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Legitimacy Of A Wagering Agreement

This Article states about Wagering Agreement under the Indian Contract Act. It also discusses the wagering agreement meaning, features, History , Its lawfulness in India and relevant case laws are also discussed.

Meaning of wagering agreement;

Wagering agreement are entered by the parties under the condition that money is payable by the first party to the second party on the occurrence of the future uncertain events and the second party to the first party when that particular event does not happen . In a wagering agreement, there should be a mutual possibility of profit and loss. Generally wagering agreements are void.

In a Layman language we can define the term wager as a bet .It is a game of chance where winning or losing is uncertain and the event on which chance of winning or losing depends is also uncertain .The parties who are involved in a agreement like this mutually agree upon the nature of the agreement that either one will win .Both the party stand equal to win or loose the bet .The risk of loss or the chance of gaining is not one sided .In a wagering contract either of the party may win but not lose or may lose but cannot win.

The essential part of wagering agreement is that neither of the parties should have any interest in the contract other than the sum which the person is going to win or lose . Parties to a wagering agreement focus mainly on the profit or loss they earn.

wagering agreement is void and unenforceable by law but not forbidden by law that's why wagering agreements are void not illegal .As far as collateral transaction are concerned they are not void therefore they are enforceable.

Features of wagering agreement:

  • There should be two parties
  • There should be Mutual chances of gain and loss
  • There should be Uncertain event
  • Parties should not have any other interest other than the stake

Section 30 of Indian contract act 1872

Section 30 of ICA,1872 states that:

Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.'

Exception in favour of certain prizes for horse-racing:

This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be rewarded to the winner or winners of any horse-race.

Section 294A of the Indian Penal Code not affected:

Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code (45 of 1860) apply.

So, We can decipher from the above section that wagering agreement occurs when:

  1. The parties have opposite views regarding an uncertain event.
  2. There are chances of gain or loss to the parties on the determination of the event one way or the other.
  3. The parties have no other interest except winning or losing the bet.
     

Explanation to the Exception of Section 30 Of Indian Contract Act,1872

The State Government sometimes sanctions certain horse racing competition if the provincial laws authorize it and if the people participate by contributing with an amount of Rs 500 or more towards the reward money which is to be given to the winner of the horse race , then it will not be considered as a wager as per section 30.

Wagering agreement are not illegal

There is a huge confusion between legal professionals about section 30 of Indian contract act which needs to be cleared out. Some people believe that wagering agreement are illegal and are not allowed by law , but this is not the case .section 30 of Indian contract act does not say anything about wagering agreement being illegal rather it renders it as void agreement. so the contract act draws a distinction between an agreement which is only void and the one in which object or consideration is unlawful.

Pringle vs Jafar khan

(Allahabad High Court - 1st march , 1883)
Facts of the case:
The plaintiff , jafar Khan was a jockey of Mr.collins , who died on 12th January , 1879 . He bought a suit against Mr .collins executor for recovery of certain sum of money which was due by Mr .collins.

The claim pertains to:
  1. An amount of Rs. 1,005 which the plaintiff averse was due by Collins to the respected Secretary of the Calcutta Races one lottery account and which he, acting on the authority and by the request of Collins, paid, through Mr. Kelly Maitland.
  2. An amount of Rs. 74, which was due by Collins to the respected Secretary of the Calcutta Races for the horse-racing account of the horse named Mars which he discharged for Collins after his death on the 19th April, 1879.
  3. A sum of Rs. 100 paid by him on the 31st December, 1678, on account of Collins and with his authority for the entries of the horse Mars at the Dacca Races.

Point of contention of appellant:
The appellant contends that there was no authority on Collins' part to pay any of the above amounts and the payment of them is not proved.

He also contended that the sums paid was in respect of a wagering transaction which the plaintiff cannot recover through the course of law.

An item of Rs. 1,000, which the plaintiff received from the defendant, should be set off against his demand . Also that the debt must be held to be satisfied by the legacy left by Collins to the plaintiff in his will.

Judgment:
It was held that:
When money has been paid at the request of an individual it can be recovered if the contract is void, and not illegal.

As far as the claim of Rs. 1,005 is concerned there is no doubt that there was an debt which was due by Mr .collins on a race lottery account , and an action can't be maintained for its recovery against him, under s. 30 of the Contract Act, being an agreement by way of wager and void at law. But the agreement between Jafar Khan and Collins is of a quite different character.

There is nothing illegal in the consideration of the agreement, whereby Collins promised to repay Jafar Khan the cash he paid to satisfy his liabilities on the lottery account. It is not made illegal by the provisions of s. 23, Contract Act; the provisions of s. 294A of the. Penal Code don't apply to a lottery of this kind; neither is the consideration otherwise unlawful under s. 23 of the Contract Act;, the agreement is only void under s. 30 of the Act.

With respect to the claim of Rs 74 , the court held that it was paid by plaintiff on behalf of Mr .collins to the honorary secretary of Calcutta races for the entry of his horse(mars) for the Calcutta races. It was found that the transaction is open to no objection under section 30 and 23 of the contract act. The plaintiff paid the amount at the request of Mr .collins and hence is eligible to recover the same and the same goes for the claim of Rs 100.

History
Wagering was seen in Indian culture from ancient times, even when there were no dice; Indians used the bibhitaki tree's nuts. If we go back to the Mahabharata times, one of India's oldest mythologies, where the opponent's abilities were tested not by battle, but by game of board. Agreement by way of wager is invalid pursuant to section 30 of the Indian Contract Act, 1872; and no action shall be brought to recover anything claimed to be gained by any wager.

