Karnataka High Court
State Of Arunachal Pradesh, ... vs Union Of India (Uoi), Through Its ... on 8 May, 2007
Equivalent citations: ILR2007KAR2497, 2007(5)KARLJ157, AIR 2007 (NOC) 1819 (KANT.) = 2007 (4) AIR KAR R 349, 2007 (4) AIR KAR R 349
Author: V. Jagannathan
Bench: V. Jagannathan
ORDER V. Jagannathan, J.
1. The Public Good ought to be the object of the Legislator' - said Jeremy Bentham.
A policy decision of the State of Karnataka to declare the State of Karnataka as 'lottery free zone' led to issuance of Notification dated 27.3.2007. The said notification is the cause for all these Writ Petitions.
2. As the issues involved are common in all the Writ Petitions and so also the prayers, all these petitions are being disposed of by this common judgment.
3. The facts leading to these Writ Petitions are as under:
In the budget presented for the year 2007-08 on 16.3.2007 on the subject pertaining to 'lottery', the proposal reads thus:
Lottery-295 Currently, paper lotteries and online lotteries, including interest lotteries are being organized in the State. It is the desire of the people and the Government that these should not be continued in the interest of the society and poor people. Accordingly, I have proposed to abolish all kinds of lotteries in the State from the next financial year and declare the State of Karnataka as lottery free zone. There will be a loss of about 250 crores rupees to the State because of the ban on lotteries. I hope to make up these loss by strengthening tax collection measures. The Government is also aware that many people who survive by selling lottery tickets would become unemployed. I assure that they will be given preference under Karnataka Suvarna Kayaka Scheme. In case they come forward to undergo training in skill development.
4. The said proposal was approved by the State Legislative Assembly as well as the Legislative Council and this lead to issuance of notification dated 27.3.2007. The said notification which is impugned (Annexure-A) in the main petition reads thus:
In exercise of power conferred by the Section 5 of the Lottery (Regulation) Act, 1998, (Central Act, 1998) the Govt. of Karnataka hereby declares that the Karnataka State shall be the free zone from paper, on line and internet lotteries and prohibits the sale of all type of paper, computerised and online lotteries of Karnataka and other States and lotteries organised by other countries marketed and operated through vending machines, terminals, electronic machines and tickets sold through the internet in Karnataka w.e.f. 1.4.2007.
It is this notification that lead to filing of the above writ petitions.
5. W.P.No. 6680/2007 has been filed by the State of Arunachal Pradesh, M/s Lotus Agency and one Mr. Sithioque and the respondents in this petition are the Union of India, State of Karnataka and the Secretary to Government of Karnataka. In this writ petition, an application was filed seeking amendment of the petition to take additional grounds and the said grounds viz., 23A, 33B, 23C and 2D all relate to the constitutional validity of Section 5 of the 1998 Act and it is contended that the impugned notification is an instance of excessive and disproportionate exercise of power and offends the principle of proportionality. It is also contended that no opportunity was given to the petitioners to present their view points.
6. W.P.No. 6682/2007 is filed by All India Federation of Gaming and Allied Industries, New Delhi and Gi Terminal i-Tech Private Limited, Bangalore, who are the petitioners and the respondents in this petition are the same as in the first petition.
7. In W.P.No. 7241/07, the petitioner is M/s Win Care represented by its director N. Gunashekar who is the distributor of tickets of lottery organised by the State of Arunachal Pradesh as per the agreement entered into between the petitioner and the Government of Arunachal Pradesh.
8. The petitioner in W.P.No. 7492/2007 is M/s Kannaiah Agencies who is the stockiest of State of Sikkim and the tax has to be borne by the said petitioner in conjunction with the State of Sikkim.
9. The State of Sikkim represented by its Director-Lottery, Gangtok is the first petitioner in W.P.No. 7047/2007 and the second petitioner therein is M/s Tashi Delek Gaming Solutions (P) Limited, a Company registered under the Companies Act, 1956 Mumbai, an agent of the first petitioner.
10. Finally, W.P.No. 7050/2007 is filed by M/s Pan India Network Infravest Private Limited, a company registered under the Companies Act, 1956. In all these Writ Petitions i.e., Writ Petition No. 7241/2007, Writ Petition No. 7492/2007, Writ Petition No. 7047/2007 and Writ Petition No. 7050/2007, the respondents are the same as in the first two petitions i.e., Writ Petition No. 6680/2007 and Writ Petition No. 6682/2007.
11. On 17.4.2007, this Court had granted an interim stay of Annexure-A giving liberty to the respondent-State of Karnataka and others to seek vacation/modification of the interim order. All these matters were listed on 4.5.2007 for hearing on the application filed by the State of Karnataka for vacating the interim stay and in the course of bearing, all the learned Counsel appearing for the parties consented for final disposal of these petitions since the grounds urged in the application filed for vacating stay were almost the same as are mentioned in the objections, filed by the State to the first two writ petitions and therefore, with the consent of all the learned Counsel for the parties, this Court heard the matter on merits and that is how, all these petitions are being disposed of finally by this judgment.
12. The facts which are almost identical in all these petitions, as averred by the petitioners, are that the issuance of notification as per Annexure-A is incapable of implementation and inoperative in law as it violates Articles 14, 19(1)(g) and 301 to 304 of the Constitution of India insofar as the said notification declares the State of Karnataka a 'lottery free zone' Under Section 5 of the Lotteries (Regulation) Act, 1998 (for short, hereinafter referred to as the '1998 Act'). It is also the stand of the petitioners that Section 5 of the 1998 Act is ultra vires and a colorable piece of legislation and beyond the powers of the Parliament under Entry 40 of List-1 of the VII Schedule to the Constitution and hence violative of Articles 14, 19(1)(g), 245, 298 and 301 to 304 of the Constitution of India. The petitioners also contend that the impugned notification has rendered several thousands of people, who are engaged in the selling of lottery tickets, without any employment and more than 1,50,000 people are directly or indirectly involved to the lottery business and more than 7,00,000 persons one employed in the lottery business in the State of Karnataka. Apart from loss of huge revenue by way of taxes to the State of Karnataka, the impugned notification has been issued without ascertaining the will of the people and without collecting any data whatsoever. The affected persons were not given an opportunity to have their say in the matter before the State thought of declaring the State of Karnataka as a 'lottery free zone'. Banning of sale of lottery tickets of other States within the territory of Karnataka in illegal, ultra vires of the Constitution and the impugned notification suffers from the defect of arbitrariness and unreasonableness and is disproportionate. It is on these reasons, the petitioners have sought for quashing of the notification. The prayer made in W.P.No. 6680/2007 reads as under:
(a) Issue a writ, direction or order in the nature of mandamus or any other appropriate writ, order or direction declaring that the notification dated 27.3.2007 bearing No. FD 22 Saula 2006 issued by the 2nd respondent under Section 5 of the Lotteries (Regulation) Act, 1998 (Annexure-A) declaring the State of Karnataka as a lottery free zone as unauthorised, illegal, incapable of implementation and inoperative in law;
(b) Issue a writ, direction or Order in the nature of certiorari or any other appropriate writ, direction or order quashing and setting aside the notification dated 27.3.2007 bearing No. FD 22 Saula 2006 issued by the 2nd respondent under Section 5 of the Lotteries (Regulation) Act, 1998 (Annexure-A) declaring the State of Karnataka as a lottery free zone;
(c) Issue a writ, direction or order declaring Section 5 of the Lotteries (Regulation) Act, 1998 Annexure-B as ultra vires, colorable piece of legislation and violative of Article 14, 19(1)(g), 245, 298, 301 to 304 as also Entry 40 List I in VII Schedule to the Constitution of India; and
(d) grant such other relief that this Hon'ble Court may deem fit in the facts and circumstances of the case.
Similar are the grounds urged in the other writ petitions and so also the prayers.
