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Whether s. 30 of the Indian Contract Act 1872 should apply to lotteries?

Our daily life revolves around the making of various contracts. Some turn out to be legal and some void. Some contracts can be legally enforced in a court of law and some get rendered unenforceable. One such contract named ‘Wagering Contracts', as mentioned under the Indian Contracts Act,1872 (hereinafter referred as ‘the Act'), void and unenforceable.

Various types of contracts come under wagering contract. One such is Lottery. In India, most people are unaware of the fact whether their rights are protected under law and whether they can recourse to some legal remedy. The same is the case with lotteries. People do not know the fact that if they aren't given the prizes they won, they have no course of action in hand. Due to being unenforceable, it is the need of the hour to look into the repercussions it may have and ways to avoid the same. This paper is an attempt towards the same.

In this paper I have argued that the sec. 30 of the Act should apply to lotteries but before that the sec. 30 needs to be amended. This paper talks about the Constitutional Stance towards lotteries. Constituent Assembly debates for the same have been looked into. Furthermore, sec. 30 of the Act and the flaws it entails are studied. The provisions of the states have been discussed. An important aspect which is currently in vogue i.e. International Lotteries has been talked about and their legal status in India. Lastly, the solutions for the flaws which currently prevail in the legal fraternity, have been mentioned.

Constitutional Stance

When the constitution of our country was being framed, a motion was passed to include Entry No. 45(currently entry 34) concerning gambling and betting under the State list in the seventh schedule. This view was heavily criticized by some members of the Constituent Assembly. They considered gambling and betting immoral and equated it with crime and hence wanted them to be banned in India.

However, Dr. B.R. Ambedkar was of the view that by not keeping these in the list, betting and gambling will be left unregulated and would lead to serious concerns for the society. Keeping it in the List II, he said, would empower the states to prohibit or regulate gambling and betting effectively.[1] Hence, betting and gambling feature in the Entry 34 of List II[2] and Lotteries organised by the Government of India or the Government of a State features in the Entry 40 of List I of the Schedule VII[3] of the Constitution of India. Apart from this, the Constitution remains silent about lottery or betting and gambling.

In the case of B.R. Enterprises v. State of U.P. and Ors, [4] Supreme Court had observed that lottery is a form of gambling because it is highly based on chance and requires no skill. But then the question arises that why Lottery of a kind i.e. ones organised by Government of India or State been kept in Union list keeping it away from the ambit of Entry 34 of the State list.

This has been done to authorize state legislatures to prohibit gambling on the aspect of morality for protecting the society from this pernicious practice. Whereas the separation can be justified by saying that this would prevent the State government from interfering into the organization of lotteries which are a source of revenue for the state which in turn is being used for the welfare of the public.[5]

Section 30 of the Act

Sec. 30 of the Act talks about wagering contracts. It declares them ‘void' and unenforceable. However, the act remains silent on what the definition of a wagering contract is.

This task has been left on the courts. Lord Hawkins, in the case of Carlill v Carbolic Smoke Ball Co.[6] defines wager as:
 ‘One by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent on the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other consideration for making of such contract by either of the parties. If either of the parties may win but cannot lose, or may lose but cannot win, it is not a wagering contract.'[7]

The public policy behind declaring wager as void and unenforceable before the court of law has been explained by Dharmadhikari J. in the case of Subhash Kumar Manwani v State of MP and Ors[8]. He said that the law discourages people from entering into games of luck and chance, trying to earn easy and quick money putting at stake their hard-earned money and not spending it for useful purposes.

However, the point of concern in Sec. 30 is that it just declares wagering contracts as void and unenforceable but doesn't declare them illegal. The implication of which is that entering into a wagering contract is legal but there is no remedy available in case there is a breach of contract. Therefore, it seems important to see whether Lottery would fall under the definition of wager or not.

The Lotteries (Regulation) Act, 1998 defines lottery as:

a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets.

According to the above mentioned definition, Lottery would said to be falling under the category of a wagering contract as lottery is based on an uncertain event which is out of the control of any person, the parties have no other interest in it apart from the money at stake and there is equal probability of winning or losing.

There have been occasions when the parties have approached the Supreme Court to resolve whether Lottery would fall under the category of trade and business and would be recognized as a fundamental right under Article 19 (1) (g) of the Constitution. The court has decided in the negative. It can be organised and taxed for specific purpose but would not attain the status of trade.[9] The Lotteries (Regulation) Act, 1998 was enacted by the government to just give legitimacy to the organization of lotteries and give assurance to the parties participating that the lotteries will be conducted fairly and without any fraud. However, the act remains silent on the rights of people in case of fraud or misappropriation in the drawing of lots or in not giving the prize to the winner.

Therefore, the position in India currently is that the winner of the lottery cannot file a suit for the claim of the prize irrespective of the fact that the lottery is organised by Central or State government because the agreement is of the nature of wager and would be governed by Sec. 30 of the Act.

