Important Point
Writ petitions filed by the States of Sikkim and Meghalaya together with its agents challenging the legality and/or validity of the notification issued u/s 5 of the Lotteries (Regulation) Act, prohibiting sale of all computerized and online lottery tickets marketed and operated through vending machines, electronic machines, are held maintainable.

Headnote:(i) Constitution of India—Article 131—Lotteries (Regulation) Act, 1998—Section 5—Ban on online lotteries—Writ petitions filed challenging legality and validity of the notification issued by the State of Karnataka—States of Sikkim and Meghalaya had commenced online lotteries, inter alia, in State of Karnataka—In exercise of power conferred u/s 5 of the Act, a declaration was made that State of Karnataka shall be free zone from online and internet lotteries—By reason of the said notification sale of all computerized and online lottery tickets marketed and operated through vending machines, terminals, electronic machines and through internet in the State of Karnataka became prohibited with immediate effect—States of Sikkim and Meghalaya together with its agents filed writ petitions challenging the notification—Preliminary objection that as the dispute involved in the writ petitions related to State Governments, writ petitions were not maintainable, in view of constitutional bar under Article 131 of the Constitution—High Court held that agents of State of Sikkim and State of Meghalaya had no locus standi to maintain the writ petitions—Appellants case that they have invested a huge amount of 300 crores for setting up the online lotteries network infrastructure and 861 retail outlets therefor—Whether writ petitions filed by appellants were maintainable—(Yes).
       Held : Article 131 of the Constitution of India postulates that this Court to the exclusion of any other court shall have original jurisdiction in any dispute between the Government of India and one or more States; or between the Government of India and any State or States on one side and one or more other States on the other; or between two or more States. We in this case are not concerned with the proviso to the said Article. The said Article would be attracted where adjudication is necessary in relation to a legal right of one State or the Union of India vis-à-vis other States, as the case may be. Indisputably, the expression ‘legal right’ has received liberal interpretation by this Court from time to time. However, it is now well-settled by various decisions of this Court that this Article will not be applicable where citizens or private bodies are parties either jointly or in the alternative with the State or the Government of India. The enlarged definition of ‘State’ under Article 12 would not extend to Article 131 of the Constitution. It is also not in dispute that even a statutory corporation is not a state within the meaning of the said provision.
       Locus of the Appellants :
       The Appellants herein were appointed as agents of the State, which were governed by contract, in terms whereof, they had invested a huge amount. If the statements made in the writ petitions to which we have adverted to hereinbefore are correct, in the event the impugned notification is implemented, the Appellants would not only loose a huge amount of money which they have invested but also would be liable to pay compensation to a large number of work force appointed by them in view of the fact that they would have to close their business. The Appellants are the agents coupled with interest. Such agencies are contemplated under the laws of contract. The Act also postulates that in the event an agent violates the notification issued by the State, he would face the penal consequences laid down therein. The notification has the force of law. In the aforementioned backdrop, the question which arises for consideration is as to whether the Appellants herein had any independent right to question the validity of the said notification. (Paras 19 and 20)
       If by a statutory provision the right of an agent to carry on his business is affected, he may, in our considered opinion, in his own right maintain an action. (Para 31)
       The High Court, therefore, was not correct in holding that they had no personal right to enforce despite the fact that they would suffer injuries or would otherwise be prejudiced by the notification issued by the State of Karnataka. It would, therefore, not be correct to contend that they could enforce their rights only through their principal and not independently. The Appellants had a legal right to carry on business. Such a right having been impugned by reason of the impugned notification, a writ petition at their instance was maintainable. (Para 35)
       The Division Bench of the High Court accepted the position that the Appellants herein are statutory agents but it evidently failed to take into consideration the status of the Appellants vis-à-vis their contractual rights and obligations with their principal coupled with their individual rights to maintain their writ petitions in proper perspective. It is no doubt true that had the State of Sikkim or the State of Meghalaya intended to sue the State of Karnataka independently; in terms of Article 131 of the Constitution of India the only forum where the dispute between them could have been resolved is this Court alone but when such a lis is brought by the State jointly with their agents who had also independent cause of action and had a legal right to maintain writ application questioning the legality and/or validity of the said notification issued by the State, a suit in terms of Article 131 of the Constitution of India would not have been maintainable. The Appellants herein were not busy bodies. They had an interest in the subject-matter of the writ petition. They were, thus, not merely strangers having no right whatsoever in the matter. (Paras 44 and 45)
       (ii) Indian Contract Act, 1872—Sections 182, 185, 186, 202 and 230 —Agent—Definition—Authority of an agent to sue or be sued in his own name.
       Held : ‘Agent’ has been defined in Section 182 of the Indian Contract Act, 1872, to mean a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the ‘principal’. Section 185 of the Contract Act postulates that no consideration is necessary to create an agency. The authority of an agent may be express or implied in terms of Section 186 thereof. Section 202 of the Contract Act provides that where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest. The right of an agent to sue or be sued in its own name, is governed by Section 230 of the Contract Act (Para 22)
       The second part of the said provision does not envisage a situation where the right of an agent is protected in terms of Section 202 of the Contract Act. We have noticed hereinbefore that Section 4(c) of the Act envisages appointment of agents, which empowers the State Government to sell the tickets either itself or through distributors or selling agents. Such distributors or selling agents may also be companies or body corporates. Section 7(3) of the Act, as noticed hereinbefore, provides for a penal consequence. If any person acts as an agent or promoter or trader in any lottery, he may be subjected to punishment if he sells, distributes or purchases tickets of such lottery in contravention of the provisions of the said Act, which may include any notification issued under Section 5 of the Act. (Para 23)
       An agent coupled with interest has a right to sue. He may in certain situations be sued as regard his own liabilities independent of his principal. (Para 24)

