Lottery Sale: One State cannot make Rules impacting authority of other States

Future Gaming and Hotel Services Pvt. Ltd. Vs State of Kerala (Kerala High court)

Conclusion: No State can exercise its authority by making Rules in such a way to impact upon authority of other States to organise, conduct and promotion of lottery. That power is exclusively given to the Central Government. Therefore, State of Kerala had to be restrained with the right of assessee to market and sell the lotteries organised by the State of Nagaland in accordance with the directions issued under Section 10 of Central Act 17 of 1998. If State of Kerala is of the view that any marketing and sale of lottery tickets was contrary to the directions of the Central Government, the State Government is free to move the Central Government for taking appropriate action.

Held: Assessee-private limited company was engaged in marketing and sale of lottery tickets organized by the State of Nagaland in the State of Kerala. Assessee challenged an amendment brought to the Kerala Paper Lotteries (Regulation) Rules, 2005. In exercise of the power conferred upon the State Government to make Rules under Section 12 of the Lotteries (Regulation) Act, 1998, the State of Kerala formulated the Kerala Paper Lotteries (Regulation) Rules, 2005. which came into effect from 20/4/2005. These Rules originally conceived to regulate lotteries organised by the State of Kerala. The amendment now impugned in this writ petition was having the characteristics to impact upon the lotteries organised by the other States. The essential question that arose for consideration was regarding the power of the State Government under Section 12 of Central Act of 1998 to make Rules that govern a lottery organised by the State other than the State of Kerala. It was held no State can exercise its authority by making Rules in such a way to impact upon authority of other States to organise, conduct and promotion of lottery. That power is exclusively given to the Central Government under Section 6. The Central Government alone has the power to regulate, control and interfere with lotteries, if it is run in violation of law. Assessee also sought a direction against interference with the marketing and sale of lotteries organised, conducted and promoted by the State of Nagaland. The Central Government had given clear direction regarding the procedure for marketing other State lotteries. The State of Kerala had no case that the State of Nagaland had not followed the directions of the Central Government. In such circumstances, assessee had every right to sell and market the lotteries organised by the State of Nagaland in the State of Kerala. Therefore, the State of Kerala had to be restrained with the right of assessee to market and sell the lotteries organised by the State of Nagaland in accordance with the directions issued under Section 10 of Central Act 17 of 1998. If State of Kerala was of the view that any marketing and sale of lottery tickets was contrary to the directions of the Central Government, the State Government was free to move the Central Government for taking appropriate action.

1. This writ petition was filed by a private limited company engaged in marketing and sale of lottery tickets organised by the State of Nagaland in the State of Kerala. The petitioner challenges an amendment brought to the Kerala Paper Lotteries (Regulation) Rules, 2005. These amendments were brought into force in the State with effect from 28/4/2018 vide Government order, G.O.(P).No.66/2018/TD. Pending the writ petition, the writ petition was amended by incorporating challenge to Ext.P12 and P17 communications. These communications issued by the Principal Secretary to the Government and Director of State Lotteries respectively are in tune with the amendment directing the petitioner to comply with the amended rules to market lotteries of other States.

2. In exercise of the power conferred upon the State Government to make Rules under Section 12 of the Lotteries (Regulation) Act, 1998 (hereinafter referred to as the “Central Act 17 of 1998”), the State of Kerala formulated the Kerala Paper Lotteries (Regulation) Rules, 2005. This came into effect from 20/4/2005. These Rules originally conceived to regulate lotteries organised by the State of Kerala. The Rules underwent amendment on different intervals. The amendment now impugned in this writ petition is having the characteristics to impact upon the lotteries organised by the other States. The rule making power of the State Government is traced out to Section 12 of Act 17 of 1998. The lottery is in Entry 40 in the Union List under Schedule VII of the Constitution of India. The essential question that arises for consideration in this writ petition is regarding the power of the State Government under Section 12 of Central Act 17 of 1998 to make Rules that govern a lottery organised by the State other than the State of Kerala.

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