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State Lotteries

Cite as : (1971) 1 SCC (Jour) 55

SOCIO-LEGAL ASPECTS

Economic gain is one of the most powerful and widely recognised factor to influence human behaviour in contemporary societies. The urge to possess more money and property serves as a driving force for a majority of human actions. Men engage in trade, business and occupation of diverse nature, to earn as much as possible. Such a materialistic attitude receives a fair amount of social recognition in the form of a wide choice, to individuals, to indulge in any activity, so long one does not embark upon socially dis approved areas. The activities of gambling nature are said to fall in such a socially disapproved category and, therefore, are considered as immoral and pernicious means of economic gain. Viewed against this background the recent trend of State Lotteries raises diverse problems of politico-socio-legal nature which call for juristic thinking on the subject.

SOCIAL AND MORAL ASPECTS

Indian society always treated gambling as a social vice and provided legal and extra-legal measures to deal with it. The legal measures, which reflect social attitudes, display a broad spectrum of social reactions to gambling. On the one end of this spectrum can be placed the extreme reaction which brands gambling as an offence, followed by the milder ones which profess to regulate and control gambling by levy and taxation and, those that merely associate gambling with stigma to deny in the status of trade, business and the incidental favours. Such a diversity of reactions leads to variations in the meaning and content of gambling under different situations, largely depending upon the object of social reaction itself. Thus, every enquiry pertaining to activities of gambling nature, must at the outset, lay down the definition and the scope of "gambling" for its purpose. For the present, we would discuss gambling in the light of lotteries with special reference to State Lotteries.

Is Lottery Gambling?

The various Central and State legislations dealing with public gambling display a marked feature of excluding lotteries from their ambit.1 Since the object of these legislations is to punish gambling activities of a special type, like gambling in a public place, gambling in common gaming house, keeping gaming house, etc., therefore, lotteries, which do not require public participation in the public gambling sense, are exempted from the purview of these legislations. But under Section 294-A of the Indian Penal Code, running lotteries is a punishable offence. The issue of nature of lotteries was analysed in detail by the Supreme Court in State of Bombay v. R. M. D. C.2 where the Court laid down a general test for determining the gambling nature of a particular activity in the following words: "That a competition in order to avoid the stigma of gambling must depend to a substantial degree upon the exercise of skill. Therefore, a competition success where it does not depend to a substantial degree upon the exercise of skill is now recognised to be of gambling nature".3 This test would brand all competitions not involving substantial degree of skill as gambling. Applying this test to lotteries one would have little difficulty in concluding that lottery, which solely depends on chance, and which requires little skill, assumes a gambling nature.

Are State Lotteries Pernicious?

Lottery must, therefore, attract the same social disapproval as any other form of gambling. The most important element which is common in every form of gambling is of causing economic harm to the general public. This element of economic harm and the consequences flowing therefrom, can also be termed as the rationale of social reaction towards gambling as a whole. Emphasising the harm element the Supreme Court in R. M. D. C. case observed thus : "We find it difficult to accept the contention that those activities which encourage a spirit rackless propensity for making easy gain by lot or chance, which lead to the loss of 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. . . . . . . ".4 Looking to lotteries from the point of view of consequential harm would render State-run lotteries open to the same objections that are levelled against other lotteries. The State running of lotteries might vary the operative nature of the activity, but it cannot cure lotteries of their harmfulness. Therefore, State lotteries will have little justification, unless they deliver some benefit to the society, which shall clearly out-weigh the harm they produce.

Are State Lotteries Immoral?

State lotteries also raise significant issues of morality. The State indulging in an activity which is considered immoral for individual members, seems, on the face of it, illogical. This is because the governmental behaviour and policies are understood to exert a strong influence on individual morality and behaviours. Thus, the application of dual standard or morality in the matter of lotteries is likely to lead to confusion with regard to moral standards, and give a feeling to the common man that the social norms are largely moral, if not immoral. But the talk of strict adherence to moral norms and uniformity of moral standards is losing much of its bite on the face of the changing trends which show a marked preference for modifications of the out-dated concepts of morality5 and which approve a wider state role, strictly on the grounds of economy. The Governmental Family Planning Programme is an instance where the traditional notions of sex morality have undergone a marked change and, which upholds the concept of separate standard of morality for governmental activities.

