V.K. Bali, C.J.

The challenge posed by the appellants who were the petitioners in the original lis to notifications issued by the Government of Kerala dated 13.1.2005 and 22.4.2005 issued in exercise of the power under Section 5 of the Lotteries (Regulation) Act, 1998 (hereinafter referred to as the 17 of 1998) failed. Three Writ Petitions filed for the said purpose bearing Nos.14495, 16063 and 19582 of 2005 were dismissed by the learned Single Judge of this Court by order dated 27th July, 2005. The appellants in reiterating the challenge to the impugned notifications have thus called in question the impugned judgment recorded by the learned Single Judge in the present appeals which need to be disposed of by a common order.

2. By notification dated 13.01.2005 the Government of Kerala in exercise of the powers conferred by Section 5 of the17 of 1998 prohibited the sale of all Computerized and Online lottery tickets marketed and operated through vending machines, terminals, electronic machines and tickets sold through Internet in Kerala with immediate effect and declared that Kerala shall be a free zone from Online and Internet lotteries. The notification dated 13th January, 2005, the subject matter of challenge reads as follows:

In exercise of the powers conferred by Section 5 of the Lotteries (Regulation) Act, 1998 (Central Act 17 of 1998), the Government of Kerala hereby prohibit the sale of all Computerized and Online lottery tickets marketed and operated through vending machines, terminals, electronic machines and tickets sold through Internet in Kerala with immediate effect and declare that Kerala shall be the free zone from Online and Internet lotteries.

A perusal of the notification reproduced above would manifest that what was prohibited was sale of computerized and online lottery tickets and it is with regard to such type of lottery that Kerala was declared to be the free zone. In short, prohibition pertained to online and internet lotteries. In a matter of less than a fortnight, to be precise on 27th January, 2005, the Government of Kerala came up with yet another notification, whereby the sale of tickets of all lotteries organized, conducted or promoted by every other state government including lotteries organized, conducted or promoted by the Government of Kerala in the State of Kerala were prohibited. The State of Kerala was declared to be completely lottery free zone. The relevant part of the notification dated 27th January, 2005 which is not under challenge reads as follows:

Now THEREFORE, in exercise of the powers conferred by Section 5 of the Lotteries (Regulation) Act 1998 (Central Act 17 of 1998) and all other powers enabling for it, the government of Kerala hereby prohibit the sale of tickets of all lotteries organized, conducted or promoted by every other state government including lotteries organized, conducted or promoted by the Government of Kerala in the State of Kerala with immediate effect and declare that the State of Kerala shall hereafter be a Lottery Free Zone.

Almost on heels of notification dated 27th January, 2005 followed yet another notification dated 22nd April, 2005 by virtue of which the Government of Kerala lifted the prohibition partially and permitted the sale of paper lotteries organized, conducted or promoted by every State Government including the State of Kerala. Government, however, confirmed its stand with regard to prohibition of sale of computerized and online lottery tickets organized, conducted or promoted by every State Government, thus making the State of Kerala to be a lottery free zone, in so far as online, internet and computerized lotteries were concerned. This notification too is under challenge. The relevant part of the notification dated 22nd April, 2005 reads as follows:

NOW, THEREFORE, in exercise of the powers conferred by Section 5 of the Lotteries (Regulation) Act, 1998 (Central Act 17 of 1998) and in partial modification of the Notification issued as S.R.O.No.73/2005 dated 27th January, 2005, the Government of Kerala hereby lift the prohibition partially by permitting the sale of paper lotteries organized, conducted or promoted by every State Government including the State of Kerala provided that the prohibition imposed on the sale of computerized and online lottery tickets organized, conducted or promoted by every State Government shall continue to remain in force and the territory of the State of Kerala shall be on-line, internet and computerized lotteries free zone.

The frontal attack in challenge in the two notifications dated 13th January, 2005 and 22nd April 2005 is based on lack of legislative competence of the State of Kerala to regulate lotteries of other States, which according to the stand taken by the petitioners counsel is in the sole domain of Parliament under Entry 40 of List I of the Constitution of India. The only exception that may clothe the state with the power to enact on a subject matter of lotteries would be where the State may choose to ban sale of lotteries in the State and make it a completely lottery free zone, as that is how, it is urged that the Honourable Supreme Court instead of striking down Section 5 of17 of 1998 his read it down. It is in that context, it is urged, that whereas there cannot be any exception to the notification dated 27th January, 2005 prohibiting any kind of lottery in the State of Kerala, the prohibition of sale of online, internet and computerized lotteries alone will be impermissible, wholly illegal and unconstitutional. Before, however, we may deal with the contentions of the learned counsel for the petitioners on the point mentioned above and other points as have been pressed into service in their endeavour for quashing the notifications dated 13th January, 2005 and 22nd April, 2005, it will be appropriate to extract the resume of the facts, even though, in brevity-

3. Writ Petition (C).No.14495 of 2005 has been filed by State of Sikkim as also a company registered under the Companies Act, stated to be the marketing agent of the State of Sikkim and a registered partnership firm cum distributor of the company. W.P.(C).No.19582 of 2005 has been filed by the Association of Retailers which is stated to have several hundred retailers as its members. They too have been adversely affected in their business, trade and occupation which it is stated to have come to an abrupt end. W.P.(C).No.16063 of 2005 has been filed by 20 retail outlet dealers who are said to have lost their livelihood on account of the aforesaid notifications as their trade, business and occupation has come to an abrupt end.

4. The facts of Writ Petition No.14495 of 2005 would reveal that the State of Sikkim in its trading capacity has been organizing, conducting and promoting online lotteries in accordance with the provisions of Act 17 of 1998 and lottery tickets have been sold in various lottery playing States in India including State of Kerala. The State of Sikkim, it is pleaded, substantially depends on the revenue by sale of lottery tickets. It is a north eastern State with no avenues of industrialization. It is the case of the petitioners that they have started the business of online lottery in the State of Kerala in the year 2003. Online lottery is a tamper proof lottery, which has been designed using the aid of modern technology that eliminates all the ills of paper lottery and has greater transparency and is universally recognized as a tamper proof and safe method of conducting lotteries Modernisation led to spurt of computerization, satellite and internet connectivity which bear a great impact on every aspect of life, made things easier and faster and brought in more transparency. Thus began lottery in another form, popularly called online lottery. This online lottery, it is further the case of the petitioners, is organized, conducted and promoted by States respectively under the 17 of 1998, as covered under the definition of term contained in the said Act and is a scheme like any other paper lottery. The difference in the lotteries of this form is that online is free from any possibility of any duplication, tamper etc. and is totally transparent. The online lottery involves installation of a Central Server through a satellite and all this involves huge expenses running into hundred of crores. In this online lottery form, there are no pre-printed tickets as such. A person interested to purchase a ticket of online lottery comes to the terminal, fills a play-slip with numbers selected by him and hands it over to the person manning the terminal. This play-slip is put into the terminal and numbers selected by the player are transmitted to the central server, which registers the said numbers. A person may not like to select any numbers and may play a lucky dip in which case the computer makes random generation of numbers itself and transmits them to the Central server, which registers the said numbers. In either case, after the central server has registered the numbers, it generates a ticket and commands the terminal, which acts like a fax on command and delivers the ticket, which is on an imported thermal paper. The ticket besides containing these numbers contains various codes, details as also bar codes, which ensures against any possibility of any duplication etc. The game is made more interesting and entertaining since the player has the option to choose numbers for himself. Like paper lottery, in this case also, various tickets can be printed and sold as such, however, the same may not sell at all because the player does not like to choose the charm of selecting the numbers himself. However, whatever be the position, all the details regarding the number of tickets sold, their respective playing numbers, the number to tickets sold from each terminal etc. are all available in the central server. The generation of tickets for any particular scheme closes 30 minutes before the holding of the draw and no retain terminal can generate a ticket for such draw after such closing and at the time of draw all the details are readily available to the authorities immediately before the draw. The draw is held by the respective States themselves through a tamper free machine and is telecast from the Zee television network and watched by the public at large. Considering the advantages of online lotteries, the States simultaneously with their lotteries in paper form, also connected the online lottery as well and the same became more popular with the playing public on account of greater confidence, transparency and security. In order to carry on its said business occupation, petitioners Nos.2 and 3 have installed its electronic/computer terminals at various outlets, which are in-turn connected to its central computer system under the strict monitoring, control and supervision of the State of Sikkim. Each of these outlets is manned through a retailer appointed by the said petitioner. In effect, all these outlets are branches and integral part of Petitioner No.2. The terminals without the central server are an article of no utility. Petitioners 1 and 2 are selling the tickets of the online lotteries in various States including the State of Kerala. As of today, petitioners have installed 927 terminals in the entire State of Kerala and a huge amount of money has been spent for the set up and a number of families are being fed from the earnings of the same.

