No Acts & Articles mentioned in this case
1957
April 9.
874 SUPREME COURT REPORTS [1957]
THE STATE OF BOMBAY
i'.
R. M. D. CHAMARBAUGWALA
(S. R. DAS C. J., VENKATARAMA AYYAR, B. P. SINHA,
S. K. DAs and P. B. GAJENDRAGAOKAR JJ.)
Lottery-Prize competitions, if and when of a ga1nbling
nature-Legislation taxing promoters of such competition carried on
through newspaper printed and published Ot4tside the State
Validity-Test-Territorial nexus-Gambling, if trade and commerce
tvithin the rneaning of the Constitution--Constitutionality of enact~
rnent-Bombay Lotteries and Prize Competition Control and Tax
Act (Bom. LIV of 1948), as amended by the Bombay Lotteries and
Prize Competition Control and Tax (Amendment) Act (Born. XXX
of 1952), ss. 2(1) (d), 12A-Constitution of India, Arts. 19 (1) (g),
301.
The first respondent was the founder and Managing Director
of a company, the second respondent in the appeal, which was
incorporated in the State of Mysore and conducted a
Prize
Competition called the R. M. D. C. Cross-words through a weekly
newspaper printed and published at Bangalore. This paper had
a wide circulation in the State of Bombay, where the respondent'
set up collection depots to receive entry forms and fees, appointed
local collectors
and invited the people by advertisements in the
paper to participate in the competitions.
On November 20, 1952,
the Bombay Legislature passed the Bombay Lotteries
and
Prize
Competitions Control and Tax (Amendment) Act of 1952, and
widened the scope of the definition of 'prize competition'
contained in s. 2(l)(d) of the Bombay Lotteries and Prize
Competition Control and Tax Act of 1948, so as to include prize
competitions carried on through newspapers printed
and published
outside the
State and inserted a new section, s. 12A, levying a
tax on the promoters of such competitions for sums collected
from the State. Thereupon, on December I 8, 1952, the respond
ents moved the
High Court of Bombay under Art. 226 of the
Constitution
and contended that the Act as amended and the
Rules framed thereunder in
so far as they applied to such prize
competitions were
ultra vires the
State Legislature and violated
their fundamental rights under Art. 19(i)(g) and freedom of
inter-State trade under Art. 301 of the Constitution. The single
Judge
who heard the matter in the first instance as also
the
court of appeal found in favour of the respondents, though on
son1ewhat different grounds,
and the
State of Bombay preferred
the appeal.
The principal question canvassed in this Court
related to the validity or otherwise of the impugned Act. It was
contended on behalf of the appellant that the impugned Act
"':ts
a law relating to betting and gambling and as such was covered
S.C.R. SUPREME COURT REPORTS 875
by Entries 34 and 62 of List II in the Seventh Schedule to the
Constitution, whereas the contention of the respondents
was that
the Act
was with respect to trade and commerce and came under
Entries
26 and
60 of that List.
Held, that in testing the validity of an Act it was necessary,
in the first place, to decide whether it
was with respect to a topic
11.ssigned to the legislature :ind, secondly, where it was so and the
legislature was a State Legislature and the Act purported to
operate beyond the State, whether there was sufficient territorial
nexus
to validate such operation and, lastly, whether the powers
of the legislature were in any other way fettered
by the
Consti
tution. So judged, the impugned Act was a perfectly valid
legislation and its constitutionality was beyond question.
Regard being had to the purpose and
scope of the Act read
11.s a whole there could be no doubt that all the categories of prize
competitions included in the definition contained in
s. 2(1) (d) of
the Act were of a gambling nature.
The qualifying clause
11.ppearing at the end of cl. (i) must apply to each of the five
kinds enumerated therein, and the word 'or' appearing after the
word 'promoters' and before the word 'for' in the clause must
be, read as 'and'. Similarly, cl. (ii), properly construed, could
not include any prize competitions other than those of a gambling
nature.
Elderton
v. Tota/isator
Co. Ltd., (1945) 2 All E. R. 624, held
inapplicable.
The impugned Act was, therefore, a legislation with respect
to betting and gambling and fell under Entry 34 of List TI of the
Seventh
Schedule to the Constitution and was within the
competence of the State Legislature.
Taxes on gambling are a well recognised group of indirect
taxes and s. 12A of the Act in seeking to tax the gross collections
in the hands
of the promoters, and not their profits, was only
following an easy and convenient way of getting at the gambler's
money in their hands and this made no difference in the character
of the tax, essentially one on betting and gambling and not on 11.ny trade, and, consequently, the section fell within Entry 62
11.nd not Entry 60 of List II of the Seventh Schedule to the
Constitution.
A prize competition that did not to a substantial degree
depend upon the exercise of skill for its solution would
be of a
gambling nature and a scrutiny of the prize competitions offered
by the respondents clearly showed that there was . an element of
chance to start with, and, consequently, they must
be of a
gambling nature and
fell within the mischief of the Act.
·
The doctrine of territorial nexus was a well-established
doctrine and could apply only when ( 1) the territorial connection
between the persons sought to be taxed and the legislating State
was real and not illusory and (2) the liability sought to be imposed
\vas pertinent to that connection. The existence of sufficient
1957
The Stale of
Bombay
••
R. M. D. Chamar-
baugwala
1957
The Sta" of
Bombay
v.
R. M. D. Chamar
baugwala
876 SUPREME COURT REPORTS [1957J
territorial nexus in a particular case was essentially a question of
fact.
There could hardly be any doubt in the instant case that
the impugned Act satisfied all these tests and, consequently, it
was unassailable on the ground of extra-territoriality.
Gambling activities were in their very nature
and essence
extra-commercium although they might appear in the trappings
of trade. They
v.rere considered to be a sinful and pernicious vice
by the ancient seers and law-givers of India and have been
deprecated
by the laws of England, Scotland, United States of
America and Australia.
The Constitution-makers of India, out to
create a welfare State, could never have intended to raise
betting
and gambling to the status of trade, business, commerce
or
intercourse:.._
The petitioners, therefore, had no fundamental right under
Art. 19(I)(g) or freedom under Art. 301 of the Constitution in
respect of their prize competitions that could be violated and the
validity of the impugned Act, in pith and substance an Act
relating to gambling, did not fall to be tested by Arts. 19( 6) and
304 of the Constitution.
Judicial decisions on Art.
1, s. 8, sub-s. (3) of the Constitution
of the United
States and s. 92 of the Australian Constitution
should
be used with caution and circumspection in construing
Arts. 19(l)(g) and
301 of the Indian Constitution.
State of Travancore-Cochin v. The Bombay Co. Ltd. (1952)
S.C.R. 1112 and P. P. Kutti Keya v. The State of Madras, A.LR.
(1954) Mad. 621, referred to.
The
King v. Connare, (1939) 61 C.L.R. 596, The King v.
Martin, (1939) 62 C.L.R. 457, Commonwealth of Australia v.
Bank of New South Wales, L.R. (1950) A.C. 235, Mansell v. Beck,
Australian Law Journal Vol. 30, No. 7, p. 346, Champion v. Ames,
47 L.Ed. 492, Hipolite Egg Co. v. United States, 55 L.Ed. 364,
Hoke v. United States, 57 L.Ed. 523, United States v. Kahriger, 97
L.Ed. 754 and Lewis v. United States, 99 L.Ed. 475, discussed.
CIVIL APPELLATE Ju&1so1cnoN: Civil Appeal No.
134 of 1956.
Appeal under articles 132(1) and 133(i)(c) of the
Constitution of India from the Judgment and Order
dated January 12, 1955, of the Bombay High Court
in Appeal No.
72 of 1954 arising out of the Judgment
and
Order dated April 22, 1954, of the Bombay High
Court in its Original Civil Jurisdiction
in Miscellaneous
Application No.
365 of 1952.
C. K. Daphtary, Solicitor-General of India, H. M.
Seervai, Porus A. Mehta and R. H. Dhebar, for the
appellant.
S.C.R. SUPREME COURT REPORTS 877
M. C. Setalvad, Attorney-General for India, Sir
N. P. Engineer, N. A. Palkhivala, R. A. Gagmt, S. V.
Subramanian, and
G. Gopal Krishnan, for the
respond
ents.
G. R. Ethirajulu Naidu, Advocate-General, Mysore,
Porus A. Mehta and T. M. Sen, for the intervener.
1957. April 9. The Judgment of the Court was
delivered by
DAs C.J.-This is an appeal by the State of Bombay
from the judgment and order passed on January 12,
1955, by the Court of Appeal of the High Court of
Judicature
of Bombay confirming, though on somewhat
different grounds, the judgment and order
passed on
April 22, 1954, by a single Judge of the said High
Court allowing with
costs the present respondents'
petition under Art.
226 of the Constitution of
India.'
The said petition was presented before the High Court
of Judicature at
Bombay on December 18, 1952. In
the said petition there were two petitioners who are
now the two respondents
to this appeal. The first
petitioner
is an individual who claims to be a citizen
of India and the founder and Managing Director of the
second petitioner, which
is a company incorporated in
the State of Mysore and having its registered head
office at 2, Residency Road, Bangalore in that State.
That petition
was further supported by an affidavit
sworn
by the first petitioner on the same day.
The allegations appearing in the said petition and
affidavit
may now be shortly stated. In July, 1946
the first petitioner applied for and obtained from the
then Collector
of Bombay a licence, being Licence No.
84 of 1946, for the period ending March 31, 1947, to
conduct what
was known as the Littlewood's Football
Pool Competitions in India. That licence was
granted to the first petitioner under the provisions of
the
Bombay
Prize Competitions Tax Act, (Born. XI of
1939) (hereinafter referred to as the 1939 Act), which
was then in force. The said licence was renewed for
a period of one year from April
1, 1947 to March 31,
1948. During that period the first petitioner paid, by
way of competition tax, to the Bombay
Provincial
1957
The State of
Bombay
v.
R. M. D. Chamar
baugwa/a
DasC.J.
1957
Tiu Stat1 of
Bombay
v.
ll. M. D. Chamar
4
baugwala
Dase. J.
878 SUPREME COURT REPORTS [1957]
Government a sum of rupees one lakh per annum. The
Government of Bombay having declined to renew the
first petitioner's licence for a further period, the first
petitioner filed a petition under
s. 45 of the Specific
Relief Act in the
High Court of Bombay, which was
eventually, after various proceedings, dismissed
by
the court of appeal on or about March 28, 1949.
In the meantime, in view of the delay and difficulty
in obtaining a renewal
of the licence in Bombay, the
first petitioner in or about August,
1948, shifted his
activities from Bombay
to the
State of Mysore, where
he promoted and on February
26, 1949, got incorporated
a company under the name
of R.M.D.C. (Mysore)
Limited, which
was the second petitioner in the High
Court and is the second respondent before us. The
first petitioner, who was the promoter of the second
petitioner became the Managing Director
of the second
petitioner. All the shareholders and Directors of the
second petitioner are
said to be ·nationals and citizens
of India. The second petitioner also owns and runs a
weekly newspaper called
"Sporting Star", which was
and
is still printed and published at Bangalore in a Press also owned by the second petitioner. It is through
this newspaper that the second petitioner conducts
arrd
runs a
Prize Competition called the R.M.D.C. Cross
words for which entries are received from various
parts
of India including the
State of Bombay through
;1gents and depots established in those places to collect
entry forms and
fees for being forwarded to the head
office at Bangalore.
The 1939 Act was replaced by the Bombay Lotteries
and
Prize Competition Control and Tax Act (Born.
LIV of 1948), (hereinafter referred to a• the 1948 Act)
which came into force on December
1, 1948. The 1939
Act as well as the 1948 Act, as originally enacted, did
not apply
to prize competitions contained in a
news
paper printed and published outside the Province of
Bombay. So the Prize Competition called the R.M.D.C.
Crosswords was not affected
by either of those two
Acts. On June 21, 1951, the State of Mysore, however,
enacted the Mysore Lotteries and Prize Competition
S.C.R. SUPREME COURT REPORTS 879
Control and Tax Act; 1951, which was based upon the
lines of the said
1948 Act. That Mysore Act having
come into force on February
1, 1952, the second
peti
tioner applied for and obtained a licence under that
Act and paid the requisite licence
fees and also paid
and
is still paying to the State of Mysore the tax at
the rate of
15% (latterly reduced to
12!%) of the gross
receipts in respect of the R.M.D.C. Crosswords Prize
Competition ;md continued and is still continuing the
said Prize Competition through the
said weekly
news-
paper "The Sporting Star" and to receive entry forms
with
fees from all parts of the territory of India
includ
ing the State of Bombay. It is said, on the strength
of the audited books of account, that after distribution
of prizes to the extent of about 33% of the receipts
and after payment of taxes in Mysore amounting to
about
15% and meeting the other expenses aggregating
to about 47% the net profit of the second petitioner
works out to about 5% only.
On November 20, 1952, the State of Bombay passed
The Bombay Lotteries and Prize Competitions
Control and Tax (Amendment) Act (Born. XXX of
1952). This Act amended the provisions of the
1948
Act in several particulars. Thus, the words
"but does
not include a prize competition contained in a news
paper printed and published outside the Province of
Bombay'', which occurred in the definition
of Prize
Competition in
s. 2(l)(d) of the 1948 Act, were deleted
and the effect
of this deletion was that the scope and
the application of the
1948 Act so amended became
enlarged and extended
so as to cover prize competitions
contained in newspapers printed and published outside
the State of Bombay. After
cl. (d) of s. 2(1) the
Amending Act inserted a new
cl. (dd) which defined
the word
"Promoter". A new section was substituted
for the old
s. 12 and
another new section was inserted
after
s. 12 and numbered as s. 12A. By this new s. 12A
provision was made for the levy in respect of every
prize competition contained in
a. newspaper or a
publication printed outside the State of Bombay for
which a licence was obtained under the Act of a tax
at such rates
as might be specified not exceeding
the
1957
The State of
Bombqy
v.
R M. D. Chamar
baugwala
DasC.J.
1957
TheStaJeqf
BomlJ(!1
v.
ll, M. D. Chamar·
haugwala
Das C.J.
880 SUPREME COURT REPORTS [1957]
rates specified in s. 12 or in a lump sum having regard
to the circulation or distribution of the newspaper or
publication in the State of Bombay. It is pointed out
that the margin
of net profit being only 5%, if tax has to
be paid to the
State of Bombay under the 1948 Act,
as amended, (hereinafter referred to as the impugned
Act) the
second petitioner will be unable to carry on
its prize competition except at a
loss.
Reference is also made to the rules framed by the
State of Bombay called the Bombay Lotteries and
Prize Competition Control and Tax Rules, 1952 (herein
after called the 6aid Rules), which came into force on
and from December
8, 1952. The said Rules require
the petitioner
to apply for and obtain a licence in
Form
"H" which imposes certain onerous conditions.