CONSTITUTIONAL ASPECTS

Do State Lotteries violate Article 14?

An important constitutional objection to State lotteries might be on the ground of discrimination under Article 14. Since the legal prohibitions applying to lotteries work against the right of the individual alone, while, as the State is at liberty to indulge in lottery activity, it may be argued that the equal treatment guaranteed under Article 14 of the Constitution is denied in matters of running lotteries. A close scrutiny of the issue would reveal that such argument of unconstitutionality hardly be tenable on the face of reasonable classification permissible under the article, which would permit the State being treated as a separate class. Furthermore it will always be open for the State to pass legislations which would grant them a monopoly over lottery trade. In the famous Australian Banking case Lord Porter in the judicial committee, made an important observation in this regard which reads as follows:

"That in regard to some economic activities and in some stage of social development it might be maintained that prohibition with a view to State monopoly was only practical and reasonable manner of regulation . . . . . . . . . . That regulation of trade might clearly take the form of denying certain activities to persons by age or circumstances unfit to perform them. . . . . . . . . "6

Is Lottery a Trade or Business under Article 19(1)(g)?

The running of lotteries has all the incidents of a trade or business, especially in view of the State lotteries, which are run in a well-organised and arranged manner. This feature of lotteries is likely to tempt individuals, to take up lottery business. But individual's indulging in such activity will be severely limited by various legal measures and the Supreme Courts observation in R. M. D. C. case, which refused to accord lotteries the status of trade under Article 19(1)(g). Such a view of the Supreme Court is likely to affect only individual or collectively run lotteries, particularly where the activity is being claimed as a fundamental right. The R. M. D. C. case will have no relevance for State lotteries, because the State not being a citizen, need not claim the right to carry on any activity.

Thus, lotteries in general, comprise a special type of economic activity, which has a social harm potential, specially when carried in an uncontrolled and unregulated way. Therefore, the running of lotteries is permitted only under such conditions that reduce the possibility of harm to a minimum and make them a source of social gain. In the recent times the social gain aspect of lotteries has been increasingly appreciated. The lotteries have become an effective instrument of indirect taxation, involving a much larger segment of population. Taxation through lotteries, being purely voluntary in nature, is largely free from the charge of unjust and uncalled for burden on the common man. Therefore, the prepondering social purpose7 and presumption of minimum social harm go a long way to justify State lotteries.

Bhuvaneshwar Ballabh Pande, LL.M.

THE GREATEST SOCIAL EVIL

Ours is an age of materialism. Everybody wants to get rich by means, fair or foul. The general desire is to become a millionaire overnight by a single stroke of fortune. For purposes of achieving wealth through easy means people naturally cling to gambling devices. Lotteries are one of such devices which offer a chance of getting riches without any effort whatsoever. They require nothing but a rupee to invest. So, naturally lotteries have become the greatest attraction to the masses particularly when they are run by the State Governments who are allegedly reported to be making huge profits out of the sale proceeds of their lottery tickets. In the wake of the enormous sums of money earned by the State Governments it is worthwhile considering whether it is at all desirable or expedient to extract the hard-earned money of the common man for the coffers of the State Exchequer.

Examining this issue from the legal point of view, it may be noted that the running of cross-word puzzles and lotteries, etc. have already been declared by the Supreme Court1 to be of a gambling nature, and are not within the fundamental right to carry on any trade, business or occupation under Article 19(1)(g) of the Constitution. So, no individual or a group of individuals can claim to undertake such a venture. They are also forbidden by Section 294-A of the Indian Penal Code2 in so far as an individual is concerned. But strangely enough what is forbidden by law in respect of an individual is allowed in respect of the State Government. If a person dares to launch any such project, he is punished with a rigorous imprisonment or fine or with both, but if a State launches the same venture, it is amply rewarded in terms of huge financial resources to be exploited thereby. This position seems to be quite abnoxious when judged from a wider angle. There is no justification to support such discrimination. Thus, it certainly amounts to a hostile discrimination within the meaning of Article 14 of the Constitution of India.