5. The State of Kerala issued the Kerala Lotteries and Online Lotteries Regulation Rules, 2003. By virtue of Rule 24 thereof, the State of Kerala attempted to regulate the lotteries of other States by seeking to look into the alleged violation of Section 4 of thewhich is in the exclusive domain of the Central Government. The State of Kerala assumed to itself the right to prohibit the lotteries of other States and the sale of their tickets in the State while continued to sell its own lotteries. Pursuant to the formulation of the rules aforesaid, the State issued a public notice unilaterally holding the lotteries of all other States as illegal and started taking action against the retail outlets including those of the petitioners in an indiscriminate manner. Rule 24(3) of the aforesaid Rules envisages that before a fellow State desired to sell the tickets of its own lotteries in the State of Kerala, it should obtain permission from Secretary (Taxes) of the State of Kerala, whereas, Rule 24(10) provides for suspension of the sale of lottery tickets of other States by the State of Kerala. It is the case of the petitioners that the said rule was ex-facie contrary to the Scheme of the and militated against the exclusive power of the Central Government under Section 6 of17 of 1998 as also the judgment of the Supreme Court in the case of B.R. Enterprises v. State of U.P. (1999) 9 SCC 700 [LQ/SC/1999/531] . A number of petitions were filed before this Court challenging the same. Petitioner No.2 also filed Writ Petition bearing No.35368 of 2003. This court vide order dated 17.11.2003 dismissed the petitions thus restraining the petitioners of the said case including petitioner No.2 herein to file writ appeals. Vide a detailed order dated 19th December, 2003, a Division Bench of this Court passed an interim order and stayed the operation of Rule 24(3) and 24(10) of the aforesaid Rules and allowed the petitioners to commence the sale of its lotteries. The Division Bench also permitted the respondent State of Kerala to approach the Central Government under Section 6 of the17 of 1998 in case the State of Kerala felt that lotteries of any of the other State/s was in violation of the provisions of the said Act. In terms of the interim order referred to above, the respondent State of Kerala, filed a complaint dated 12.01.2004 before the Central Government under Section 6 of theraising various grounds against the lotteries of all the other States. Petitioner No.1 filed its comments thereto and the matter is pending decision before the Central Government. It is further the case of the petitioners that vide interim orders referred to above, the Division Bench after an elaborate discussion prima facie held the impugned rules to be ultra vires. Petitioners thereupon commenced the sale of their lotteries. However, vide judgment dated 28th April, 2004, the Division Bench dismissed the Writ Appeals taking a view contrary to the one taken by the learned Single Judge and contrary to the one prima facie taken, even though, in the interim, order dated 19.12.2003 by Division Bench. Immediately on the pronouncement of the said judgment, the petitioners stopped the sale of lotteries tickets in the State of Kerala. Against the said judgment dated 28th April, 2004 a Special Leave Petition was filed before the Honourable Supreme Court and vide order dated 7th May, 2005 (annexed as Ext.P2) special leave was granted by the Supreme Court. Thereafter vide orders dated 17.05.2005, the Honourable Supreme Court ordered that interim order passed by the High Court dated 19.12.2003 would continue to operate. Pursuant to the order aforesaid, the petitioners commenced their sale of lottery tickets. A number of litigations came into being on account of the State of Kerala not permitting the petitioners to carry on their business of sale of lotteries despite the interim orders passed by the Supreme Court as mentioned above. There would be no need to give the details of such litigation. However, it is when the litigation referred to above was pending before the Honourable Supreme Court that the impugned notifications were issued.

6. The cause of the petitioners has been opposed by respondents 1 and 2 and in the counter affidavit filed in contesting the petition, it has inter alia been pleaded that in exercise of the powers conferred by Section 5 of the Lotteries (Regulation) Act, 1998 and in partial modification of the notification issued earlier declaring Kerala a lottery free zone State, the Government have lifted the prohibition partially by permitting the sale of paper lotteries provided that the prohibition imposed on the sale of computerized and online lotteries shall remain in force and the territory of the Kerala State shall be online, internet and computerized lottery free zone. The legislative competence in respect of State run lotteries vests exclusively with the Centre except where a State is lottery free State and that only the Central Government will have the power to deal with the same. The notification dated 22.04.2005 was issued by the State on the ground that the State of Kerala is an online lottery free zone. The State of Kerala is of the view that online lottery and conventional paper lotteries are to be dealt separately and are entirely different in every aspects by the nature and features inherent in them. It is then pleaded that the lotteries running the name of other States violates most of the provisions of the Lotteries (Regulation) Act, 1998 and as such they no longer remain to be State lotteries. The State of Kerala has banned the sale of online/internet lotteries in the State of Kerala in exercise of the powers conferred under Section 5 of the Act, 1998. As per Section 5 of the Act, a State Government may within the State prohibit the sale of tickets of a lottery organized, conducted or promoted by every other State. The State of Kerala is of the view that online lottery does not characterize the features of a lottery as defined by the of 1998. In fact, the so-called online lottery is not a lottery as it is a widespread network using internet and cheating the public in a massive way in the absence of a proper regulatory system of the same standards. The online companies are merely gaming, but not conducting any lottery as per the guidelines issued under the. It is further pleaded that though it is claimed that online lotteries are universally recognized as tamper proof lotteries, in experience it is felt that the so-called online lotteries were cheating the massive gullible public by misusing the advancement of information technology in the field of economy. The Government of Kerala has detected and established before the Union Government of India that online lotteries organized by the petitioner State are blatantly violating the provisions of Section 4 of the Act, 1998. The Central Act was enacted by the Parliament on 7.7.1998. At the time of formulating the, only conventional paper lottery was being conducted in the country. No online lottery was existing at the time of enactment of the. The Central Act did not envisage or take into account the online lotteries in the definition clause while stipulating conditions under Section 4 of thefor organizing, conducting or promoting a lottery by a State Government. The conditions stipulated therein are only intended to cover the conduct of paper lotteries. Online lottery is running with sophisticated technology, which involves installation of a Central Server, various terminals which are connected to the Central Server through a Satellite and all this is involving huge expenses running into hundreds of crores of rupees. This leads to a possible massive cyber cheating to incur the hundreds of crores of rupees invested by them, especially in a situation when there is no effective monitoring under the provisions of the Act, 1998, which had been enacted for the regulation of conventional paper lotteries. The online lottery can no longer be considered as lottery in its full sense of the term. The Government of Kerala has detected the flagrant violations and fraud inherent in the online lotteries and the illegal activity run in the name of the petitioner directly affects more than 15 lakhs people of Kerala who are deceived and are continuously cheated on a minute to minute basis. The ill effects of these lotteries had assumed major dimensions in the State. The newspaper reports, petitions from the public and reports from the police reveal the magnitude of these ill effects, which include suicides, divorces, starvation and murders. This created more hardship to the respondent-State. As per the case set up by the petitioner, around 1961 terminals have been installed throughout the State of Karnataka investing a huge amount of money and a number of families are being fed from the earnings of the same. The Government of Karnataka imposed a total ban on all sort of computerized and online lottery tickets marketed in the State with effect from 24.7.2004. It is then pleaded that by the emergence of the so-called online lotteries the very objectives of the Act, 1998 was defeated and these online lotteries, running in the realm of gambling with no control by the concerned State Governments, gained upper hand. The violations in terms of the Act, 1998 in the case of Maghalaya, Sikkim and Nagaland State lotteries have already been furnished to the Union Government of India on 12.1.2004 and 23.8.2004, some of which are as follows:-

(a) The online lottery tickets of Meghalaya, Sikkim and Nagaland States are printed by the terminal in violation of Section 4(b) of the Lotteries (Regulation) Act, 1998.