The petitioners point out that it would
be impossible
for them, in a commercial
sense and from a practical
point
of view, to run the prize competitions in the
territory
of India if they are required to comply not
only with the restrictions and conditions imposed
by
the Mysore
State where the newspaper is printed and
published but
also with the v.arying and different
restrictions, conditions and
taxes imposed by the
State
of Bombay and other States in the territory of India
where the
said newspaper containing the advertise
ments
of the said prize competitions are circulated.
The petitioners submit that the provisions of the
impugned Act and the Rules, in
so far as they apply
to prize competitions contained in newspapers and
other publications printed and
publ~hed outside the
State of Bombay, are ultra vir~s void and inoperative
in law.
Upon the presentation of the petition a 'Ruic was
issued calling upon the State of Bombay to appear and
show
cause, if any it had, why the writ or orders
prayed for should not
be issued or made. The
State
of Bombay filed an aflidavit raising several technical
legal objections to the maintainability
of the petition
and
refuting the allegations and submissions contained
therein and in the supporting aflidavit.
It submitted
that,
as the second petitioner was a corporation and
the first petitioner,
who was a Managing Director
S.C.R. SUPREME COURT REPORTS 881
thereof, had no rights independent of the second peti
tioner, neither of them could lay any claipi to any
fundamental right under Art. 19(1) (g) and no question
could arise of any violation of the petitioner's alleged
fundamental rights. It further submitted that, having
regard to the
fa.ct that lotteries and prize competitions
were opposed to public policy, there could
be no
"business" in promoting a lottery or a prize competi
tion and the question of the violation of the petitioners'
alleged rights under Art. 19(1)(g) of the Constitution
did not arise. It
was also contended that if the
provi
sions of the Act and the Rules operated as restrictions,
then the same were reasonable and in the interest
of
the general public. Likewise it was submitted that,
having regard to the fact that lotteries and pnze
competitions are opposed to public policy, there could
be no
"business" in promoting a lottery or a prize
competition and the question
of the violation of the
provisions of Art.
301 of the Constitution did not arise.
It was denied that ss. 10 and 12 of the Act violated
the equal protection clause of the Constitution. An
affidavit in reply was filed
by the first petitioner
traversing the allegations, submissions
aru:l contentions
set forth in the affidavit in opposition filed on behalf
of the State of Bombay.
The main contentions
of the present respondents
before the trial Judge were
:-
(a) The impugned Act and particularly its
taxing provisions were beyond the competence of the
State Legislature and invalid inasmuch as they were
not legislation with respect
to betting and gambling
under Entry
34 or with respect to entertainments and
amusements under Entry
33 or with respect to taxation
on entertainments and amusements, betting and
gambling under Entry
62 of the
State List. The
legislation
was with respect to trade and commerce
and the
tax levied by the impugned Act was a tax on
the trade or calling of conducting prize competitions
and fell within Entry
60 of the State List.
(b) The respondents' prize competition was not
a lottery and could not
be regarded as gambling
1957
The State of
Bombay
v.
R. M. D. Chamar·
baugwala
DasC.J.
1957
Ti1' Stau of
Bombay
v.
R. M. D. Chamar
baugwala
DasC.].
882 SUPREME COURT REPORTS [1957]
inasmuch
as it was a competition in which skill, know
ledge and judgment had real and effective play.
( c)
The impugned Act itself contained distinct
provisions in respect of prize competitions and lotteries
thereby recognising that prize competitions were not
lotteries.
( d)
The said tax being in substance and fact a
tax on the trade or business
of carrying on prize
competitions it offended against
s. 142A (2) of the
Government of India Act,
1935 and Art. 276(2) of the
Constitution which respectively provide that such a
tax shall not
e.xceed fifty rupees and tw) hundred and
fifty rupees per annum.
( e) The impugned Act was beyond the legis
lative competence of the Bombay Legislature and
invalid
as it was legislation with respect to trade and
commerce not within but outside the
State.
(f) The impugned Act operated extra-terri-
torially inasmuch
as it affected
the· trade or business
of conducting prize competitions outside the State
and was, therefore, beyond the competence of the State
Legislature and invalid.
(g) The· impugned Act offended aipinst Art.
301 of the Constitution inasmuch as 1t imposed
restrictions on trade, commerce and intercourse between
the States and was not saved by Art. 304(b) of the
Constitution.
(h) The restncttons imposed by the impugned
Act on the trade or
businecs of the petitioners were
not reasonable restrictions in the interests of the
general public and, therefore, contravened the funda
mental right of the petitioners, who were citizens of
India, to carry on their trade or business under Art.
19(l)(g) of the Constitution. .
(i)
That ss.
10, 12 and 12A of the said Act
offended against Art.
14 of the Constitution inasmuch
as they empowered discrimination
between! prize
competitions contained in newspapers or publications
printed and published within the State and those
printed and published outside the State.
The State of Bombay, which is now the appellant
before us, on the other hand, maintained that
S.C.R. SUPREME COURT REPORTS 883
(a) The prize competitions conducted by the
petitioners were a lottery.
(b) The provisions
of the impugned Act were
valid and competent legislation under Entries
33, 34
and 62 of the
State List.
( c) The impugned Act
was not extra-territorial
in
its operation.
(d) The prize
competitions conducted by the
petitioners were opposed to public
policy and there
could therefore
be no trade or business of promoting
such prize competitions.
( e) As the petitioners were not carrying on a
trade or business, no question
of offending their funda
mental rights under Art. 19(1)(g) or
of a violation of
Art.
301 of the Constitution could arise.
( f) The second petitioner being a Corporation
was not a citizen and could not claim to be entitled to
the fundamental right under Art. 19(1) (g)
of the
Constitution.
(g) In any event the restrictions on the alleged
trade or
business of the petitioners imposed by the Act
were reasonable restrictions in the public interest with
in the meaning
of Art. 19(6) and Art.
304(b) of the
Constitution.
The trial Judge held :
(a) The tax
levied under ss. 12 and 12A of the
Act
was not a tax on entertainment, amusement, bet
ting or gambling but that it was a tax on the trade or
calling of the respondents and
fell under Entry
60 and
not under Entry
62 of the
State List.
(b) The prize compet1t10n conducted by the
petitioners
was not a lottery and it could not be said
to be either betting or gambling inasmuch as it was a
competition in which skill, knoweldge and judgment
on the
parf of the competitors were essential ingredients.
( c) The
levy of the tax under the said sections
was void as offending against Art. 276(2) of the
Constitution.
( d) The restrictions imposed
by the
. impugned
Act and the
Rules thereunder offended against Art. 301 of the Constitution and were not saved by Art.
4 .. -so s. C. India/59.
1957
The State of
Bombay
v.
R. M. D. Chamar
baugwala
DasC.J.
1957
The State of
Bombay
v.
R. M. D. Chamarw
baugwala
Dase.].
884 SUPREME COURT REPORTS [1957]
304(b) inasmuch as the restnct1ons imposed were
neither reasonable nor in the public interest.
( e)
The second petitioner, although it was a
company, was a citizen of India and was entitled to
the protection of Art.
19 of the Constitution.
( f)
The restrictions imposed by the impugned
Act and the Rules made thereunder were neither
reasonable nor in the interests of the general public
and were void
as offending against Art. 19(1)(g) of
the Constitution.
In the result the rule nisi was made absolute and it
was further ordered that
tl1e
State of Bombay, its
servants and agents, do forbear from enforcing or
taking any steps
in enforcement, implementation,
furtherance or pursuance of any of the provisions of
the impugned Act and the
1952 Rules made thereunder
and particularly from enforcing any of
tl1e penal
provisions against the
petit,c>ners, their Directors,
officers, servants or agents and that the State of
Bombay, its servants and agents, do allow the peti
tioners to carry on their trade and business of running
the Prize Competition mentioned in the petition and
do forbear from demanding, collecting or recovering
from the petitioners any tax
as provided in the
impugned Act or the said Rules in respect of the said
Prize Competition and that the State of Bombay
do pay to the petitioners their costs of the said appli
cations.
Being aggrieved
by the decision of the trial Judge,
the
State of Bombay preferred an appeal on June 8,
1954. The Court of Appeal dismissed the appeal and
confirmed the order of the trial Juclge, though on
somewhat different grounds.
It differed from the
learned trial Judge on the view that he had taken
that there was no legislative competence in the
Legislature to enact the Legislation.
It held that the
topic of legislation was 'gambling' and the
Legislature was competent
to enact it under Entry
34 of the
State List. It, however, agreed with the
learned trial Judge that the tax levied under
s. 12A
was not a tax on gambling but that it was a tax
which fell under Entry
60. It held that there was
S.C.R. SUPREME COURT REPORTS 885
legislative competence in the Legislature to impose
that tax but that the tax was invalid because it did
not comply with the restriction contained in Art.
276(2) of the Constitution. It also took the view that
the tax, ~ven assuming it was a tax on betting or
gambling, could not
be justified because it did not
fall under Art. 304(b
). It differed from the learned
trial Judge when he found
as a fact that the scheme
underlying the prize competitions was not a lottery
and came to the conclusion that the Act applied to the
prize competitions
of the respondents. It held that
the challenge of the petitioners to the impugned provi
sions succeeded because the restrictions contained in
the impugned Act controlling the business
of the peti
tioners could not
be justified as the requirements of
the provisions of Art.
304(b) had not been complied
with.
The High Court agreed with the learned trial
Judge, that the petitioners' prize competitions were
their
"business" which was entitled to the protection
guaranteed under the Constitution. It took the view
that although the activity of the petitioners was a
lottery, it was not an activity which was against public
interest and, therefore, the provisions of Part XIII of
the Constitution applied to the respondents' business.
Being aggrieved
by the said judgment of the Court
of Appeal, the appellant applied for and obtained under
Arts. 132(1) and 133(1) of the Constitution a certificate
of fitness for appeal to this
Court and hence this appeal
before
us.
The principal question canvassed before us relates to
the validity or otherwise of the impugned Act.
The
Court of Appeal has rightly pointed out that when the
validity of an Act
is called in question, the first thing
for the court to do
is to examine whether the Act is
a law
wit~ respect to a topic assigned to the particular
Legislature which enacted it.
If it is, then the court
is next to consider whether, in the case of an Act passed
by the Legislature of a
Province (now a State), its
operation extends beyond the boundaries of the
Province or the State, for under the provisions confer
ring legislative powers on it such Legislature can only
make a law for its territories or
any part thereof
1957
The State of
Bomba;
v.
R. M. D. Chamar
baugwata
DasC.J.
1957
TIM Stai. ef
Bom5ay
v.
R •• W.D.C,,__
taugwa/•
DasC.J.
886 SUPREME COURT REPORTS [1957]
and its laws cannot, in the absence of a territorial
nexus, have any extra territorial operation.
If the
impugned law satisfies both these tests, then finally the
court has
to ascertain
if· there is anything in any other
. part of the Constitution which places any fetter on the
legislative powers of such Legislature.
The impugned
law has to
pass all these three tests.
Taking the first test first, it will be recalled that the
1948 Act was enacted by the Provincial Legislature of
Bombay when the Government
of India Act, 1935, was
in force. Under
ss. 99 and
100 of that Act the Provincial
Legislature of Bombay had power to make laws for the
Province of Bombay or any part thereof with respect
to
any of the matters e1mmerated in List II in the
Seventh Schedule to that Act.
It will also be remember-
ed that the 1948 Act was amended by Bombay Act
XXX of 1952 after the Constitution of India had come
into operation. Under Arts.
245 and 246, subject to
the provisions of the Constitution, the Legislature of
the
State of Bombay has power to make laws for the
whole or any part of the State of Bombay with respect
to any of the matters enumerated
in List II of the
Seventh Schedule to the Constitution.
The
State of
Bombay, which
is the appellant before us, claims that
the impugned Act including
s. 12A is a law made with
respect to topics covered
by Entries 34 and 62 of List
II in the Seventh Schedule to the Constitution which
reproduce Entries
36 and
50 of List II in the Seventh '
Schedule to the Government of India Act,
1935.
On
the other hand, the petitioners, who are respondents
before
us, maintain that the impugned Act is legisla
tion under Entries
26 and
60 in List II of the Seventh
Schedule to the Constitution corresponding to Entries
27 and 46 of List II in the Schedule to the Government
of India
Act, 1935, and that, in any event, s. 12A of
the impugned Act, in
so far as it imposes a tax, comes
under Entry
60 of List II in the Seventh Schedule to
the Constitution corresponding to Entry
46 of List II
in the Seventh
Schedule to the Government of India
Act,
1935, and not under Entry 62 of List II in the
Seventh
Schedule to the Constitution corresponding to
Entry 50 of List II in the Seventh Schedule to the
S.C.R. SUPREME COURT REPORTS 887
Government of India Act, 1935, and that as the tax
imposed exceeds
Rs. 250/-it is void under Art. 276(2)
which reproduces
s. 142A of the Government of India
Act,
1935. Reference will hereafter be made only to
the relevant Entries of List II in the
Seventh Schedule
to the Constitution, for they are substantially in the
same terms
as the corresponding Entries of List II in
the Seventh Schedule to the Government of India Act,
1935. For easy reference, the relevant Entries in
List II in the
Seventh Schedule to the Constitution are
set out below :
"26. Trade and commerce within the State sub
ject to the provisions of Entry 33 of List III.
34. Betting and gambling.
60. Taxes on professions, trades, callings, and
employments.
62. Taxes on luxuries, including taxes on enter
tainments, amusements, betting and
gambling."
In order to correctly appreciate the rival contentions
and
to come to a decision as to the particular Entry or
Entries under which the impugned Act including
s. 12A thereof has been enacted, it is necessary to
examine and to ascertain the purpose and
scope of the
< impugned legislation. It may be mentioned that the
1939 Act was. enacted to regulate and levy a tax on
prize competitions in the Province of Bombay.
It did
not deal with lotteries at all.
That Act was repealed
by the
1948 Act which was enacted to control and to
levy a tax not only on prize competitions but on
lotteries also. It
is not unreasonable to conclude that
the clubbing together of lotteries and prize competi
tions in the
1948 Act indicates that in the view of the
Legislature the two topics were, in a way, allied
to each
other.
As already indicated, the 1948 Act was amended
in
1952 by Bombay Act XXX of 1952 so as to extend
its operation to prize competitions contained in news
papers printed and published outside the
State of
Bombay.
In s. 2(1)(d) of the impugned Act will be found the definition of "prize competition" to which
reference will
be made hereafter in greater detail. Clause ( dd) was inserted in s. 2( 1) in 1952 defining
"promoter". Section 3 declares that subject to the
1957
The State of
Bom/)(g
v.
R. M. D. Chamar
baugwala
DasC.J.
1957
Th< Stall ef
Bom/J'!1
v.