Again examining the position of State lotteries under the provisions of the India Contract Act, one finds that it is a sort of wagering contract not enforceable under law. A contract is complete when there is offer and acceptance, and some consideration. Here the State makes an offer through public advertisements and agrees to pay to the winning tickets the sums specified in the lotteries. The individual accepts it by payment of the price of the lottery ticket and there is sufficient consideration in the form of inducement to get a prize. So, it may seem to be a valid contract, but as the object involved in the contract is against public policy, such a contract comes within the category of wagering contracts and is, therefore, void under Section 30 of the Indian Contract Act. It is rather surprising that despite the provisions of the Indian Contract Act, such void contracts are allowed to operate in full swing.

It is stated in favour of the State-run lotteries that they fetch huge sums of money which are utilized in financing development activities undertaken by the State Governments. Though lotteries are a source of great income which can be diverted to fill in the gap created in the State's economy resulting from its various new projects of social welfare, it is also to be noted that the State has so many other resources which it is tapping and many others which have so far remained untapped. The tapping of extra resources is just a means to an end and not an end in itself. If the State requires extra funds for its progressive development activities, it does not mean that it may adopt any means to attain that goal. Allowing the State to tap financial resources for financing its projects cannot give it a right or a moral justification to launch questionable ventures. If it not be so, then given the right to run State lotteries for getting money, they may claim the privilege of opening brothels or public houses for purposes of meeting their financial commitments.

It may also be noted that the existing law on the subject is far from satisfactory. The provisions of Section 294-A of the IPC may be referred to. It seems that the very purpose for which this provision was made has been defeated by the exception contained therein. No one will disagree that it was intended to prohibit the lotteries and other devices which come within the purview of gambling activities. Money spent on lotteries brings the greatest misfortune to the family. As stated by the Supreme Court in State of Bombay v. R. M. D. C,3 such activities ". . . encourage a spirit of reckless propensity for making easy gain by lot or chance, which lead to loss of 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. . . . "

But curiously enough the provisions of Section 294-A of the IPC provide an exception in the case of State-owned lotteries by authorizing the advertisement for and the running of this undesirable venture. In other words, it means that what is bad or immoral for an individual is good and morally sound for the State. Giving a still wider interpretation it may amount to saying that if an individual resorts to black-marketing or hoarding, he is immediately brought to book. But if the State indulges in such a corrupt practice, it is left protected under the long arms of law. It can hardly be said that the framers of the Code had ever nourished such an idea of giving a whole-sale licence to the State to indulge in immoral or illegal activities under the pretext of bringing social reform.

Examining that effect of lotteries in the society as a whole, it can safely be said that it cannot but be disastrous. Besides making the individual indolent and a shirker of hard work, he is always in a gambling mood. The evils of lotteries are heightened when they are patronized or run by the State Governments, because in the private sector, it covers only a limited area and population, but in the case of Government-run lotteries, it encompasses the entire community, by reason of providing greater inducement through cheap lottery tickets and providing numerous lucrative prizes. As far back as 1850, the Supreme Court of the United States of America made the following observations4:

"Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the widespread pestilence of lotteries. The former are conferred to a few persons and places, but the latter infests 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."

In conclusion it may be submitted that the State lotteries are the greatest social evil; they are a public menace and the sooner they are eradicated , the better. For purposes of doing away with this evil, the law on the subject, e.g., section 294-A of the IPC may also suitably be amended to exclude the exception made in favour of State lotteries, so that the State Governments may not validly launch such schemes in future.

