The High Court of Bombay on 18 January 2023 in the matter of Play Games 24×7 Pvt Ltd v Reserve Bank of India and Department for Promotion of Industry and Internal Trade,[1] addressed the question of whether Play Games 24×7 Pvt Ltd (“Petitioner”) online game constituted ‘gambling’. In doing so, the Court explored principal concepts with relation to online gaming.
The High Court of Bombay, vide their decision stated that the nature of a game is determined by whether the predominant element is ‘skill’ or ‘chance’. Further, the Court laid down that for a game to constitute ‘gambling’ would have to suffice both the conditions, namely: (i) it must be predominantly a game of chance, and (ii) it must be played for a reward.[2] The Court further disposed the petition on the terms that the Petitioner would be required to make a fresh application (i.e. compounding application) with RBI. The Court laid down that the mere fact that a game is available online, does not automate the game to constitute gambling unless the game provides for monetary rewards.
The Petitioner in this case is – an online gaming platform, with foreign shareholding, pursuant to which it was required to carry out certain compliances and documentation under the Foreign Exchange management Act, 1999 (FEMA). One such compliance is to disclose the contraventions (in a compounded manner) to RBI (Respondent No.1).
The RBI, upon accepting the compounding application redirected the Petitioner to the Department of Promotion of Industry and Internal Trade (DPIIT) (Respondent No.2) on recording the permissibility of the Petitioner’s business. However, Respondent No.2 stated that the Petitioner was not entitled to receive any foreign investment as the Petitioner (through its platform) hosted illegal games that amounted to gambling and betting which are prohibited under the FDI Policy.
The Petitioner, through its platform, hosts games namely, Rummycircle, My11Circle, Ultimate Teen Patti and Call It Right. In assessing the nature of games, the Court noted that all the aforementioned games did not provide monetary rewarding and the revenue is generated through in-app purchases made by users and advertisements. Further, the virtual chips available/purchased by the user could not be availed on any other platform.
The Court in examining the matter, made reference to celebrated precedents including RMD Chamarbaugwala v Union of India,[3] and Dr KR Laxmanan v State of Tamil Nadu & Anr.[4] These prevalent judgments examined the concepts of ‘game of skill’ and ‘games of chance’ in detail. In differentiating the two, the aforementioned judgments stated a game of chance is ‘determined entirely or in part by lot or mere luck’, whereas a game of skill ‘is one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player’.
Further with regards to gambling, the Court made reference to State of Bombay v RMD Chamarbaugwala,[5] noted the laid down law as ‘(i) the competitions where success depends on substantial degree of skill are not ‘gambling’ and (ii) despite there being an element of chance if a game is preponderantly a game of skill it would nevertheless be a game of “mere skill”.’
The aforementioned judgment has provided clarity on games that would constitute gambling and has provided a delineation between games of chance and games that constitute gambling.
It is noteworthy that in the above discussed judgment, the court considered the requirement of monetary rewards for a fame to constitute gambling. While the requirement of monetary incentive is logically necessary for anything to constitute gambling, the recent draft of amendments to the IT Intermediary Guidelines, as introduced by MEITY also emphasize the need for such monetary reward in respect of online gaming. The definition of ‘online gaming’ as proposed in the draft amendments highlights the requirement of a monetary deposit and monetary rewards as a core element of such definition.
This indicates that while hidden economics of gaming through utilization of user data and advertised revenues (as done by the Petitioner) may be better addressed through a data privacy law, both the courts and the government department- charged with regulating online gaming, seem to be aligned on the need of monetary consideration for something to be within the ambit of gaming regulatory landscape.
For further information, please contact:
Tanya Nair, Amicus
tanya.nair@amicusservices.in
