STATE OF SIKKIM Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) In this writ petition, the writ petitioners, five in number, questioned the validity of the impugned notification bearing G.O. Ms. No. 20 dated 8th January 2003 issued by the Government of Tamil Nadu as in Annexure-P5 to the writ petition by contending inter alia, that the impugned notification is arbitrary, mala fide, ultra-vires of the scheme of the Lotteries (Regulation) Act, 1998 and also violative of Article 14 of the Constitution of India. In the said writ petition, the writ petitioners highlighted the following facts : Sikkim a sovereign kingdom is merged with the Union of India as its 22nd State. Sikkim is a small mountainous State with difficult terrain and no mineral resources worth the name and also has no industries other than few small-scale industries. Since the State of Sikkim has limited resource- generating capacity, it is highly underdeveloped. The petitioner-State has been exploring possibilities to generate and enhance its own revenue by various means and is engaged in the business of organising lotteries and has formulated several schemes such as (i) paper lotteries which are sold throughout the country by distributors, wholesalers, etc., (ii) On-line lottery organised by the petitioner-State and marketing through its marketing agent. der-development the petitioner-State with an object of raising additional revenues to be spent on welfare activities and developmental programs of the State conceived the idea of floating an On-line lottery system in accordance with the Lotteries (Regulation) Act, 1998. Short term tender notice at Natiohal level were floated on 8th July, 9th July and 10th July 2001 inviting applications/quotations for said On-line lottery. Sealed Tenders were opened and technical and financial evaluations of the offer were examined by the tender committee. Agreement for the On-line lottery executed at Gangtok between the petitioner - State and M/s. Tashi Delek Gaming Solutions Pvt. Ltd. whereby the said company was appointed as the Marketing Agent for the petitioner-State. Sikkim On-line lottery launched all over India. First draw held on 29th March 2002. Till now there has been about 58 draws of Super lotto and 48 draws of Thunder Ball and petitioner-State has earned revenue to the tune of Rs. 73.32 crores approximately. Section 5 of the said Act is reproduced "A State Govt. may, within the State, prohibit the sale of tickets of a lottery organised, conducted or promoted by another State". Section 6 'The Central Govt. may, by order published in the Official Gazette, prohibit a lottery organised, conducted or promoted in contravention of the provisions of Section 4 where tickets of such lottery are sold in contravention of the provisions of Section 5". These above provisions are more or less in consonance with the guidelines stipulated in the case of State of Haryana v. Suman Enterprises (1994 (4) SCC 217).

(2.) Supporting the case of the petitioner- State and other petitioners, Mr. S. P. Wangdi, learned Advocate General and Mr. A, Moulik, learned counsel submitted thus The Supreme Court in B. R. Enterprises v. State of U.P., reported in (1999) 9 SCC 700 : (AIR 1999 SC 1867) upheld the validity and vires of the Lotteries (Regulation) Act, 1998. In the above case the Supreme Court interpreted Section 5 to mean that the State can prohibit other State lotteries only if it does not conduct its own lotteries. As far as petitioner-State is concerned, it is carrying on the business of running the lotteries organised by it in strict conformity with the provisions of Section 4 of the said Act. When the Lottery Ordinance was in force, the State of Tamil Nadu under Section 5 of the said ordinance passed G.O.Ms. No. 1203 Home (Courts II) Department dated 24th November 1997 prohibiting the sale of lottery tickets of other States from 1st January 1998. Such a ban was imposed when the State of Tamil Nadu was running its own lotteries. In B. R. Enterprises case, the said G.O. Ms. was held to be invalid in view of the interpretation rendered by the Supreme Court on Section 5 of the Act. Under Section 12 of the Act, the State of Tamil Nadu framed the Tamil Nadu State Lotteries (Regulation) Rules, 2002 and the Tamil Nadu State On-Line Lottery (Regulation) Rules, 2002. (Annexures P2 and P3). Rule 20 of the above Rules Annexure P2 is in contravention of Sections 5, 6 and 12 of the Lotteries (Regulation) Act, 1998 enacted by the Parliament. Even if the lotteries are organised by any State Government in contravention of Section 4 of the Act, it is the Central Government alone which can prohibit such lotteries. Under Section 12 of the Act, the State Government has power to make Rules in respect of its own lotteries to ensure compliance of Section 4 of the Act. Respondent State of Tamil Nadu refused to accept the Sales tax from the sub