K. N. Tandon, LL.M.
Lecturer of Law, Lucknow University.

IMMORAL AND ILLEGAL

For quite some time the lotteries game has been going on in this country. Such has been its benefits, that more and more States have stepped on to the bandwagon. Legal minds, however, have stood a silent spectator to the phenomena. It is time we questioned it.

The votaries of State lotteries emphasize that per Article 39(a) the State has to direct its policy towards securing its citizens an adequate means of livelihood. Lotteries are a form of savings which augment State coffers and which the State utilises for development projects. Hence lotteries is perfectly legitimate business. To clinch their argument they cite Krishan Kumar and Surinder Kumar v. State of J. & K.1 which held that if selling ghee is business then why not selling liquor.

The argument above shows utter confusion of thought. Our legal system never divorced means from end. As was said in Mohd. Hanif Qureshi v. State2 the State must execute Directive Principles but not in a manner prejudicial to the Constitution.

The dictionary defines lottery as "an arrangement for distributing prizes by chance among purchasers of tickets". There can be no doubt that a lottery is unexceptionably of a gambling nature being no more than "blind shots at a hidden target". And this gambling is not as innocent as it appears in the high claims of providing resources for economic development. The temptation is too much for the man of average means. Instead of giving his family or himself a better deal, instead of inculcating a spirit of gaining reward by dint of hard work, such activity makes him invest an increasing amount on more and more tickets in the hope that fortune may smile on him some time.

The specious plea is raised that this application of tests laid down in State of Bombay v. R. M. D.C.3 applies only to private individuals and not the State.

The State should be the embodiment of exemplary conduct. The aim of the Government of the day, as has been the aim of all Governments, ought to be the good of their citizens. Surely an activity, which tempts away food from the hungry and clothes from the naked, deprives the uneducated of education and in general breeds a lazy fatalistic spirit on a national scale, can have no moral in it. Gambling is no less a gambling because it is run by the State.

The continuous clamour made on the basis of the ghee and liquor argument of Krishnan Kumar case ought to be settled once and for all.

Firstly, Krishan Kumar case brushed aside the test of R. M. D. C. on the ground that the question before the court was one of selling liquor. This argument therefore becomes in applicable, for here, as in R.M.D.C. we are concerned with an activity of a gambling nature.

Also, Krishan Kumar case was wrongly decided. It proceeded on the fundamental premise that Cooverjee case4 conceded that dealing in liquor was business. This concession was seen in the use of the word 'business' in Crowley v. Christensen cited with 'complete concurrence' in Cooverjee case. However, the inference is mis-conceived. A proper contextual reading clearly shows that the quotation from Crowley v. Christensen was used in the case only to show that "by the general concurrence of opinion of every civilised community there are few sources of crime and misery to society equal to the dram shop". Hence the quotation was merely to portray the grave dangers attendent to such activity and not to show that liquor was business.

But the matter does not conveniently rest here. When the State indulges in res-extra-cmmercium it becomes a person and so immediately falls under the shadow of Article 14. No court of the land would allow the State to carry on slave-trade or pillage or extort savings. It is of the essence of the rule of the law, in a country which has and wants to steer clear of tyrannical control and laissez-faire, that where the activities of individuals and State are the same, both are to be judged by the same scale. The object is thoroughly discredited, already; but there is no intelligible differentia which lends virtue to the object—gambling—when the State is the agency instead of the individual. The confusion is cleared by Mansell v. Beck cited in State of Bombay v. R. M. D. C. wherein the lotteries and Art Unions Act of New South Wales came up for consideration: "The only feature which distinguishes such a transaction from trade and commerce as generally understood is to be found in the subject of the transaction; there is no difference in the means adopted for carrying it out". (Emphasis mine).

Truly if the salt loseth its flavour, whither shall it be salted. Innocent millions short on money but long on hope are led by the nose. The Bench and the Bar turn a Nelsonian eye to the fact that short term gain could prove long term loss.

