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Ergo Update

14-Apr-2020

INTRODUCTION

The Hon’ble Supreme Court of India (SC) has on 6 March 2020 stayed the operation of the judgment of the Hon’ble Bombay High Court (Bombay HC) in the case of Gurdeep Singh Sachar v Union of India & Ors dated 30 April 2019 (Gurdeep Singh Case) until further notice. The Bombay HC had, in the Gurdeep Singh Case, upheld the legality of online fantasy sports gaming in India as games that are preponderantly games of skill. This casts doubts, for the time being, over legality of online fantasy sports games in India. The growth in this industry, among other things, had stemmed from the various judicial decisions of the High Courts upholding virtual / online fantasy sports games as games involving ‘considerable and substantial degree of skill’ – which are games that are not within the purview of gambling laws in India.

POSITIONS UNDER VARIOUS HIGH COURT JUDGMENTS

The leading judicial precedent so far for online fantasy sports gaming has been the judgment of the Punjab and Haryana High Court (P&H HC) in the case of Varun Gumber v Union Territory of Chandigarh and Ors (Varun Gumber Case). The P&H HC held, among other things, that success in Dream11 arises out of a user’s exercise of superior knowledge, judgment and attention and that Dream11’s games are exempt from the provisions of the Public Gambling Act 1867 (PG Act) as they require a substantial degree or preponderance of skill.

After the Varun Gumber Case, a criminal public interest litigation was filed before the Bombay HC by one Mr Gurdeep Singh Sachar against Dream11 contending that Dream11 was (a) carrying out gambling / betting / wagering in the guise of ‘online fantasy sports gaming’ in violation of applicable laws; and (b) evading taxes by levying inadequate goods and services tax (GST) on such offerings. Relying on the analysis of the P&H HC in the Varun Gumber Case, the Bombay HC held that the activities and offerings of Dream11 were permitted in law and were not illegal operations of gambling or betting in the guise of online fantasy sports gaming. It also concluded that there was no evasion of GST by Dream11 due to the activities not amounting to gambling.

The most recent judgment was delivered in February 2020 by the Hon’ble High Court of Rajasthan (Raj HC) in Chandresh Sankhla v State of Rajasthan and Ors. The Raj HC endorsed the views of the Bombay HC in the Gurdeep Singh Case as well as those of the P&H HC in the Varun Gumber Case. The Raj HC, whilst citing the dismissal of the special leave petitions filed against Gurdeep Singh Case and the Varun Gumber Case in the SC (as detailed below), had stated that the issue of treating the Dream11 game as having any element of betting / gambling is no more res integra (ie, a point of law that is undecided or without a precedent).

APPEAL BEFORE THE SC AGAINST THE GURDEEP SINGH CASE

The decision of the Bomaby HC in the Gurdeep Singh Case was challenged before the SC in 2019. The fundamental petition challenging the views of the Bombay HC regarding Dream11 being a game of skill was dismissed outright by the SC. However, in a separate order clubbing various other appeals including an appeal made by the Government of India, the SC had permitted the Government of India to apply to the Bombay HC for a specific review of the applicability of GST to Dream11’s operations. Following this, Mr Sachar once again approached the SC seeking a clarification on the scope of this order, and urging the SC to permit the Bombay HC to review whether the games offered by Dream11 amount to gambling or betting in order to appropriately determine the applicability of GST to Dream11’s operations. However, this too was dismissed by the SC.

Thereafter, the State of Maharashtra separately filed a special leave petition in the SC, challenging the decision of the Bombay HC in the Gurdeep Singh Case, which was heard by the SC on 6 March 2020. The SC has now stayed the orders of the Bombay HC in the Gurdeep Singh Case and issued notices to all the parties in the Gurdeep Singh Case for hearing their contentions afresh.

COMMENT:

Even though the views of the P&H HC and the Raj HC continue to be in operation, the SC’s order to put a stay on the operation of one of the seminary judgements regarding online fantasy sports in India has for the time being thrown into doubt the existing judicial endorsements in favour of online fantasy sports in India. Given the current COVID-19 crisis, with the functioning of the SC (like all other institutions) being significantly reduced, the next hearing of the case has been tentatively scheduled for 24 April 2020.

-       Rishabh Bhardwaj (Partner) and Neil Deshpande (Associate)

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Rishabh Bharadwaj (partners)

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