(b) The tickets of three States are printed in the stationery of the Sole-selling agent.

(c) The draws are conducted in such a manner that the transparency and credibility of the draw process is not at all established. According to Meghalaya rules, the presence of one judge shall form the quorum.

(d) The draws are conducted daily in a severe gambling fashion and in violation of Section 4(h) and prizes are offered on the basis of a single digit violating Section 4(a) of the.

(e) There are clear similarities in the name of different lotteries and they follow the same prize pattern, obviously making an attempt to circumvent Section 4(h).

It is then pleaded that in practice, the so-called online lotteries mislead the general public by its mesmeric gambling instinct inherent in it. People are attracted to the modern technology used in these lotteries and the instantaneous nature of it. They spend all their time in front of the online outlets and spoil all their money. They are being trapped by the simple prizes they get and they invest the remaining part of their money in a hope to get more and more big prizes. This is a continuous process starting from early in the morning and extends to late in the night. There appears to be no draw break. The lotteries conducted by these online companies have draws in every 15 minutes. Technically they call it weekly lotteries in order to circumvent the objectives of the, but in result they are ridiculously setting aside the spirit of the. As a technical argument, each lottery have only one draw in a week. The draw of one lottery repeats only in the next week. But, the tactics followed by these States is that they are conducting more than 100 lotteries with very strange names and by assigning pseudonyms. The online lotteries running in Kerala were in flagrant violation of the provisions of the and this fact was detected by the State of Kerala. The State of Kerala has made known this fact to the Union Government of India twice. The findings of the Government of Kerala revealed that the other States, on whose behalf the lotteries are running in Kerala, have least control over them and major source of income from these gambling type of lotteries were siphoned by the so-called middlemen who acts in the name Sole selling agents. After the Government of Kerala has revealed these facts, the States of Karnataka and Arunachal Pradesh have stopped the sale of online lotteries as they have admitted the violations pointed out by the State of Kerala. Online lotteries conducted under the name of other State Governments, circumventing the provisions of the are also conducting single digit lotteries through dubious methods adopted by their distributors and agents. There are cases detected, wherein some lotteries except one digit all other digits will be pre-fixed and the buyer has to choose only a single digit. In some other cases one digit of two digit number or of three digit number will be changing continuously, but in a pre-determined cyclic manner, which shows that the draw is held only for one digit. It was detected from the lottery terminals that the tickets of State of Meghalaya and Nagaland are being printed one after another from the same terminal, from the same pool in an unbroken manner. Several tickets without the imprint and logo of other State Governments and not even without signature of the authorized officer of those States have been found being sold in the State of Kerala. Standard set of rules are printed on the reverse side of the stationery and tickets of more than one State are being printed on the same material, by the same terminal in unbroken strips. The proceeds of the sale of online lotteries are rather shared by the distributors and agents without crediting in the public account of the respective States, in violation of the provisions of the. The other State Governments are not conducting the draws of the lotteries, but the said right is given away to the sole distributors. The details of unclaimed money are not brought to the knowledge of the other State Governments, whereas the unclaimed prize money is being appropriated by the distributors and agents. The place of draw is not at all located within the other States, whereas the same is being conducted according to the convenience of the distributors. The lottery distributors and agents of other State Governments are resorting to such unscrupulous methods and conducting online lotteries in every 15 minutes from the lottery terminals. The Lottery Department of the State had detected the draws being conducted in lottery outlets for more than 49 draws in a day. The online lotteries are being conducted on the banner of other State Governments in total violation of the provisions of the Central Act. The violations of conditions stipulated in Section 4 of theof 1998 while conducting lotteries were brought to the notice of the Central Government by letters dated 12.1.2004 and 23.8.2004. By Exhibit P10 notification issued in exercise of the powers conferred on the respondent-State and sub-sections (1) and (2) of Section 12 of Act, 1998, amendments were made to the Kerala Lotteries and Online Lotteries (Regulation) Rules, 2003. The State Government, it is pleaded, is fully empowered to make Rules in view of the provisions contained in the. After Exhibit P10 notification dated 13.1.2005, the State Government took a policy decision to prohibit all types of lotteries organized, conducted or promoted by every other State Governments including the lotteries organized, conducted or promoted by the State of Kerala and declared the State as a lottery free zone. The Government has subsequently convinced themselves that the total ban imposed on the sale of all types of lotteries affected a substantial number of population of the State of Kerala who were engaged in the sale of paper lottery tickets. Most of them were physically disabled and incapable of doing any other work. A large number of people were making out a living by selling lottery tickets. The Government was bound to protect them. Considering all the ground realties, Government took a policy decision to reintroduce the conduct and sale of Kerala Government paper lotteries. The Government has issued Rules regulating the conduct and sale of Kerala Government paper lotteries. Accordingly, the Kerala Paper Lotteries (Regulation) Rules, 2005 was introduced. At the very same, the Government was aware of the gravity and pernicious effect of the sale of online lottery tickets on the people, especially those belonging to the lowest strata of the society. Government felt that online lottery is a social evil and that it led to penury and desperation of the said population.

7. The irregularities committed in the conduct of lotteries by the Sikkim Government which were brought to the notice of the Central Government by the State of Kerala as contained in Exhibit R1(c) and R1(d) are as follows:

Ext.R1(c)

Government of Sikkim

The details furnished in letter No.714/Fin/DSSI, and 718/Fin/DSSI, on 14.11.2001 (Annex.A10) by the Government of Sikkim reveal that most of the provisions laid down in Section 4(a) of the Lotteries (Regulation) Act, 1998, are violated, as described below:

a. The Sikkim Online Network Lottery Rules (Annex.A11) came into effect on 31st August, 2001. The Agreement executed on 24th August, 2001 between the State and M/s. Tashy Delek Graming Solutions Pvt. Ltd. (Annexure.A12) reveals that the Agreement was signed 7 days before the Sikkim Online Network Lottery Rules came into effect.

Section 4(c) of the Central Act specifies that the State Government shall sell the tickets either itself or through distributors or selling agents. Under Rule 18(1) of the Sikkim Rules, the State Government may appoint marketing agent for selling the computerized network lottery tickets. It is also mentioned that the State Government may permit such agent to set up required infrastructure and use of technology for the purpose. This is clearly more than what is statutorily permissible under Section 4(c) of the.

b. Section 4(c) of theprescribes that the State Government shall itself conduct the draws of all the lotteries. In letter No.671(a)/Fin/DSSI dated 06.11.2003, the Director of Lotteries, Sikkim has stated that the State Government itself is conducting the draws of online lotteries. But as per the Methodology for Conducting the draw (Annex.A13), the draw is held in the presence of a representative of the Tashi Delek Graming Solutions Pvt. Ltd. Therefore, it is evident that the Government of Sikkim has given away at least one half its responsibility for Itself conducting the Draw to a private party. It is interesting to note that this delegation of the partial responsibility for conducting the Draws does not find a place in the Agreement between the Government and M/s. Tashi Delek. Section 4(c) of the Central Act is clearly violated.

According to Section 4(b) of the Act, the State Government shall print the lottery tickets. Rule 9(2) of the Sikkim Rules stats printing of the lottery tickets shall be by the terminal. At the same time, clause 17(b) of the Agreement states that the tickets will be printed in the machines through its inbuilt mechanism.

As per Rule 12 of the Sikkim Online Network Lottery Rules, 2001, the tickets will be printed on pre-printed ticket material. But the specimen tickets reveal that they are printed on Playwin stationery. The tickets also bear the message that get prizes up to Rs.5000/- across counter, tax free. The specimen play slips submitted by the Director, State Lotteries bear the Playwin logo. Evidently the tickets are instantly printed at the retail computer terminal in clear violation of Section 4(b), which insists, the State Govt. shall print the lottery tickets.

