Hence, the above writ petition is dismissed. There is no order as to costs.
15.11.2012
Index : Yes.
Internet : Yes.
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To:
1.The Secretary,
Government of Tamil Nadu
Department of Home (Court-II),
Fort St.George,
Chennai-600 009.
2.The Director General of Police,
Kamaraj Salai, Mylapore,
Chennai-600 004.
C.S.KARNAN, J.
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W.P.No.44756 of 2002
15.11.2012