13. The State of Karnataka in its objections filed in WP.No. 6680/07 which has been adapted in other writ petition also, has contended that the writ petitions are not maintainable insofar as the challenge Under Section 5 the 1998 Act to concerned in view of the Supreme Court of India having upheld the validity of the vires of Section 5 as well as the whole Act in the case of B.R. Enterprises v. State of Uttar Pradesh . It is also stated in the objections that in view of the constitution bench decision of the Supreme Court in the case of State of Bombay v. R.M.D. Chamarbaugwala , lottery is res extra commercium and the decision to ban all the lotteries including its own lottery in the State of Karnataka is part of the budget proposal of the State having had the approval of the State Legislative Assembly as well as the Legislative Council and staying of the notification amounts to staying of part of the budget and therefore, the writ petitions are not maintainable. It is also contended in the objections filed by the State that thousands of people have ruined themselves by having become addicted to lottery activities and as many as 35,700 draws are being held every year and it has brought miseries to people and their families. The Government has received representations from several bodies which are to be found at Annexure-R-1 to the objections and a look at them would go to indicate that majority of the people of the State are against the lotteries being organised in the State of Karnataka. It is also note-worthy to mention that as many as 17 States have banned all types of lotteries and these States are Chattisgarh, Orissa, Rajasthan, Tamilnadu, Uttarkhand, Uttar Pradesh, Andhra Pradesh, Gujarat, Tripura, Bihar, Karnataka, Haryana, Himachal Pradesh, Jammu and Kashmir, Madhya Pradesh, Manipur and Delhi. It is also stated in the objections that before taking the decision to ban the lotteries, the Director of State Lotteries, Joint Secretary to Government of Karnataka, Finance Department examined the pros and cons of such a ban by visiting the States of Andhra Pradesh, Tamilnadu and Kerala and the study revealed that people of these States welcomed the ban on lotteries. Placing reliance on the decision of the Apex Court in B.R. Enterprises v. State of Uttar Pradesh and Ors., cited supra, it is contended in the objection statement that all the grounds urged by the petitioners concerning the constitutional validity of 1998 Act and also Section 5 of the said Act, have been dealt with exhaustively in the aforesaid decision of the Supreme Court and therefore, all the grounds attacking the validity of the Act as well as Section 5, therefore, have no basis and the petitioners cannot question the judgment of the Supreme Court before this Court and therefore, all the Writ Petitions are liable to be dismissed in limine for the aforesaid reasons.
14. I have heard the submissions made by the learned Senior Counsel Sri Soli Sorabjee for the petitioners in W.P.No. 6680/07 and W.P.No. 7047/07. Learned Senior Counsel and former Advocate General Sri. B.V. Acharya submitted the arguments on behalf of the petitioners in W.P.No. 6682/07. Learned Counsel Sri Krishnan Venugopal alongwith Sri Shashikiran Shetty contended as per the grounds raised in W.P.No. 7492/07 and 7050/07. Learned Advocate General for the State Sri Udaya Holla defended the notification Annexure A and submitted arguments in response to the contentions put forward by the petitioners. It is to be mentioned at this juncture that though the learned Advocate General for the State opened the agreements, since I.A. for vacating stay had been fifed and later on, the learned Counsel for the petitioners submitted their arguments, I deem it proper, for the sake of convenience and to appreciate the case in proper perspective, to first refer to the submission made toy the petitioners' Counsel.
15. Learned Senior Counsel Sri Soli Sorabjee put forward five-fold contentions. The first and the foremost contention is that there is no power granted to the State to ban the lotteries of other States and in this regard, he drew nay attention to Article 73 which deals with the extent of executive power of the Union and Article 162 dealing with the extent of executive power of the State and by referring to entries 40 in the Union List and 34 in the State List in VII Schedule to the Constitution of India, it is contended that the State has no power to declare the ban of lotteries on the other States being sold within the territory of State of Karnataka. In the absence of executive power, the impugned notification therefore cannot be upheld and the very fact that Entry 40 of List-I deals with lotteries and Entry 34 of State List deals with betting and gambling, it is thus clear that the State has got no power to make any law or issue notification with regard to the lottery which is an item falling under the Union List. Therefore, it was contended that the State has got no authority or power Under Section 5 of the 1998 Act to ban lotteries of other States being sold within the State of Karnataka and it is also contended that there is no absolute ban of lotteries in the country as could be seen from the Scheme of 1998 Act.
16. The second contention put forward by the learned Senior Counsel is that notwithstanding the fact that the State had no power to issue the notification banning lotteries, yet assuming that it has the powers, there are no guidelines prescribed under the Act and therefore, in the absence of guidelines indicating the manner of executing the powers vested with the State, the impugned notification and consequently Section 5 of the 1998 Act will have to be held unconstitutional because of the power being unguided and unbridled. The third contention advanced by the learned Senior Counsel Sri Soli Sorabjee is that the petitioners were not given an opportunity to have their say in the matter and when the lives of so many thousands rests on the activities of lottery, the State ought to have heard the affected persons and although it is impracticable to give hearing to every one of the persons engaged in the business of lotteries, the barest minimum would have been to have given an opportunity to atleast some of the affected persons before the impugned notification was issued and therefore, the action of the State in issuing the notification as per Annexure-A suffers from the vice of violation of principles of natural justice. Therefore, the impugned notification cannot be sustained in law for this reason. The next submission made by the learned Senior Counsel is that the action of the State in issuing the notification as per Annexure-A is wholly arbitrary, unreasonable and is disproportionate exercise of power and hence the impugned notification cannot be sustained in law. It is contended that where was the mortal hurry in bringing out the notification on 27.3.2007 making it effective from 1.4.2007 i.e., hardly within three days of issuance of the notification. Therefore, it is contended that the said act of the State its highly arbitrary and is disproportionate and that the notification issued as per Annexure-A is violative of Articles 14 and 19(1)(g) of the Constitution of India. In support of the above contentions, learned Senior Counsel Sri Soli Sorabjee placed reliance on the following decisions:
1. 1999 (9) SCC 700
2. (2001) (3) SCC 635
3. AIR 1967 SC 1766
4. AIR 1991 SC 1117
5. (1995) (1) SCC 114
6. (2004) 7 SCC 68
17. Learned Senior Compel Sri B.V. Acharya while reiterating the contentions urged by the learned Senior Counsel Sri Soli Sorabjee pointed out that what is being questioned by the petitioners is the manner in which the notification has been issued. It was submitted that until the issuance of the notification, the State itself was selling the lottery through MSIL and its action to ban lotteries and declaring the State of Karnataka 'lottery free zone', after having allowed the petitioners and others engaged in the business of lottery to be in the said business for over three decades, without giving an opportunity to the petitioners to put in their say, renders, the action on the part of the State violative of Article 21 of the Constitution of India. In the absence of guidelines being there, the action of the State Government in issuing the notification cannot be sustained in law. Insofar as the decision of the Apex Court in B.R. Enterprise's case, cited supra, is concerned, the learned Senior Counsel pointed out that the Apex Court has observed in Paragraph 2 of its judgment as under:
2. xxxxxx Apart from the common issues, we are not disposing of nor propose to dispose of any of the individual residuary points, if any, that remain after our this adjudication.
18. Referring to the said observation, it is contended that as there are no guidelines to indicate the manner of executing power vested Under Section 5 of the 1998 Act and in the absence of rules being framed by the State in this regard, particularly having inferred to Section 11 of the Act, the impugned notification therefore, is illegal and suffers from arbitrariness. In a sense, the learned Senior Counsel submitted that the challenge is with regard to the notification, though not with regard to the constitutional validity of Section 5 of the 1998 Act. The learned Senior Counsel wound-up his arguments by contending that in the absence of legislative power, the State could not have exercised its executive power to issue the impugned notification Annexure-A and there is no proper application of mind inasmuch as, the decision has not been arrived at in a fair manner by giving minimum opportunity to the petitioner and the affected persons. A reference was also made to the effect that in respect of prohibition on the sale of arrack, mane time has been granted, by the Government, whereas in respect of lottery, within a couple of days of issuance of the notification, the ban has been brought to force. The balance of convenience therefore lies in favour of the petitioners.
19. Learned Counsel Sri Krishnan Venugopal and Sri Shashikiran Shetty for the petitioners submitted that in B.R. Enterprise's case, cited supra, there is no reference to the decision of the Apex Court rendered in H. Anraj-I case referring to Entry 40 of List-1 and the corresponding entry 34 of Lists-2 in the VII Schedule, it is submitted that the activities of lottery has been carved out of the entry 'betting and gambling' and has been put in the Union List and therefore, the State has no power or authority to ban the lotteries of other States being sold in the State of Karnataka. It is submitted that to the extent of the power of the State under Section 5 of the 1998 Act being unguided, the action of the Government, therefore, becomes arbitrary exercise of power. In support of the said submissions, apart from the decision in H. Anraj's-I Case referred to above, support was also drawn from the decision in the case of Bannari Amman Sugars Ltd. v. Commercial Tax Officer and Ors.
20. The learned Advocate General for the State Sri Udaya Holla at the outset submitted that insofar as the grounds urged by the petitioners as regards the constitutional validity of Section 5 of 1998 Act, as well as the provisions of the whole Act are concerned, the issue is no longer res integra inasmuch as the Apex Court in B.R. Enterprises v. State of Uttar Pradesh and Ors. has comprehensively dealt with all the grounds that have been raised in the present petitions and has answered in categorical terms that Section 5 as well as all the provisions of 1998 Act are held to be constitutionally valid and therefore, it is not open to the petitioners to urge before this Court once again that Section 5 of the 1998 Act is ultravires of the Constitution and therefore, the said stand of the petitioners is nothing but an abuse of the process of law.