The prize structure of Super Lotto and Thunder Ball (Annex.A14) clearly reveals that the intending players, purchasing tickets are misled. The approximate prize amount when 6 numbers are matched is stated as minimum assured Rs.1 Crore with odds of 13,983,816. A footnote in small print states that Jackpot will be hit approximately every 4.66 Draw for Super Lotto. Similarly for Thunderball the Jackpot is claimed to be hit approximately every 4.25 Draws. Intending players are deceived and deliberately given the impression that Rs.1 Crore is the 1st prize for each draw.

c. In Thunder Ball, the last prize amount of Rs.20/- is won when one main number and Thunder Ball (fixed) are matched. It is obvious that, since the probability of winning is more than 1 out of 10, this is a single digit lottery specifically prohibited under Section 4(a) of the Lotteries Regulation Act.

Ext.R1(d)

SIKKIM

The provisions in respect of Sikkim State Lotteries had already been reported to the Ministry of Home Affairs, Government of India on 12.01.2004, vide ref.I cited. The schemes of lotteries furnished by the Government of Sikkim revealed that they were not in conformity with the provisions of Section 4 of the Lotteries Regulation Act, 1998. The irregularities/violations in respect of the Sikkim lotteries being sold in Kerala as in January 2004 were brought to the notice of the State Government earlier with a request for further documents/clarifications. Some of these violations/irregularities are briefly mentioned below:

i. On a perusal of the agreement between the Government of Sikkim and M/s. Tashi Delek Gaming Solutions Pvt. Ltd., the Marketing Agent, it is seen that the agreement with the marketing agent is executed seven days before the Sikkim Online Network Lottery Rules came into effect.

ii. The Marketing Agent is vested with powers more than what the Lottery Regulation Act permits. The State of Sikkim was asked to offer specific remarks on this.

iii. Since a detailed description of the method of draw was not furnished by the State of Sikkim, the same was called for from this office.

iv. As per rule 12 of the Sikkim Online Network Lottery Rules, 2001, the tickets will be printed on pre-printed ticket material. On perusal of the tickets of Super-Lotto and Thunder Ball it is seen that the specimen play slips furnished by the Director of Lotteries, Sikkim bear the imprint and logo of PLAYWIN. This shows that the tickets are instantly printed at the retail computer terminal, violating Section 4(b) of the Lotteries Regulation Act, 1998.

v. The contractual agreement between the Play Win sub-agent and the distributors was not furnished. So also the names of distributors for certain districts in Kerala were not furnished.

vi. The Government have furnished the details of 926 retail outlets operating in the State. But the contractual agreement between the distributor and these retail outlets were not submitted.

vii. The marketing Agent under the Sikkim State lotteries is empowered to set-up the required infrastructure and use of technology for the draw purpose. It is clearly more than what is statutorily permissible under Section 4(c) of the.

viii. As per Section 4(e) of the Central Act, the State Government itself shall conduct the draws of all the lotteries. But actual conduct of the draws is done by the Marketing Agent, reducing the role of the State Government to that of a mere spectator, thereby violating the above provision.

ix. In Thunderball, the last prize amount of Rs.20/- is when one main number and the Thunder ball (fixed) are matched, Until clarifications to the contrary are provided with evidence, it has to be presumed that this is a camouflaged single digit lottery specifically prohibited under Section 4(a) of the Central Act.

A representative of the State Government of Sikkim was present at the meeting convened by the Joint Secretary (CS) Ministry of Home Affairs, Government of India in his Chamber on 6.7.2004. The remarks of the Government of Kerala on the explanations offered at the meeting are given below:

The first Agreement of the Sikkim Government is not received till date.

It was pointed out in the letter to the Government of India that Sikkim has delegated more rights and responsibilities to the Marketing Agent than what is statutorily permissible under the. However, regarding the appointment of Marketing Agents, the State of Sikkim has informed that they will discuss the matter with the legal wing.

The State of Sikkim has admitted that the tickets are printed on PLAYWIN Stationery, clearly admitting violation of Section 4(b) of the.

Regarding the allegation that Thunder Ball lottery is organized on the basis of single digit, the State of Sikkim has not offered any reasonable explanation or furnished any document. Instead the State has merely refuted the allegation.

Even though the State of Sikkim was requested to furnish details/documents/clarifications regarding the allegations raised, no reply was received from them. The Government of Sikkim was reminded on 11.05.2004 and 15.06.2004 to furnish the details called for earlier and also to provide details of the new lotteries introduced by them in Kerala There has been no response from the State so far. Thus the violations and irregularities pointed out in request of Sikkim State Lotteries as in January, 2004 continue unabated. This shows that the Government of Sikkim is not inclined to address the serious issues pointed out by the Government of Kerala with regard to the illegalities and violations connected with Sikkim State Lotteries, tickets and which are sold among the public in Kerala.

What is extremely alarming is the sudden spurt of new Sikkim State Lotteries recently introduced in Kerala, all of them violating the provisions of Section 4 of the. Information on some of these lotteries (On-Line and paper) newly introduced in the State by the Government of Sikkim, collected from the retailers and from results published in newspapers is indicated below:

Preliminary enquiries reveal that these lotteries are blatantly violating the provisions contained in Section 4 of the Lotteries Regulation Act of 1998. All these lotteries are conducted daily, violating Section 4(h) of the. More than 60 draws are conducted per day on a minute to minute basis. All these lotteries are instant in nature and offer prizes on the basis of single-digits violating Section 4(a).

The State of Sikkim has recently introduced a lottery by name JOKER (CARDS) offering Rs.100/by paying just Rs.11/-. To get over the provisions relating to singe digits the lottery uses the symbols of Playing Cards, viz. Hearts, Clubs, Diamond and Clover. The draws are held daily as per the following scheme:

The BHAGYA EXPRESS lotteries recently introduced in Kerala in the name of the Government of Sikkim violate all the provisions of the Lottery Regulation Act, 1998. Bhagya Express Lottery is a daily lottery with first prize for Rs.122/- and second prize of Rs.100/-. Tickets are issued in a set of 10 numbers. It is interesting that the terms and conditions are not printed on the reverse of the ticket but it is stated that terms and conditions can be had from the Government of Sikkim/Sole Distributor. It is then evident that even the terms and conditions of this lottery are determined by the Sole Distributor.

8. Having mar shelled the pleadings of parties, time is now ripe to take into consideration the legal issues that have been raised in support of these appeals. Learned counsel for the appellants, Sri, Sudhir Chandra Agarwal, Senior Advocate has raised the following points for our consideration:

(1). The condition precedent to the exercise of power under section 5 of Act 1998 is that the State prohibiting the lottery organised and conducted by another State must not have any lottery of its own, inasmuch as, the State of Kerala is permitting paper lotteries of its own as also other States and the State of Kerala is thus not a free lottery zone, notifications dated 13.1.2005 and 22.4.2005 cannot be sustained.

(2). All lotteries are a form of gambling and online lottery cannot be singled out as significantly different from paper lottery. The distinction drawn between online lottery and paper lottery by the Government of Kerala is illusory and discriminatory and violative of Article 14 of the Constitution.

(3). The notifications are arbitrary and male fide, and violative of Article 14 of the Constitution.

(4). The impugned notifications are lacking legislative competence and are a colourable exercise of power.

(5). The impugned notifications, therefore, are clear example of fraud on power and colourable exercise of power.

9. A perusal of the legal issues enumerated above would straight away reveal that issues 1, 4 and 5 deal with the same point, although spelled out in different language thus adding dimensions to the same contention. These three issues would thus need to be discussed together. Before, however, we may take that exercise in hand, it would be appropriate to deal with 2nd and 3rd issues as these are two facets of the same contention of there being no distinction between online and paper lottery and in any case the distinction is illusory and discriminatory. The notification suffering from mala fides appears us to be a separate and distinct issue and can thus be segregated and made as issue No.6.

10. The relevant provisions of the of 1998, which we shall refer hereinafter, would clearly demonstrate that even though all types of lotteries are meant to be regulated by the said Act, online lotteries were not under the contemplation of the Central Government at the time when the of 1998 came into force. It is otherwise also not a disputed fact that online became popular in so far as India is concerned only recently and in any case after the enforcement of the Act, 1998. Having this background in mind, the scheme of Act of 1998 would clearly show that the Government at that stage was concerned with paper lotteries of all kinds. The statement of Objects and Reasons of the of 1998 in so far the same is relevant as mentioned in the reads as follows: -

The conduct of certain types of lottery trade in the country, the malpractices thereof and their impact on the poorer section of the society have been under scrutiny or the Government for quite some time. The continued prevalence of the popularly known single digit and instant lotteries and the temptation offered by them proved to be under doing of many families, especially poor daily wagers and low income groups.