R. M. D. CIUJnUJr·
baugroa/a
D.,C.J.
888 SUPREME COURT REPORTS [1957]
prov1S1ons of the Act, all lotteries and all prize com
petitions are unlawful. This is a clear indication that
the Legislature regarded lotteries and prize competi
tions as on the same footing and declared both of them
to
be unlawful, subject, of course, to the provisions of
the Act. Section 4 creates certain offences in connection
with lotteries and competitions
punishable as therein
mentioned. We may skip over
ss. 5 and 6 which deal
exclusively with lotteries and
pass on to s. 7.
Section 7
provides that a prize competition shall
be deemed to
be an unlawful prize competition unless a licence in
respect of such competition has been obtained by the
promoter thereof. There are two provisos to the section
which are not material for our present purpose, Section 8 imposes certain additional penalty for
contravention of the provisions of
s. 7.
Section 9
regulates the granting
of licences on such fees and
conditions and in such form
as may be prescribed, that
is to say prescribed by rules.
Section 10 makes it
lawful for the Government,
by general or special order,
to,
inter alia, prohibit the grant of licences in respect
of a lottery or prize competition or
class of lotteries or
prize competitions throughout the
State or in any area.
Section 11 empowers the Collector to suspend or cancel
a licence granted under this Act in certain circum
stances therein specified. Section 12 authorises the levy
of a tax on lotteries and prize competitions at the
rate of 25%
of the total sum received or due in respect
of such lottery or prize competition. This section
directs that the tax shall
be collected from the promoter
of such lottery or prize competition
as the case may
be. Sub-section (2) of s. 12 empowers the
State Govern
ment by a Notification in the official Gazette, to enhance
the rate of tax
up to
50% of the total sum received or
due in respect of such prize competition
as may be
specified in the Notification.
Section 12A, which is of
great importance for the purpose of this appeal, runs
as follows:
"12A. Notwithstanding anything contained in
section
12, there shall be levied in respect of
every
lottery or prize competition contained in a newspaper
or publication printed and published outside the State,
•
S.C.R. SUPREME COURT REPORTS 889
for which a licence has been obtained under section 5,
6 or 7, a tax at such rates as may be specified by the
State · Government in a notification in the Official
Gazette not exceeding the rates specified in section 12
on the sums specified in the declaration made under
section 15 by the promoter of the lottery or pnze com
petition as having been received or due in respect of
such lottery or prize competition or in a lump sum
having regard to the circulation or distribution of the
newspaper or publication in the State."
Section 15 requires every person promoting a lottery
or prize competition
of any kind to keep and maintain
accounts relating to such lottery or prize competition
and to submit to the Collector statements in such form
and at such period
as may be prescribed. It is not
necessary for the purpose of this appeal to refer to the
remaining
sections which are designed to facilitate the
main purpose of the Act and
deal with procedural
matters except to
s. 31 which confers power on the
State Government to make rules for the purpose of
carrying out the provisions
of the Act. In exercise of
powers so conferred on it, the
State Government has,
by Notification in the Official Gazette, made certain
rules called the
Bombay Lotteries and Prize Competi
tions Control and Tax
Rules, 1952, to which reference
will
be made hereafter.
The petitioners contend that the object of the
impugned Act
is to control and tax lotteries and
prize competitions. It
is not the purpose of the Act to
prohibit either the lotteries or the prize competitions.
They urge that the impugned Act
deals
.alike with prize
competitions which
may partake of the nature of
gambling and
also prize competitions which call for
knowledge and skill for winning
success and. in support
of this contention reliance is placed on the definition of "prize competition" in s. 2(1)(d) of the impugned Act.
We are
pressed to hold that the impugned Act in its
entirety or at
any rate in so far as it covers legitimate
and innocent prize competition
is a law with respect
to trade and commerce under Entry 26 and not with
respect to betting and gambling under Entry 34. They
also urge that in any event the taxing provisions,
1957
Th4 State of
Bomb19
v.
~. M.D. Cham"'·
baugwala
DasC. 7.
1957
The Stato ef
Bombay
v.
R. M. D. Chamar
baugwnla
DasC.J.
890 SUPREME COURT REPORTS [1957]
namely ss. 12 and 12A, are taxes on the trade of run
ning prize competitions under Entry 60 and not taxes on
betting and gambling under Entry
62. We are unable
to accept the correctness of the aforesaid contentions
for reasons which we proceed immediately to state.
As it has already been mentioned, the impugned
Act replaced the
1939 Act which dealt only with prize
competitions.
Section 2(2) of the 1939 Act defined
"prize competition" in the terms following :-
2(2) "Prize Competition" includes-
(a) crossword prize competition, m1ssmg words
competition, picture prize competition, number prize
competition, or any other competition, for which the
solution
is prepared beforehand by the promoters of
the competition or
0
for which the solution is determined
by lot;
(b) any competition in which prizes are offered
for forecasts
of the results either of a future event or
of a past event the result of which
is not yet
ascertain
ed or not yet generally known; and
( c) any other competition
success in which does
not depend to
a substantial
degree upon the exercise of
skill,
but does not include a prize competition contained
in a newspaper or periodical printed and published out
side the Province of Bombay."
The 1948 Acts. 2(l)(d), as originally enacted, sub
stantially reproduced the definition of "prize competi
tion" as given ins. 2(2) of the 1939 Act. Section 2(1)(d)
of the 1948 Act, as originally enacted, ran as follows :
"2(1) ( d) "Prize Competition" includes-
(i) cross-word prize compet:1t1on, missing words
prize competition, picture prize competition, number
prize competition, or any other competition for which
the solution is prepared beforehand by the promoters
of the competition or for which the solution
is
deter
mined by lot;
(ii) any competition in which prizes are offered
for forecasts of the results either
of a future event or
of a past event the result
of which is not yet
ascer
tained or not yet generally known; and
S.C.R. SUPREME COURT REPORTS 891
(iii) any other competition success in which does
not depend to a substantial degree upon the exercise of
skill,
but does not include a prize
compet1t1on contained
in a newspaper printed and published outside the
Province of
Bombay;"
The collocation of words in the first category of the
definitions in both the
1939 Act and the 1948 Act as
originally enacted made it quite clear that the
qualify
ing clause "for which the solution is prepared before
hand by the promoters of the competition or for which
the solution
is determined by
lot" applied equally to
each of the
fiye kinds of prize competitions included in
that category and set out one after another in a
continuous sentence. It should also
be noted that the
qualifying clause consisted of two parts separated from
each other
by the disjunctive word
"or". Both parts
of the qualifying clause indicated that each of the
five
kinds of prize competitions which they qualified were
of a gambling nature. Thus
a prize competition for
which a solution was prepared beforehand was clearly
a gambling prize competition, for the competitors were
only invited to guess what the solution prepared
beforehand
by the promoters might be, or in other
words,
as Lord Heward C.J. observed in
Coles v.
Odhams Press Ltd.(
1
), "the competitors are invited to
pay certain number of pence to have the the opportunity
of taking blind shots at a hidden target." Prize com
petitions to which the second part of the qualifying
dause applied, that is to say, the prize competitions
for which the solution
was determined by lot, was
necessarily a gambling adventure.
On the language
used in the definition section of the 1939 Act as well as
in the 1948 Act, as originally enacted, there could be
no doubt that each of the five kinds of prize competi
tions included in the first category to each of which
the qualifying clause applied was of a gambling
nature.
Nor has it been questioned that the third
category; which comprised
"any other competition
success in which
does not depend to a substantial
<legree upon the exercise of skill'', constituted a
(1) L. R. (1936) I K.B. 416.
1957
The State of
Bomba;·
v.
R. M. D. Chamat··
baugwala
Das C.J.
1957
The State of
Bombay
v.
R. M. D. Chama,...
haugwala
DasC.J.
892 SUPREME COURT REPORTS [1957]
gambling competition. At one time the notion was
that in order to be branded
as gambling the competi
tion must
be one success in which depended entirely on
chance.
If even a scintilla of skill was required for
success the competition could not be regarded as of a
gambling nature.
The
Court of Appeal in the judgment
under appeal has shown how opinions have changed
since the earlier decisions were given and it
is not
necessary for us to discuss the matter again.
It will
suffice to say that we agree with the
Court of Appeal
that a competition in order to avoid the stigma
of
gambling must depend to a substantial degree upon
the exercise of skill. Therefore, a competition success
wherein
does not depend to a substantial degree upon
the exercise of skill
is now recognised to be of a
gambling nature. From the above discussion it follows
that according to the definition of prize competition
given in the
1939 Act as in the 1948 Act as originally
enacted, the five kinds of prize competitions comprised
in the
first category and the competition in the third
category were all of a gambling nature. In between
those two categories of gambling competitiops were
squeezed in,
as the second category, "competitions in
which prizes were offered for forecasts
of the results
either
of a future event or of a past event the result of
which is not yet ascertained or is not yet generally
known." This juxtaposition is important and signi
ficant and will hereafter
be discussed in greater detail.
As already stated the 1948 Act was amended in 1952
by Bombay Act XXX of 1952.
Section 2(1) (d) as
amended runs as follows :
"Prize competition" includes-
( i) ( 1) cross-word prize competition,
(2) missing word prize competition,
(3) picture prize competition,
( 4) number prize competition,
or
(5) any other prize competition, for which
the solution
is or is not prepared beforehand by the
promoters or for which the solution is determined by
lot or chance;
(ii) any
competitic;m in which prizes are offered
for forecasts of the results either of a future event or
of
..
•
-
S.C.R. SUPREME COURT REPORTS 893
a past event the result of which is not yet ascertained
or not yet generally known; and
(iii) any other competition
success in which does
not depend to a substantial degree upon the exercise
of
skill;"
It will be noticed that the concluding sentence "but
does not include a prize competition contained in a
newspaper printed and published outside the Province
of Bombay" has been deleted. This deletion has very
far reaching effect, for it has done away with the
exclusion of prize competitions contained in a
news
paper printed and published outside the State of
Bombay from the scope of the definition. In the next
place, it should
be noted that the definition of prize
competition still comprises three categories
as before.
The
second and the third categories are couched in
exactly the same language
as were their counterparts
in the earlier definitions. It
is only in the first category
that certain changes are noticeable. The
five kinds of
prize competitions that were included in the first
cate
gory of the old definitions are still there but instead of
their being set out one after another in a continuous
sentence, they have been set out one below another
with a separate number assigned to each of them. The
qualifying clause has been amended
by inserting the
words
"or is not" after the word "is" and before the
word "prepared" and by adding the words "or chance''
after the word "lot". The qualifying clause appears,
as before, after the fifth "item in the first category. It
will be noticed that there is a comma after each of the
five items including the fifth item. The mere assigning
a separate number to the
five items of prize competi
tions included in the first category
does not, in our
judgment, affect or alter the meaning,
scope and
effect
of this part of the definition. The numbering of th~
five items has not dissoaiated any of them from the
qualifying clause.
If the qualifying clause were
intended to apply only
to the fifth item, then
-there
would have been no comma after the fifth item. In
our opinion, therefore, the qualifying clause continues
to apply to each of the five items as before the amend
ment. There
is grammatically no difficulty in
reading
1957
The State of
Bombay
v.
R. M. D. Chamar
baugwala
Das C.J.
1957
The State of
Bombay
v.
R.M.D. Chamar
baugwala
Das C.J.
894 SUPREME COURT REPORTS [1957]
the qualifying clause as lending colour to each of those
items.
Accepting that the qualifying clause applies to each
of the live kinds of prize competitions included in the
first category, it
is urged that the qualifying clause as
amended indicates that the Legislature intended to
include innocent prize competitions within the
defini
tion so as to bring all prize competitions, legitimate or
otherwise, within the operation
of the regulatory
provisions of the Act including the taxing sections.
The argument is thus formulated. As a result of the
amendment the qualifying clause
has been broken up
into three parts separated from each other
by the
disjunctive word
"or". The three parts are (1) for
which the solution
is prepared beforehand by the
promoters, (2)
for which the solution is not prepared
beforehand
by the promoters and (3) for which the
solu
tion is determined by lot or chance. The first and the
third parts of the qualifying clause, it
is conceded, will,
when applied to the preceding
five kinds of prize
com
petitions, make each of them gambling adventures;
but it
is contended that prize competitions to which
the second part
of the qualifying clause may apply,
that
is to say prize competitions for which the solution
is not prepared beforehand, need not be of a gambling
nature at all and at any rate many
of them may well
·be of an innocent type. This argument hangs on the
frail peg
of unskilful draftsmanship. It has been seen
that in the old definitions all the
live kinds of prize
competitions included in the first category were of a
gambling nature.
We find no cogent reason-and none
has been suggested-why the Legislature which treated
lotteries and prize competitions on the same footing
should suddenly enlarge the first category
so as to
, include innocent prize competitions. To hold that the
first category
of prize competitions include innocent
prize competitions will go against the obvious tenor
of
the impugned Act. The 1939 Act dealt with prize
competitions only and the first category in the definition
given there comprised only gambling competitions. The
1948 Act clubbed together lotteries and prize
com
petitions and the first category of the prize competitions .
-
S.C.R. SUFREME COURT REPOBTS 895
included in the definition as originally enacted was
purely gambling as both parts of the qualifying
clause clearly indicated. Section 3 of the Act declared
all lotteries and all prize competitions unlawful. There
could
be no reason for declaring innocent prize
competitions unlawful. The regulatory provisions
for
licensing and taxing apply to all prize competitions.
If it were intended to include innocent prize competi
tions in the first category, one would have expected the
Legislature to have made separate provisions for the
legitimate prize competitions imposing
less rigorous
regulations than what had been imposed on illegitimate
prize competitions.
It will become difficult to apply the
same taxing sections
to legitimate as well as to illegiti
mate competitions. Tax on legitimate competitions may
well
be a tax under Entry
60 on. the trader who carries
on the trade
of innocent and legitimate competition. It
may be and indeed it has been the subject of serious
controversy whether an illegitimate competition can
be
regarded as a trade at all and in one view of the matter
the
tax may have to be justified as a tax on betting
and gambling under Entry
62. Considering the nature,
scope and effect of the impugned Act we entertain no
doubt whatever that the first category of
pr~ze
competitions does not include any innocent pnze
competition. Such is what we conceive to be the
clear intention
of the Legislature as expressed in the
impugned Act read
as a whole and to give effect to this
obvious intention,
as we are bound to do, we have
perforce to read the word
"or" appearing in the
qualifying clause after the word "promoter" and
before the word "for" as "and". Well known
canons
of construction of Statutes permit us to do so. (See Maxwell on the Interpretation of Statutes, 10th
edition, page 238).
A similar argument
was sought to be raised on a
construction
of cl. (ii) of s. 2 (1 )( d).
