MANU/MH/1451/2019

Equivalent Citation: (2019) 75 GST 258 (Bombay), 2019[30] G.S.T.L. 441, [2020]72GSTR75(Bom)

IN THE HIGH COURT OF BOMBAY

Criminal Public Interest Litigation Stamp No. 22 of 2019
Decided On: 30.04.2019
Appellants: Gurdeep Singh Sachar
Vs.
Respondent: Union of India and Ors.
Hon'ble Judges/Coram:
R.V. More and Bharati H. Dangre, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: Sujay Kantawala i/b. Sarosh Damania, Advocate
For Respondents/Defendant: Vikram Nankani, Senior Advocate, Lavesh Nankani,
Ramnath Prabhu, Prithviraj i/b. Nikhil Rungta, Advocate and Sangeeta D. Shinde, APP
JUDGMENT
R.V. More, J.
1. Rule. Rule is made returnable forthwith and, by consent, the matter is heard finally.
2 . Heard Dr. Kantawala, learned counsel for the petitioner and Mr. Nankani, learned
senior counsel for the respondent No. 3.
3 . The petitioner claims himself as a public spirited advocate practising in this High
Court, and seeks directions to initiate criminal prosecution against the respondent No.
3-a Company named "Dream 11 Fantasy Pvt. Ltd.", firstly for allegedly conducting
illegal operations of gambling/betting/wagering in the guise of Online Fantasy Sports
Gaming, which as per the petitioner shall attract penal provisions of Public Gambling
Act, 1867, and secondly for alleged evasion of Goods & Service Tax (GST) payable by it
by violating the provisions of Goods and Service Tax Act and the Rule 31A of CGST
Rules, 2018.
4. The petitioner has placed on record a copy of the print-out taken from the web-site
of respondent No. 3 for giving the details and manner of selecting virtual teams and
playing free or paid online fantasy games on internet on the web-site of the respondent
No. 3. It is the case of the petitioner that players can create different virtual teams for
playing fantasy games. Admittedly, for understanding and getting a know-how of the
game, option to play for free is also available on the website. He, however, claims that
the fantasy games are such that after some time people tend to pay with their hard
earned money, instead of playing for free. According to him, these fantasy games are
nothing but means to lure people to spend their money for quick earning by taking a
chance, and most of then end up losing their money in the process, which is thus
gambling/betting/wagering, being different forms of "gambling". According to his
belief, a fantasy game of this nature is merely a game of chance or luck, which is totally
dependent upon the luck of a player on a particular day. He further claims that upon
entering in various contests and putting alleging bet money in them, the player receives