2. In spite of the guidelines issued by the Central Government over a period of time as also the guidelines issued in the recent past by the Honourable Supreme Court in the matter, the evil has not been totally eliminated and it is felt that a Central legislation to regulate the conduct of lotteries is necessary to protect the interest of the gullible poor.

11. From the preamble of the of 1998 spelled out from Statement of Objects and Reasons as re-produced above, what transpires is that necessity to bring about legislation in the matter of regulating lotteries was felt on account of continued prevalence of single digit and instant lotteries. It was primarily done to curb mal practices in the conduct of such lotteries which at that time were paper lotteries only when the Act, 1998 came into force. Lottery has been defined in section 2(b) of theto mean a scheme, in whatever from 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 (Emphasis supplied). By virtue of provision contained in section 3, save as otherwise provided in section 4, no State Government shall organize, conduct or promote any lottery. There is a ban thus to organizes, conduct or promote any lottery by State Government except as provided in section 4. Conditions, subject to which lotteries may be organized by the State, are as follows: -

(a) prizes shall not be offered on any pre-announced number or on the basis of a single digit;

(b) the State Government shall print the lottery tickets bearing the imprint and logo of the state in such manner that the authenticity of the lottery ticket is ensured;

(c) the State Government shall sell the tickets either itself or through distributors or selling agents;

(d) the proceeds of the sale of lottery tickets shall be credited into the public account of the State;

(e) the State Government itself shall conduct the draws of all the lotteries

(f) the prize money unclaimed within such time as may be prescribed by the State Government or not otherwise distributed, shall become the property of that Government;

(g) the place of draw shall be located within the State concerned;

(h) no lottery shall have more than one draw in week;

(i) the draws of all kinds of lotteries shall be conducted between such period of the day as may be prescribed by the State Government;

(j) the number of bumper draws of a lottery shall not be more than six in a calendar year;

(k) such other conditions as may be prescribed by the Central Government.

Whereas, condition (a) completely prohibits distribution of prizes on any pre-announced number or on the basis of a single digit, the other conditions, in particular clauses (b), (c) and (d), do clearly spell out conditions which are on lottery tickets. Sections 5 and 6 would further reveal that it was lottery tickets which was under contemplation of the Central Government, which are reproduced below:

5. Prohibition of sale of ticket in a State. - A State Government may, within the State, prohibit the sale of tickets of a lottery organized, conducted or promoted by every other State.

6. Prohibition of organization, etc. of lottery. - The Central Government may, by order published in the Official Gazette, prohibit a lottery organized, conducted or promoted in contravention of the provisions of section 4 or where tickets of such lottery are sold in contravention of the provisions of section 5.

Section 7 provides for punishment for organizing, conducting or promoting a lottery in contravention of the provisions of Act of 1998 and under the provisions of section 8 such contravention would be a cognizable and non-bailable offence.

12. Whether as, it may be true that all lotteries are in the form of gambling, but from the provisions of the of 1998 it cannot be said that in the sense that all lotteries are in the form of gambling and, therefore, online lottery cannot be different from paper lottery. There is a well marked distinction between online lottery and paper lottery and this distinction is neither illusory nor discriminatory. In fact, while regulating lotteries by the of 1998, as mentioned above, online lottery was not even in the contemplation of the Central Government. It is the pit falls of paper lottery which were under active consideration of the Central Government. Whenever a paper lottery had partaken the character of an instant lottery like online lottery the same was banned as would be clearly made out not from the statement of Objects and Reasons of the Act, 1998 only but also from condition (a) of section 4 which prohibition of prizes on any pre-announced number or on the basis of a single digit. From the various provisions of the of 1998 as enumerated above, it becomes absolutely clear that it is paper lottery which was required to be regulated by Act of 1998, and that being so, even though all lotteries are in the form of gambling there is a clear distinction between paper lottery subject matter of regulation of the of 1998 and the online lottery. The matter does not rest there as it would be seen from the provisions of section 4 of theof 1998 that the tickets of State owned lottery would be printed by the State itself. Sale of tickets alone is entrusted to agents and the entire sale proceeds have to be deposited in the public account of the State. Draws of all lotteries have to be conducted by the State Government and no lottery can have more than one draw in the week. Bumper draws shall not be more than six in a calendar year. The State can run only 52 ordinary lotteries and six bumper lotteries in an year. Section 5 empowers the State Government to prohibit the sale of tickets of lotteries organized by others State Governments. Section 6 empowers the Central Government to prohibit the conduct of lotteries which are conducted in violation of the conditions of section 4 or the tickets which are sold in contravention of the prohibition imposed by the State Government under section 5. There is penalty for running a lottery in violation of the provisions of the as made out from section 7. A punishment can be imposed on sale of tickets in violation of conditions and further that the offence committed under the is cognizable and non-bailable. Online lottery is such, the features of which automatically result into violation of conditions emanating from section 4 of theof 1998. The Online lottery has thus necessarily to be termed as significantly different from paper lottery. Once it is held that the paper lottery and online lottery are significantly different from each other, then banning one and continuing the other cannot be termed as discriminatory and violative of Article 14 of the constitution of India. The distinction between the paper lottery and online lottery could well lead to classify the two kinds of lotteries differently. The classification would have definite nexus with the object sought to be achieved. The contents of the counter affidavit filed by the State giving in details the pit falls of online lottery resulting into number of suicides and commission if heinous crimes may be recalled at this stage. It is the deleterious effects of the online lottery which appeared to the State to make distinction between paper lottery on the one hand and online lottery on the other. Reference may also be made to the report of the District Lottery Officer, Thrissur available at page 367 of the paper book of W.A.No.2012 of 2005. While giving his report, pertaining to problems and social chaos relating to online lotteries, it has bee stated that the victims of these anti-social business are prominently from the poor class of the society. People of all walks of life being tortured day by day is progressively increasing due to its fabulous advertisement through medias. Individual cases of victims of online lottery have been given as follows: -

Poyyara Appu, who had a tea-shop with a retail shop at Vatta Kottai, Thrikkara Grama Panchayat in Thrissur online lottery. On a visit to his house, reports collected from the neighbors and friends, he was a regular customer of one digit lottery and in every week he used to purchase online lottery tickets of Playwin and Smartwin from Varandarappilly and Amballur. A lot of money had been spent for these lotteries. Thus he became bankrupt and indebted for more than one lakh rupees. At last he committed suicide on 23rd July 2004.

His wife, Chandrika and son Anu and Abhithan state that he was disappointed of loosing money on games.

A youth of 24, Jayarajan near Kattoor, Irinjalakuda was working in a retail outlet of one digit lottery has been absconding by two weeks due to the failure of loosing money that he could not pay the money in time for his customers.

A bus cleaner, Thomas near Poyya, Mala, Thrissur is a regular customer of on line lottery. He said that he spend money for purchasing Smartwin Lottery even sparing the money for buying medicines.

Available on records is also report of District Lottery Officer, Thiruvananthapuram dated 22.7.2004. The relevant part of the same reads as follows: -

On 12/06/04 newspapers had reported that one Salim a head load worker from the suburban area of Thiruvananthapuram City, Kachani, had committed suicide owing to his inability to pay back the loans he had borrowed from his friends and relatives. To ascertain the fact I had visited the house of the deceased. On enquiry I have understood that the deceased person with his wife and three children were living with his income from head load work without any problem, with a bank balance of Rs.65,000/- in the name of their children. But after the starting of sales of online and paper lotteries he had started to play the online lottery games and gradually addicted to it. He played the same even without going for his normal work and had lost all money with him. However he continued the game by borrowing from money lenders and undergone in unbroken debt-trap. Having lost everything with him he committed suicide on 11/06/04. His wife and three children without anyone to support their family is now in a very pathetic condition. The deceased person was the only earning member in the family.