.As already stated,
in between the first and the third categories of prize
competitions which,
as already seen, are of a gambling
nature the definition
has included a second category of
competitions in which prizes are offered for forecasts
of the results either of a future event or of a past event
1957
The
State of
Bombay
v.
R. M. D. Chamar·
baugwala
Dase.].
1957
The Stale of
Bombay
v.
R.M.D. Cham.,_
baugwala
Das C.J.
896 SUPREME COURT REPORTS [1957]
the result of which is not yet ascertained or not yet
generally known.
It is said that forecasts of such
events
as are specified in the section need not neces
sarily depend on chance, for
it may be accurately done
by the exercise of knowledge and skill derived from a
close study of the statistics of similar events of the
past. It may
be that expert stat1st1c1ans may form
some idea of the result of an uncertain future event
but it is difficult to treat the invitation to the general
public to participate in these competitions
as an
invitation to a game of skill.
The ordinary common
people who usually join in these competitions can
hardly
be credited with such abundance of
stat;stical
skill as will enable them, by the application of their
skill, to attain success. For most, if not all, of them
the forecast
is nothing better than a shot at a hidden
target. Apart from the unlikelihood that the Legis
lature
in
enacting a statute tarring both lotteries and
prize competitions with the same brush
as indicated
by
s. 3 would squeeze in innocent prize competitions in
between two categories of purely gambling varieties of
them, all the considerations and difficulties we have
adverted
to in connection with the construction of the
first category and the qualifying clause therein will
apply
mutatis mutandis to the interpretation of this
second clause.
Reliance
is placed on s. 26 of the English Betting
and Lotteries Act.
1934 (24 and 25 Geo.
V c. 58) in aid
of the construction of the second category of prize
competitions included in the definition given in the
impugned Act.
The relevant portion of s. 26 of the
aforesaid Act runs thus : "26. (!) It shall be unlawful to conduct in or
through any ne\vspaper, or in connection with any trade
or business or the sale of any article to the public-
(a) any competition in which prizes are offered
for forecasts of the result either of a future event,
or
of a past event the result of which is not yet ascertained
or not vet
gener:illv known;
(b) anv other competition success in which does
not depend to a substantial degree upon the exercise
of skill."
S.C.R. SUPREME COURT REPORTS 8<J'l
It will be noticed that this section is not a definition
section at all but
is a penal section which makes
certain competitions mentioned
in the two clauses
unlawful.
Clause (a) of that section which corresponds
to our second category is not sandwiched between two
categories of gambling prize competitions. In
Elderton
v. Totalisator
Co. Ltd.(
1
)
on which the petitioners rely
the question was whether the football pool advertised
in newspapers by the appellant company came within
the wide language
of cl. (a) of that section which was
in Part II of the Act. Whether the appellant company's
football pool called for any skill on the part of the
"investors" or whether it was of a gambling nature was
not directly relevant to the discussion whether it fell
within
cl. (a). The penal provisions of the English
Act and the decision of the
Court of Appeal throw no
light on the construction
of our definition clause. Seeing that prize competitions have been clubbed
together with lotteries and dealt with in the same Act
and seeing that the second category
of the definition
of
"prize competition" is sandwiched in between the
other two categories which are clearly
of a gambling
nature and
in view of the other provisions of the
impugned Act and in particular
s. 3 and tl1e taxing
sections,
we are clearly of opinion that the definition
of
"prize competition" on a proper construction of
the language of s. 2(1) ( d) in the light of the other
provisions
of the Act read as a whole comprises only
prize competitions which are
of the nature of a lottery
in the wider
sense, that is to say, of the nature of
gambling.
The
Court of Appeal took the view that
although
as a matter of construction the definition did
include innocent prize competitions, yet
by the appli
cation of another principle, namely, that a literal
construction will make the law invalid because
of its
overstepping the limits
of Entry 26, which comprises
only trade and commerce within the
State, the
definition should
be read as limited only to gambling
prize competitions
so as to make it a law with respect
to betting and gambling under Entry
34. It is not
necessary for
us in this case to consider whether the
(1) (1945) 2 A.E.R.
624.
1957
The State of
Bombay
v.
R.M.D. Chamar
baugwala
Das C.J.
1957
TM State of
Bombay
v.
R.M.D. Chamar
haugwala
Das C.J.
898 SUPREME COURT REPORTS [1957]
principle laid down
by
Sir Maurice Gwyer C. J. in the
Hindu Women's Right to Property Act case(' ) can be
called in aid to cut down the scope of a section by
omitting one of two things when the section on a
proper construction includes two things, for
we are
unable, with great respect, to agree with the Court of
Appeal that on a proper construction the definition
covers both gambling and innocent competitions. In
our view, the
section, on a true construction, covers
only gambling prize competitions and the Act is a
law with respect to betting and gambling under Entry
34. As, for the foregoing reasons, we have already
arrived at the conclusion just stated,
it is unnecessary
for
us to refer to the language used in the third
category and
to invoke the rule of construction which
goes by the name of noscitur a sociis relied on by
learned counsel for the appellant.
The next point urged is that although the Act may
come under Entry
34, the taxing provisions of s. 12A
cannot be said to impose a tax on betting and gamb
ling under Entry
62 but imposes a tax on trade under
Entry
60. Once it is held that the impugned Act is on
the topic of betting and gambling under Entry
34, the
tax imposed
by such a statute, one would think, would
be a tax on betting and gambling under Entry 62.
The Appeal Court
has expressed the view that s. 12A
does not fall within Entry 62, for it does not impose a
tax on the· gambler but imposes a tax on the peti
tioners who do not themselves gamble but who only
promote the prize competitions. So far as the
promoters are concerned, the tax levied from them
can only
be regarded as tax on the trade of prize com
petitions carried on
by them. .This, with respect, is
1
taking a very narrow view of the matter. Entry 62
talks of taxes on betting and gambling and not of
taxes on the men who bet or gamble. It
is necessarv,
therefore, to bear in mind the real nature of the
ta~.
The tax ·imposed by s. 12A is, in terms, a percentage
of the sums specified in the declaration made under
~-15 by the promoter or a lump sum having regard to
the circulation and distribution of the newspaper or
(1) (1941) F.C.R. 12.
S.C.R. SUPREME COURT REPORTS 899
pub!ication in the State. Under s. 15 the promoter of
a prize competition carried on in a newspaper or
publication printed and published outside the State. is
to make a declaration in such form and at such penod
as may be prescribed. Form 'J' prescribed by
r. 11 ( c) requires the promoter to declare, among other
things, the total number
of tickets/coupons received for the competition from the State of Bombay and the
total receipts out
of the sale of the tickets/coupons
from the
State of Bombay. The percentage under
s. 12A is to be calculated on the total sums specified
in the declaration.
It is clear, therefore, that the tax
sought to
be imposed by the impugned Act is a
percentage
of the aggregate of the entry fees received
from the
State of Bombay. On ultimate analysis it is
a tax on each entry fee received from each individual
competitor who remits it from the State of Bombay.
b gigantic prize competitions which the prize com
petitions run
by the petitioners undoubtedly are, it is
extremely difficult and indeed well nigh impossible for
the
State to get at each individual competitor and the
provisi'.>n for collecting the tax from the promoters
after the entry
fees come into their hands is nothing
but a convenient method of collecting the tax. In
other words, the
taxir1g authority finds it convenient
in the course
of administration to collect
tl;e duty in
respect of the gambling activities represented
by each
of the entries when the same reaches the hands of the
promoters. The tax on gambling
is a
well recognised
group of indirect taxes
as stated by Findlay
Shirras
in his Science of Public Finance, vol. II p. 680. It is
a kind of tax which, in the language of J. S. Mill
quoted
by Lord Hobhouse in Bank of Toronto
v.
Lambe(1), is demanded from the promoter in the
expectation and intention that he shall indemnify
himself at the expense of the gamblers who sent
entrance
fees to him. That, we think, is the general
tendency
of the tax according to the common under
standing of men. It
is not difficult for the promoters
to pass on the tax to the gamblers, for they
may
charge the proportionate percentage on the amount of
{1) L.R. (1887)
12 A.G. 575.
5-80 S. C. India/59
1957
The State of
Bombay
v.
R. M. D. Chama,.
baugwala
Das C.J.
1957
The State of
Bombay
v.
R. M.D. Chamar•
baug-JJc:lc
Das G. ],
900 SUPREME COURT REPORTS [1957]
each entry as the seller of goods charges the sales tax
oc !Je may increase the entrance fee from 4 annas to 5
annas 6 pies to cover. the tax.
If in particular
circumstances it
is economically undesirable or practi
cally impossible to pass on the tax to the gamblers,
that circumstance
is not a decisive or even a relevant
consideration for ascertaining the true nature of the
tax, for it does not affect the general tendency of the
tax which remains.
If taxation on betting and gamb
ling
is to be regarded as a means of controlling
betting and gambling activities, then the easiest
and
surest
way of doing so is to get at the promoters who
hoict the gamblers' money in their hands. To collect
encourage and promote the u,1social activities and who
the tax from the promoters
is not to tax the promoters
but
is a convenient way of imposing the tax on betting
and gambling and indirectly taxing the gamblers them
selves.
It is to be noted that the tax here is not on
the protits made by the petitioners but it is a percen
tage of the total sum received
by them from the
State
of Bombay as entrance fees without the deduction of
any expense. This circumstance also indicates that
it is not
a tax on ::i trade. AccorJ.ing to the general
understanding
of n1en, as stateJ by Lord Warrington of Clyffc in Rex. v. Caledonia11 Collieries Ltd.('), there
are n1arked distinctions bet\veen a tax on gross ro\lcc
tion and a tax on inco1ne which for taxation purposes
means gains and profits. Si1nilar considerations n1ay
apply to tax on trade. There is yet another cogent
reason for holding that the tax imposed by s. 12A is a
tax un betting and gambling.
In enacting the statute
the Legislature was undoubtedly
making a law with
respect to betting and gatnbling under Entry 3-t as
hcrcinbcfore m~ntioned. By the amending Act XXX
of 1952 the Legislature by deleting the concluding
wonls of the definition of 'prize competition', mmely,
"but does not include etc., etc.," extended the opera
tion of the Act to prize competitions carried on in
newspapers printed and published outside the State of
Bombay. They knew that under Art.
276 which reproduced s. 142A of the Government of India Act,
(1) L.R. (1928) A.C. 3:.;8.
S.C.R. SlJPREME COURT REPORTS 901
1935, they could not impose a tax exceeding the sum
of Rs. 250 on any trade or calling under Entry 60. If
the tax can be referable either to Entry 60 or to Entry
62, then in view of the fact that s. 12A will become at
least partially, if not wholly, invalid as a tax on trade
or calling under Entry 60 by reason of Art. 276(2), the
court must,
in order to uphold the section, follow the
well established principle of construction laid
down by
the
Federal
Court of India and hold that the Legis
lature must ha';e been contemplating to make a iaw
with respect to betting and gambling under Entry 62,
for there
is no constitutional limit to the quantum of tax which can be imposed by a law made under that
Entry. For reasons stated above, we are >atisfied that
s. IiA is supportable as a valid piece of legislation
under Entry 62.
The next point urged by the petitioners is that under
Arts. 245 and 246 the Legislature of a State c;:m only
make a law for the State or any part thereof and, con
sequently, the Legislature overstepped the limits of its
legislative field
when by the impugned Act it purported
to
affect men residing and carrying on business outside
the State. It is submitted that there is no sufficient
territorial nexus between the State :111d the activities of
the petitioners
who
are not in the St:itc. The doctrine
of territorial nexus is well established :ind there is no
dispute :is to the principles. As enunciated by learned
coun;el for the petitioners, if there is :i territorial nexus
between the person sought to
be
ch:irgcd :ind the St:ite
seeking to tax him the taxing statute m:iy he unheld.
Snfficiencv of the territorial connection involves a
consideration of
two
elements, n:imel\' ( :i) the connec
tion must he re:il and not illmorv :ind (h) the liability
sought to be imposed must he pertinent to th:it connec
tion. ft is conceded that it is 0f 110 impmtancc on the
question of nliditv th:it the liahilitv imposed is or
may he altogether. disproportionate to tl{e tcrritori:il
connection. Tn other words, if the connection 1s
sufficient in the sense mentioned above. the extent of
such connection :iffects merelv the policv and not the
v:iliditv of the legislation. Keeping. the;c principles in
mind we have to :isccrt:iin if in the case before us there
!957
The State of
Bombf!1
v.
R. M. D. ChamM·
baugwa!a
Das C.J.
1957
The State of
Bombay
v.
R. M. D. Chamar
baugwala
Das C.J.
902 SUPREME COURT REPORTS [1957]
was sufficient territorial nexus to entitle the Bombay
Legislature to make the impugned law.
The question
whether
in a given case there is sufficient territorial
nexus
is essentially one of fact. The trial court took
the view that the territorial nexus was not sufficient
to uphold the vaiidity of the law under debate.
The
Court of Appeal took a different view of the facts and
upheld the law.
We find
0•1rselves in agreement with
the Court of Appeal. The newspaper "Sporting Star"
printed and published in Bangalore is wide! y circulated
in the State of Bombay. The petitioners have set up
collection depots within the State to receive entry
forms and the
fees. They have appointed local collectors.
Besides the circulation of the copies of the
"Sporting
Star", the petitioners print over 40,000 extra coupons
for distribution which no doubt are available from
their local collectors. The most important circumstance
in these competitions is the alluring invitation to
participate in the competition where very large prizes
amounting to thousands of rupees and sometimes
running into a lakh of rupees may
be won at and for a
paltry entrance
fee of say 4 annas per entry. These
advertisements reach a large number of people resident
within the
State. The gamblers, euphemistically called
the competitors, fill up the entry forms and either leave
it along with the entry
fees at the collection depots set
up in the
State of Bombay or send the same by post
from Bombay. All the activities that the gambler
is
ordinarily expected to undertake take place, mostly if
not entirely, in the
State of Bombay and after sending
the entry forms and the
fees the gamblers hold their
soul in patience in great expectations that fortune may
smile on them.
In our judgment the standing invita
tions, the filling up of the forms and the payment of
money take place within the
State which is seeking to
tax only the amount received
by the petitioners from
the
State of Bombay. The tax is on gambiing although
it is collected from the promoters. All these, we think,
constitute sufficient territorial nexus which entitles the
State of Bombay to impose a tax on the gambling that
takes place within its boundaries and the law cannot
be struck down on the ground of extra territoriality.
S.C.R. SUPREME COURT REPORTS 903
Assuming that the impugned Act is well within the
legislative competence of the Bombay Legislature
and
that it is not invalid on the ground of extra territorial
operation, we have next to examine
and see if there is
anything else in the Constitution which renders it
invalid.