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a tax invoice in which tax is being charged only on the amount received and retained by
respondent No. 3 towards platform fee say 20%, and not on the entire money which is
put a stake by the player. For the balance 80% amount only "acknowledgement" is
given. Admittedly, this "acknowledgement" amount collected from each player is pooled
in as Escrow Account and their contribution ultimately gets distributed amongst the
players themselves as price money immediately upon conclusion of game, as a result of
which, some players get more than their contribution, and some lose money. According
to the petitioner, since these activities are nothing but 'gambling' or 'betting' even if this
acknowledgement amount is separately kept in an Escrow account and not retained by
the respondent No. 3, GST would be payable even on this amount. However, since GST
is not being paid on this "acknowledgement" amount by the respondent No. 3 and since
the activities such as those being conducted by the respondent No. 3, are nothing but
'betting' or 'gambling', the same according to the petitioner shall be governed by Rule
31A(3) of CGST Rules, 2018. According to him, like horse racing the said Rule shall
apply even ins such fantasy games amounting to gambling and/or betting and/or
wagering, and thus GST shall be payable on 100% amount collected by the respondent
No. 3, which shall be under proper classification so as to pay Tax @ 28% instead of
@18%. The petitioner in effect submits that the activities of the respondent No. 3 is
nothing but 'gambling'/'betting', and for promoting gambling/betting and for evading
payment of CGST/IGST, suitable action shall be taken for criminal prosecution of the
said respondent No. 3.
5. At the outset, it is submitted on behalf of the respondent No. 3 that the main issue
raised by the petitioner is substantially decided in a judgment dated 18th April, 2017
passed by the Hon'ble Punjab and Haryana High Court, in another such petition filed
against the respondent No. 3, which is also referred in the petition. Admittedly, the said
judgment dated 18th April, 2017, records the introduction Dream 11-the online gaming
platform of respondent no. 3 for online fantasy sports games, and gives in detail the
activities carried out on their platform. After detailed consideration of the facts as well
as law, the Hon'ble Punjab and Haryana High Court categorically held that success in
Dream 11's Fantasy Sports basically arises out of user exercise of superior knowledge,
judgment and attention thus as per their skill; and that their fantasy games are exempt
from the application of the penal provisions, in view of section 18 of 1867 Act, and held
that they have protection guaranteed under Article 19(1)(g) of the Constitution of India.
A SLP against this judgment of Punjab and Haryana High Court was admittedly
dismissed by the Hon'ble Supreme Court vide Order dated 15.09.2017. Despite this
admitted position, the petitioner effectively seeks to reopen not only the issue decided
therein, but also seeks to reopen a judgment of 3 Judges Bench of the Hon'ble Supreme
Court in K, R. Lakshmanan v. State of Tamil Nadu [MANU/SC/0309/1996 : AIR 1996 SC
1153] which was relied upon by the Punjab and Haryana High Court to hold that since
success in Dream 11's fantasy sports basically arises out of user's exercise of superior
knowledge, judgment and attention, it is a game of skill and not a game of chance. The
3 judges bench of the Hon'ble Apex Court held that the "horse racing" is not gambling,
and is a game of skill, nor of mere chance. The Petitioner erroneously claims that these
judgment are per incuriam. It is the case of the respondent No. 3 that such frivolous
and misconceived petitions are being filed by targeting them before different forums in
the guise of PILs, and even the present petition is abuse of process of law, and each of
the Petitioner's claim for seeking criminal prosecution of the respondent No. 3 is on
such frivolous grounds, which lack in bona fide and merits. In the written submissions
tendered on behalf of the respondent No. 3, it is also contended that the Online Fantasy
Sports Gaming conducted by it is predominantly game of skill, where users/participants
create virtual teams comprising as many players as in real life teams, e.g., in cricket, he
creates team of 11 real players out of the 30 probables, for upcoming matches. There

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has to be a mix of players from both the competing teams between whom the real life
matches being played. The users/participants compete against such virtual teams
created by other users/participants. The winners are decided based on points scored,
using statistical data generated by the real-life performance of the players on the
ground. Further, the deadline to create a team is latest by the official match start time.
No changes can be made after the deadline. The participants do not bet on the outcome
of the match and merely play a role akin to that of selectors in selecting the team. The
points are scored by the participants for the entire duration of the whole match and not
any part of the match. Their Online Fantasy Sports Gaming are "games of skill" and not
any "games of chance" and therefore outside the purview of Rule 31 A(3). It was
submitted that present PIL is gross abuse of the process of the Court and ought to be
dismissed in the light of the judgment of the Hon'ble Supreme Court in State of
Uttaranchal v. Balwant Singh Chaufal and others [MANU/SC/0050/2010 : (2010) 3 SCC
402].
6 . After perusing the records and considering the arguments, there are mainly two
issues which arise for consideration:-
(a) Whether the activities of the respondent No. 3 amount to
'Gambling'\'Betting'?
(b) Whether there is any merit in the allegation of violation of Rule 31A(3) of
CGST Rules, 2018 and erroneous classification?
7 . In respect of the first issue, after considering the very same activities of the
respondent No. 3 at considerable length, it has already been held by the Punjab and
Haryana High Court that the activities performed by the respondent No. 3 do not amount
to 'gambling', even as per the Public Gambling Act, 1867. The respondent No. 3 refers
and relies on the findings contained in the said judgment Admittedly, SLP filed there
against has been dismissed. The Punjab and Haryana High Court has categorically held
that these are games of skill and not games of chance. Various judgments have been
referred and relied upon in the said judgment. There is no reason to take a different
view. The Punjab and Haryana High Court has relied upon a three Judges Bench
decision of the Hon'ble Apex Court in K.R. Lakshmanan (Dr.) v. State of T.N.,
MANU/SC/0309/1996 : (1996) 2 SCC 226, wherein it was held as under-
"9. On the same day when this Court decided Chamarbaugwala's case, the same
four-Judge Bench presided over by S.R. Das, Chief Justice, delivered judgment
in another case between the same parties titled R.M.D. Chamarbaugwala & Anr.
vs. Union of India & Anr. The validity of some of the provisions of the Prize
Competitions Act (42 of 1955) was challenged before this Court by way of
petitions under Article 32 of the Constitution. Venkatarama Ayyar J. speaking
for the Court noticed the contentions of the learned counsel for the parties in
the following words:-
"Now, the contention of Mr. Palkhiwala, who addressed the main
argument in support of the petitions, is that prize competition as
defined in S. 2(d) would include not only competitions in which
success depends on chance but also those in which it would depend to
a substantial degree on skill; .... that even if the provisions could be
regarded as reasonable restrictions as regards competitions which are
in the nature of gambling, they could not be supported as regards
competitions wherein success depended to a substantial extent on skill,