In this context I may report that the on-line lottery games and double digit paper lotteries are organizing their games to lure the common man especially the weaker section of the society literally spelting doom to their poor family. They are blatantly violating the Lotteries (Regulation) Act, 1998 and the guidelines issued by the Honble Supreme Court to organize and conduct lotteries. I have already reported the violation of rules by the other state on-line and paper lotteries to the commissioner of police, Thiruvananthapuram city and the local police station to take necessary actions.

13. From the perusal of the facts as has been given in the counter affidavit supported by specific instances it cannot be said that not even a signal cogent reason has been given in the counter affidavit as to why the online lotteries have been singled out and classified differently as compared to paper lottery and therefore, the State has not discharged its mandatory function under Article 14 of the Constitution. The judicial precedents in D.S. Nakara V. Union of India (1983) 1 SCC 305 [LQ/SC/1982/209] ), B. Prabhakara Rao & Ors. V. State of A.P. (1985 [Supp] SCC 432) and Pratap Singh v. State of Punjab (AIR 1964 SC 72 [LQ/SC/1963/209] ) holding the legislative power and action may accordingly be sustained if it satisfies the twin tests of reasonable classification and the rational principles correlated with the objects sought to be achieved would not be relevant as in the present case it is not possible to hold that there is no classified difference between an online lottery and a paper lottery.

14. While dealing with issues 1, 4 and 5, it is urged by the learned counsel for the appellants that the Honourable Supreme Court in B.R. Enterprises case ([1999] 9 SCC 700 [LQ/SC/1999/531] ) has clearly held that the State which conducts its own lottery has no power to prohibit another State from conducting its lottery within that State. It has been held that it is the Parliament which can regulate lotteries organized by the union or other States under Entry 40 of List 1 and that in respect of the subject matter of lotteries, States cannot derive legislative competence under Entry 34, List II of the 7th Schedule of the Constitution of India. The court instead of striking down the constitutional validity of section 5 of theread it down in the manner as mentioned below:

It is true that unless this provision is read down to mean a State can only ban lotteries of other States when it bans, as a policy, its own lotteries, it is bound to be subjected to the vagaries as pointed out and on deeper scrutiny it may not successfully stand. But by reading down the provision, which has to be read that to is only that State which decides lottery-free zone within its State can prohibit lotteries of other States clearly provides the guidance of the exercise of such a power. It is inbuilt and inherent in the provision itself in view of the Scheme of the and nature of subject in issue.

It is urged by the counsel that all lotteries are a form of gambling. It is a matter of public policy for each State to decide whether it wishes to expose its citizens to gambling and to lotteries. If it decides that its State should be free from lotteries that is to say, a lottery free zone, then alone it has the power to ban the lotteries of the Union and of other States because it would be extremely unreasonable to expose its citizens to gambling in the shape of lotteries of other States, when it does not have one of its own, as a matter of policy. When it has one of its own as a matter of policy, once, therefore, the State of Kerala has not only lotteries of its own, but from other States as well, it will have no legislative competence to ban online lotteries, contends the learned counsel.

15. Article 246(1) of the Constitution of India deals with exclusive power of the Parliament to make laws with respect to matters enumerated in List I (Union List) in the Seventh Schedule. As per Article 246(2), Parliament and the Legislature of any State have power to make laws with respect to any of the matters enumerated in List III (Concurrent List) in the Seventh Schedule. The Legislature of the State has, however, exclusive power to make laws with respect to matters enumerated in List II (State List) in the Seventh Schedule, as per Article 246(3) of the Constitution. Item No.40 of List I (Union List) in the Seventh Schedule reads as follows:

Lotteries organised by the Government of India or the Government of a State.

Item No.34 of List II (State List of reads as follows:

Betting and gambling.

There being a specific entry dealing with lotteries, the power to legislate on lotteries would be in the exclusive domain of the Parliament, even though lottery is also a form of gambling and would be generally covered under Item No.34 of List II (State List). The Parliament in exercise of power vested in it to enact law on lotteries as per Item No.40 of List I (Union List), enacted the Lotteries (Regulation) Act, 1998. Section 3 of theof 1998 ordains that save as otherwise provided in section 4, no State Government shall organise, conduct or promote any lottery. A State Government has been authorised to organise, conduct or promote a lottery, subject to the conditions enumerated in section 4 which have already been re produced in the earlier part of the judgment. It is absolutely clear that even though the power to legislate on lotteries vests exclusively with the Parliament the respective states have been delegated this power but it has to be subject to conditions enumerated in section 4. By virtue of the provisions contained in section 12 of theof 1998, the Government may, be notification in the Official Gazette, make rules to carry out the provisions of the. Exercising the powers vested in it by the provisions contained in Section 12, the State of Kerala has framed Rules called as Kerala Paper Lotteries (Regulation) Rules, 2005.

16. Provisions of Act of 1998 and in particular section 12 thereof, would clearly manifest that even though the power to legislate on the subject of lotteries is in the exclusive domain of the Parliament, the power to legislature on lotteries as well has been delegated by the Parliament to respective States in the country and as mentioned above, it is in exercise of that power the State of Kerala has indeed framed the Rules of 2005. It is significant to mention that section 5 further authorises a State Government to prohibit the sale of tickets of the lottery organised, conducted or promoted by every other State, as would be clear from section 5 of theof 1998. If the things were to rest at that, there have been no scope for an argument that the State of Kerala while not making the State as a lottery free zone could well prohibit the sale of tickets of lotteries organised by every other State. Section 5 of theof 1998 was, however, under a serious challenge in B.R. Enterprises V. State of U.P. (supra) and it is from the observations made by the Honourable Supreme Court in the said case that it is being urged by Mr. Agarwal, the learned counsel representing the appellants that unless State of Kerala is made a lottery free zone, there would be no power with the State Legislature to ban sale of lottery tickets from other States. In order to answer the question posed by the learned counsel, we are, however, of the view that the context in which the observation made by the Supreme Court relied on by the learned counsel were made shall have to be noticed. The facts leading to the decision in B.R. Enterprises case (supra) would reveal that the State of U.P. banned State lotteries of other States by virtue of power entrusted under section 5 of theof 1998. Various States challenged the provisions in different High Courts. Whereas the Gujarat High Court upheld the validity of the order passed by the U.P. Government, the Guwahati High Court struck down some of the provisions as ultra vires. It is against these orders that appeals were filed in the Honourable Supreme Court under Article 32 of the Constitution of India. The Supreme Court was also dealing with some of the petitions which were transferred to it from various High Courts dealing with similar issues. What was primarily debated before the Honourable Supreme Court was the character of the State lotteries and also if lotteries were gambling in nature, would it lose its character as such when it takes on the cloak of state lotteries and whether such cloak dissolves its character as res extra commercium. In any case, even if lottery was to be legalized would it be qualified to be or could it be held to be a trade with in the meaning of Chapter XIII of the Constitution of India and if lottery was a trade, were the provisions of the impugned Act violative of the Articles of Chapter XIII Entrustment of power to State under section 5 was also challenged as being unbridled without any guideline thus liable to be struck down. The precise contentions in challenging the validity of section 5 was that the power conferred on the State for banning the lotteries of every other State is bereft of any guidelines and, therefore a piece of excessive delegation. The power was styled to be uncanalised power conferred on the State at its whim and fancy. There was nothing in the Objects, Preamble, or any other provisions of the from which a guideline could be collected specially that it is only a State which does not run its own lottery, can impose such a ban on every other State. Framed in somewhat different language the challenge to section 5 was that the delegation to the State to decide to prohibit sale of lotteries organised by other States is a delegation by Parliament of its essential legislative power, without any policy or bereft of the guidelines and that there was total abdication of the legislative power of the Parliament which was a naked delegation, hence violative of Article 14 of the Constitution of India. The counter contention raised by the States and in particular the State of Tamil Nadu which had banned lotteries of other States, but continued to have its own, was that on a plain reading of Section 5, a State without banning its own lotteries can ban lotteries organised by other States. The Union of India and also State of U.P. had raised a contention that section 5 should be read as to entitle only such State to ban which, as a policy, does not permit its own lottery to run. If this be so, there possible could be no discrimination as it would apply uniformly to all the States. On the respective contentions of the learned counsel as mentioned above, the Honourable Supreme Court framed the question as follows:

The legal principle which emerges, as submitted, is that delegation of essential legislative power of the principal to the delegate would amount to abdication of its legislative power and if it is bereft of any guidelines then it is unsustainable in the eye of the law.