The petitioners contend that even if the prize
competitions constitute gambling transactions, 'hey
are neverthele~s trade or bu5iness activities and that
that being
so the impugned Act infringes
.the peti
tioners' fundamental right under Art. 19(1) (g) of the
Constitution to carry on their trade or business and
that the restnctions imposed by the Act cannot
possibly
be supported as reasonabie restrictions in the
interests of the general public permissible under Art.
19(6).
The petiti0ners also point out that the trade or
business carried on by them is not
confined within the
limits of the State of Mysore but extends across the
State boundaries into other States within the territories
of India and even into lands beyond the Union of Ir.dia
and they urge that in view of the inter-State nature of
their trade or business the restrictiom imposed by the
impugned Act offend against Art. 301 wl:ich declares
that, subject to the other provisions of Part XIII of
the Constitution, trade, commerce and intercourse
throughout the tc;::rritory of India shall be free and
cannot· be supported under Art. 304(b ), for the restric
tions cannot be said to be reasonable or required in the
public interest and because the procedural require
ments of the proviso thereto had _not been corr;plied
with.
The
State of Bombay repudiates these conten
tions and submits that as prize compe,1t1ons are
opposed
to public policy there can be no
"trade" or
"business" i.n promoting a prize competition and the
question of infraction of the petitioner's fundamental
right to carry
en trade or business guaranteed by
Art. 19(l)(g) or of the
viobion of the freedom of trade
commerce or intercourse declared by Art. 3Cll d8es no;
arise at all ar:id that in any event if Art. 19( 1) (g) or
~-rt. 301 applies at all, the restrictions imposed by the
tmpu.gned Act are reasonable restrictions necessary in
the mterest of tre general pt!biic and saved by An.
19(6) and by Art. 304(b) of the Constitut:on. It is
1957
The State of
Bombay
v.
R. M. D. Chamar
baugwala
Das C.J.
1957,
The State of
Bombay
v.
R. M. D. Chamar~
baugwala
Das C.J.
904 SUPREME COURT REPORTS [1957)
conceded that the bill which became Act XXX of
1952
and amended the 1948 Act in the manner hereinbefore
stateci was introduced in the Legisbture of the State
without the previous sanction of the
President and,
consequently, the condition precedent
to the validitv
of the resulting Act
as laid down in the proviso
had
not been complied with but it is submitted, we think
correctly, that the defect was cured, under An. 2)5,
by the assent given subsequently bv the President to
the impugned Act.
It
is, however, admitted b;· learned
counsel appearing for the appellant State that under
Art.
255 the subsequent assent of the
President will
save· the Act if the other condition embodied in Art.
304(b) as to the restnct10ns imposed by it being
reasonable in the public intc.rest is held to be satisfied
but it will not save the rules framed under s. 31 of the
impugned Act which had never been placed before the
President or assented to or approved by him. We now
proceed to examme and deal with these rival
contentions.
The first branch of the argument on this part of the
appeal raises a question of a very far reaching nature.
The question posed before us is : Can the promotion
of prize competitions, which arc opposed to public
policy,
be characterised as a
"trade or hminesi'
within the meaning of Art. 19(1) (g) or "trade, commerce
and intercourse" within Art. 301? The learned trial
Judge has exprccseJ the view that if he were able to
hold that the prize competitions conducted by the
petitioners were of a gambling nature, he would have
had no difficulty in concluding that they were outside
the protection of the Constitution. The Court of
Appeal, however, took a different view. What weighed
with the Court of Appeal was the fact tliat the legis
lature had not prohibited gambling outright but only
made provisions for regulating the same and further
that the State was making a profit out o'. these prize
competitions by levying taxes thereon. It is necessary
to consider the arguments that have been adduced
before
us by learned counsel for the parties in support
0£ their resnective contentions.
S.C.R. SUPREME COURT REPOR"FS 905
It will be noted that Art. 19(1)(g) in very general
terms guarantees
to all citizens the right to carry on
any occupation, trade-or business and
cl. ( 6) of Art. 19
protects legislation which may, in the interest of the
general public, impose reasonable restrictions on the
exercise of the right conferred
by Art. 19(1)(g).
Like
wise Art. 301 declares that trade, commerce and
intercourse throughout the territory of India shall
be
free but makes such declaration subject to the other
provisions of
Part XIII of the Constitution. _ Arts. 302-
305, which are in that Part, lay down certain restric
tions subject to which the declaration contained
in -
Art.
301 is to operate. Article 302 empowers Parlia
ment by law to impose restrictions on the freedom of
trade, commerce or intercourse not only between one
State and another but also within the State, provided
in either
case such restrictions are required in the
public interest. Article
304(b) authorises the State
Legislatures to impose reasonable restrictions on the
freedom of trade, commerce or intercourse with
or
within the
States as may be required in the public
interest, provided the formalities of procedure are
complied with. Arts.
19(1)(g) and
301, it is pointed out
are two facets of the same
thing-the freedom of trade.
Art.
19(1)(g) looks at the matter from the point of view
of the individual citizens and protects their individual
right to carry on their trade or business. Art.
301
looks at the matter from the point of view -of the
country's trade and commerce as a whole, as distinct
from the individual interests
of the citizens and it
relates to trade, commerce or intercourse both with and
within the
States. The question which ca,lls for our
decision
is as to the true meaning, import and scope of
the
freedom so guaranteed and declared by our Consti
tution. We have been referred to a larcre number of
decisions bearing on the Australian a~d American
Constitutions in aid of the construction of the relevant
articles of our Constitu_tion.
In the Commonwealth
of. Australia Constitution Act
(6.3 and 64 Vic. e,. 12) there i.6 s. 92 from which our
Art. 3Gl appears to. ha,vc been taken. The material
part of s. 92 nms thus :
1957
The State of
Bombay
v.
R. M. D.
Chama>
baugwala
Das C.J.
1957
The State of
B9mb<fl
v.
R. M. D. Chamar·
baugwala
Das C.J,
906 SUPREME COURT REPORTS (1957]
. "On the imposition of uniform .duties of customs,
trade, commerce and intercourse among the States,
whether by means of internal carriage or ocean naviga
tion, shall
be absolutely
free." .
It has been held in fames
v. Commonwealth of
Australia(') that the word
"absolutely" adds nothing
but emphasis to the width of the section. In the same
case it has also been stated and decided that the section
imposes a fetter on the legislative power not only of
the Commonwealth Parliament but also of the Parlia
ment of
the· States. It has been equally authoritatively
held that the words "whether' by means of internal
carriage or ocean navigation" occurring in the section
do not restrict its operation to such things and persons --<•
as are carried by land or sea but that the section
extends to all ' activities carried on
by
· means of inter
State transactions (Commonwealth of Australia v. Bank
of
New South
Wales(') )•The Privy Council in the last
mentioned · case has also said at p. · 299 that it is no
longer arguable that freedom, from customs or other
monetary charges· alone is secured by the section. The
idea underlying the section was that the Federation · in
Australia should abolish the frontiers between the
different States and create one Australia and that
conception involved freedom from customs duties,
imports, border prohibitions and restrictions of every
kind, so that the people of Australia would be free to
trade with each other and to ·pass to and fro from one
State to another· without any 'let or. hindrance, or with-
out any burden· or restriction ·based merely· on the fact
that they were not members of ·the· same State (James
v. Commonwealth of Australia(')). ·
One cannot· but be struck by the sweeping· generality
of language used' in the section. · Such a wide enuncia
tion· of the freedom of inter-State trade, · comnierce and
intercourse was' bound to lead 'to difficulties. ·· The full
import and' true meaning of the general words. had to
be considered, as years went past, in · relation · to
the' vicissitudes · of ·altering facts · and circumstances
which'· from time to time· 'emerged: The changing
circumstances and the necessities compelled· the · court
(1(L.R. (1936) A.C. 578, 627. (2) L.R; (1950)-A.C: 235, 302-303 ..
S.C.R. SUPREME COURT REPORTS
to reach the conclusion that the conception of freedom
of trade, commerce . and intercourse in a community
regulated
by law presupposed some degree of restriction
on the individual.
Cases arose out of statutes enacted
for ·restricting competition of privately owned motor
vehicles with publicly owned railways, or to compel
users of motor to contribute to the upkeep of the roads
e.g .. Willard v. Rawson(1); R. v. Vizzard( z) and
0. Gilpin Ltd. v. Comm;ssioner of Road Transport and
Tramways(3). In ear:h of these three cases the State
law
was upheld as not offending against s. 92. Cases
arose
. under statutes which were sought to be supported
on the ground
of health. In Ex parte Nelson (No. 1)
(4)
a New South Wales statute prohibited entry of cattle
from tick infected area
until dipped. Applying the
principle
· of pith and substance, it was held tl1at the
· restrictions looked at in their true light, were aids to and
not restrictions upon the freedom of inter-State trade,
commerce and intercourse.
In Tasmania v.
Victoria(
6
)
the absolute prohibition of imports of potatoes from
Tasmania
to Victoria could not
'm facts be supported
as a health measure and conseqm .1tly was struck down
as a violation of s. 92. In fames v. Commonwealth of
Australia(
8
) came up for consideration the Dried
Fruits Act
1928-35
·.Vhich prohibited the carrying of
any dried fruit from one State to an~ther except under
a licence and which provided for penalty for its
contravention. The regulations authorised the Minister
to direct the
licensee to· export a certain percentage of
dried ·fruits from Australia. The Minister
bv an order
determined that it would
be a condition
of· the licence
that the licensee should export a percentage of the
dried fruits
as therein mentioned. The appellant
having refused to apply for a licence, his consignments
of
<lried fruits shipped from Adelaide for delivery at
Sydney in performance of contracts for sale were
seized. The appellant brought an action for damages
for what he alleged tv be a wrongful seizure. After
holding that the section bound the Parliament of
(1) (1933) 411 C.L.R. 316.
(2){1933H50 C.L.R. 30.
(3} (1935) 52 C.L.R. 18g.
(4) (1928) 42 C.L.R .. 209.
(5) (1935) 52 C.L.R. 157.
(6) L.R. (1936) A.C. 578, 627,
1957
Tiu Stat. f
&m1Nl;
v.
R.M.D. Crt1f1lll¥
/J111Jgwa'•
D11.1C.J.
1957
Tiu Stateof
Bombay
v.
R. M. D. Chamara
baugwala
Das C.J.
908 SUPREME COURT REPORTS [1957]
Commonwealth equally with those of the States the
Judicial Committee proceeded to say that the freedom
declared in
s. 92 must be somehow limited and the
only limitation which emerged from the
coNext and
which could logically and realistically apply
was free
dom at what was
·the crucial point in inter-State trade,
namely at the State barrier (p. 631). In the later case
of Commonwealth of Australia v. Bank of New South
Wales(
1
) it has been said that those words were to be
read secundum subjectam materiam and could not be
interpreted as a decision either that it was only the
passage of goods which
is protected by s. 92 or that it
is only at the frontier that the stipulated freedom
might
be impaired (p.
308).
Leorned counsel for the State has strongly relied on
two decisions of the Australian
High Court in both of
which the validity
of a New
South Wales Statute called
the Lotteries and Art Unions Act 1901-1929 was
called in question. Section 21 of that Act provided :
"Whoever sells or offers for sale or accepts any money
in respect of the purchase of any ticket or share in a
foreign lottery shall
be liable to a
penaltr." In the
first of those two cases-The King v. Connare( ')-the
appellant offered for sale in Sydney a ticket in a
lottery lawfully conducted in Tasmania and wa5
convicted of an -0ffence under s. 21. He challenged the
validity of the law on the ground that it interfered
with the freedom of trade, commerce and intercourse
among the States and consequently violated the provi
sions of
s. 92. It was held by
Starke, Dixon, Evatt
and McTiernan
JJ. (Latham C.J. and Rich J. J'issent
ing) that the provisions of
s. 21 did not contravene
s. 92 and the appellant was properly convicted.
Starke J. discussed the question as to whether the sale
in question was an inter-State or intra-State tran,._
action bm did not think it necessary to decide that
question. After referring to the observations of Lord
Wright in James v. The Commonwealth(') that the
freedom declared
by s. 92 meant freedom at the
frontier,
the learned Judge observed that the question
(•)LR. (>950) A.C. "'35· :Jo0"'.!03. (•) (1939) 51 C.L.R. 5q6.
(3) l..R. (1936) A.C. 578, &.11.
S.C.R. SUPREME COURT REPORTS 909
whether that freedom had been restricted or burdened
depended upon the true character and effect of the
Act.
He took the view (at p. 616) that the main
purpose of
. the Act was to prevent or suppress lotteries
and particularly, in
ss. 19,
20 and 21, foreign lotteries
and that it was aimed at preventing what he graphically
described
as
"illegitimate :methods of trading'', if sales
of lottery tickets were regarded
as trading. The
learned Judge took note of the fact that New
South
Wales law allowed State lotteries and concluded that
the true character of the impugned Act was to suppress
gambling in foreign lottery tickets and examined from
the historical point of view, from the character of the
Act, ·its function and its effect upon the flow of
commerce, the Act did not, in his view, restrict or
hinder the freedom of any trade across the frontier of
the States. Dixon J. as he then was, gave two reasons
for his opinion, namely that the transaction was not in
itself a transaction of inter-State trade, commerce or
intercourse but was a sale in
New
South Wales of a
ticket then
in New
South Wales and that, apart from
the State lottery and permitted charitable raffles, the
Act suppressed uniformly the sale of all lottery tickets
in
New
South Wales. Adverting to the argument
which, in substanct, asked the Court to declare that
s. 92 had created an overriding constitutional right to
traffic or invest in lotteries
so long as the trafficker or
investor could succeed in placing some
bound1ry or
other between himself and the conductor of the lottery
Evatt
J. said at pp.
619-20:
"In my opinion such a pmposition cannot be
supported in principle or by reference to authority.
For it is obvious that the appellant's argument also
involves the assertion of the constitutional right of a
citizen, so long
as he can rely upon, or if necessary anificially create, some inter-State connection in his
business, to sell indecrnt and obscene publications,
diseased cattle, impure foods, wibranded poisODli,
wistam~d silver, ungraded fruit and so forth."
The obviOus inoonvenience and undesirability of the
effects to be produced if such extravagant ·arguments
1957
The State of
B0mbay
v.
R. ltl. D. Chama,._
baugwala
Das C.J.
19.'>7
Th•Slau•f
Bombay
v.
R. M. D. Cham.,..
baugwaia
Das C.].
910 SUPREME COURT REPORTS [19571
were to prevail led the learned Judge to think (at
p. 620) that in the interpretation of s. 92 it was
permissible to accept some postulates or axioms
demanded alike
by the dictates of common sense and by
some knowledge of what was being attempted by the
founders
of the Australian Commonwealth. Making
these assumptions and concessions Evatt
J. opined (at
p. 621) that the guarantee contained in s. 92 had
nothing whatever to
say on the topic of inter-State
lotteries and could not
be invoked to prevent either
the suppression or the restriction in the public interest
of the practice of gambling or investing in such
lot
teries. The learned Judge did not think that lottery
tickets could be. regarded
as goods or commodities
which
we.re entitled to the protection of s. 92 and
concluded thus at
p. 628 :
"If they are goods or commodities they belong to
a
very special category, so special that in the interests
of its citizens the
State may legitimately exile them
from the realm
of trade, commerce or business. The
indiscriminate sale of such tickets may be regarded as
causing business disturbance and loss which, on general
grounds of policy, the
State is entitled to prevent or at
least minimize."