21. It was also submitted that insofar as the guidelines are concerned, the Apex, Court has dealt with the issue exhaustively in B.R. Enterprises's Case and even with regard to the colorable legislation as well as the power of the State to ban lotteries of other States the law laid down by the Apex Court in the above case is an answer and thus all the grounds urged by the petitioners as well as the contentions put forward by the learned Senior Counsel for the petitioners in this regard will have to be rejected as unsustainable in law. The learned Advocate General in this connection referred to the decision of the Apex Court with regard to the binding effect of the judgment of the Supreme Court by virtue of Article 141 of the Constitution.
22. As regards the notification issued being arbitrary, unreasonable or disproportionate is concerned, the submission made by the learned Advocate General is that the notification is only a ministerial act reflecting the policy decision of the State of Karnataka and the said decision also forming part of the budget presented for the year 2007-08, such policy decision of the State, more so, when it forms a part of the budget, is not subjected to judicial review and the notification as such, having been issued subsequent to the budget proposal being approved in both the houses of the legislature, it is not possible to take the view that the said action of the State is arbitrary or unreasonable or for that matter disproportionate.
23. As far as the opportunity of hearing is concerned, learned Advocate General Sri Udaya Holla submitted that the settled position of law is that, insofar as the policy decisions of the State are concerned, there is no room for application of principles of natural justice and in this regard he placed reliance on number of decisions of the Apex Court.
24. Referring to the nature, character and status of lottery as such, it is submitted that in view of the Constitutions. Bench decision of the Apex Court, in State of Bombay v. R.M.D. Chamcarbaugwala, followed by the decision in B.R. Enterprises's case, lottery by its very nature is nothing but gambling and it is res extra commercium and does not enjoy protection of Article 19(1)(g) of the Constitution of India. Therefore, the learned Advocate General submitted that the argument advanced to the contrary, by the petitioners' Counsel does not carry enough conviction behind it and as far as, the decision in H. Anraj's-II case is concerned, the Apex Court in B.R. Enterprises's case has considered H. Anraj's decision and after referring to all the earlier decisions the Supreme Court has laid down the law that Section 5 as well the whole provisions of 1998 Act are constitutionally valid and in view of the said law laid down by the Apex Court, the decision of the State to ban lotteries by taking recourse to Section 5 of 1998 Act cannot be faulted as the said decision does not suffer from violation of any of the constitutional provisions.
25. Though the learned Advocate General also referred to the aspect of grant of final relief by way of interim relief itself and referred to number of decisions in this regard, since all the petitions have been taken up for disposal finally, I do not deem it necessary to refer to the said argument advanced by the learned Advocate General.
26. As far as denial of opportunity to the petitioners and the affected persons are concerned, the learned Advocate general submitted that the documents produced at Annexure-R1 to the objections would go to show that the Government did hear the affected persons and even though the Government did consult the concerned persons namely, the distributors, agents involved in the lottery activity, the said persons did not concede to the request of the Government to have minimum number of drawn and it is only after the failure on the part of the persons engaged in the lottery activity and following consultation from several sections of people as well as from several bodies, the Government after careful consideration of all the matters took a policy decision to declare the State of Karnataka took a Lottery Free Zone and the said decision having formed part of the budget proposals and having had the approval of legislators cutting across party lines, the said decision of the Government to ban lottery, therefore, cannot be subjected to judicial review.
27. In support of his submissions, the learned Advocate General Sri Udaya Holla for the State placed reliance an the following judgments:
(1) [1999] 9 SCC 700 (2) AIR 1947 SC 699 (3) [2004] 11 SCC 26 (4) [2005] 1 SCC 625 (5) AIR 2002 SC 350 (6) [2001] 3 SCC 635 (7) [2005] 9 SCC 733 (8) [1995] 3 SCC 263 (9) [1995] 6 SCC 614 (10) ILR 1994 KAR. 1125 (11) AIR 1976 SC 1992 (12) AIR 1986 SC 1455 (13) AIR 1964 SC 1359 (14) AIR 1987 SC 2323 (15) AIR 1983 SC 1272 (16) [1985] 1 SCC 523 (17) [1995] 1 SCC 85 (18) [1995] 1 SCC 374 (19) [1985] 1 SCC 260
28. On behalf of the Union of India Smt. Veena Jadhav submitted that so far as the contentions urged by the petitioners concerning the validity of Section 5 of 1998 Act and the power of the State to issue notification in regard to lottery which falls under Entry-40 of List-I is Concerned, the answer to the said contention of the petitioner can be found in the decision of the Apex Court in B.R. Enterprises's case and therefore, the question of Section 5 of the 1998 Act being ultra vires or for that matter, the power given to thus State being a colorable piece of legislation does not arise.
29. In the light of the contentions urged by the learned Counsel appearing for the parties and taking note of the grounds urged in the writ petitions as well as the stand taken by the State in its objections and also upon a careful perusal of all the rulings cited by the learned Counsel appearing for the parties the following points arise for consideration:
i) Whether Section 5 of the 1998 Act is ultra vires the Constitution and a colorable piece of legislation beyond the powers of the Parliaments under Entry-40 of List-I of the VII Schedule of the Constitution?
ii) Whether the impugned notification Annexure-A is violative of Articles-14 19(1)(g), 301 to 304 of the Constitution of India insofar as it declares the State of Karnataka as Lottery Free Zone under Section 5 of the 1998 Act and is amenable to judicial review?
iii) Whether the impugned notification Annexure-A is unsustainable in law for want of application of principles of natural justice?
iv) Whether the impugned notification at Annexure - A suffers from defect of it being arbitrary, unreasonable and disproportionate?
30. Before I refer to the contentions concerning validity of Section 5 of the 1998 Act, I deem it proper to refer to the position in law with regard to nature, character and status of lottery as such. Lottery is a game of chance involving no skill and hence, it is gambling. A Constitution Bench of the Supreme Court in the case of State of Bombay v. R.M.D. Chamarbaugwala AIR 1957 SCC 699 considered in great depth the nature an character of lottery and has observed at paragraph-40, 41 and 42 thus:
(40) As for back as 1850 the Supreme Court of America in Phalen v. Commonwealth of virginia (1850) 49 U.S. 163:12 Law Ed. 1030 at P. 1033 (z) observed:
Experience has shown that the common forma of gambling are comparatively innocuous when placed in contract with widespread pestilence of lotteries. The former are confined to a few persons and places, but, the latter interests the whole community; it enters every dwelling; it reaches every class; it preys upon the hard earnings of the poor; it plunders the ignorant and the simple.
(41) The observations were quoted, with approval, in Douglas v. Commonwealth Kentucky, 1897 168 U.S.483: 42 Law Ed. 553 at P.555 (Z1). After quoting the passage from (1850) 49 U. S. 163 : 12 Law Ed. 1033(Z) the judgment proceeded;
Is the State forbidden by the supreme law of the land from protecting its people at all times from practices which it conceives to be attended by such ruinous results? Can the Legislature of a State contract away its power to establish such regulations as are reasonably necessary from time to time to protect the public morals against the evils of lotteries?
(42) It will be abundantly clear from the foregoing observations that the activities which have been condemned in this country from ancient times appears to have been equally discouraged and baked upon with disfavour in England, Scotland, the United States of America and in Australia in the cases referred to above.
We find it difficult to accept the contention that those activities which encourage a spirit of reckless propensity for making easy gain toy lot or chance, which lead to the boss of the hard earned money of the undiscerning and improvident common man and thereby lower his standard of living and drive him into a chronic state of indebtedness and eventually disrupt the peace and happiness of his humble home could possibly have been intended by our Constitution makers to be raised to the status of trade, commerce or intercourse and to be made the subject matter of a fundamental right guaranteed by Article 19(1)(g).
We find it difficult to persuade ourselves that gambling was ever intended to from any part of thus ancient country's trade, commerce or intercourse to be declared as free under Article 301. It is not our purpose nor is it necessary for us in deciding this case to attempt an exhaustive definition of the word "trade", "business" or "intercourse".
We are, however, clearly of opinion that whatever else may or may not be regarded as falling within the meaning of these words, gambling cannot certainly be taken as one of them. We are convinced and satisfied that the real purpose of Article 19(1)(g) and 301 could not possibly have been to guarantee or declare the freedom of gambling. Gambling activities from their very nature and in essence are extra-commercium although the external forma, formalities and instruments of trade may be employed and they are not protected either by Article 19(1)(g) or Article 301 of our Constitution.