While dealing with the question aforesaid, the Honourable Supreme Court first recorded reasons as to why the power had been delegated by the Union to the States. It was inter alia observed as follows: -

As revealed from Anraj case I some of the States sought permission of the Union as a policy to raise their revenue through these lotteries, which was conferred by the Presidential Order under Article 258(1), though it records, the State could have exercised their discretion as a policy to have their own lotteries without such permission in view of its extended executive power under Article 298. It further reveals, till Parliament makes any law, the decision to start its lottery or to close it is exclusively within the executive power of each State. This is because it is the policy decision of a State which has to decide as a principle whether it desires to collect in this form the revenue or not. The Benefit of Article 298 is, it is extraterritorial, applicable beyond its territory, it is for this State lotteries are place in Entry 40 List i. So in a federal structure, Union has to play a role to coordinate between on State with the other. So by regulation it has to sub serve the objectives. The Union cannot force a State to gamble if such a State does not want to gamble. To run its own lotteries or to close it is left on the discretion of each State. It is each State which has to decide its policy and has to be concerned about its subject. In any case, the Union cannot force any State that it must run its own lotteries. But control of State lotteries running in the territory of other States is left on the Union. The State cannot restrict sales of lotteries organised by other States even in its territory unless authorised by the Union. This difficulty was felt by the State which is indicated in Anraj case-I. That seems to be the reason that Parliament has delegated this power to the State under section 5.

17. After taking into consideration the background leading to delegation of power by Union to the States, the question as to whether the delegation could be construed to be such as amounting to delegating of its essential legislative power and that too unguided or unbridled was examined. The question was answered as follows: -

84. In Section 2(b) lotteries are defined to be a scheme for distribution of prizes by a lot or chance. This definition itself recognizes that even in State lotteries the prizes are to be collected by chance without any skill, hence gambling in nature. Section 3 prohibits that no State lotteries can be organised without the condition stipulated under clauses (a) to (k) of section 4. Section 4 provides the condition to be complied with by the State lotteries. To initiate any State lottery it is left to the policy of each State, for this Act is silent. The only control is, in case it decides, then it must follow the conditions as laid down under section 4. Next comes Section 5 which is subject matter of challenge, the delegation of power to the State to prohibit the sale of lottery tickets organised by every other State. If a State desires not to subject its people to the lottery gambling, it has no power to restrict lotteries organised by Other States. It is to remove this mischief that power is conferred through delegation to the States to do it in terms of their own policy. By virtue of this, now the State Government can prohibit sale of lottery tickets of every other State within its territory. Next, Section 6 seeks strict compliance with section 4. Under this the Central Government may prohibit any State lottery which is being conducted in contravention of the conditions as laid down under section 4 or section 5. Section 7 shows the rigour of this Act by making it a penal offence as against all, who violate the provisions of this Act, be it the Head of the Department of the Government or the agent, promoter or trader, to be punishable with two years rigorous imprisonment. Section 8 makes such an offence cognizable and non-bailable. Similarly, Section 9 deals with offence committed by the companies. Section 10 entrusts the Central Government power to give directions to the State Government for carrying into execution the provisions of this Act, Rule or Order. Section 11 and 12 are the rule-making power entrusted to the Central and the State Governments respectively. Section 13 repeals the Ordinance. Thus, the whole Act makes clear that the subject is not to control the policy decision of each State to start or to close its lotteries, but to regulate it in case a State decides to run its own lottery through modalities and conditions laid down therein. Emphasis of the whole Act is to abide by the conditions strictly if you want to run a lottery. Thus, regulation is through conditions to eliminate even the remotest possibility of malpractices by providing stringent measures for its compliance. Perusal of the reveals, the scheme of the is limited in its application, and it admits the subject it is dealing is gambling in nature. As we have said, the decision to collect or not to collect revenue through State lotteries is exclusively within the policy decision of the State and for this, neither the Union nor Parliament interferes nor is there any indication under the. Thus, the question which remains is, if any State decides that it does not want any lotteries but if it feels helpless as having no jurisdiction over the lotteries orgainsed by other States, what is the way out This can only be done by Parliament or by entrusting this power on such State desiring so, which has been done through Section 5. In this background, for this helplessness of a State as recorded in Anraj case-I (1984) 2 SCC 292 [LQ/SC/1984/21] ) the remedy is provided by entrusting this power on the State under the impugned provision. This helps such State to achieve its objective of lottery (gambling) free zone within its territory. A well-concerned remedy. Next question is what could have been the guideline If State lotteries are gambling and it cannot be termed as trade and commerce at common parlance for any free right under the Constitution. Such right though recognized under Article 298, so other States may continue to enjoy till prohibited by valid law, and if any State wants within its State lottery-free zone and for which the power is entrusted to such State, it cannot be said in this setting and background and the nature of the subject that such a delegation is of its essential legislative power. The only guideline necessary in such delegation is to see that the State does not pick and choose one State from the other, which guideline is already provided in this section. It provides that such a ban could only be if it is applied to every other State. The only residual field of attack so far as this delegation could be, which has been attacked in this case, that the State could on one hand ban lotteries of every other State but run its own lotteries. It is argued that while a State bans lotteries of other States not to permit any gambling activity in the public interest as a policy but this very public interest is flouted by having lotteries of its own. It is true that unless this provision is read down to mean a State can only ban lotteries of other States when it bans as a policy its own lotteries it is bound to be subjected to the vagaries as pointed out and on deeper scrutiny it may not successfully stand. But, by reading down the provision, which has to be read that it is only that State which decides lottery-free zone within its State can prohibit lotteries of other States clearly provides the guidance for the exercise of such a power. It is inbuilt and inherent in the provision itself in view of the Scheme of the and nature of subject in issue. If interpretation as given on behalf of the State of Tamil Nadu is accepted that delegation of power is absolute, then the submission that such delegation is unbridled without any guideline carries great weight. Submission for the State of Tamil Nadu is that the lotteries may be prohibited in phases, viz. while running its own lotteries yet prohibiting other lotteries, may be as a public policy, for law and order, for political reasons, morality, etc. For surviving such an interpretation given by Mr. Ganguli, Parliament should have provided some guidelines. Such an interpretation falls into the trap of the submission that this delegation is unbridled. So, if there are two interpretations, the interpretation which upholds the validity should be accepted. So, the interpretation as given by Mr. Ganguli cannot be accepted.

85. There are two parts of the attack of the delegation of power to the State under Section 5. The latter part, by which it can prohibit sale of lottery tickets organized by every other State which leaves no scope of any discretion on the States to discriminate from one State to other. So if it decides no lottery tickets of any State to be sold it cannot pick and choose from one State to the other. Once it, as a policy, decides to prohibit the sale of lottery tickets of other States it must prohibit every other State, that is to say, all the States and such a delegation cannot be said to be either abdication of the legislative power of Parliament or to be unbridled or unguided. As we have said looking to the nature of the subject and object of the which is to help each State in its endeavour to run State lotteries which would include starting or closing its lotteries and when a State wants to have lottery-free zone in its State, then such a delegation to ban lottery of every other State cannot be said to be invalid. To the first part, there are two interpretations, one on the plain reading of Section 5, a State may run its own lottery yet may prohibit the sale of lotteries of other States. This construction leads to discrimination and opens for criticism of unbridled delegation. The submission further is, if the ban of sale of lottery tickets of every other State is as a public policy, affecting the morality and resultant ill effect on its subject then there is no justification that the State may run its own lottery affecting the very subject for which the power is exercised prohibiting the lotteries of other states. It is true, if such an interpretation is accepted then this submission has a force. On the other hand, on behalf of the Union the submission is that the language of the section has to be read down. The decision to have its lottery or not to have its lottery has to be in the public interest. Every decision to have either lotteries authorized by the State or organized by the State has to be in public interest. May be for collection of public revenue or for a public purpose. It has been held in Central Inland Water Transport Corpn. Ltd. V. Brojo Nath Ganguly AIR para 93:

There must be no injury or harm to the public interest, public good and public welfare.