Mc'fiernan J. was even more forthright in placing
gambling outside the pale
of
uade, commerce ~nd
intercourse. At p. 631 he said :
"Some trades are more adventurous or speculative
than others, but trade or commerce
as a branch of
human activity belongs to an order entirely different
from gaming or gambling. Whether a particular
activity falls within the one or the .other order
is a
matter of social opinion rather than jurisprudence
..... .
. . . . . . . . . . . . . . .
.. . It is gambling to buy a ticket or share
in a lottery.
Such a transaction does not belong to
the commercial business of the country. The purchaser
stakes money in a scheme for distributing prizes by
chance. He is a gamester."
A little further down the learned Judge observed :
"It is not a comme1 cial arrangement to sdl a
lottery ticket; tor it is merely the acceptance of money
S.C.R. SUPREME COURT REPORTS 911
or the promise of money for a chance. In this case
the purchase of a lottery ticket merely founds a hope
that something will happen in Tasmania to benefit the
purchaser."
Naturally enough learned counsel for the appellant
State seeks to fasten upon the observations quoted or
referred to
above in support of his thesis that gambling
is not trade, commerce or intercourse within the mean
ing alike
of s. 92 of the Australian Constitution and
our Art.
19(l)(g) and Art. 301.
In the second case-The King v. Martin(1)-the
same question came up for reconsideration. The only
difference in fact
was that there was no actual sale
by delivery of a lottery ticket in New
South Wales but
money
was received by the agent of
~ Tasmania
promoter
in New
South Wales and transmitted to
Tasmania from where the lottery ticket
was to be sent.
The
State law was again upheld. Latham C. J ., Rich,
Starke, Evatt and Mctiernan JJ. adhered to their
respective opinions expressed in the earlier
case of The
King
v. Connare(2). Dixon J., as he then was, gave a
new reason for his opinion that notwithstanding the
inter-State character of the transaction s. 21 of the
impugned Act
was valid.
Said the. learned Judge at
pp. 461-462 :
''The reason for my opinion
is that the application
of the
law does not depend upon any characteristics of
lotteries or lottery transactions in virtue of which they
are trade or commerce or intercourse nor upon any
inter-State element in their nature. The only criterion
of its operation
is the aleatory description of the acts
which it forbids. There is no prohibition or restraint
placed
UJ?<>n any act in connection with a lottery
because either the act or the lottery is or involves
commerce or trade or intercourse or movement into or
out of New South Wales or communication between
that State and another State ......................... .
To say that inter-State trade, commerce and inter
course shall
be free, means, I think, that no restraint
or burden shall
be placed upon an act falling under
that description because
it is trade or commerce or
(1) (1939) 62 C.L.R. 457• (2) {1939) 61 C.L.R. 596.
195-7
The State of
Bomba7
v.
R. M. D. Clwnn
"baugwala
DasC.J.
1957
The StaJ1 of
Bombay
v.
R. M. D. Chamar~
baugwala
DasC.J.
912 SUPREME COURT REPORTS [1957]
intercourse or invo\.ves inter-State .movement or
communication."
In this view of the matter Dixon J. now upheld s. 21
of the impugned Act on the ground that the criterion
of its application
was the specific gambling nature of
the transactions which it penalised and not anything
which brought the transactions under the description
of trade, commerce or intercourse or made them interState in their nature.
Then came the
case of Commonwealth of Australia v.
Bank of New
South Wales(') commonly called the
Bank
case where it was held 'that s. 46 of the Banking
Act,
1947, was invalid as offending against s. 92 of the
Australian Constitution. Sub-section (1) of
s. 46
provided that a private bank should not, after the
commencement of the Act, carry on banking business
in Australia except as required by the section.
Sub
section (2) laid down that each private bank should
carry on banking business
in Australia and should not,
except on appropriate grounds,
cease to provide any
facility or service provided
by it in the course of its
banking business on the fifteenth day of August one
thousand nine hundred and forty seven.
Sub-section
(4) authorised that the Treasurer might, by notice
published
in the gazette and given in writing to a
private bank, require that private bank to
cease, upon
a date specified in the notice, carrying on business in
Australia.
Sub-section (8) provided that upon and after
the date specified in a notice under
sub-s. (4) the private
bank to which that notice was given should not carry
on banking business in Australia. It also provided a
penalty of
£10,000 for each day on which the contra
vention occurred.
The question was: Whether this
section interfered with the freedom of trade, commerce
or intercourse among the
States declared by s. 92 of
the Australian Constitution?
It was held that the
business of banking which consisted of the creation
and transfer of credit, the making of loans, the
purchase and disposal of investments and other kindred
transactions was included among those
acuv1t1es
described as trade, commerce and intercourse in s. 92
(1) L.R. ( 1950) A.G. 235.
S.C.R. SUPREME COURT REPORTS 913
and, accordingly, the impugned s. 46. which while
leaving untouched the Commonwealth and Sta~e Banks,
prohibited the carrying on
in Australia of the business
of banking
by private banks, was invalid as
contraven
ing s. 92. Lord Porter delivering the judgment of the
Judicial Committe pointed out that
it was no longer
arguable that freedom from customs or other monetary
charges alone was secured
by the section. Then after
reviewing and explaining at some length the two
cases
of fames v.
Cowan(1) and fames v. The Common
wealth (2), his Lordships proceeded to make certain
observati9ns on the distinction between restrictions
which are regulatory and do not offend against s. 92
and those which are something more than regulatory
and do so offend. His Lordship deduced two general
propositions from
the decided cases, namely ( 1) that
regulation of trade, commerce and intercourse among
the States
was compatible with absolute freedom and
(2) that
s. 92 was violated only when a legislative or
executive
act operated to restrict trade, commerce and
intercourse directly and immediately
as distinct from
creating
some indirect or consequential impediment
which might fairly
be regarded as remote. The problem
whether an enactment was regulatory or something
more or whether a restriction
was direct or only remote
or only incidental involved, his Lordship pointed out,
not
so much legal as political, social or economic
considerations. Referring to the
case of Australian
National Airways
Proprietary Ltd. v. The Common
wealth,(3) his Lordship expressed his agreement with
the
view that simple prohibition was not regulation. A
little further down, however, his Lordship made a
reservation that he did not intend to
lay down that in
no circumstances could the exclusion of competition so
as to create a monopoly, either in a State or
Common
wealth agency, or in some body, be justified and that
every
case must be judged on its own facts and in its
own setting of time and circumstances, and that
it
might be that in regard to some economic activities
and at some stage of social development
it might be
(1) L.R. (1932) A.C. 542. (3)
(1945) 71 C.L.R. 29f
(2) L.R. (1936) A.C. 578, 627.
1957
Tht State of
Bombf!1
v.
./l. M. D. Chamar
haugwala
DaJC.J.
1957
Tire Stote of
&mbay
v.
R. M. D. Clulm"'"
baugwala
DasC.J.
.914. SUPREME COURT REPORTS [1957}
maintained that prohibition with a view to State
monopoly was the only practical and reasonable
manner of regulation, and that inter-State trade, com
Merce and intercourse thus prohibited and thus
monopolised remained absolutely free. His Lordship
further added that regulation of trade might clearly
tak~ the form of denying certain activities to persons
by age or circumstances unfit to perform them or of
excluding from passage across the frontier of a State
crearures or things calculated to injure its citizens.
Referring to the doctrine of "pith and substance" his
Lordship observed that it, no doubt, raised in con·
venient form an appropriate question in cases where the
real issue was one of subject matter
as when the point
was whether a particular piece of legislation was a law
in respect of some subject within the permitted field,
but it might also serve a useful purpose in the process
of deciding whether an enactment which worked some
interference with trade, commerce and intercourse
among the States
was, nevertheless, untouched by
s. 92 as being essentially regulatory in character.
The last Australian case on the point cited before us
is Mansell v.
Beck('). In this case also the provisions of
the Lotteries and
Art
Ur.ions Act of New South Wales
came up for consideration and the decisions in the
King v. Connare(
2
)
and the King v. Martin(') were
considered and approved. Dixon C.J. and Webb J
observed that the true content of the State law must
be ascertained to see whether the law that resulted
from the whole impaired the freedom which
s. 92
protected. Their Lordships pointed out that lotteries
not conducted under the authority of Government were
suppressed
as pernicious. The impugned legislation
was, in their Lordships' view, of a traditional kind
directed against lotteries
as such independently
alt<>
gether of trade, commerce and intercourse between
States. McTiernan
J. reiterated the views he had
expressed in the
case of the King v.
Connare(') in the
following words:
(1) (Austr:i.lian Law Journal, Vol. 30. No. i p. 346).
(2) (1938) 61 C.L.R. 596.
(3) (1939) 62 C.L.R. 457·
S.C.R. SUPREME COURT REPORTS 915
"It is important to observe the distinction that
gambling
is not trade, commerce and intercourse within
the meaning of
s. 92 otherwise the control of gambling
in Australia would
be attended with constitutional
difficulties."
Williams J. did not consider it necessary to express
any final opinion on the question whether there could
be
inter-State commerce in respect of lottery tickets.
He took the view that ss. 20 and 21 of the New South
·wales Act were on their face concerned and concerned
only with intra-State transactions and that their pro
visions did not directly hinder, burden or delay any
inter-State trade, commerce or intercourse. His Lord
ship observed that there
was nothing in the reasoning
in the judgment in the Bank
case or in subsequent
decisions to indicate that the
King v.
Connare(1) and
King v. Martin(2) were not rightly decided. He quoted,
with approval, the observations
of Dixon J. in Martin's
case. Fullagar J. also took the view that the previous
decisions of the High
Court in Connare's case(
1
)
and
Martin's
case(2 ) were rightly decided for the reasons
given
by Dixon J. Kitto J. dissented from the majority
view. Taylor J. who
was also in favour of the validity
of the impugned law, observed :
"No simple legislative expedient purporting to
transmute trade ~.nd commerce into something else
will remove it from the ambit of s. 92. But whiht
asserting the width of the field in which s. 92 may
operate it
is necessary to observe that not every
transaction which employs the forms of trade and
commerce will,
as trade and commerce, invoke its
protection. The
sale of stolen goods, when the transac
tion
is juristically analysed, is no different from the
sale of any other goods but can it be doubted that the
Parliament of any State may prohibit the sale of stolen
goods without infringing
s. 92 of the Constitution? The
only feature which distinguishes such a transaction
from trade and commerce
as generally understood is to
be found in the subject of the transaction; there is no
difference in the means adopted for carrying it out.
Yet it may
be said that in essence such a transaction
(1) (1939) 61
C.L.R 596, (2) (1939) 62 C.L.R. 457.
6-80 S.C. India/59
1957
The State of
Bombay
v.
R. M. D. Chamar·
baugwa/a
DasC.J.
1957
Ti.. Stale of
Bombay
••
R M.D.Chamm-
baugwala
DasC.].
916 SUPREME COURT REPORTS [1957}
constitutes no part of trade and commerce as that
expression
is generally understood. Numerous examples
of other transactions may be given, such as the sale of
a forged passport, or, the
sale of counterfeit money,
which provoke the same comment and, although
legislation prohibiting such .transactions
may, possibly,
be thought to be legally justifiable pursuant to what
has, on occasions, been referred to as a
"police power'',
l prefer to think that the subjects of such transactions
are not, on any view, the subjects
of trade and
com
merce as that expression is used in s. 92 and that the
protection afforded
by that section has nothing to do
with such transactions even though they may require,
for their consummation, the employment of
instru
ments, whereby inter-State trade and commerce is
commonly carried on."
After referring to the history of lotteries in England
the learned Judge concluded :
"The foregoing observations give some indication
of the attitude of the law for over two and a half
centuries towards the carrying on of lotteries. But
they show also that, in this country, lotteries were,
from the moment of its first settlement, common and
public nuisances and that, in general, it
was impossible
to conduct them except in violation of the law. Indeed
it was impracticable for any person
to conduct a
lottery without achieving the status
of a rogue and a
vagabond."
In the Constitution of the United States of America
there
is no counterpart to Art.
301 of our Constitution
or
s. 92 of the Australian Constitution. The problem
of gambling came up before the courts in America in
quite different setting. Article
1, s. 8,
sub-s. (3) of the
Constitution of the United States compendiously called
the commerce clause
gives power to the Congress to
regulate commerce with foreign nations and among
the several
States and with the Indian tribes. Congress
having made law regulating gambling activities which
extended across the State borders, the question arose
whether the making of the law was within the legis
lative competence of the Congress, that is to say
whether it could be brought within the commerce
S.C.R. SUPREME COURT REPORTS 917
clause. The question depended for its" answer on the
further question whether the gambling activities could
be said to be commerce amongst the
States. If it could,
then it
was open to Congress to make the law in
exercise of its legislative powers under the
commerce
clause. More often than not gambling activities extend
from State to State and, in view of the commerce clause,
no State Legislature can make a law for regulating
inter-State activities in the nature of trade. If betting
and gambling
does not fall within the ambit of the com
merce clause, then neither the Congress nor the
State
Legislature can in any way control the same. In such
circumstances, the Supreme Court of America thought
it right• to give a wide meaning to the word "commerce"
so as to include gambling within the commerce clause
and thereby enable the Congress to regulate and control
the
same. Thus in Champion v.
Ames(1) the carriage
of lottery tickets from one State to another by an
express company was held to be inter-State commerce
and the court upheld the
law made by Congress which
made such carriage an
offence. In Hipolite Egg Co. v.
United States(
2
)
the
Pure Food Act which prohibited
the importation of adulterated
food was upheld as an
exercise
of the power of the Congress to regulate
commerce.
The prohibition of transportation of women
for immoral purposes from
one
State to . another or to
a foreign land
has also been held to be within the
commerce clause (see
Hoke v.
United State(3 ) ). So
has the prohibition of obscene literature and articles
for immoral. use. Reference has also been made to the
cases of United States v. Kahriger(
4
) and Lewis v.
United States (
5
)
to support the contention of the
appellant
State that the Supreme Court of the United
States looked with great disfavour on gambling
activities. In the last mentioned
case it was roundly
stated at
p.
480 that "there is no constitutional right
to gamble".
(1) [1903] 188 U.S. 321; 47 L. Ed. 492.
(2) [1911] 220 U.S. 45; 55 L. F.d. 364.