The Hindu law betting has not been implemented in India's contract act. Gambling is not trade and barter, but res extra commercium and is therefore not covered under Article 19(1) or Article 301. Under the Indian Constitution, the State legislatures have been granted the power to frame specific state laws on 'Betting and Gambling' .

Wagering and Provisions Of Gambling In India

The constitution of India has entrusted the Indian states with certain powers to frame state specific laws on Betting and Gambling. The Public Gambling Act of 1867 has been adopted by some states of India . The gambling legislations regulate casinos in India.

The Gambling Legislations of state, Daman & Diu and Sikkim enable gambling to a restricted extent, underneath a license, in 5 star hotels. In Goa, the law additionally permits casinos on board an offshore vessel.

Section thirty solely says that “agreement by way of wager is void”. The section doesn't outline “wager”. In the case of Gherulal Parakh v Mahadeodas (AIR 1958 Cal 703 On 1st April, 1953) Honourable Judge Subba Rao j pointed out Sir William Anson's definition of “wager” as a promise to provide cash or money's worth upon the determination or ascertainment of an unsure event, brings out the idea of wager declared void by section thirty of the contract act.

There is no technical objection as to the validity of a wagering agreement. It's an agreement by mutual guarantees, each of them conditional on the happening or not happening of an unknown event.

Different states have different provisions relating to Gambling. According to section 3 of the Odisha prevention of gambling act 1955 ,anyone who takes part in gambling or gaming shall be punishable with imprisonment of one month or fine which may extend to Rs 100 or with both .According to section 4 of the same an owner or an occupier of a place where the gambling is done is punishable with the same punishment. section 5 and 6 talks about common gaming house i.e. if a person owns a common gaming house or knowingly provides any person with the space for common gaming house shall be liable for imprisonment of 6 months or to a fine which may extend to 1000 rupees or both and section 6 provides same punishment for the person whoever takes part in gambling in a common gaming.

Gambling in Maharashtra

Online betting is legal in Maharashtra, but the site should be located outside India .But playing at a gaming house is illegal. online lottery is also illegal in Maharashtra. There are only 13 states which offers state lotteries and Maharashtra is one of them. Only authorized agents of Maharashtra government can print and sell lottery tickets. If someone sells lottery tickets or prints them without authorization can result in imprisonment of up to two years

Suit for recovery- when lies and when doesn't

While a wagering contract cannot be enforced , a deposit created by one individual with the opposite as security for observance of the terms of the wagering contract can not be recovered, so long as the amount has in fact been appropriated for the purpose for which it was deposited.

A claim for loss with respect to an wagering arrangement is not legally enforceable, and if such contract is by one person with another, who is a partner to the firm , then such an individual cannot recoup the loss by filing a lawsuit against the other partner of the company.

When the parties agree that their promises will be fulfilled simultaneously, one party cannot blame the other for breach of contract unless he can show that he was able and willing to fulfill his part of the deal at the agreed-upon date.

A suit lies for recovery of cash deposited by the party to a wagering agreement as security for performance of his part of the contract. The direct prohibition contained during this section doesn't cowl such a claim.

In a situation where an individual bets on a horse for himself and on behalf of another, and the horse wins for himself and for another, Suit for restitution of money for this share is maintainable.

The loser of the bet has the right to reclaim his deposit from the stakeholder if he claims it until the latter hands it off to the winner, but he does not have the right to recover the money from the winner when it is paid to the winner amid plaintiff's protest..

Despite the fact that the initial agreement was of the form of a wagering deal, plaintiff's forbearance to sue together with his forbearance to find the defendant in default represent good consideration for a new agreement, and the plaintiff is entitled to recover on the new agreement.

This section does not bar a principle from bringing a claim against an agent or trustee on behalf of his principle for prize money won on a wagering deal.

Gherulal Parakh vs. Mahadeodas Maiya And Ors. (29 January 2013)

Facts:
The appellant( Gherulal Parakh) and the respondent (Mahadeodas Maiya) entered into an partnership to carry on wagering contracts with two firms of Hapur(Messrs).It was Agreed Between the partners that the said contract would be made in the name of the Respondent and that the profit and loss arising from the said contract would be borne by them in equal proportion. Respondent entered into various kind of transactions with the two firms and in the end suffered a loss , which was borne by him. Appellant denied to bear his share of loss. The Respondent along with his son filed a suit in the court of law , claiming half of the loss incurred by him in the transaction. The Appellant took the defence of section 23 of the Indian Contract Act,1872 and Section 69(1) of the Partnership Act to invalidate the contract.

Issues Involved:
whether the above agreement is unlawful going by the provisions of section 23 of the Indian Contract Act,1872.

Held:
  • It was held that the common law of England as well as India has never struck down contracts of wager on the grounds of public policy. They have always been held not illegal keeping in mind that the statute declares such kind of agreement as Void.
  • It was also held that the above agreement is not illegal within the meaning of Section 23 Of the Indian Contract Act , 1872.
  • The appeal fails and hence is dismissed with costs.

Conclusion

From the above study we found that wagering agreements are void and unenforceable by law but not forbidden by law that's why wagering agreements are void not illegal according to section 30 of Indian contract act 1872.A claim for loss in consequence of a wagering agreement isn't enforceable rightfully.

An agreement is said to be a wagering agreement if there are two parties, There is Mutual chances of gain and loss, There is an Uncertain events. There is no interest other than the stake. wagering agreement on any sport event is void except horse racing. wagering is even seen many times in Indian culture since ancient times like in Mahabharata which is one of India's oldest mythologies

Bibliography:
I have completed this project with the reference of following online resources:
  • lawjustice.com
  • indiancaselaw.wordpress.com
  • indiancaselaws.org
Written By;
  1. Ronak Pattanaik, Email Id – [email protected]
  2. Sriman Mishra, Email Id - [email protected]

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