31. In the case of B.R. Enterprises v. State of Uttar Pradesh and Ors. , the Hon'ble Supreme Court dealing with the nature and character of lottery has made the following observations at paragraphs-47 and 59 thus:
47. From the references from Dharmashastra, opinions of distinguished authors, references in the Encyclopaedia Britannica and Boston Law Review and others, we find that each concludes, as we have observed, lottery remains in the realm of gambling. Even where it is State-sponsored still it was looked down upon as an evil. Right from ancient time till the day all expressed concern to eliminate this, even where it was legalised for raising revenue either by the king or in the modern times by the State. Even this legitimisation was for the sole purpose of raking revenue, was also for a limited period, since this received condemnation even for this limited purpose. All this gives a clear picture of the nature and character of lottery as perceived through the conscience of the people, as revealed through ancient scriptures, also by various courts of the countries. It is in this background now we proceed to examine, if lotteries are goods, could a contract for sale of such goods be conferred the status of trade and commerce as used in Chapter XIII of our Constitution."
59... But it cannot be doubted and it is recognised by all the countries that gambling by its very nature promises to make a poor man a rich man; to quench the thirst of a man in dire economic distress or to a man with a bursting desire to become wealthy overnight it draws them into the magnetic field of lotteries with crippling effect. More often than not, such hopes with very remote chance encourages the spirit of reckless prosperity (sic propensity) in him, ruining him and his family. This encouraging hope with the magnitude of prize money never dwindles. Losses and failures in lotteries instead of discouragement increases the craze with intoxicating hope, not only to erase the losses but to fill his imaginative coffer. When this chance mixes with this utopian hope, he is repeatedly drawn back into the circle of lottery like a drug addict. Inevitably, the happiness of his family is lost. He goes into a chronic state of indebtedness.
32. It is theorefore dear from the aforesaid observations of the Apex Court that lottery is nothing but gambling and it is res extra commercium and does not have the protection of Article 19(1)(g) of the Constitution of India.
33. In the case of Khoday Distilleries Ltd. v. States of Karnataka and Ors. the Apex Court has observed that activities which are res extra commercium cannot be carried on by any citizen.
34. The Apex Court in the case of State of Punjab v. Devans Modern Breweries Limited at paragraph-144 has made the following observations:
144. In the case of B.R. Enterprises v. State of U.P. this Court held that this case relates to lottery which is gambling in nature. This Court held that merely because a lottery transaction is run by the State itself will not change its character as res extra commercium and that merely because lottery tickets are goods, transaction of sale thereof cannot constitute trade and while trade contains skill with no chance, gambling contains the element of chance with no skill and, therefore, ban by any State on the sale of lotteries of other States within its territory does not violate Articles 301 and 303.
35. It is thus clear from the above decisions of the Constitution Bench of the Supreme Court in State of Bombay v. R.M.D. Chamarbaugwala and Khoday Distilleries's case as well as Devans Modern Breweries's case that lottery is nothing but gambling and it is res extra commercium and its effect is pernicious and it does not enjoy the protection of Article 19(1)(g) of the Constitution of India. With this back-ground, I now proceed to deal with the points raised, for consideration.
36. Reg. Point No. 1:
So far as the validity of Section 5 of the 1998 Act is concerned as also the other grounds urged in the writ petitions pertaining to colorable legislation. Section 5 being unguided and unbridled, there is no power under Section 5 of the 1998 Act for the State to declare ban of lotteries of other States within its territory is concerned, as rightly submitted by the learned Advocate General all the grounds urged by the petitioners touching upon the constitutional validity of Section 5 and the said submission being ultra vires end being colorable piece of legislation beyond the powers of the Parliament under Entry-40 of List I of the VII Schedule and being violative of Articles 14, 19(1)(g), 245, 298, 301 to 304 of Constitution of India are concerned, all these questions have been comprehensively dealt with by the Supreme Court in the case of B.R. Enterprises v. State of Uttar Pradesh and Ors. . The relevant observation of the Apex Court are to be found at paragraphs--84, 85, 86 and 87 and they are as under:
84. In Section 2(b) lotteries ere defined to be a scheme for distribution of prizes by a lot or chance. This definition itself recognises that even in State lotteries the prizes are to be collected by change without any skill, hence gambling in nature. Section 3 prohibited that no State lotteries can be organized without the condition stipulated under Clauses (a) to (k) of Section 4. Section 4 provides the conditions to be complied with by the State lotteries. To initiate any State lottery it is left to the policy of each State, for this, the Act is silent. The only control is, in case it decides, then it must follow the conditions as laid down under Section 4. Nest comes Section 5, which is subject matter of challenge, the delegation of power of the State to prohibit the sale of lottery tickets organised by every other State. If a State desires not to its people to the lottery gambling, it has no power to restrict lotteries organised by other States. It is to remove this mischief that power is conferred through delegation to the States to do it in terms of their own policy. By virtue of this, now the State Government can prohibit sale of lottery tickets of every other State within its territory. Next, Section 6 seeks strict compliances with Section 4. Under this the Central government may prohibit any State lottery which is being conducted in contravention of the conditions as laid down under Section 4 or Section 5. Section 7 shows the rigour of this Act by making it a penal offence as against all, who violate the provisions of this Act, be it the Head of the department of the Government or the agent, promoter or trader, to be punishable with two years rigorous imprisonment. Section 8 makes such an offence cognizable and non bailable. Similarly, Section 9 deals with offences committed by the companies. Section 10 entrusts the Central Government power to give directions to the State Government for carrying into execution the provisions of this Act, Rule or Order. Sections 11 and 12 are the rule-making power entrusted to the Central and the State Governments respectively. Section 13 repeals the ordinance. Thus, the whole Act makes clear that the subject it is dealing with is gambling in nature. The object of the Act is not to control the policy decision of each State to start or to close its lotteries, but to regulate it in case a State decides to run its own lottery through modalities and conditions laid down therein. Emphasis of the whole Act is to abide by the conditions strictly if you want to run a lottery. Thus, regulation is through conditions to eliminate even the remotest possibility of malpractices by providing stringent measures for its compliance. Perusal of the Act reveals, the scheme of the Act is limited in its application and it admits the subject it is dealing is gambling in nature. As we have said, the decision to collect or not to collect revenue through State lotteries is exclusively within the policy decision of the State and for this, neither the Union nor Parliament interferes nor is there any indication under the Act. Thus, the question which remains is, if any State decides that it does not want any lotteries but if it feels helpless as having no jurisdiction over the lotteries organised by other States, what is the way out? This can only be done by Parliament or by entrusting this power on such State desiring so, which has been done through Section 5. In this background, for this helplessness of a State as recorded in Anraj case-I, the remedy is provided by entrusting this power on the State under Anraj case-I, the remedy is provided by entrusting this power on the State under the impugned provision. This helps such State to achieve its objective of lottery (gambling)-free zone within its territory. A well-concerned remedy. Next question is what could have been the guideline? If State lotteries are gambling and it cannot be termed as "trade and commerce" at common parlance for any free right under the constitution. Such right though recognised under Article 298 so other States may continue to enjoy till prohibited by valid law, and if any State wants within its State lottery-free zone and for which the power is entrusted to such State, it cannot be said in this setting and background and the nature of the subject that such a delegation is of its essential legislative power. The only guideline necessary in such delegation is to see that the State does not pick and choose one State form the other, which guideline is already provided in this Section. It provides that such a ban could only be if it is applied to every other State. The only residual field of attack so far as this delegation could be, which has been attacked in this case, that the State could on one hand ban lotteries of every other State but run its own lotteries. It is argued that while a State bans lotteries of other States not to permit any gambling activity in the public interest as a policy but this very public interest is flouted by having lotteries of its own. It is true that unless this provision is read down to mean a State can only ban lotteries of other States when it bans as a policy its own lotteries, it is bound to fee subjected to be vagaries as pointed out and on deeper scrutiny it may not successfully stand. But by reading down the provision which has to be read that it is only that State which decides lottery-free zone within its State can prohibit lotteries of other States clearly provides the guidance for the exercise of such a power. It is inbuilt and inherent in the provision itself in view of the scheme of the Act and nature of subject in issue. If interpretation as given on behalf of the State of Tamil Nadu is accepted that the delegation of power is absolute, then the submission that such delegation is unbridled without any guidelines carries great weight. Submission for the State of Tamil Nadu is that the lotteries may be prohibited in phases, viz., while running its own lotteries, yet prohibiting other lotteries, may be as a public policy, for law and order, for political reasons morality, etc. For surviving such a interpretation given by Mr. Ganguli, Parliament should have provided some guidelines. Such an interpretation falls into the trap of the submission that this delegation is unbridled. So if there are two interpretations, the interpretation which oppose the validity should be accepted. So the interpretation as given by Mr. Ganguli cannot be accepted.