States' stance on Lotteries

There is no blanket ban on the lotteries in India per se but there are few states which have banned lotteries whereas as many as 13 states have legalized them. Banning of the lotteries started from the turn of the century when social activists put forward the issues of people getting addicted to gambling too much that they even ruined their family's life putting everything at stake. Cases have come to light where men have left their families hungry just for the sake of gambling.[10]  This ban on lotteries by some states isn't effective because of the advent of online lotteries which can be accessed and taken part into by any person all across India.

In the case of All Kerala Online Lottery Dealers Association v State of Kerala,[11] the Supreme Court held that the State Government has the right to allow or prohibit the citizens from taking party in lotteries. This judgment was followed by legalization of lotteries by various states with Sikkim being first amongst them to legalize online lotteries.[12]

State Governments formulate laws for regulating, licensing and taxing lotteries. However, these rules also remain silent on the point of liability in cases of fraud. These rules are made to provide legitimacy of fair practice on the face of the lottery proceedings to the customers. The states which have legalized lottery have a website for the same. The websites of none of the State contains any terms and conditions for the customer to read and get a clear picture of what would be his/her first resort in case the winnings aren't given away.

International Lotteries

The advent of internet has brought almost everything on our figure tips. Lotteries didn't remain unaffected by this digitalization. Online lotteries have gained a lot of hype in the current world because of the user-friendly interface it provides to its customer. The cumbersome work of physically going and purchasing a lottery ticket can now be done with ease.

There are no specific laws governing international lotteries in India. These online lotteries can be accessed even by the people living in states where lotteries are banned by the government. This is another aspect which defeats the purpose of ban by the State Government. This also raises the question of where the jurisdiction would lie in case of any conflict. As purchasing of lotteries is a contract so there are some terms which govern the same. These terms are decided and mentioned by the online lottery websites.

Given below are the terms and conditions of a highly popular online lottery website lottoland.com.
21. Law

21.1.
All transactions including the payment of Winnings whether contractual or otherwise between Players and Lottoland and EU Lotto shall be deemed to be concluded and to take place in Gibraltar where Lottoland's and EU Lotto's servers are located.

21.2.
These Terms and Conditions, the relationship between Players and Lottoland and/or EU Lotto and each Bet and each Instant Win Game shall be governed by and construed in accordance with the laws of Gibraltar. Each Bet is placed and received and each Instant Win Game is played in Gibraltar.[13]

The terms mention that the jurisdiction would lie at the place where the company has its servers and not the native place of the customer. This would leave the Indian customers in a situation of great despair because the suits can only be filled in the foreign state where the company is based. Though these companies provide with lot of guarantee and authenticity but still there is always a risk which the customer has to bear in mind before risking his hard-earned money.
 
Conclusion
In the absence of appropriate laws for the protection of rights of the people indulging in legal lotteries, the government needs to take up some measures which would recognize their rights. The solution of the biggest problem of unenforceability of wagering agreements can be rectified with the amendment of Sec. 30 of the Act.[14] The section should be expanded in order to include the definition of wager which would remove the vagueness, reducing the multiplicity of suits. Moreover, the lotteries which have been licensed by the Government of India or any State should be kept outside the ambit of wagering contracts and should be made enforceable before the court of law.

This would, however, lead to another argument of public policy. Legal enforceability of lotteries would lead to increase in the number of people playing as well as the amount being put at stake. This problem can be rectified by linking all the gambling transactions with the PAN card or Aadhar card of the parties.[15] The government by law should impose a limit on the amount which can be put at stake depending upon the income of the party. This would remove the risk of having adverse effects on the family due to excessive gambling. The government should also consider the issue of International lotteries and should frame proper rules for safeguarding the interests of the people.

Therefore, I would conclude that the Sec. 30 of the Act should apply to lotteries but before that Sec. 30 needs to be amended.

End-Notes:
  1. Constituent Assembly Debates, vol 9.
  2. Constitution of India 1950, a 246.
  3. ibid.
  4. AIR 1999 SC 1867.
  5. ibid.
  6. [1892] 2 QB 484.
  7. ibid.
  8. AIR 2000 MP 109.
  9. ibid.
  10. India Today Web Desk, ‘Lottery is legal in 13 states, banned in rest but available almost everywhere' India Today, accessed 16 November, 2019.
  11. [2016] 2 SCC 161.
  12. Anushka, ‘Indian States where Lottery is legal' < https://www.lottoland.asia/magazine/indian-states-where-lottery-is-legal.html> accessed 16 November 16, 2019.
  13. Lottoland accessed 16 November, 2019.
  14. Law Commission of India, Legal Framework: Gambling and Sports Betting including in Cricket in India (Report No. 276, 2018).
  15. ibid

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