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 and that as the impugned law constituted a single in severable
enactment, it must fail in its entirety in respect of both classes of
competitions. Mr. Seervai who appeared for the respondent disputes
the correctness of these contentions. He argues that 'prize competition'
as defined in S.2(d) of the Act properly construed, means and includes
only competitions in which success does not depend to any substantial
degree on skill and are essentially gambling in their character: that
gambling activities are not trade or business within the meaning of that
expression in Art. 19(1) (g), and that accordingly the petitioners are
not entitled to invoke the protection of Art. 19(6); and that even if the
definition of 'prize competition' in S.2(d) is wide enough to include
competitions in which success depends to a substantial degree on skill
and Ss. 4 and 5 of the Act and Br. 11 and 12 are to be struck down in
respect of such competitions as unreasonable restrictions not protected
by Art. 19 (6), that would not affect the validity of the enactment as
regards the competitions which are in the nature of gambling, the Act
being severable in its application to such competitions."
The learned Judge thereafter observed as under:-
"We must hold that as regards gambling competitions, the petitioners
before us cannot seek the protection of Art. 19(1) (g)...
(5) As regards competitions which involve substantial skill however
different considerations arise. They are business activities, the
protection of which is guaranteed by Art. 19(1) (g)..."
Finally, Venkatarama Ayyr, J. speaking for the Court held as under:-
"(23) Applying these principles to the present Act, it will not be
questioned that competitions in which success depends to a substantial
extent on skill and competitions in which it does not so depend, form
two distinct and separate categories. The difference between the two
classes of competitions is as clear-cut as that between commercial and
wagering contracts. On the facts there might be difficulty in deciding
whether a given competition falls within one category or not; but when
its true character is determined, it must fall either under the one or the
other. The distinction between the two classes of competitions has long
been recognised in the legislative practice of both the United Kingdom
and this country, and the Courts have, time and again, pointed out the
characteristic features which differentiate them. And if we are now to
ask ourselves the question would Parliament have enacted the law in
question if it had known that it would fail as regards competitions
involving skill, there can be no doubt having regard to the history of
the legislation, as to what our answer would be. The conclusion is
therefore inescapable that the impugned provisions, assuming that they
apply by virtue of the definition in S.2(d) to all kinds of competitions,
are severable in their application to competitions in which success does
not depend to any substantial extent on skill."
This Court, therefore, in the two Chamarbaugwala-cases, has held that
gambling is not trade and as such is not protected by Article 19(1)(g) of the
Constitution. It has further been authoritatively held that the competitions