85. There are two parts of the attack of the delegation of power to the State under Section 5. The latter part, by which it can prohibit sale of lottery tickets organised by every other State which leaves no scope of any discretion on the States to discriminate from one State to other. So if it decides no lottery tickets of any State to be sold, it cannot pick or choose from one State to the other. Once it, as a policy, decides to prohibit the sate of lottery tickets of other States, it must prohibit every other State, that is to say, all the States and such a delegation cannot be said to be either abdication of the legislative power of Parliament or to be unbridled or unguided. As we have said looking to the nature of the subject and object of the Act, which is to help each State in its endeavour to run State lotteries which would include starting or closing its lotteries and when a State wants to have lottery-free zone in its State, then such a delegation to ban lottery of every other State cannot be said to be invalid. To the first part there are two interpretations one on the plane reading of Section 5, a State may run its own lottery yet may prohibit the sale of lotteries of other States. This construction leads to discrimination and opens for criticism of unbridled delegations. The submission further is, if the ban of sale of lottery tickets of every other State is a public policy, affecting the morality and resultant ill-effect on its subject then there is no justification that the State may run its own lottery affecting the very subject for which the power is exercised prohibiting the lotteries of other States. It is true, if such an interpretation is accepted then this submission has a force. On the other band, on behalf of the Union, the submission is that the language of the Section has to be read down. The decision to have its lottery or not to have its lottery has to be in the public interest. Every decision to have either lotteries authorised by the State or organised by the State has to be in public interest. May be for collection of public revenue or for a public purpose. It has been held in Central Inland Water Transport Corporation Ltd., v. Brojo Nath Gauguly AIR Paragraph 93:
There must be no injury or harm to the public interest, public good and public welfare.
Thus, the decision to run State lottery has to be made with the conscience (sic consciousness) of its evil consequences on its subject. Thus before deciding the State has to equate the pubic welfare with the injury on its public. It may be in a given case within the limitation of its financial capacity with the need of the hour it has to decide to run its own lotteries to augment its revenue in the larger interest of the public which if weighed with the evil consequences on its subject, the public welfare gains more by running it then the evil consequence on its subject has to give way till the situation changes by finding a better way for this additional source or evil consequences inflicting on its subject overweighing. This exercise has to be by each State, the Union not coming in its way. It is for each State to decide what is its public welfare and what constitutes an injury to the public interest. Ratan chand Hira Chand v. Askar Nawaz Jung SCC paragraph 17 holds what constitutes public interest or welfare would depend upon the time. The social milieu in which the contract is sought to be enforced would decide the factum, the nature and the degree of injury.
86. So, wherever a State decides to run or not to run its lotteries it is the State which has to decide as a public policy in the public interest. Once such a decision is taken to have in its State lottery-free zone, the entrustment of power by Parliament cannot be said to ultra vires.
87. We find on plain reading of Section 5, it empowers the State Government within its State to prohibit the sale of tickets of the lotteries organised by every other State. There is also nothing in the language reading by itself so as to say, whether such power can be exercised by the State while running its own lottery or can be exercised only where such State does not run its own lottery. This leads to two possible interpretations, as referred to above. In view of settled principle of interpretations, the interpretation given by the Union to read down the provisions has substance. This would mean that the State could only exercise such discretion if it decides not to have any lottery within its territory including its own lottery. In this situation, the delegatee is tied down by this limitation which itself is a clear guide to a State hence cannot be said to be unbridled delegation. So even to the first part it cannot be said to be arbitrary or unbridled. So, we have no hesitation to approve the interpretation given by the Union to uphold the validity of Section 5.
(Emphasis by me)
37. Further, while upholding Section 5 of the 1998 Act and various clauses of Section 4 to be valid piece of legislation, the Apex Court has made the following observations at paragraph-90:
90. In view of the findings recorded by us above, holding lotteries organised by the State is also gambling in nature, thus the principle as laid down in RMDC case would equally be applicable to the case of State lotteries. Thus, State lotteries cannot be construed to be a "trade and commerce" within the meaning of Articles 301 to 303 of the Constitution of India. We also hold that the impugned provisions are not violative Article 14 nor could the delegation of power by Parliament to the State Government be said to be delegation of its any essential legislative power or a delegation, which is unguided or unbridled. Thus, we uphold Section 5 and various clauses of Section 4 to be valid piece of legislation.
Finally, the Court concluded by observing that the impugned provisions and the 1998 Act are constitutionally valid.
38. It is thus clear from the above pronouncement of law the highest Court of land that Section 5 of the 1998 Act has been held to be valid and the Court has also ruled that Section 5 of the 1998 Act does not suffer from excessive delegation of essential legislative powers by the Parliament to the States without any policy and guidelines and the Court also held that guidelines are given in the Act itself and the said guidelines cannot be construed as unbridled or unguided.
39. As far as the submission raised by the petitioners' Counsel with regard to H. Anraj's case-II 1996 (1) SCC 414 is concerned, the Supreme Court did refer to the said case also at paragraph-49 of its judgment and it is only after referring to the decisions reported in AIR 1957 SCC 699 (State of Bombay v. R.M.D. Chamarbaugwala), (State of Haryana v. Suman Enterprises) and several other decisions of the Constitution Bench of the Apex Court, law was laid down as above in B.R. Enterprises's case. Such being the authoritative pronouncement of the Apex Court in the aforesaid decision upholding the entire 1998 Act to be valid and so also Section 5 in particular, being found to be not ultra vires, the constitution question of this Court once again embarking upon the constitutional validity of Section 5 of the 1998 Act or for that matter any of the provisions of 1998 Act, does not arise. It will be improper far all the other Courts not to act upon the law laid down by the Supreme Court. In the cause of Shyamaraju Hegde v. U. Venkatesha Bhat it has been held, that judicial propriety warrants that the decisions of the Supreme Court must be taken as wholly binding on all the High Courts. The Court also observed that by virtue of provisions of Article 141 of the Constitution, the law declared by the Supreme Court shall be binding on all the Courts within the territory of India. I am therefore of the view that it is not open to this Court to once again go into the question of constitutional validity of otherwise of Section 5 as well as the whole provisions of 1998 Act.
40. In the case of Nand Kishore v. State of Punjab the Apex Court has made the following observations at paragraph-17:
17. xxxxxx Under Article 141, the law declared by it is of a binding character and as commandful as the law made by a legislative body or an authorised delegates of such body. The Court is thug a "competent authority" within the scope of the words above emphasised and under Article 141 of the Constitution, the Supreme Court is not the Court of mere interpreter of law as existing but much beyond that. The Court as a wing of the State is by itself a source of law. The law is what the Court says it is.
(Emphasis by me)
41. In yet another decision (Narinder Singh v. Surjit Singh) the Supreme Court at paragraph-2 of the aforesaid decision has observed thus:
2. These observations besides being made in poor taste are lacking in propriety as also in respect due to the highest Court of the land by the State High Court. It may be that the learned Judge felt that the decision in respect of paragraphs 29 and 36 was not to his liking but when its own decision was set aside by this Court it became the law of the land and it was the duty of everybody including the High Court to obey the order and not try to avoid it. Now was it open to the High Court to find fault with the same. More than this we do not like to say but we cannot refrain from observing that the High Court will realise its limitations in future.
42. Keeping the above observations of the law laid down by the Apex court with regard to the binding effect of the law laid down by the Supreme court on all other Courts in the Country, it is clear that the Apex court having comprehensively dealt with the constitutional validity of Section 5 and other provisions of Section 1998 Act with reference to Articles 14, 19(1)(g), 298, 301 to 304 of the Constitution, the petitioners could not have once again raised the very same grounds which were also the subject matter of the decision of the Supreme Court in B.R. Enterprises's case and as such, I am in agreement with the learned Advocate General that, for all the contentions put-forward by the learned Senior Counsel appearing for the petitioners as well as the grounds urged in the writ petitions concerning the validity of Section 5 of the 1998 Act and concerning the colorable legislation and the Parliament having no powers under Entry 40 of List-I of the VII Schedule, insofar as giving powers to the State to ban the lotteries by virtue of Section 5 of the 1998 Act, the decision of the Apex Court in B.R. Enterprises's case gives the complete answer. I therefore, do not find any merit in any of the grounds urged by the petitioner with regard to Section 5 of the 1998 Act being ultra vires and as such, the contentions put-forward in this connection are rejected outright and I have no hesitation to do so.
43. Reg: Point No.-2:
It is the submission of the petitioners' Counsel that the notification under Annexure-A is impermissible in law and is violators of Article 14 and it is arbitrary and is incapable of implementation. What is to be borne in view is that the decision of the State to declare the State of Karnataka as Lottery Free Zone is a policy decision, of the State and also formed part of the budget proposals and thus had the approval of both the houses of the legislature and hence, such policy decision of the State, whether can be subjected to judicial review is the question that has to be answered concerning the notification issued at Annexure-A.