(3) [1913] 227 U.S. 308; 57 L. Ed. 523.
(4) [1953] 345 U.S. 22; 97 L. Ed. 754.
(5) [1955] 348 U.S. 419; 99 L. Ed. 475.
1957
ThtState of
Bomba7
v.
R. M. D. C"""'
baugwola
DasC.J.
1957
The Stale of
Bombay
v.
R. M. D. Ch4mar
baugwala
DasC.J
918 SUPREME COURT REPORTS [1957]
In construing the provisions of our Constitution the
decisions of the American Supreme Court on the
commerce clause and the decisions of the Australian
High Court and of the Privy Council on s. 92
of· the
Australian Constitution should, for reasons pointed out
by this Court in State of
Travancore-Cochin v. The
Bombay Co. Ltd.(
1
), be used with caution and circum
spection. Our Constitution differs from both American
and Australian Constitutions. There is nothing in the
American Co11<titution corresponding to our Art. 19(1)
(g) or Art. 301. In the United States the problem was
that
if gambling did not come within the commerce
clause, then neither the Congress nor any
State Legis
lature could interfere with or regulate it er-State
gambling. Our Constitution, however, has provided
adequate safeguards in
cl. ( 6) of Art. 19 and in Arts. 302-305. The schem~ of the Australian Constitution
also is different from that of ours, for in the Australian
Constitution there
is no such provision as we have in
Art. 19(6) or Arts.
302-304 of our Constitution. The
provision of s. 92 of the Australian Constitution being
in terms unlimited and unqualified the judicial autho
rities interpreting the same had to import certain
restrictions and limitations dictated
by common sense
and the exigencies of modern society. This they did,
in some
cases, by holding that certain activities did
not amount to trade, commerce or intercourse and, in
other
cases, by applying the doctrine of pith and
substance and holding that the impugned law
was not
a law with respect to trade, commerce or intercourse.
The difficulty which faced the judicial authorities
interpreting
s. 92 of the Australian Constitution cannot
arise under our Constitution, for our Constitution did
not stop at declaring by Art. 19(1) (g) a fundamental
right to carry on trade or business or at declaring
by
Art.
301 the freedom of trade, commerce and inter
course but proceeded to make provision
by Art. 19(6)
and Arts.
302-305 for imposing in the interest of the
general public reasonable restrictions on the exercise of
the rights guaranteed and d(:clared by Art. 19(1) (g)
and Art. 301. As one of us said in P. P. Kutti Keya
(1) (1952) S.C.R. 1112 at p. 1121.
S.C.R. SUPREME COURT REPORTS 919
v. The Seate of Madras(
1
)
the framers
·of our · Consti
tution, being aware of the problems with which the
Australian Government had been confronted
by reason
of s
.. 92, sought to solve them by enacting limitations in
Part XIII itself on the freedom guaranteed in Art. 301.
Our task, therefore, will be to interpret our Consti
tution and ascertain whether the prize competitions
falling within the definition of the impugned Act, all
of which are of a gambling nature, can
be said to be a
"trade or business" within the meaning of Art. 19( 1)
(g) or "trade, commerce and intercourse" within the
meaning of Art. 301 of our Constitution.
The scheme of our Constitution, as already indicated,
is to protect the freedom of each individual citizen to
carry on his ttade or business. This it
does by
Art. 19(1)(g). This guaranteed
ri!Jht is, however,
subject to Art. 19(6) which protects a law which
imposes, in the interest of the general public, reasonable
restrictions on the exercise of the fundamental right
guaranteed by Art. 19(1)(g). Our Constitution also
proclaims by Art. 301 the freedom of trade, commerce
and intercourse throughout the territory
of India
sub
i ect to the provisions of Arts. 302-305 which permit
the imposition of reasonable restriction
by Parliament
and the
State Legislatures. The underlying idea in
making trade, commerce and intercourse with,
as well
as within, the
States free undoubtedly was to emphasise
the unity of India and to ensure that no barriers might
be set up to break up the national unity. One important
point
to note is that the language used in Art. 19(1)(g)
and Art.
301. is quite general and that the provisions
for restricting the exercise of the fundamental right
and the declared freedom of the country's trade,
commerce and intercourse are made separatdy, e.g.,
by Art. 19(6) and Arts.
302-305. This circumstance is
fastened upon by learned counsel for the petitioners
for contending that the right guaranteed by Art. 19( 1) (g)
and the freedom declared by Art. 301 should, in the
first instance and
to start with,
be widely and liberally
construed and then reasonable restrictions may be
superimposed on that right under Art. 19( 6) or Arts.
302-305 in the interest of. the general publit. According
(1) A.I.R. (1954) Mad. 621.
1957
The State of
Bombtg
v.
R. M. D. CfUJf1141'
btnlgwala
DasC.J.
1957
The State of
Bomb111
v.
R. M. D. Chamar
baugwala
DasC.J.
920 SUPREME COURT REPORTS [1957]
to him the words "trade" or "business" or "commerce"
should be read in their widest amplitude as meaning
any activity which
is undertaken or carried on with a
view
to earning profit.
Thece is nothing in those two
Arts. 19(1)(g) and 301, which, he says, may qualify or cut
down the meaning of the critical words.
He contends
that there
is no justification for excluding from the
mean
ing of those words activities which may be looked upon
with disfavour
by the
State or the Court as injurious
to public morality or public interest. The argument
is that if the trade or business is of the last mentioned
character, then the appropriate Legislature may impose
restrictions which will
be justiciable by the courts and
this restriction may, in appropriate
cases, even extend
to total prohibition.
Our attention has been drawn
to Art.
25 where the limiting words
"subject to public
order, morality and health" are used and it is pointed
out that no such limiting words are to
be found in
Art. 19(1)(g) or Art.
301. In short the argument is
that Art. 19(l)(g) and Art. 301 guarantee and declare
the freedom of all activities undertaken and carried
on with a
view to earning profit and the safeguard is
provided in Art. 19(6) and Arts.
302-305. The proper
approach
to the task of construction of these provisions
of our Constitution, it
is urged, is to start with absolute
freedom and
then to permit the State to cut it down,
if necessary,
by
restrict'.ons which may even extend to
total prohibition. On this argument it will follow that
criminal activities i!ndertaken and carried on with a
view to earning profit will be protected as fundamental
rights until they are restricted
by law. Thus there will
be a guaranteed right to carry on a business of hiring
out goondas to commit assault or even murder, of
housebreaking, of selling obscene pictures, of
traffick
ing in women and so on until the law curbs or stops
such activities. This appears
to us to be completely unrealistic and incongruous. W c have no doubt that
there arc certain activities which can under no circum
stance be ~cgardcd as trade or business or commerce
although the usual forms and instruments arc employed
therein. To exclude those activities from the meaning
of those words is not ro cut down their meaning at all
>
S.C.R. SUPREME COURT REPORTS 921
but to say only that they are not within the true
meaning of those words. Learned counsel has to
concede that there can be no "trade" or "business" in
crime but submits that this principle should not
be extend~d and that in any event there is no reason to
hold that gambling
does not fall within the words "trade" or "business" or· "commerce" as used in the
Articles under consideration. The question arises
whether our Constitution makers ever intended that
gambling should
be a fundamental right within the
meaning
of Art. 19(1)(g) or within the protected freedom
declared
by Art.
301.
The avowed purpose of our Constitution is to create
a welfare State. The directive principles of State policy
set forth in Part IV of our Constitution enjoin upon
the State the duty to strive to promote the welfare of
the people
by securing and protecting, as effectively as
it may, a social order in which justice, social, economic
and political, shall inform all the institutions
of the
national life. It
is the duty of
the State to secure to
every citizen, men and women, the right to an adequate
means of livelihood and
to see that
the health and
strength of workers, men and women, and the tender
age of children are not abused, to protect children and
youths against exploitation and against moral and
material abandonment.
It is to be the endeavour of
the
State to secure a living wage, conditions of work
ensuring. a decent standard of life .and full enjoyment
of leisure and
social and cultural opportunities, to
protect the weaker sections
of the people from social
injustice and all forms
of exploitation, to raise the
standard of living
of its people and the improvement
of public health. The question canvassed before
us is
whether the Constitution makers who set up such
an·
ideal of a welfare State could possibly have intended to
elevate betting and gambling on the
level of country's
trade or
business or commerce and to guarantee to its
citizens, the right to
carry on the same. There can be
only one answer to the question.
From ancient times seers and law givers
of India
looked upon
gambling as a sinful and pernicious vice
and deprecated its practice. Hymn XXXIV of the
1957
-I
Tire State of
B rr:bcy
v.
R. M. D. Chamar·
baugwala
DasC.].
!957
T"' s ,.,. OJ
Bombay
.v.
R. M. D. Cham<U·
hm4gwaia
DasC.J.
922 SUPREME COURT REPORTS [1957]
Rigveda proclaims the demerit of gambling. Verses 7,
10 and 13 say :
"7 Dice verily are armed with goads and driving
hooks, deceiving and tormenting, causing grievous
woe.
They give frain gifts and then destroy the man who
wins, thickly anointed with the player's fairest good. 10 The gambler's wife is left forlorn and wretched :
the mother
mourns the son who wanders homeless.
In constant fear, in debt, and seeking riches, he
goes by
night unto the home of others.
11 Play not with dice : no, cultivate thy
corn
land.
Enjoy the gain, and deem that wealth sufficient.
There are thy cattle, there thy wife, 0 gambler. So
this good
Savitar himself hath told me."
The Mahabharata deprecates gambling by depicting
the woeful conditions of the Pandavas who had
gambled away their kingdom. Manu forbade gam
bling altogether. Verse 221 advises the king to exclude
from his realm gambling and betting, for those two
vices cause the destruction of the kingdom of princes.
Verse 224 enjoins upon the king the duty to corporally
punish all those persons who either gamble or bet or
provide an opportunity for it.
Verse 225 calls upon the
king to instantly banish all gamblers from his town.
In
verse 226 the gamblers are described as secret
thieves who constantly harass the good subjects
by
their forbidden practices. Verse 227 calls gambling a
vice causing great enmity and advises wise men not to
practise it even
fot amusement. The concluding verse
228 provides that on every man who addicts himself to
that vice either
secr<:tly or openly the king may inflict
punishment according
to his discretion. While Manu
condemned gambling outright, Yajnavalkya sought
to
bring it
untler State control but he too in verse 202(2)
provided that persons gambling with false dice or other
instruments should
be branded and punished by the
king. Kautilya also advocated
State control of
gambling and,
as a ptactical person that he was, was
+
S.C.R. SUPREME COURT REPORTS
not averse to the State earning some revenue there
from. Vrihaspati dealing with gambling in chapter
XXVI, verse 199, recognises that gambling had been
totally prohibited
by Manu because it destroyed truth,
honesty and wealth, while other law givers permitted
it when conducted under the control of the
State so as
to allow the king a share of every stake. Such was the
notion of Hindu law givers regarding the
vice of
gambling. Hamilton in
his Hedaya, vol. IV, book
XLIV, includes gambling
as a kiraheeat or
abomina
tion. He says: "It is an abomination to play at
chess, dice or any other game; for if anything is
staked it is gambling, which is expressly prohibited in
the Koran; or
if, on the other hand, nothing be
hazarded it is useless and
vain." The wagering con
tracts of the type which formed the subject-matter of
the
case
of Ram/oil v. Soojumnull(1) and was upheld
by the ;Privy Council as not repugnant to the English
Common Law were subsequently prohibited
by Act
XXI of
1948 which was enacted on the suggestion of
Lord Campbell made in that
case and introduced in
India provisions similar
to those of the English Gaming
Act (8
& 9 Viet. c.
l()C)). Bengal Gambling Act (Ben. II
of
1867) provided for the punishment of public gambling
and the keeping of common gaming house in the
territories subject to the Lieutenant Governor of
Bengal. Lottery
has been, since 1870, made an offence
under
s. 294A of the Indian Penal Code. Gambling
agreements have
been declared to be void under the
Indian Contract Act,
1872 (s. 30). This in short is how
gambling
is viewed in India.
Before the Legislature intervened, gambling and
wagering were not prohibited
by the English Common
Law although the English courts looked upon it with
disfavour and discouraged it on grounds of public
policy
by denying procedural facilities which were
granted to other litigants. The
Scottish courts, how
ever, have always refused to recognise the validity of
wagering contracts and have held that sponsiones
ludicroe, as they style such contracts, arc void by the
Common Law of Scotland. Gambling and Betting Act.
(I) (1848) 4 M.J.A. 339.
11»7
The Stauof
Bom6tr1
"· R. M. D. Chami#
baugwa/a
DasC.J.
1957
T ii< Stale of
Bomb41
v.
R. M. D. Chamar
baugwala
Dase.].
924 SUPREME COURT REPORTS [1957)
1664 ( 16 Car. JI, c. 7) was directed against fraudulent
and
excessive gambling and betting at games or sports.
This
was followed by the Gaming Act of
1710 (9 Anne.
c. 19). The Marine Insurance Act 1745 (19 Geo. II
c. 37) for the first time prohibited wagering policies on
risks connected with British shipping. This was
supplemented
by the Marine Insurance Act 1788
(28 Geo. III c. 56). The Life Insurance Act, 1774 (14
Geo. III c. 48) though not intended to prohibit wager
ing in .general, prohibited wagering under the cloak of
a mercantile document which purported
to be a contract
of insurance. Then came the Gaming
Act of 1845
(8 and 9 Viet. c.
109) which for the first time declared
all contracts · made by way of gaming or wagering
void irrespective of their form or subject-matter. The
provisions of this Act were adopted
by our Act XXI
of 1948 as hereinbefore mentioned. The Gaming Act
of 1892 (55 and 56 Viet. c. 9) further tightened up the
law.
As far back as
1850 the Supreme Court of America
in Phalen v. Virginia(') observed :
"Experience has shown that the common forms of
gambling arc comparatively innocuous when placed
in contrast with widespread pestilence
of lotteries. The
former are confined to a few persons and places, but
the latter infests the whole community; it enters
every
dwelling; it reaches every class; it preys upon the
hard earnings
of. the poor; it plunders the ignorant
and the
simple."
The observations were quoted, with approval, in
Douglas v. KentuckJ(2). After quoting the passage
from Phalen v. Virginia(') the judgment proceeded :
"Is the state forbidden by the supreme law of the
land from protecting its people at all times from
practices which
it conceives to be attended by such
ruinous results
? Can the Legislature of a
State con
tract away
its power to establish such regulations as are
reasonably necessary from time
to
time to protect the
public morals
against the evils
of lotteries?"
(I) (1850) 49 U.S. 163; 12 L Ed. 1030, 1033.
(2) (1897) 168 U.S. 488; 42 L. Jld. 553, 555.