JUDGMENT

S.B. Sinha, J.—Leave granted.

Introduction :

2. Scope and ambit of Article 131 of the Constitution of India is in question in these appeals, which arise out of a common judgment and order dated 16.03.2005 passed by a Division Bench of the Karnataka High Court in Writ Petition Nos. 5516-5117 of 2004 and Writ Appeal Nos. 29-31 of 2005, whereby and whereunder the appeals preferred by the Appellants herein were dismissed.

Background facts :

3. It is not in dispute that the States of Sikkim and Meghalaya commenced online lotteries, inter alia, in the State of Karnataka. It is, however, otherwise a lottery playing State. In exercise of its power conferred upon it under Section 5 of the Lotteries (Regulation) Act, 1998 (for short, the Act’) a declaration was made that the State of Karnataka shall be free zone from online and internet lotteries. By reason of the said notification sale of all computerized and online lottery tickets marketed and operated through vending machines, terminals, electronic machines and through internet in the State of Karnataka became prohibited with immediate effect.

Writ Proceedings :

4. The States of Sikkim and Meghalaya together with its agents filed writ petitions before the Karnataka High Court, challenging the legality and/or validity of the said notification, inter alia, on the ground that the State of Karnataka, having itself been organizing lotteries, could not have imposed the said ban having regard to the decision of this Court in M/s B.R. Enterprises etc. v. State of U.P. & Ors. etc. [(1999) 9 SCC 700].

5. The contention of the State of Karnataka, on the other hand, was that online lotteries had nothing to do with the conventional lotteries and as the State of Karnataka has put an embargo on online lotteries without any discrimination, B.R. Enterprises (supra) cannot be said to have any application.

6. A preliminary objection was taken on behalf of the State that as the dispute involved in the writ petitions related to two State Governments, the writ petitions were not maintainable, in view of the constitutional bar under Article 131 of the Constitution of India. The said contention was upheld by a learned Single Judge of the High Court holding inter alia, that the agents of the State of Sikkim and State of Meghalaya had no locus standi to maintain the writ petitions in view of the fact that they did not have any independent right in that behalf. The agents of the State of Sikkim preferred an intra-court appeal thereagainst. The State of Meghalaya and its agents thereafter also preferred writ appeals.

Contentions of the writ petitioners :

7. The contention of the Appellants herein being agents and, distributors of the State of Sikkim is as under :

Section 4(c) of the Act permits the State Governments to sell tickets either itself or through distributors or selling agents and in terms thereof the First Appellant M/s Tashi Delek Gaming Solutions Ltd., was appointed by the State of Sikkim as an agent for sale of online lotteries. The Second Appellant, Pan India Network Infravest Pvt. Ltd., is a distributor of the First Appellant.

8. It was contended that the Appellants herein have invested a huge amount of 300 crores for setting up the online lotteries network infrastructure and 861 retail outlets therefor. They have been paying sales tax and other taxes running into crores of rupees to the Respondent-State and have entered into diverse third party arrangements with distributors and retailers. It was contended that by reason of the impugned notification, their investments made in this behalf would go totally waste and they would be seriously prejudiced as they have borrowed funds from banks and financial institutions on which interest is mounting manifold.

9. The State of Meghalaya and its agent, M/s Best & Co. in their writ petition, inter alia, contended :

“The petitioner State for the purposes of sale of the online and internet lotteries appointed Petitioner No. 2 & 3 as its agent/sub agent to sell t

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2005 Supreme(SC) 1578

Cases Referred (7)