44. So far as this aspect is concerned, before answering the said question, a reference to the law laid down by the Apex Court is necessary. In the case of Ugar Sugar Works Limited v. Delhi Administration and Ors. , the Supreme court at Paragraph 18 has observed thus:
Para 18: The challenge, thus, in effect, is to the executive policy regulating trade in liquor in Delhi. It is well settled that the courts, in exercise of their power a judicial review, do not ordinarily interfere with the policy decisions of the executive unless the policy can be faulted on grounds of mala fide, unreasonableness arbitrariness or unfairness etc. Indeed, arbitrariness, irrationality, perversity and mala fide will render the policy unconstitutional. However, if the policy cannot be faulted on any of these grounds, the mere fact that it would hurt business interests of a party, does not justify invalidating the policy. In tax and economic regulation cases, there are good reasons for judicial restraint, if not judicial deference, to judgment of the executive. The courts are not expected to express their opinion as to whether at a particular point of time or in a particular situation any such policy should have been adopted or not. It is best left to the discretion of the State.
(Emphasis by me)
45. In the case of State of Punjab and Ors. v. Ram Lubhaya Bagga as regards the issue concerning interference with the policy decisions of the State, the Apex Court has observed at paragraph 25 thus:
Para 25: Now we revert to the last submission, whether the new State policy is justified in not reimbursing an employee, his full medical expenses incurred on such treatment, if incurred in any hospital in India not being a Government hospital in Punjab. Question is whether the new policy which is restricted by the financial constrains of the State to the rates in AIMS would be in violation of Artiste 21 of the Constitution of India. So far as questioning the validity of governmental policy is concerned in our view it is not normally within the domain of any court, to weight the pros and cons of the policy or to scrutinize it and test the degree of its beneficial or equitable disposition for the purpose of varying, modifying or annuling it, based on howsoever sound and good reasoning, except where it is arbitrary or violative any constitutional statutory or any other provision of law. When Government forms its policy, it is based on number of circumstances on facts, law including constrains based on its resources. It is also based on expert opinion. It would be dangerous if court is asked to test the utility, beneficial effect of the policy or its appraisal based on facts set out on affidavits. The court would dissuade itself from entering into this realm which belongs to the executive. It is within this matrix that is to be seen whether the new policy violates Article 21 when it restricts reimbursement on account of its financial constraints.
(Emphasis by me)
46. In the case of Union of India and Ors. v. KannadaPara Sanghatanegala Okkuta & Kannadigara and Ors. , the Supreme Court dealing with the decision of the Union Cabinet that zonal headquarter should be shifted to Hubli, the court observed, that, the Court cannot review and examine as to whether the State Policy should have been adopted or not. Referring to the decision in Delhi Science Forum v. Union of India , the Court referred to paragraph 7 of the said judgment, which reads thus:
Para 7: What has been said in respect of legislations is applicable even in respect of polities which have been adopted by Parliament. They cannot be tested in court of law. The courts cannot express their opinion as to whether at a particular juncture or under a particular situation prevailing in the country any such national policy should have been adopted or not. There may be views and views, opinions and opinions which may be shared and believed by citizens of the country including the representations of the people in Parliament. But that has to be sorted out in Parliament which has to approve such policies. Privations is a fundamental concept underling the questions about the power to make economic decisions. What should be the role of the State in the economic development of the nation? How the resources of the country shall be used? How the goals fixed shall be attained? What are to be the safeguards to prevent the abuse of the economic power? What is the mechanism of accountability to ensure that the decision regarding privatisation is in public interest? All these questions have to be answered by a vigilant Parliament. Courts have their limitations--because these issues rest with the policy-makers for the nation. No direction can be given or is expected from the courts unless while implementing such policies, there is violation or infringement of any of the constitutional or statutory provision. The new Telecom policy was placed before Parliament and it shall be deemed that Parliament has approved the same. This Court cannot review and examine as to whether the said policy should have been adopted. Of course, whether there is any legal or constitutional bar in adopting such policy can certainty be examined by the Court.
(Emphasis by me)
47. Thus, we see that unless it is shown that the decision, suffers from constitutional violation or from infirmly or arbitrariness, it is not for the courts to interfere with the policy decisions of the State.
48. Lord Justice Lawton in Laker Airways Lt. v. Department of Trade reported in (4) (1977) 2 All England Reports 182 has put it a more picturesquely thus:
Judges have nothing to do with either the policy making or carrying out the policy. In a case such as this, I regard myself as a referee. I can blow my judicial whistle when the ball comes out of play; but when the game restarts, I must neither take part in it nor tell the players how to play.
49. Keeping in view the allow parameters of law concerning judicial review, in the case on hand in taking the decision to ban lotteries and declare the State of Karnataka as a lottery free zone and also to prohibit sale of lotteries of other states within the territory of Karnataka, the State did take into account, the representations given by various sections of the Society as could be seen from Annexure R1 and it is only after taking stock of the entire situation and after making a study of the effect of the lotteries on the people in the neighboring states that the State finally decided to declare the State of Karnataka as a lottery free zone and the said decision also formed part of the budget proposal and had the approval of both the houses of the legislation. It is only after all these exercises that the notification as per Annexure -A came to be issued. Therefore, such policy decision of the State more particularly when it formed part of the budget proposal, cannot in my view be subjected to judicial review.
50. The Apex Court in the case of State of Andhra Pradesh and Ors. v. McDowell and Co. and Ors. has observed that, the scope of judicial review is limited into three grounds namely 1) Irrationality 2) Illegality, and 3) Procedural impropriety. The Court also observed in the said case that the courts cannot enter into the wisdom of the policy of prohibition and only the aspects of constitutional infirmity in its imposition or enforcement can be gone into. Therefore, in the instant case as there is no constitutional infirmity in issuing the notification pursuant to the exercise of power by the State under Section 5 of the 1998 Act which exercise of the power has been held to be valid by the Apex Court in B.R. Enterprises case. I do not see any infirmity in the notification which is based on the policy decision taken by the State, so as to warrant a conclusion that it is in violation of any of the constitutional provisions. As such, the policy decision of the State as reflected in the notification in deciding to declare the entire State as lottery free zone and to prohibit the lotteries of other States, cannot be subjected to judicial review.
(Emphasis by me) 51. Reg: Point No. 3 One of the main grounds urged by the learned Senior Counsel for the petitioners, Sri. Soli Sorabjee, in the case on hand, is that there has been violation of principles of natural justice inasmuch as the petitioners who are the affected person were not given opportunity of hearing before the budget proposals were put up or before issuance of the notification as per Annexure-A. In this connection it would be appropriate to look to the law concerning this area.
52. The question is, whether in matters of policy decision, the State is bound to hear the persons who are going to toe affected, who earlier had enjoyed the benefits.
53. In the case of Bannariamman v. Commercial Tax Officer and Ors. reported in 2005 Vol. I 623, the Supreme Court dealing with issue concerning the legality of the Government Order directing discontinuance of purchase of tax exemption in the form of annual subsidy towards the purchase of Sugarcane, made the observations at Paragraphs 14 and 21 thus:
14. As was observed in Punjab Communications Ltd. v. Union of India the change in policy can defeat a substantive legitimate expectation if it can be justified on "Wednesbury reasonableness". The decision-maker has the choice in the balancing of the pros and cons relevant to the change in policy. It is, therefore, clear that the choice of policy is for the decision-maker and not the Court. The legitimate substantive expectation merely permits the Court to find out if the change of policy which is the cause for defeating the legitimate expectation is irrational or perverse or one which no reasonable person could have made. A claim based on merely legitimate expectation without, anything more cannot ipso facto give a right. Its uniqueness lies in the fact that it covers the entire span of time; present, past and future. How significant is the statement that today is tomorrow's yesterday. The present is as we experience it, the past is a present memory to a present expectation. For legal purposes, expectation is not same as anticipation. Legitimacy or an expectation can be inferred only if it founded only it is founded on the sanction of law.
21. In view of the factual position recorded by the High Court that the point of time the appellant units were set up and the commercial production started there was no assurance or promise, the doctrine of promissory estoppel had no application to the facts of the case at that stage. We find no substance in the plea that before a policy decision is taken to amend or alter the promise indicated in any particular notification, the beneficiary was to be granted an opportunity of hearing. Such a plea is clearly unsustainable. While taking policy decision, the Government is not required to hear the persons who have been granted the benefit which is sought to be withdrawn.
