# M/S. B.R. ENTERPRISES ETC. ETC v. STATE OF U.P. AND ORS. ETC. ETC

- **Citation:** [1999] 2 S.C.R. 1111
- **Court:** Supreme Court of India
- **Decided:** 1999-05-07
- **Case number:** Civil Appeal No. 2747 of 1999
- **Bench:** K. Venkataswami, A.P. Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-b-r-enterprises-etc-etc-v-state-of-u-p-and-ors-etc-etc-16685
- **Pages:** 78

## Headnote

The Lotteries (Regulation) Act, 1998--Section 5-Lotteries-Ingredients
of-State lotteries-Conduct of lotteries by States-Nature of-Held, State
lotteries also fall within the ambit of gambling.
Constitution of India-Articles 298, 301 and 303-Trade-Meaning
of-Ccmduct of lotteries by States-Held, is not Trade-The Lotteries
(Regulation) Act, 1998--Section 5.
Constitution of India -Articles 14 and 303-Discrimination-Lotteries
A
B
c
of Bhutan Government allowed under a Treaty-Sale of Bhutan Lottery D
subject to laws in India-States given power to prohibit sale of lotteries of
other States-Held, the prohibition on lotteries would apply even to Bhutan
Lotteries-No discrimination~The Lotteries (Regulation) Act, 1998Section 5.
The Lotteries (Regulation) Act, 1998--Section 5-Power to the States E
to prohibit sale of lotteries of eve1y other State-No discretion to pick and
choose States while imposing prohibition-Held, there is no unbridled
delegation or discrimination-Constitution of India-Articles 14 and 303Discrimination.
The Lotteries (Regulation) Act, 1998--Section 5-Power to States to p
prohibit sale of lotteries of every other State-Can be exercised only when
the State prohibits its own lottery-Otherwise, it would be discriminatoryConstitution of India-Articles 14 and 303.
Interpretation of Statutes-Principle of reading down-Exercise of
The Lotteries (Regulation) Act, 1998--Section 4(aj(g) and (h)-Held, G
not arbitrary.
Words and Phrases-Trade-Business-Lottery-Meaning of
The Lotteries (Regulation) Act, 1998 was enacted by the Parliament
"to regulate the lotteries and to provide for matters connected therewith and H
1111
1112
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A incidental thereto." Section 2(b) of the said Act defined lotteries as a scheme
for distribution of prizes by a Jot or chance. Section 3 prohibited organisation
of State lotteries without following the conditions stipulated under subsections (a) to (k) of Section 4 of the Act. Section 4 of the Act laid down
conditions that would make the conduct of lotteries fair and credible. Section
B 4(a) of the Lotteries (Regulation) Act prohibited offer Of prizes on any preannounced number or on the basis of a single digit. Section 4(g) required
that the place of draw shall be located within the State concerned. Section
4(h) prohibited more than one draw in a week. Section 5 of the Lotteries
(Regulation) Act provided that "a State Government may, within the State,
prohibit the sale of tickets of a lottery organised, conducted or promoted by
C every other State." Section 7 of the Act makes contravention of the provisions
of the Act a penal offence.
The State of U.P., exercising its power under Section 5 of the Lotteries
(Regulation) Act, banned the State lotteries of all other States in the State
ofU.P. This order of the State ofU.P. was challenged in various High Courts.
D The Gujarat High Court upheld the validity of the Lotteries (Regulation) Act
whereas the Guahati High Court struck down the provisions of the Lotteries
(Regulation) Act as ultra vires. The aggrieved parties filed appeals by way
of Special Leave Petition before this Court. Along with the Special Leave
Petitions, a Writ Petition and few Transfer Petitions involving the same
E question of law were also heard by this Court.
F
Before this Court, those who sought to challenge the validity of the
Lotteries (Regulation) Act raised, inter alia, the following contentions :-
1. When a State undertakes the sale of lottery tickets, it does so for
public good and therefore, the sale loses its pernicious nature, ceases to be
gambling and becomes 'trade' under Article 302 of the Constitution of India
and is no more res extra commercium.
2. The word 'trade' used in Article 298 of the Constitution of India has
to be given the same meaning as 'trade' used in Article 301 of the Constitution
G of India. If State lotteries are not 'trade' under Article 301 of the Constitution
oflndia, it would not be 'trade' under Article 298 of the Con

