# [1957] 1 S.C.R. 874

- **Citation:** [1957] 1 S.C.R. 874
- **Court:** Supreme Court of India
- **Decided:** 1957
- **Bench:** S. R. Das C. J, Venkatarama Ayyar, B. P. Sinha, S. K. DAs, P. B. Gajendragaokar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1957-1-s-c-r-874-1380
- **Pages:** 56

## Headnote

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 StateValidity-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 respondents 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 Constitution.
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 impugn

## Text

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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 StateValidity-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 respondents 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 Constitution.
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. Chamarbaugwala
1957
The Sta" of
Bombay
v.
R. M. D. Chamarbaugwala
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 respondents.
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. Chamarbaugwa/a
DasC.J.
1957
Tiu Stat1 of
Bombay
v.
ll. M. D. Chamar4
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. Crosswords 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 newspaper 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 petitioner 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 including 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 newspaper 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. Chamarbaugwala
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 (hereinafter 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 advertisements 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 petitioner, 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 competition 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 provisions 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. Chamarbaugwala
DasC.].
882
SUPREME COURT REPORTS
[1957]
inasmuch as it was a competition in which skill, knowledge 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
legislative
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-territorially 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 fundamental 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 fundamental 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 within 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, betting 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. Chamarbaugwala
DasC.J.
1957
The State of
Bombay
v.
R. M. D. Chamarwbaugwala
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 petitioners 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 applications.
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 provisions succeeded because the restrictions contained in
the impugned Act controlling the business of the petitioners 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 conferring 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. Chamarbaugwata
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 remembered 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 legislation 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
subject 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 entertainments, 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 competitions 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 newspapers 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. Chamarbaugwala
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 competitions are unlawful. This is a clear indication that
the Legislature regarded lotteries and prize
competitions 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 circumstances 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 Government 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 competition 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 Competitions 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. Chamarbaugwnla
DasC.J.
890
SUPREME COURT REPORTS
[1957]
namely ss. 12 and 12A, are taxes on the trade of running 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
0for 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 ascertained 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 outside the Province of Bombay."
The 1948 Acts. 2(l)(d), as originally enacted, substantially reproduced the definition of "prize competition" 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 determined 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 ascertained 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 qualifying clause "for which the solution is prepared beforehand 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.