(Emphasis by me)
54. Dealing with the issue of disinvestment and transfer of 51% shares of the Public Sector undertaking (BALCO) in favour of private party, the Apex Court at Para 56 of the Judgment ( BALCO Employees Union (Regd.) v. Union of India) has made the following observation:
Para 56: Even though the employees of the company may have on interest in seeing as to how the company is managed, it will not be possible to accept the contentions that in the process of disinvestment, the principles of natural justice would be applicable and the workers, or for that matter any other party having an interest therein, would have a right of being heard. As a matter of good governance and administration whenever such policy decisions are taken. It is desirable that there should be wide range of consultations including considering any representations which may have been filed, but there is no provision in law which would require a hearing to be granted before taking a policy decision. In exercise of executive powers, policy decisions have to be taken from time to time. It will be impossible and impracticable to give a formal hearing to those who may be affected whenever a policy decision is taken. One of the objects giving a hearing in application of the principles of natural justice is to see that an illegal action or decision does not take place. Any wrong order may adversity affect a person and it is essentially for this reason that a reasonable opportunity may have to be granted before passing of an administrative order. In case of the policy decision, however, it is impracticable, and at times against the public interest, to do so, but this does not mean that a policy decision which is contrary to law cannot be challenged. Not giving the workmen an opportunity of being heard cannot per se be a ground of vitiating the decision. If the decision is otherwise illegal as being contrary to law or any constitutional provision, the persons affected like the workmen, can impugn the same, but not giving a pre-decisional hearing cannot be a ground for quashing the decision.
(Emphasis by me)
55. As far as the decisions referred to by the learned Senior Counsel Soli Sorabjee for the petitioners is concerned, it was contended by him that the barest minimum could have been to hear the affected persons before issuing the impugned notification. He places reliance heavily on the decision of the Apex Court in the case of the State of Assam v. Bharat Kala Bhandar and drew my attention to paragraph 28 to drive home the point that it is not necessary for the Government to give notice to all the individual employers or employees nor does it require consultation should be of the same amplitude as adjudication by a quasi judicial Tribunal and it is not necessary that oral evidence should be taken, witnesses should be called, examined and cross examined and it is necessary that some kind of collection of data with the help of the interests concerned and some kind of hearing or conference with the interest concerned which is the barest minimum necessary for the Government to exercise power. This decision was rendered by the Apex Court in the context of certain notification being issued under Sub-rule 4 of Rule 126-AA of the Defence of India Rubs 1962 and by the said notifications the Governor had ordered payment of Ad-hoc coat of living allowance of Rs. 10/- per month to all the workers drawing pay upto Rs. 400/- p.m. and by another notification payment of ad-hoc cost of living of Rs. 38.46 paise p.d. to all persons engaged on daily wage basis. It was in the context of the above facts and circumstances that the court made the observations that there ought to have been some hearing or some consultation.
56. The next decision referred to by the learned Senior Counsel Sri. Soli Sorabjee, is the one (The Scheduled Caste and Weaker section Welfare Association (Registered) and Anr. v. State of Karnataka and Ors.) and dealing with a case involving declaring certain areas as slum area, the Apex Court observed that, slum dwellers ought to have been heard on the basis of earlier notifications which were in force. In this case, the facts reveal that a notification was issued an 17.1.1977 declaring an extent of 1 acre in Timber Yard Layout Slum by the side of Main Road, Cotton pet, Bangalore, as slum area and this was followed by another notification dated 30.12.1977 after calling for objections, declaring the entire area as 'slum clearance area' and again on 20.1.1981 another notification was issued cancelling notification dated 30.12.1977 and re-declaring an extent of 141/2 guntas only as slum area. The notification dated 20.1.1981 was challenged on the ground that it violates Article 14 because the slum dwellers affected were not heard as major part of the slum area were earlier excluded from the operation of the Scheme. It was under these circumstances the Court held that the affected persons should have been heard.
57. The third decision which the learned Senior Counsel appearing for the petitioners has relied upon is that of the Government of Mysore and Ors. v. J.V. Bhat and Ors. . This was a case that arose out of the Mysore Slum areas (Improvement and Clearance) Act, 1958 and here again the fact situation was that there were three notifications, one under Section 3 of the Act declaring an area as slum area and the other one under Section 9 of the Act declaring the area as clearance area and the third one under Section 12 of the Act giving power to the State Government to acquire the land. Referring to the above provisions of the Act viz. 3, 9 and 12, the court observed in the case that, where nature of statutory duty imposed itself necessarily implied an obligation to hear before deciding, the 'audi alteram partem' rule could be imported.
58. The learned Senior Counsel has also referred to the story in the Bible, that even God gave a hearing to the Adam who ate the forbidden fruit before banishing him from the paradise.
59. The last of the decisions cited, which was the climax according to the learned Senior counsel Soli Sorabjee, was the decision of the Apex Court in the Case of Godawat Pan Masala Products I.P. Ltd. and Anr. v. Union of India and Ors. My attention was drawn particularly to paragraphs 73, 74, 75 and 76 of the said decisions to contend that before exercising power whether judicial or quasi judicial function, consideration of relevant factual data pressed into service by one side, which would be rebutted by the other side, who would be adversely affected if such exercise of the power is undertaken by the delegate, is necessary. Therefore, it was submitted that in the instant case the petitioners and other affected persons have not been given hearing by the State. As far as this decision is concerned, having gone through the same carefully, I am of the view that the facts and circumstance of the said decision are altogether different inasmunch as the court had held in the said decision that pan masala or gutka falls within the meaning of word 'food' and secondly, the court also found that there was interference with the fundamental rights of the appellants guaranteed under Articles 14 and 19 of the Constitution and the power having been vested only in the Central Government under Section 23(1A)(f) and not with the State (Food) Health Authority and last but not the least, the product pan masala and sale of tobacoo being not an activity falling under res extra commercium, the a Apex Court in the above circumstances had observed that as the impugned notifications are unconstitutionals and in violation of fundamental rights of the appellants and as the Food Authority had no powers the aforesaid observations in paragraphs 73, 74, 75 & 76 were made.
60. Having considered the decision in Gotawat Pan Masala's case and the facts and circumstances mentioned therein, I am of the considered opinion that the said decision does not apply to the case with which we are concerned, because the Apex Court in B.R. Enterprises case (2004(11)SCC 26) has held that the activity of lottery is res extra commercium and the said activity does not get the protection of Article 19(1)(g) of the Constitution of India and further as Section 5 of the 1998 Act has been upheld by the Apex Court as constitutionally valid. Hence, the question of applying the aforesaid decision i.e. the Gotawat Pan Masala's case to the case on hand will not arise.
61. Reg: No. 4:
The last of the contentions urged by the learned Senior Counsel for the petitioners is that the notification Annexure-A suffers from arbitrariness and it is unreasonable and disproportionate.
62. The learned Senior Counsel for the petitioners Sri. Soli Sorabjee, referring to the date of issuance of the notification i.e. 27.3.2007 and bringing the said notification into force from 1.4.2007, submitted that the very fact that the State decided to bring into force the notification within three days of issuing the same speaks of arbitrariness, writ large in the action of the State.
63. I am unable to concur with the said contention of the learned Senior Counsel.
64. In this connection, it is not out of place to refer to the decision of the Supreme Court in the case of K. Nagraj and Ors. v. State of Andhra Pradesh and Anr. . In the said case the challenge was with regard to the age of retirement being reduced from 58 to 55 within one month of the government assuming office. The challenge was negatived toy the Apex Court by observing in paragraph 13 thus:
Paragraph 13: It is untenable to contend that a law is bad because it is passed immediately on the assumption of office by a new Government. It must also be borne in mind that the question as to what should be the proper age of retirement is not a novel or unprecedented question which the State Legislature had to consider. There is a wealth of material on that subject and many a Pay Commission has dealt with it comprehensively. The State Government had the relevant facts as also the reports of the various Central and State Pay Commissions before it, on the basis of which it had to take a reasonable decision. The aid and assistance of a well-trained bureaucracy which, notoriously, plays an important part not only in the implementation of policies but in their making was also available to the Government. Therefore, the speed with which the decision was taken cannot, without more, invalidate it on the ground of arbitrates.
(Emphasis by me)
65. On the above reasoning, the Apex Court refused to accept the argument put forward before it that there was hurry in issuance of the ordinance. The court viewed that neither arbitrariness nor unreasonableness can be found in the decision merely because that the decision has been taken with speed.
66. In the case on hand, the argument of the learned Advocate General reveals that the decision to declare the State of Karnataka as lottery free zone was not a decision taken overnight. On the other hand, the decision to issue the notification at Annexure-A- was preceded by the budget proposal and the said proposal being accepted by the Legislative Assembly as well as the Legislative Council and the Government had also send the Director concerned to the neighbouring states to study the pros and cons of bringing a ban on sale of lotteries. Under the circumstances, neither can it be said that the Government acted in haste nor for that matter, the State action smoke of arbitrariness.
