HC thrashes gambling charge against online sports game Dream11

Sujay Kantawala, the counsel for petitioner Gurdeep Sachar, had contended that Dream 11 promoters were encouraging gambling and were not paying due taxes.

India’s thriving online gaming sector has got a shot in the arm with two high courts (HCs) in the country delivering two concurring judgements over the span of a year, holding that “skill-based gaming” can’t be construed as gambling. In early April 2018, the Punjab & Haryana HC had said online fantasy sports game Dream 11 is “a legitimate business activity protected under Article 19(1)(g) of the Constitution of India.” The Supreme Court subsequently dismissed a special leave petition against the high court’s order.

Ruling on a similar petition before it, the Bombay HC on April 30 this year concurred and went on to also dismiss a tax evasion charge against the popular game’s promoter Dream 11 Fantasy Pvt Ltd.

The Bombay HC said, “only, if their Online Fantasy Sports Gaming is ‘gambling’ or ‘betting’ (which it is clearly not), there is a scope to infer possibility of any tax evasion.”

The petitioners in both cases sought to initiate criminal proceedings against the firm for alleged promotion of gambling.

“The attempt to reopen the issue.., that too, after dismissal of SLP by the apex court is wholly misconceived,” the Bombay HC said.

Analysts reckon India’s online gaming industry is poised to grow exponentially. According to a KPMG report, the industry could grow at 22% CAGR from FY18-FY23 to touch Rs 11,900 crore. The number of fantasy sports operators were 70 in 2018, up from 10 in 2016; sports fantasy users grew even faster to some 50 million in February 2019 from just 2 million in June 2016.

The judicial view, now settled with the above court judgements, is that Dream11 constitutes a ‘game of skill and not a game of chance’ which makes it exempt from the provisions of the Public Gambling Act, 1867 (PGA).

The PGA criminalises the act of ‘gambling’ in a public forum and the keeping of a ‘common gaming house;’ however, it expressly states that ‘games of mere skill,’ wherever played, are not gambling.

“The petitioner has lost sight of the fact that the result of the fantasy game contest on the platform of Dream 11 Fantasy Pvt Ltd is not at all dependent on winning or losing of any particular team in the real world game. Thus, no betting or gambling is involved in their fantasy games,” the division bench of the Bombay HC, comprising Justices Ranjit More and Bharati Dangre, said.

Sujay Kantawala, the counsel for petitioner Gurdeep Sachar, had contended that Dream 11 promoters were encouraging gambling and were not paying due taxes.

The tax question raised by the petitioner was based on his contention that Dream11 amounted to gambling. As per Rule 31A of the Central Goods and Services Tax Rules, 2017, the value of supply of actionable claim in the form of betting, gambling or horse racing is chargeable to GST at 28%, at 100% of the face value of the bet.

The court, however, held that skill-based online games being par of “other services,” as defined under GST law, are subject to 18% tax, on the gross consideration collected.

Participants in the Dream11 game are required to choose a team consisting of at least the same number of of players as in a real-life sports team and each of them are run for at least the duration of one full sports match. No team changes are allowed by participants after the start of the match. The success in the game is linked to the participant’s knowledge of the game, judgment and attention and not to the outcome of any real-world sporting activity. Though money could be the lure for some to join such games, many take part in them just for the fun and excitement of it.


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