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2021 Supreme(Online)(KER) 14924
S.V. BHATTI, BECHU KURIAN THOMAS, JJ
THE STATE OF KERALA, REP.BY THE CHIEF SECRETARY TO THE GOVERNMENT OF KERALA, GOVT.SECRETARIAT, TRIVANDRUM 695 001. – Appellant
Versus
FUTURE GAMING & HOTEL SERVICES (P)LTD., (FORMERLY FUTURE GAMING SOLUTIONS INDIA (P) LTD.) – Respondent
WA.No.78 OF 2021 | WP(C) 34025/2019(P)
For the Appellants/Petitioners: SRI.PALLAV SHISHODIA, ADV.C.E.UNNIKRISHNAN, SPL.GOVT. PLEADER
For the Respondents: SRI.NEERAJ KISHEN KAUL (SR.), ADV.HARISH SALVE (SR.), ADV.A.KUMAR, ADV.G.MINI, ADV.KAPIL SIBAL (SR.), ADV. MUGUL ROHATGI (SR), ADV.P.S.SREEPRASAD
The Host State is entitled to enact rules under Section 12 of the Lotteries (Regulation) Act, 1998, to monitor the conduct of outside State lotteries, provided they do not infringe on the authority of the Organizing State.
Headnote:(A) Lotteries (Regulation) Act, 1998 - Section 12, Kerala Paper Lotteries (Regulation) Amendment Rules, 2018 - Legality of State amendments regarding outside lotteries - The rules amended by the Kerala Government were primarily contested for being ultra vires and unconstitutional - It was held that the Host State retains the authority to impose rules for monitoring lotteries conducted by Organizing States within its territory - The validity of specific amendments in the rules was scrutinized, primarily rule 4(4) which was declared ultra vires for infringing the Organizing State's authority - The amended rules were determined valid, except for the severed portion of rule 4(4). (Paras 1-61)
(B) Federalism - The cooperation between the Union and State Governments must align with constitutional provisions, wherein Host States must act to ensure proper compliance with the Act. (Paras 55-60)
| Table of Content |
|---|
| 1. state governments are authorized to regulate lotteries. (Para 1 , 2 , 4 , 5) |
| 2. future gaming challenged the amended rules. (Para 3 , 6) |
| 3. arguments presented from both sides on the amended rules. (Para 7 , 8 , 9) |
| 4. court's analysis of state power in lottery regulations. (Para 10 , 11 , 12 , 13) |
| 5. legislation must align with constitutional provisions. (Para 14 , 15 , 16 , 17 , 18) |
| 6. delegated legislation principles and their significance. (Para 19 , 20 , 21) |
| 7. statutory interpretation and legislative intent. (Para 22 , 23 , 24 , 25) |
| 8. host state's monitoring responsibilities clarified. (Para 26 , 27 , 28) |
| 9. federalism and state legislative powers. (Para 29 , 30 , 31) |
| 10. role of judicial interpretation in legislation. (Para 32 , 33 , 34) |
| 11. doctrine of ultra vires applied. (Para 35 , 36 , 37 , 38) |
| 12. enforcement of compliance with lottery regulations. (Para 39 , 40 , 41) |
| 13. severability in unconstitutional provisions. (Para 42 , 43 , 44) |
| 14. court's ruling on validity of kerala's amended rules. (Para 46 , 47 , 48 , 49) |
| 15. monitoring rules and their necessity. (Para 50 , 51 , 52 , 53) |
| 16. federalism and monitoring obligations clarified. (Para 54 , 55 , 56) |
| 17. final ruling emphasizing legislative competence. (Para 57 , 58 , 59 , 60 , 61) |
JUDGMENT
Dated this the 17th day of May, 2021
Lotteries are gambling in nature and its business is res extra commercium. To legitimize the pernicious character of lotteries, the State Governments are given the power to organise, conduct or promote lottery. Conferment of authority on the State Governments alone, to conduct lottery was made with the fervent belief that the pestilent nature of lottery could be diluted to some extent while nourishing the State exchequer at the same time.
2. The Lotteries (Regulation) Act, 1998 (for brevity 'the Act') was enacted by the Parliament. The source of legislative power for the Act is traced to Entry 40 of List 1 of the VII Schedule to the Constitution of India. The Government of Kerala enacted the Kerala Paper Lotteries (Regulation) Rules, 2005 (for short 'Kerala Rules'), in exercise of the powers under section 12 of the Act. The Kerala Rules as originally enacted applied only to lotteries organised by the Government of Kerala. Thereafter, the Central Government enacted the Lotteries (Regulation) Rules, 2010 (for short 'Central Rules'). The subject matter of this dispute centers on an amendment brought in by the Kerala Government in 2018, known as the Kerala Paper Lotteries (Regulation) Amendment Rules, 2018 (for short 'Amended Rules'). By the said amendment, the Kerala Rules have been amended to incorporate allegedly restrictions/regulations for the conduct of outside State lotteries in Kerala.
3. Future Gaming & Hotel Services (P) Ltd. - a company with its registered office at Coimbatore, Tamil Nadu, claiming to be the authorised agent of the State of Nagaland challenged the Amended Rules through W.P.(C) No.34025 of 2019. It was pleaded that the Amended Rules were unconstitutional and beyond the legislative competence of the State, apart from being ultra vires the Act. Specific challenges were raised against the validity of Rules 2(3A), 2(6A), 4(4), 4(5), and Rule 9A of the Amended Rules. Communications issued by the Government of Kerala, produced as Ext.P12 and Ext.P17, were also challenged in the writ petition.
4. By the impugned judgment, the learned Single Judge declared that the Amended Rules were ultra vires and unenforceable. The learned Single Judge also set aside Ext.P12 and Ext.P17 and restrained the appellants from interfering with the marketing and sale of lottery tickets of the State of Nagaland. The State of Kerala and its officers have preferred this appeal.
5. For easier assimilation, We employ the following terminologies also in this Judgment. 'Organizing State' means the State that conducts lotteries as defined in rule 2(f) of the Central Rules and the 'Host State' to mean the State where the lottery conducted by another State