67. At this juncture, a decision of the Division Bench of the High Court of Judicature at Madras in the case of State of Mizoram v. The Stare of Tamilnadu has to be referred. In that case, the facts revealed that only on the previous day, a Minister had inaugurated a State Lottery Scheme on 7.1.2003. But on the very following day i.e. 8.1.2003 the ban came. The Division Bench of the High Court held that when the decision to ban lotteries had the cabinet approval no question of unreasonableness or arbitrariness could be found in the impugned government Notification dated 8.1.2003.
(Emphasis by me)
68. As far as the contention concerning disproportionate action on the part of the State is concerned, the Apex Court in the case of Commissioner of Police v. Syed Hussein dealing with a case of punishment of removal from service imposed on Constable for having betrayed public trust, held that the said punishment could not be held as wholly disproportionate and it is not violative of doctrine of proportionality. The relevant observations are at Paragraphs 10 and 13 which reads thus:
Para 10: It is one thing to say that order passed by the statutory authority is wholly arbitrary and thus violative of Article 14 of the Constitution and thus liable to be set aside but it is another thing to say that the discretionary jurisdiction exercised by such authority should not ordinarily be interfered with by a superior court while exercising its power of judicial review unless one or the other ground upon which and on the basis whereof the power of judicial review can be exercised, exits.
Para 13: It is, therefore beyond any doubt or dispute that the doctrine of proportionality has to be applied in appropriate case as the depth of judicial review will depend on the facts and circumstance of each case.
69. In the case of M.P. Gangadhran v. State of Karala and Ors. dealing with the case of shifting of Family Court from Manjeri to Malappuram following a request made by the High Court, the Apex Court observed at paragraph 34 thus:
Paragraph 34 -- The constitutional requirement for judging the question of constitutional requirement for judging the question of reasonableness and fairness on the part of the statutory authority must be considered having regard to the factual matrix obtaining in each case. It cannot be put in a straitjacket formula. It must be considered keeping in view the doctrine of flexibility. Before an action is struck down, the court must be satisfied the a case has been made out for exercise of power of judicial review. We are not unmindful of the development of the law that from the doctrine of wednesbury unreasonableness, the court is leaning towards the doctrine of proportionality. But in a case of this nature, the doctrine of proportionality must also be applied having regard to the purport and object for which the Act was enacted.
70. In Om kumar v. Union of India reported in (2001) 2 SCC 386, dealing with a case of proposal to re-open the quantum of punishment imposed in the departmental enquiries on certain officers of the Delhi Development Authority, the Apex Court at paragraphs 28, 66, 67 and 68 has made the following observations:
Para 28: By "proportionality", we mean the question whether, while regulating exercise of fundamental rights, the appropriate or least-restrictive choice of measures has been made by the legislature or the administrator so as to achieve the object of the legislation or the purpose of the administrative order, as the case may be. Under the principle, the court will see that the legislature and the administrative authority "maintain a proper balance between the adverse effects with which the legislation or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve". The legislature and the administrative authority are, however, given an area of discretion or a range of choices but as to whether the choice made infringes the rights excessively or not is for the court. That is what is meant by proportionality.
Para 66- It is clear from the above discussion that in India where administrative action is challenged under Article 14 as being discriminatory, equals are unequally or unequals are treated equally, the question is for the Constitutional Courts as primary reviewing courts to consider correctness of the level of discrimination applied and whether it is excessive and whether it has a nexus with the objective intended to be achieved by the administrator. Here the court deals with the merits of the balancing action of the administrator and is, in essence, applying "proportionality" and is a primary reviewing authority.
Para 67: But where an administrative action is challenged as "arbitrary" under Article 14 on the basis of Royappa (as in cases where punishments in disciplinary cases are challenged), the question will be whether the administrative order is rational" or "reasonable" and the rest then is the Wednesbury test. The Courts would then be confined only to a secondary role and will only have to see whether the administrator has done well in his primary role, whether the has acted illegally or has omitted relevant factors from consideration or has taken irrelevant factors into consideration or whether his view is one which no reasonable person could have taken. If his action does not satisfy these rules, it to be treated as arbitrary.
Para 68 : thus, when administrative action is attacked as discriminatory under Article 14, the principle of primary review is for the courts by applying proportionality. However, where administrative action is questioned as "arbitrary" under Article 14, the principle of secondary review based on Wednesbury principles applies.
(Emphasis by me)
71. Thus, it is clear from the above position in law with regard to the application of the doctrine of proportionality, that all the cases under consideration above were concerned with either dismissal of an employee or reducing the punishment. Whereas in the case on hand, what we are concerned is, with regard to the policy decision of the State to declare the State of Karnataka as lottery free zone and also to prohibit lotteries of other states being sold within the territory of Karnataka. When such is the policy decision and when the State is prepared to ban lotteries, despite the fact that there will be a loss of revenue to the tune of Rs. 250 crores, as mentioned in the budget proposal, the said decision of the State cannot be termed as disproportionate.
72. When private interest is in conflict with public interest, the private interest will have to yield to the larger public interest, is the settled position in law. As Bentham, puts it, every action of the state must aim at the greatest good of the greatest people. In the aforesaid decision of the Om kumar, the Apex Court has dearly held that, when administrative action is attacked as discriminatory under Article 14, the principle of primary review is for the courts by applying proportionality. But, however, where administrative action in questioned, as arbitrary under Article 14, the principle of secondary review based on Wednesbury principles applies.
73. Therefore, in the light of the above position in law, in the case on hand, it is not anybody's case much lees the case of the petitioners that the state had discriminated by prohibiting the lotteries of some states over the other states. But on the other hand, as could be seen from the proposal as well as the notification Annexure-A, the state took the decision, not only to prohibit the lotteries of other states being sold by the State of Karnataka, but went to the extent of declaring its own state as Lottery Free Zone. The state action, therefore, could not be termed as discriminatory when none is discriminated. The state was prepared to incur a lows of Rs. 250 crore revenue to erasure that it remains a lottery free zone because as has been observed by the Apex Court in B.R. Enterprises case, that when the state decides a ban under Section 5 of the 1998 Act, it cannot allow the lotteries of some states to be sold in its territory and bail the lotteries of some other states thus showing discrimination in this respect. Under the said factual scenario, I am of the view that the question of the action of the State being dispropartionate, will not arise nor can it be said that the decision is unreasonable.
74. In the light of the foregoing discussion and analysis of the contention put forward by both the sides the following view points emerge.
75. Conclusion:
i) Lottery is gambling and the activity is res extra commercium.
ii) In view of the Apex Court having upheld the constitutional validity of Section 5 of the 1998 Act as well as its entire provisions, in B.R. Enterprises v. State of U.P. the writ petitions questioning the very same validity of Section 5 as well as other provisions of the 1998 Act, before this Court, therefore, are not maintainable.
iii) The decision to declare the State of Karnataka as 'Lottery Free Zone' and to prohibit the lotteries of other states being a policy decision forming part of budget proposal and having been approved by both Legislative Assembly and the Legislative Council, such policy decision which forms part of the budget proposal is not subject to judicial review.
iv) The notification Annexure-A does not suffer from the infirmity or arbitrariness, unreasonableness nor can it be said that it is disproportionate and hence, the said notification is upheld as it does not contravene any of the constitutional provisions.
76. In the result, all the writ petitions are dismissed.
77. Learned Counsel for the Union of India Smt. Veena Jadhav is permitted to file vakalath within four weeks.
78. At this juncture, learned Counsel Sri. Shashikiran Shetty for some of the petitioners prayed that in view of the decision in Suman Enterprises case, the operation of the judgment be stayed for a period of four weeks to enable the petitioners to prefer an appeal and further, the benefit extended by the High Court of Judicature in the case of State of Mizoram v. State of Tamilnadu be extended.
79. In response to the above submission, learned Government Advocate Sri. Venugopala Gowda submitted that the decision in Suman Enterprises was considered by the Apex Court in B.R. Enterprises case and secondly, as far as the decision in the State of Sikkim v. State of Tamilnadu is concerned, the benefits given were on account of the peculiar facts and circumstances of that particular case, since the Government had announced a scheme and had even fixed the dates for lotteries. It is, therefore, under those circumstances, the Division Bench of the High Court made an order to the effect as mentioned therein.
80. In the light of the submissions made as aforesaid by the respective sides, I am of the view that both the prayers made by the learned Counsel Sri. Shashikiran Shetty for the petitioners cannot be granted, because, as far as the decision in Suman Enterprises case is concerned, it was, in fact, subject matter of the decision in B.R. Enterprises case and secondly, as far as the benefits extended by the Division Bench of the High Court, of Judicature at Madras is concerned, they were the benefits extended having regard to the fact that the Government itself had announced a scheme only the previous day and dates had also been given for schedule draw of the lotteries. It is, therefore, under those circumstance, the Court granted the benefits. In the case on hand, no such circumstance exists and therefore, the second prayer also cannot be granted.