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which involve substantial skill are not gambling activities. Such competitions
are business activities, the protection of which is guaranteed by Article 19(1)(g)
of the Constitution. It is in this background that we have to examine the
question whether horse-racing is a game of chance or a game involving
substantial skill.
19. We may now take-up the second question for consideration. Section 49 of
the Police Act and Section 11 of the Gaming Act specifically provide that the
penal provisions of the two Acts shall not apply to the games of "mere skill
wherever played". The expression "game of mere skill" has been interpreted by
this Court to mean "mainly and preponderantly a game of skill". In State of
Andhra Pradesh vs. K. Satyanarayana & Ors. MANU/SC/0081/1967 : (1968) 2
SCR 387, the question before this Court was whether the game of Rummy was a
game of mere skill or a game of chance. The said question was to be answered
on the interpretation of Section 14 of the Hyderabad Gambling Act (2 of 1305
F) which was pari materia to Section 49 of the Police Act and Section 11 of the
Gaming Act. This Court referred to the proceedings before the courts below in
the following words:
"The learned Magistrate who tried the case was of the opinion that the
offence was proved, because of the presumption since it was not
successfully repelled on behalf of the present respondents. In the order
making the reference the learned Sessions Judge made two points: He
first referred to Section 14 of the Act which provides that nothing done
under the Act shall apply to any game of mere skill wherever played
and he was of opinion on the authority of two cases decided by the
Madras High Court and one of the Andhra High Court that the game of
Rummy was a game of skill and therefore the Act did not apply to the
case."
This Court held the game of Rummy to be a game of mere skill on the following
reasoning:
"We are also not satisfied that the protection of s. 14 is not available in
this case. The game of Rummy is not a game entirely of chance like the
'three-card' game mentioned in the Madras case to which we were
referred. The 'three card' game which goes under different names such
as 'flush', 'brag' etc. is a game of pure chance. Rummy, on the other
hand requires certain amount of skill because the fall of the cards has
to be memorised and the building up of Rummy requires considerable
skill in holding and discarding cards. We cannot therefore, say that the
game of Rummy is a game of entire chance. It is mainly and
preponderantly a game of skill. The chance in Rummy is of the same
character as the chance in a deal at a game of bridge. In fact in all
games in which cards are shuffled and dealt out, there is an element of
chance, because the distribution of the cards is not according to any set
pattern but is dependent upon how the cards find their place in the
shuffled pack. From this alone it cannot be said that Rummy is a game
of chance and there is no skill involved in it."
20. The judgments of this Court in the two Chamarbaugwala cases and in the
Satyanarayana case clearly lay-down that (i) the competitions where success
depends on substantial degree of skill are not 'gambling' and (ii) despite there

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 being an element of chance if a game is preponderantly a game of skill it would
nevertheless be a game of "mere skill". We, therefore, hold that the expression
"mere skill" would mean substantial degree or preponderance of skill.
8. The petitioner himself admits that in the 'How to Play' link of the website, the steps
to start playing are as follows:
"Follow these 5 easy steps to get started:
• Select A Match:
Select any of the upcoming matches from any of the current or upcoming
cricket series
• Create Your Team:
Use your sports knowledge and showcase your skills to create your Dream 11
team within a budget of 100 credits
• Join a Contest:
Join any Dream 11 free or cash contest to win cash and the ultimate bragging
rights to showoff your improvement in the Free/Skill contest on Dream 11!
• Follow the Match:
Watch the real match and track you fantasy scorecard (updated every 2
minutes)"
• Withdraw your Winnings:
Instantly withdraw your winning from your Dream 11 account (One Time
Verification required)"
9. The petitioner has relied upon the definition of "Betting or Gambling" in Finance Act,
1994 as contained in definition in Section 65-B(15) thereof, as follows:-
"Section 65-B. Interpretations:
(15) Betting or gambling means putting on stake something of value,
particularly money, with consciousness of risk and hope of gain on the outcome
of a game or a contest, whose result may be determined by chance or accident,
or on the likelihood of anything occurring or not occurring."
It is evident that the expressions 'betting' or 'gambling' were used interchangeably in
Section 65B(15) of the Finance Act, 1994. Again the test applicable was whether it was
a game of chance or game of skill. Only if the result of the game/contest is determined
merely by chance or accident, any money put on stake with consciousness of risk and
hope to gain, would be 'gambling' or 'betting'. There is no merit in the submission that
the result of their fantasy game/contest shall be considered as merely by chance or
accident notwithstanding involvement of substantial skill. The petitioner claims that the
result would depend largely on extraneous factors such as, who amongst the players
actually play better in the real game on a particular day, which according to the
petitioner would be a matter of chance, howsoever skillful a participant player in the
online fantasy game may be. The petitioner has lost sight of the fact that the result of

