January 31, 2023
The High Court of Bombay vide its order dated January 18, 2023, in the case of Play Games 24X7 Private Limited vs Reserve Bank of India and Anr., Writ Petition No. 3047 of 2022 has observed that the mere provision of a game of chance without offering monetary rewards should not be considered as betting or gambling.
The petitioner was engaged in the designing and development of software related to games of skill. The petitioner, during the course of its business, onboarded foreign investors and was therefore required to comply with regulations under the Foreign Exchange Management Act, 1999 and in particular Foreign Exchange Management (Transfer of issue of security by a person resident outside India) Regulations, 2000. The petitioner in the present petition acknowledged its procedural and technical contraventions of the FEMA and regulations under it. The Reserve Bank of India (Respondent no. 1) thereafter, on July 30, 2012 vide a letter informed the petitioner that the forms that were submitted under compliance were no longer acceptable due to the contravention on part of the petitioner. However, the Apex Bank stated that the contraventions were compoundable if appropriate filings were made by the petitioner within the prescribed time. Thereafter, when the petitioner attempted to file the same, it was returned by the RBI with a direction to approach its Foreign Exchange Department. The Foreign Exchange Department proceeded to direct the petitioner to approach the Department of Promotion of Industry and Internal Trade so as to seek a clarification for the petitioner’s eligibility to receive foreign direct investment in the first place. Upon making several attempts to represent its case before the DPIIT, the petitioner failed to receive a response and presumed that it was not bound to seek such clarification in the first instance. The petitioner aggrieved by non-compounding of the contravention by RBI, moved another application, pursuant to which it was redirected to approach the DPIIT and seek its permission.
The present petition was thus instituted against RBI before the Bombay High court in 2021, whereafter the court directed that DPIIT should also be joined as a party to the petition. The question that the division bench of the Bombay High Court was deliberating in this petition came down to, whether, during the relevant time period, it can be said that the business activity of the petitioner was illicit, prohibited by law, or illegal such that it would be disentitled to receive foreign investment at all.
The respondents in the petition, had taken their view based upon their understanding that the petitioner offered in particular two games by the name of ‘Teen Patti’ (three card game) and ‘Call it Right’ through its website that would fall under the category of gambling and betting. In response to the allegations, it was the case of the petitioner that while the website of the petitioner did in fact offer these two games, none of the games involved any monetary/tangible prize or reward that could be won by the players of such games based on the outcome. While the petitioner offered virtual chips to the winners of such games, the same could not be redeemed for money and neither be used for seeking refund or obtain goods with tangible value and money’s worth. The petitioner further submitted that in the absence of the element of reward from such games, they could not qualify as gambling under the relevant legislations.
The court thereafter, taking note of the arguments put forth by the parties, arrived at the decision that the predominant element of the activity, skill or chance, determines the character of the game. However, to constitute as gambling, two conditions must be met:
Therefore, in light of the submissions made by the parties, including the fact that the petitioner’s website categorically stated that there was no reward involved for playing the games in question, the court held that the mere positioning of the two games on the petitioner’s website cannot render illicit or illegal any activity undertaken by the petitioner.
The court further stated that the mere fact that there is a game of chance being offered on a website, does not in itself make the activity gambling unless there is accompanying reward or promise of reward involved.
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