agents of the petitioners on the ground that no approval of the State of Tamil Nadu has been obtained in compliance with the Tamil Nadu State Lotteries (Regulation) Rules, 2002. G.O. Ms. No. 308 dated 9th September 2002 (Annexure P4) issued by the respondent-State, prescribing certain guidelines for sale of State lotteries in Tamil Nadu based on the Rules framed. Cumbersome procedures have been laid down as a device that it would not be possible for any other States to comply and operate in the State of Tamil Nadu. As such, the action in framing such cumbersome procedures are nothing but a colourable exercise of power and therefore, is arbitrary, unreasonable, malafide and beyond jurisdiction. Rule 20 and 21 of the said Rules 2002 has been framed in order to avoid competition and illegally prohibit the sale of tickets organised by other State Government. Under Rule 12 the officials of the State Government of Tamil Nadu sought for information relating to the conduct of Sikkim lotteries. Accordingly, the same were furnished by the petitioner-State. However, for a long time no order was passed and the petitioner-State was constrained to file Writ Petition No. 36067 of 2002 in the High Court of Madras, challenging the validity of Rule 20 of the Rules. The Madras High Court by order dated 19th September 2002 directed that no prosecution or seizure of the lotteries or action under Rule 20 be effected without giving any fair and reasonable opportunity. Notification G. O. Ms. No. 20 Home (Courts II) Department dated 8th January 2003 (Annexure P5) issued by the respondent State of Tamil Nadu whereby the sale of lottery tickets including that of Tamil Nadu, within the territory of Tamil Nadu have been prohibited. Annexure P5 is absolutely arbitrary, capricious, mala fide and in gross violation of principles of natural justice and other provisions of the Constitution. By issuing Annexure P5 the sale of lottery tickets of the petitioner-State have been brought to abrupt halt without following issuing any prior notice. Annexure P5 is violative of the law laid down in B.R. Enterprises case by the Supreme Court of India, as only sale of lottery is banned and the respondent-State has not declared itself as a lottery free zone and as the ban is only with regard to the sale of tickets and not from organising it.

(3.) The case of the writ petition is resisted and contested by the respondent-State of Tamil Nadu by filing counter-affidavit. According to the respondents, the writ petition is not sustainable both in law and on facts inasmuch as the same State of Sikkim represented by its Director, State of Sikkim Lotteries, Government of Sikkim at Gangtok filed similar writ petition being No. 36067/ 02 challenging the validity of Rule 20 of the Tamil Nadu State Lotteries (Regulation) Rules, 2002 vide G.O. Ms. No. 139, Finance (Raffles) Department, dated 19th April 2002 and when the said writ petition came up for orders before the Hon'ble single Judge of Madras High Court, the.Hon ble Court passed an ad interim order on 19th September 2002 to the effect that respondent- State shall not initiate any action under Rule 20 of the Tamil Nadu State Lotteries (Regulation) Rules, 2002, nor initiate any prosecution or seize the lotteries of the petitioner- State without giving any fair and reasonable opportunity to the petitioner. But in the meanwhile, the Government of Tamil Nadu has banned the sale of lotteries including that of Government of Tamil Nadu under the impugned notification dated 8th January 2003. Similar writ petitions and writ appeals were heard by the Hon'ble Division Bench of the Madras High Court and those cases were disposed of finally with the following observations : "(i) The impugned G.O. Ms. No. 20 dated 8-1-2003 is valid. (ii) The impugned G.O. No. 20, dated 8- 1-2003 has got only prospective operation from 9-1-2003 and from that date onwards, no lottery ticket, either of State of Tamil Nadu or other States, shall be authenticated or subjected to sales-tax. (iii) All such lottery tickets, either of the State of the Tamil Nadu or of other states and which have suffered the sales tax under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959) upto 8-1-2003 can be transferred by the Sale Agents to sub-agents (retailers) and they, in turn to the individual purchasers. (iv) The appropriate Authorities are directed to conduct draws of the lottery tickets mentioned in Clause (iii) above. (v) By conducting such draws as mentioned in clause (iv) above, the future dates of draws, which were already set beyond this date, shall be held on the said set dates while the dates of draws between 9-1-2003 and this date shall be rescheduled maintaining the same time span starting from tomorrow. All the Writ appeals and writ petitions are disposed of accordingly. No costs. Consequently, all the connected W.A.M. Ps. and W.P.M.Ps. are closed.