Krishan Mahajan
Faculty of Law, Delhi

NOT EVEN AN ECONOMIC GAIN

One of the foremost arguments put forward in defence of State lotteries is that there are huge profits and that they are used for charitable purposes. The said story about State lotteries is no longer hidden.

On the average most States spend as high as 45% of the proceeds on running them. Worst stood West Bengal which spent Rs. 53 lakhs to earn Rs. 55 lakhs, a dismal earning indeed for all the wrought it caused to poor man's earning. Even Maharashtra which earned the highest spent Rs. 412 lakhs out of its receipts of Rs. 860 lakhs. In all the 14 States that run State lotteries earned Rs. 2,836 lakhs and spent Rs. 1,286 lakhs.2

Besides the money given in prizes, a huge chunk goes to the agents. Some of the States pay as high as 42% of the sales of agents in various forms.2

Clearly the persons who reap the harvest out of this State-operated gambling are the agents. They are out in public places, bus stops and railway stations to deprive the common man of his hard earned money in return for a dream of being rich overnight. In practical terms, being widespread, it is more vicious than private lotteries. The poor man loses, the State does not gain enough while some one else fills his pockets in the name of State lotteries. One wonders if income of these agents is taxed!

It is argued that noble ends can justify ignoble means. The fact that the State uses the profits for charitable purposes is again doubtful. Some States only mention the purpose as State Development Schemes. Is that not part of States normal function? Can any of those who have lost their money hope to find solace from a new hospital or a charitable institution that yet haven't appeared after all these months?

State lotteries are sought to be justified under the privilege of the State to have a monopoly under Article 19(6)(ii). That permits a State to carry on any trade, business, industry or service to the exclusion of citizens. But for that lotteries must fall under these categories. If under Article 19(1)(g), running lotteries is not business (R.M.D.C. case) then surely it cannot be under Article 19(6)(ii) as well.

On what justification or legal ground does the State carry on this gambling activity?

Vijay Malik, Lucknow

1. The public Gambling Act, 1867; The Bengal Public Gambling Act, 1867; The Bombay Prevention of Gambling Act, 1887; The Delhi Public Gambling Act, 1955: The Madras Gambling Act, The Rajasthan Public Gambling Act and various other Acts of similar nature do not apply to lotteries. Return to Text
2. AIR 1957 SC 699. Return to Text
3. AIR 1957 SC 708. Return to Text
4. Ibid., at page 720. Return to Text
5. In Krishna Kumar v. Union of India, AIR 1967 SC 1368 where the nature of liquor trade was in question, the Court voiced strongly against the tendency of applying vague moral notion in the domain law. Return to Text
6. Referred to at page 716 in R. M. D. C. case ; Also see Mensell v. Beck, referred to in R. M. D. C. case. Return to Text
7. Phrase borrowed from Ranjit Udeshi case. Return to Text

1. State of Bombay v. R. M. D. C., (1957) SCR 874. Return to Text
2. Section 294-A, IPC provides: "Whoever keeps any office or place for the purpose of drawing any lottery, not being a State lottery or a lottery authorized by the State Government, shall be punished with imprisonment of either description for a term which may extend to six months, or with fine, or with both. And whoever publishes any proposal to pay any sum, or to deliver any goods or to do or forbear doing anything for the benefit of any person, on any event or contingency relative or applicable to the drawing of any ticket, lot, number or figure in any such lottery shall be punished with fine which may extend to one thousand rupees." Return to Text
3. (1957) SCR 874. Return to Text
4. Plalen v. Virginia, (1850) 149, US, 163 12 L Ed 1030. Return to Text

1. AIR 1967 SC 1368. Return to Text
2. AIR 1958 SC 731. Return to Text
3. AIR 1957 SC 699. Return to Text
4. AIR 1954 SC 220. Return to Text

1. Times of India, Delhi Edn. dated Dec. 22, 1970. Return to Text
2. Hindustan Times, dated Jan. 2, 1971. Return to Text