Thus, the decision to run State lottery has to be made with the conscience (sic consciousness) of its evil consequences on its subject. Thus before deciding the State has to equate the public welfare with the injury on its public. It may be in a given case within the limitation of its financial capacity with the need of the hour it has to decide to run its own lotteries to augment its revenue in the larger interest of the public which if weighed with the evil consequences on its subject, the public welfare gains more by running it then the evil consequence on its subject has to give way till the situation changes by finding a better way for this additional source or evil consequence inflicting on its subject overweighing. This exercise has to be by each State, the Union not coming in its way. It is for each State to decide what is its public welfare and what constitutes an injury to the public interest. Rattan Chand Hira Chand v. Askar Nawaz Jung SCC para 17 holds, what constitutes public interest or welfare would depend upon the time. The social milieu in which the contract is sought to be enforced would decide the factum, the nature and the degree of injury.

86. So, whenever a State decides to run or not to run its lotteries it is the State which has to decide as a public policy in the public interest. Once such a decision is taken to have in its State lottery-free zone, the entrustment of power by Parliament cannot be said to be ultra vires.

87. We find on plain reading of Section 5, it empowers the State Government within its State to prohibit the sale of tickets of the lotteries organized by every other State. There is also nothing in the language reading by itself so as to say, whether such power can be exercised by the State while running its own lottery or can be exercised only where such State does not run its own lottery. This leads to two possible interpretations, as referred to above. In view of settled principle of interpretations, the interpretation given by the Union to read down the provision has substance. This would mean that the State could only exercise such discretion if it decides not to have any lottery within its territory including its own lottery. In this situation, the delegate is tied down by this limitation which itself is a clear guide to a State hence cannot be said to be unbridled delegation. So even to the first part it cannot be said to be arbitrary or unbridled. So, we have no hesitation to approve the interpretation given by the Union to uphold the validity of Section 5;.

18. From the observations made by the Honourable Supreme Court as extracted above, learned counsel representing the appellants, however, contends that the State of Kerala could not prohibit any form of lottery as long as it was running other forms of lottery of other States as also State of Kerala, whereas Mr. Nageswara Rao, learned counsel representing the State of Kerala contends that when the State of Kerala may prohibit a particular kind of lottery from State of Kerala, it can prohibit sale of such lottery from any State. Having given anxious thoughts to the rival contentions of the learned counsel for the parties, we are inclined to accept the contention raised by Mr. Nageswara Rao as mentioned above.

19. The observations which Mr. Agarwal endeavours to rely cannot be taken in isolation and the reference and the context in which the said observations were made have necessarily to be taken into consideration. It may be reiterated that the question that came to be framed by the Supreme Court on the rival contentions raised by the counsel for the parties was as to whether the delegation of essential legislative power of the principal to a delegate would amount to abdication of its legislative power and if it is bereft of any guidelines then it is unsustainable in the ye of law. The Honourable Supreme Court first held that if the State may decide that it does not want any lotteries, but it feels helpless as having no jurisdiction over the lotteries organized by other States what is the way out, this, the Honourable Supreme Court observed, would only be done by the Parliament or by entrusting this power on such State desiring so, which has been done through Section 5. The remedy is provided by entrusting this power on the State under Section 5. This would help the State to achieve its objective of lottery free zone within its territory. While dealing with the guidelines, Honourable Supreme Court further observed that if a State may want it to be a lottery-free-zone, it could not be said that such delegation would be of essential legislative power. The only guideline necessary in such delegation was to see that the State does not pick and choose one State from the other, which guideline is already provided in the Section. If the ban is applied to all the States and also the State banning lotteries, the contention that delegation was excessive, uncanalised and unbridled would lose its sting. We have read and re-read the judgment of the Honourable Supreme Court in B.R. Enterprises case (supra) and the more we have read, more sanguine and satisfied we are that by virtue of the provisions contained in Section 12 of theof 1998 the Centre has delegated its power on legislation with regard to lotteries to States and further that there is specific delegation with regard to ban of lotteries of other States by virtue of the provisions contained in Section 5 of theof 1998. This delegation of legislative power of the principal to the delegate would not amount to abdication of legislative power by the Centre and it would not be without any guidelines and would be sustainable in law if the concerned State may ban a lottery in its own State and other States as well. What is true with regard to a total ban of lotteries of other States in our view would also be true with regard to a particular kind of lottery as, the delegation of power has been held to be valid if the power by the delegatee may be used uniformly in its own State and also in the other States. The core discussion in upholding or reading down as what is urged by Mr. Agarwal, learned counsel for the appellants pertains to applying the power uniformly even though it is a different matter that before the Honourable Supreme Court the question did not pertain to banning a particular kind of lottery. In the context of the facts and circumstances of the case as fully detailed above, we hold that when the State of Kerala may prohibit a particular kind of lottery from its own State and also other States, it can prohibit sale of such lottery from any other State and that would not be unsustainable in the eye of law nor it could be against law as held by the Supreme Court in B.R. Enterprises case (supra). In fact, as mentioned above, we are of the clear view that the Honourable Supreme Court was dealing with delegation of essential legislative power of the principal to the delegate which would amount to abdication of legislative power which may be bereft of any guidelines and thus unsustainable in the eye of law. The Honourable Supreme Court held that it is not a case of abdication of legislative power and it would not be bereft of any guidelines if the legislation banning lotteries was applied uniformly. We, on the interpretation of the Honourable Supreme Court on the issue of delegation of essential legislative power bereft of any guidelines, hold that it is not a case of abdication of the legislative power of the Centre and further that if the ban of the online lottery applies uniformly, it would not be a case of exercising power by a delegate without any guidelines.

20. The matter does not rest at that. We have already held, on the basis of facts enumerated above, that online lottery is violating the provisions of Section 4. A State Government can organize, conduct or promote a lottery subject to conditions mentioned in Section 4 and if there will be a violation, by sale of a particular kind of lottery, of the conditions mentioned in Section 4, it would be always open to the State Government to ban sale of such lottery and that would be within the legislative power vested with the State under Section 4 of theof 1998 as in that case the State would be only complying with the provisions of the of 1998 made by the Parliament. The learned Single Judge while examining the facts of the case, manner and method in which sale of online lotteries are conducted, has already held that it violates the provisions contained in Section 4 of theof 1998. These findings have not been seriously challenged. In fact, during the course of arguments, no effort was made to dislodge the findings recorded by the learned Single Judge even though, in the grounds of appeal and the written brief it has been repeatedly mentioned that online lotteries are free from any blemish whatsoever.

21. The view that we have taken from the observation made by the Supreme Court in B.R. Enterprises case (supra), in any case, is possible. The Honourable Supreme Court exhaustively considered all the materials from various foreign judgments on gambling in B.R. Enterprises case. The learned Single Judge has reproduced the relevant part of the judgment of the Honourable Supreme Court on this aspect and held as follows:

In fairness, it must be conceded that Section 5, in the light of the interpretation of the Apex Court in B.R. Enterprises case, admits two interpretations. One is that the State can prohibit one form of lottery, if only it is not running any lottery at all. The second interpretation is that the State can prohibit a particular form of lottery, if it is not running that form of lottery, even if it is running other types of lotteries. The Act has been designedly made to suppress the mischief of lottery. Therefore, I feel that an interpretation, which advances the object of the, should be favoured.

We are in respectful agreement with the view expressed by the learned Single Judge as reproduced above.

22. Mr. Agarwal, learned counsel for the appellants seriously called in question the finding of the learned Single Judge based on Section 5 that the words any lottery would mean a particular kind of lottery and, therefore, the Government had power to ban sale of tickets of a particular kind of lottery. The contention made by the learned counsel prima facie appears to be correct. But, in view of our discussion as made above upholding the power of the Government to ban online lottery from the State of Kerala and all other States there is no need to give any definite view on the aforesaid observation of the learned counsel.

23. There is absolutely scanty material with regard to the impugned notifications being vitiated on the ground of mala fides. There is no basis nor material whatsoever to support even the scanty pleadings dealing with mala fides. The contention thus based upon mala fides has to be repelled.

Finding no merit in the appeals, we dismiss the same leaving, however, the parties to bear their own costs.