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the fantasy game contest on the platform of respondent No. 3, 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. Their result is not dependent upon winning
or losing of any particular team in real world on any given day. In these circumstances,
there is no plausible reason to take a contrary view than that taken by the Hon'ble
Punjab and Haryana High court, which judgment has already been upheld by the Hon'ble
Supreme Court in the SLP filed against the respondent No. 3 itself. Moreover, the said
issue is also covered by a judgment of 3 Judge Bench of the Hon'ble Supreme Court, to
which detailed reference is made in the order of the Hon'ble Punjab and Haryana High
Court. It is thus clear that the activity of the respondent No. 3 do not amount to
'gambling' or 'betting' or 'wagering' even if the definition contained in Finance Act, 1994
is taken into consideration.
10. The allegation of the petitioner regarding GST evasion or erroneous classification is
also directly based on the outcome of the above first issue. Only, if their Online Fantasy
Sports Gaming is 'gambling' or 'betting', there is a scope to infer possibility of any tax
evasion.
1 1 . In this context, meaning of the expressions 'supply' and 'consideration' and
explanatory notes to classification 998439 would be relevant. Section 7 of CGST Act
defines the scope of the expression 'supply'. It reads as under-
"7. Scope of supply-(1) For the purposes of this Act, the expression "supply"
includes-
(2) Notwithstanding anything contained in sub-section (1)-
(a) activities or transactions specified in Schedule III: or
(b) such activities or transactions undertaken by the Central Government, a
State Government or any local authority in which they are engaged as public
authorities, as may be notified by the Government on the recommendations of
the Council,
shall be treated neither as a supply of goods nor a supply of services."
(3)....."
12. The said Schedule III referred in Section 7(2) of the Act reads as under-
"SCHEDULE III
[See Section 7]
Activities or transactions which shall be treated neither as a supply of goods
nor a supply of services
1.....
6. Actionable claims, other than lottery, betting and gambling."
13. Thus, the activities mentioned in Schedule III under the CGST Act are not taxable
as the same are neither 'supply' of goods nor 'supply' of services. The entry in schedule
III relevant for the instant case is Entry 6 which includes actionable claims, other than
lottery, betting and gambling.