S.C.R. SUPREME COURT REPORTS 925
It will be abundantly clear from the foregoing
observations that the acttvlttes which have been
condemned in this country from ancient times appear
to have
been equally discouraged and looked upon
with disfavour in England,
Scotland, the United States
of America an;d in Australia in the cases referred to
above. We find
it difficult to accept the contention
that those activities which encourage a spirit of reckless propensity for tilaking easy gain by lot or chance,
which lead to the
loss of the hard earned money of the
undiscerning and improvident common man and therel>y lower his standard of living and drive him
into a chronic state of indebtedness and eventually
disrupt the
peace and happiness of· his humble
home
could possibly have been intended by olir Constitution
makers to
be raised to the status of trade,
commerce or
intercourse ·and to
be made the subject-matter of a
fundamental right guaranteed
by Art. 19(1)(g). We
find it difficult to persuade ourselves that gambling
was
ever intended
to form any part of this ancient country's
trade, commerce or intercourse to
be declared as free
under Art.
301. It is not our purpose nor is it neces
sary for us in deciding
this case to attempt an
exhaustive definition of the word "trade", "business'',
or "intercourse". We are, however, clearly of opinion
that whatever
else may or may not be regarded as
falling within the meaning of these words, gambling
cannot certainly be taken
as one of them. We are
convinced and satisfied that the real purpose of Arts.
19(
1) (g) and
301 could not possibly . have been to
guarantee or declare the freedom of gambling. Gambling
activities from tlieir very nature and in essence are
extra-commercium although the external forms, for
malities and instruments of trade may be tmployed
and they are not protected either by Art. 19(1)(g) or
Art. 301 of our Constitution.
The Court of Appeal, we have already said, took the
view that it was not open to the State, which had not
thought fit to prohibit these prize competitions
but
had sought to make a profit out of them by levying a
tax, to contend at the same time
that it was illegal or
was not a "trade" at all. But as pointed out in United
1957
Tht Stau of
Bombay
v.
R. M. D. Chamat'
baugwala
Das C.J.
1957
Tiu S<ate of
Bomb41
v.
R. M. D. Ch.,..,..
bautw...aJ~
Das C.J.
926 SUPREME COURT REPORTS [1957]
States v. Kahrigar(
1
) ,
the fact of issuing a licence or
imposing
a tax means nothing except that the licensee
shall
be subject to no penalties under the law if he pays
it Lewis v.
United States of America(
2
)
also recognises
that the Federal Government may tax what it also
forbids and that nobody has a constitutional right
to
gamble but that if he elects to do so, though it be
unlawful, he must pay the tax. In this connection
reference may
be made to the observation of Rowlatt J.
in Mann v.
Nash(") :
"The revenue authorities, representing the State,
are merely looking at an accomplished
fact. It is not
condoning it or taking part in
it."
Further down he said '.
"It is merely taxing the individual with reference
w n·rtain facts. It is not a partner or a sharer in the
illegality."
That crime is not a business is also recognised in
F. A. Lindsay, A. E. Woodward and W. Hircox v. The
Commissioners of Inland Revenue(' ) (per Lord President
Clyde and per Lord Sands) and in Southern
(H. M.
Ins
pector of Taxes) v. A. B.( ). The fact that regulatory
provisions have been enacted to control gambling
by
issuing licences and by imposing taxes does not in any
way alter the nature of gambling which is inherently
vicious and pernicious.
We also arrive at the same result
by applying the
doctrine of 'pith and substance'.
As Lord
Porter
pointed out : "The phrase raised in a convenient
form an appropriate question in
cases where the real
issue
is one of subject matter and it may also serve a
useful purpose in the process of deciding whether a
particular enactment
is a law with respect to trade,
commerce or intercourse
as such or whether it is a law
with respect
to some other subject .
whir.h incidentally
trenches upon trade, commerce and intercourse."
Reference has already been made to the observations
(1) 345 U. S. 20: 97 L. Ed. 754·
(2) 348 U. S. 49! 99 L. Ed. 475.
(3) !.. R. (1932) 1-K.B.D. 752 at p. 757.
(4) 18 T. C. 43.
(5) L. R. (1933) I K. B. 713; 18 T. C. 59.
-·
S.C.R. SUPREME COURT REPOR'tS
of Dixon J., as he then was, in King v. Martin(1). Adapt
ing his language, we may say that when Art. 19(1)(g)
guarantees or Art. 301 declares the freedom of trade
they describe human activities in a
specific aspect.
They single out attributes which the act
or transaction
may wear and make the freedom, which they confer,
depend upon those attributes. The freedom secured
by the two Articles, we think, implies that
no
unreasonable restraint or burden shall be placed upon
an act falling under that description because it is trade
or commerce or intei;course. We have analysed the
provisions
of the impugned Act and it is quite clear
that the Act does not purport directly to
interfere
with trade, commerce or intercourse as such, for the
criterion
of its application is the specific gamblihg
nature
of the transaction which it
restricts. The
purpose
of the Act is not to restrict ahything.
which
brings the transactions under the description of trade,
commerce
or intercourse. In other words, the Act is
in pith and substance an Act with respect to betting
and
gambling, To control and restrict betting and
gambling
is not to intedere
with trade, commerce or
intercourse
as such but to keep the flow of trade,
commerce and intercourse free and unpolluted and to
save it from anti-social activities. In our opinion,
therefore, the impugned Act deals with gambling which
is not trade, commerce or business and, therefore, the
validity
of the Act has not to be
dedded by the yard•
stick oif reasonableness and public interest laid down
in Arts. 19( 6) and 304. The appeal against the
stringency and harshness,
if any, of the law
does not
lie to a court of law.
In the
view we have taken, it is not necessary for
us to consider or express any opinion on this occasion
as to
ihe vexed question whether restriction, as con
templated in Arts. 19(6) and 304(b), may extend to
total prohibition and this
is so because we cannot
persuade
ourselves to hold that Art. 19(1)(g) or Art.
301 comprises all activities undertaken with a -view to
profit
as
"trade" within the meaning of those Articles.
Nor
is it necessary for us on this occasion to consider
(1)
(1939) 62 C.L.R. 457.
1957
The St Ille of
Bombay
v.
R. M. D. Cham
liizugWIJ/a
.lJas C.J.
1957
Th< Stall of
Bombay
v.
R. M. D. C/uJm°'"
baugwala
Das c.J.
928 SUPREME COURT REPORTS [1957]
whether a company is a citizen within the meaning of
Art.
19 and indeed the point has not been argued
before
us.
The last point urged by the petitioners
is that
assuming that the impugned Act deals only with
gambling and that gambling
is not
"trade" or "business"
or "commerce" and is, therefore, not entitled to the
protection
of our Constitution, the prize competitions
run by them are in fact not of a gambling nature.
The trial court accepted this contention while the
Court of Appeal rejected it. We have examined the
scheme and the rules and the
official solutions and the
explanations in support thereof and we have come to
the conclusion that the competition at present run by
the petitioners under the name of R.M.D.C. Crosswords
are of a gambling nature.
Our view so closely accords
with that of the Court of Appeal that
we find it
unnecessary to go into the details of the scheme.
To
start with, we find that the Board of Adjudicators
pick up nine of the
clues and select only those com
petitors whose answers correspond with the
official
solution of those nine clues. Those nine clues may be
from the top, may be from the bottom or may be
selected at random. It is said that they are like nine
compulsory questions in a school examination but then
in a school examination, the students are told which
are the nine compulsory questions and they can take
particular care with regard to those; but in this scheme
there
is no knowing which nine will be selected and
those competitors whose answers do not accord with
the
official solution are debarred from being considered
for the first prize. A competitor may have given
correct answers to eight of the nine selected clues and
may have given correct answers to the remaining eight
so that he has sent in sixteen correct answers but he
will, nevertheless, not
be considered for the first prize
because his answers to the nine selected questions clid
not agree with the official solutions of those nine clues.
This
is a chance element to start with. We have then
seen that the competing words out of which one
is to
be selected are in some cases equally apt. We are not
satisfied that the word selected by the Board
is the
'
-
•
S.C.R. SUPREME COURT REPORTS 929
more apt word in many cases. The reasons given by
them appear to us to be laboured and artificial and
even arbitrary in. some
cases.
On the whole, we have
come to the conclusion that the Court of Appeal was
right
in its conclusion that in point of fact the prize
competitions run
by the petitioners partake of a
gambling nature and, therefore, fall within the defini
tion and are to
be governed by the regulatory and
taxing
·provisions of the Act.
For the reasons stated above, we have come to the
conclusion that the impugned law
is a law with respect -
to betting and gambling under Entry
34 and the
impugned taxing section
is a law with respect to tax
on betting and gambling under Entry 62 and that it
was within the legislative competence of the
State
Legislature to have enacted it. There is sufficient
-territorial nexus to entitle the State Legislature to
collect the tax from the petitioners who carry on the
prize competitions through the medium of a newspaper
printed and published outside the State of Bombay.
The prize competitions being of a gambling nature,
they cannot be regarded
as trade or commerce and as
such the petitioners cannot claim any fundamental
right under Art.
19(l)(g) in respect of such competi
tions, nor are they entitled
to the protection of Art.
301. The result, therefore, is that this appeal must be
allowed and the order of the lower court set aside and
the petition dismissed and we do
so with costs
throughout.
Appeal allowed.
1957
T"8 Stak OJ
Bomb9
v.
R.M. D. C"'1mat
b01Jgwala
Das C.J.
The landmark 1957 Supreme Court judgment in The State of Bombay v. R. M. D. Chamarbaugwala stands as a foundational ruling in Indian constitutional law, meticulously dissecting the concepts of Prize Competitions as Gambling and the Territorial Nexus Doctrine. Available for in-depth study on CaseOn, this case clarifies the constitutional status of gambling activities and defines the limits of a state's legislative power to tax operations that extend beyond its physical borders. The Court's authoritative pronouncements settled the crucial question of whether activities of a gambling nature could claim protection as a fundamental right to 'trade' or 'commerce' under the Constitution of India.
The case originated with the respondents, who ran a prize competition named 'R.M.D.C. Crosswords' through a weekly newspaper published in Bangalore, Mysore State. This competition, however, had a significant presence in the neighbouring State of Bombay, where the newspaper was widely circulated. The organizers established collection depots, appointed local agents, and advertised heavily in Bombay to attract participants, who would submit their entry forms and fees from within the state.
In 1952, the Bombay Legislature amended its Bombay Lotteries and Prize Competition Control and Tax Act, 1948. This amendment crucially expanded the definition of 'prize competition' to include those published in newspapers outside the state. It also introduced Section 12A, which levied a tax on the promoters based on the money collected from participants within the State of Bombay. The respondents challenged this law, arguing that the Bombay Legislature had no power to tax a business operating from Mysore and that the Act infringed upon their fundamental right to trade under Article 19(1)(g) and the freedom of inter-state commerce under Article 301.
The appeal brought forward by the State of Bombay required the Supreme Court to adjudicate on several interconnected constitutional issues:
The central question was whether activities of a gambling nature, such as the prize competition in question, could be considered 'trade, business, or commerce'. If they were, they would be entitled to the protections guaranteed under Article 19(1)(g) and Article 301 of the Constitution.
Did the Bombay Legislature possess the authority to enact a law taxing a company whose primary operations were based in another state? This required the Court to examine the doctrine of 'territorial nexus'—whether there was a sufficient connection between the State of Bombay and the activity being taxed to justify the law's extra-territorial application.
Was the crossword competition a game of skill, which could be considered a legitimate business, or a game of chance, which would classify it as gambling?
The Court reviewed the Seventh Schedule of the Constitution, which delineates legislative powers:
The Supreme Court systematically addressed each issue, delivering a comprehensive analysis that has shaped Indian jurisprudence for decades.
The Court's most significant finding was that gambling activities are not 'trade' or 'commerce' and are therefore not protected by the Constitution. It reasoned that the Constitution-makers, in envisioning a welfare state, could never have intended to grant fundamental right status to activities considered morally pernicious and socially harmful.
Drawing from ancient Indian scriptures, historical legal perspectives, and international precedent, the Court held that gambling is inherently a vice. It declared that certain activities, despite having the 'trappings of trade,' are fundamentally against public policy. Such activities are considered res extra commercium (things outside of commerce). Because they are not trade, they do not receive protection under Article 19(1)(g) or Article 301. Consequently, the question of whether the restrictions imposed by the Bombay Act were 'reasonable' did not even arise, as no fundamental right was being violated.
Applying the doctrine of 'pith and substance,' the Court determined that the Bombay Act was, in its true nature and character, a law relating to 'betting and gambling.' Its primary purpose was not to regulate trade but to control and tax a gambling activity. Therefore, the legislation fell squarely within the powers granted to the state under Entry 34 and Entry 62 of the State List, making it a valid exercise of legislative power.
Legal professionals often need to grasp the nuances of such pivotal rulings quickly. Understanding the Court's application of doctrines like 'pith and substance' and 'territorial nexus' is crucial. This is where CaseOn.in proves invaluable, offering 2-minute audio briefs that summarize the core reasoning of complex judgments like State of Bombay v. R. M. D. Chamarbaugwala, enabling practitioners to stay informed and efficient.
The Court upheld the validity of the tax on the grounds of a sufficient territorial nexus. It laid down a two-pronged test for such a nexus:
In this case, the nexus was firmly established. The widespread circulation of the newspaper, the collection of fees, the presence of agents, and the participation of residents within Bombay created a real and substantial connection. The tax was directly levied on the revenue generated from this connection, thus satisfying the test and validating the Act's extra-territorial reach.
Finally, the Court analyzed the mechanics of the crossword competition. It concluded that the scheme was not predominantly based on skill. The element of chance was significant, particularly in how winning entries were determined and the ambiguity of clues. Therefore, the competition was correctly classified as an activity of a gambling nature, bringing it under the purview of the impugned Act.
The Supreme Court allowed the appeal by the State of Bombay. It held that the Bombay Lotteries and Prize Competition Control and Tax Act, 1948, as amended in 1952, was constitutionally valid. The Court concluded that:
The judgment of the Bombay High Court was set aside, and the respondents' petition was dismissed.
This judgment is a cornerstone for arguments related to the regulation of businesses that may be considered morally ambiguous or harmful. It firmly establishes the principle of res extra commercium, providing a clear precedent that not all profit-making activities are constitutionally protected 'trade.' It also offers a classic and practical application of the territorial nexus test, which is frequently cited in cases involving inter-state taxation and regulation.
This case is an essential read for understanding the Indian Constitution's architecture. It beautifully illustrates the interplay between fundamental rights, the state's police powers, and the division of legislative authority. It provides a clear demonstration of key interpretive doctrines like 'pith and substance' and 'territorial nexus,' making it a vital case study for constitutional law courses.
Disclaimer: The information provided in this blog post is for educational and informational purposes only. It does not constitute legal advice. For advice on any legal issue, please consult with a qualified legal professional.
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