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14. In the instant case, admittedly, there is no dispute that the amounts pooled in the
escrow account is an 'actionable claim', as the same is to be distributed amongst the
winning participating members as per the outcome of a game. But, as held hereinabove
since the activities of the respondent No. 3 do not amount to lottery, betting and
gambling, the said actionable claim would fall under Entry 6 of the Schedule III under
Section 7(2) of CGST Act. Therefore, this activity or transaction pertaining to such
actionable claim can neither be considered as supply of goods nor supply of services,
and is thus clearly exempted from levy of any GST.
15. Thus, there is no merit in the submission that the entire deposit received from the
member is taxable. It is also erroneously contended that even this amount shall be
included in the definition of expression 'consideration' as per Section 2(31) of the Act,
which reads as under-
(31) "consideration" in relation to the supply of goods or services or both
includes-
(a) any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central
Government or a State Government
(b) the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or services
or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State
Government;
Provided that a deposit given in respect of the supply of goods or
services or both shall not be considered as payment made for such
supply unless the supplier applies such deposit as consideration for the
said supply;
The scope of definition of 'consideration' extends only in relation to "the supply of
goods or services or both". Since, the said activity or transaction relating to the
actionable claim qua the amounts of participants pooled in escrow arrangement, for
which only acknowledgement is given, is neither supply of goods nor supply of
services, the same is clearly out of the purview of the expression 'consideration'.
16. Since the CGST Act itself do not allow the imposition of Tax on such 'actionable
claim' in relation to the Online Fantasy Sports Gaming of the respondent No. 3, it being
other than lottery, betting and gambling, the said Rule 31A(3) of CGST Rules 2018
cannot be read in such a manner so as to override the parent CGST Act. The said Rule
31 A(3) reads as under:-
"31 A. Value of supply in case of lottery, betting, gambling and horse racing.-
(3) the value of supply of actionable claim in the form of chance to win
in betting, gambling or horse racing in a race club shall be 100% of the
face value of the bet or the amount paid into the totalisator."
Since the actionable claim in the Online Fantasy Sport Gaming of the respondent No. 3
are amongst such actionable claims as per Schedule III and Section 7(2) of the Act,

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which are not considered as 'supply of goods' or 'supply of services', Rule 31A has no
application. Moreover, actionable claim referred to in Rule 31A is limited to only
activities or transactions in the form of chance to win in "lottery" or "betting" or
"gambling" or "horse racing in a race club". Thus, Rule 31A which is restricted only to
such four supplies of actionable claim, has no application in this case.
17. It is further claimed by the Petitioner that respondent No. 3 is liable to levy GST @
28%, however, respondent No. 3 wrongfully, to evade tax, claims classification under
entry 998439 on the sum received by it as platform fees. Even this submission is wholly
misconceived. The "Explanatory Notes" to the said classification under entry 998439
read as follows:-
"Explanatory Notes to the Scheme of Classification of Services
"998439 Other on-line content n.e.c.
This service code includes games that are intended to be played on the Internet
such as role-playing games (RPGs), strategy games, action games, card games,
children's games: software that is intended to be executed on-line, except game
software, mature theme, sexually explicit content published or broadcast over
the Internet including graphics, live feeds, interactive performances and virtual
activities; content provided on web search portals, I.e., extensive database of
Internet addresses and content in an easily searchable format; statistics or
other information, including streamed news; other non-line content not
included above such as greeting cards, jokes, cartoons, graphics, maps.
Note: Payment may be by subscription, membership fee, pay-per-play or pay-
per-view.
This service code does not include:
-software downloads cf. 998434
-on-line gambling services, cf. 999692
-adult content in on-line newspapers, periodicals, books, directories, cf.
998431"
[emphasis supplied]
The said entry, as clarified in these Explanatory Notes, evidently covers host of online
games which are intended to be played on the Internet and involve payment by
subscription, membership fee, pay-per-play or pay-per view. The said entry however
excludes on-line gambling services. Since the Online Fantasy Sports Gaming of
respondent No. 3 are not gambling services, the respondent No. 3 is not in error in
paying GST under this entry for its on-line gaming activities, by paying applicable GST
@18%.
18. The authorities have therefore not taken any coercive steps against the respondent
No. 3, and rightly so. No case for issuing any directions is made out. It is seen that the
entire case of the Petitioner is wholly untenable, misconceived and without any merit. It
can be seen that success in Dream 11's fantasy sports depends upon user's exercise of
skill based on superior knowledge, judgment and attention, and the result thereof is not
dependent on the winning or losing of a particular team in the real world game on any
particular day. It is undoubtedly a game of skill and not a game of chance. The attempt
to reopen the issues decided by the Punjab and Haryana High Court in respect of the

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same online gaming activities, which are backed by a judgment of the three judges
bench of the Apex Court in K.R. Lakshmanan (supra), that too, after dismissal of SLP by
the Apex Court is wholly misconceived.
19. Rule discharged. The criminal PIL is dismissed. No order as to costs.
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