## Text

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M/S. B.R. ENTERPRISES ETC. ETC.
v.
STATE OF U.P. AND ORS. ETC. ETC.
MAY 7, 1999
[K. VENKATASWAMI AND A.P. MISRA JJ.]
The Lotteries (Regulation) Act, 1998--Section 5-Lotteries-Ingredients
of-State lotteries-Conduct of lotteries by States-Nature of-Held, State
lotteries also fall within the ambit of gambling.
Constitution of India-Articles 298, 301 and 303-Trade-Meaning
of-Ccmduct of lotteries by States-Held, is not Trade-The Lotteries
(Regulation) Act, 1998--Section 5.
Constitution of India -Articles 14 and 303-Discrimination-Lotteries
A
B
c
of Bhutan Government allowed under a Treaty-Sale of Bhutan Lottery D
subject to laws in India-States given power to prohibit sale of lotteries of
other States-Held, the prohibition on lotteries would apply even to Bhutan
Lotteries-No discrimination~The Lotteries (Regulation) Act, 1998Section 5.
The Lotteries (Regulation) Act, 1998--Section 5-Power to the States E
to prohibit sale of lotteries of eve1y other State-No discretion to pick and
choose States while imposing prohibition-Held, there is no unbridled
delegation or discrimination-Constitution of India-Articles 14 and 303Discrimination.
The Lotteries (Regulation) Act, 1998--Section 5-Power to States to p
prohibit sale of lotteries of every other State-Can be exercised only when
the State prohibits its own lottery-Otherwise, it would be discriminatoryConstitution of India-Articles 14 and 303.
Interpretation of Statutes-Principle of reading down-Exercise of
The Lotteries (Regulation) Act, 1998--Section 4(aj(g) and (h)-Held, G
not arbitrary.
Words and Phrases-Trade-Business-Lottery-Meaning of
The Lotteries (Regulation) Act, 1998 was enacted by the Parliament
"to regulate the lotteries and to provide for matters connected therewith and H
1111
1112
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A incidental thereto." Section 2(b) of the said Act defined lotteries as a scheme
for distribution of prizes by a Jot or chance. Section 3 prohibited organisation
of State lotteries without following the conditions stipulated under subsections (a) to (k) of Section 4 of the Act. Section 4 of the Act laid down
conditions that would make the conduct of lotteries fair and credible. Section
B 4(a) of the Lotteries (Regulation) Act prohibited offer Of prizes on any preannounced number or on the basis of a single digit. Section 4(g) required
that the place of draw shall be located within the State concerned. Section
4(h) prohibited more than one draw in a week. Section 5 of the Lotteries
(Regulation) Act provided that "a State Government may, within the State,
prohibit the sale of tickets of a lottery organised, conducted or promoted by
C every other State." Section 7 of the Act makes contravention of the provisions
of the Act a penal offence.
The State of U.P., exercising its power under Section 5 of the Lotteries
(Regulation) Act, banned the State lotteries of all other States in the State
ofU.P. This order of the State ofU.P. was challenged in various High Courts.
D The Gujarat High Court upheld the validity of the Lotteries (Regulation) Act
whereas the Guahati High Court struck down the provisions of the Lotteries
(Regulation) Act as ultra vires. The aggrieved parties filed appeals by way
of Special Leave Petition before this Court. Along with the Special Leave
Petitions, a Writ Petition and few Transfer Petitions involving the same
E question of law were also heard by this Court.
F
Before this Court, those who sought to challenge the validity of the
Lotteries (Regulation) Act raised, inter alia, the following contentions :-
1. When a State undertakes the sale of lottery tickets, it does so for
public good and therefore, the sale loses its pernicious nature, ceases to be
gambling and becomes 'trade' under Article 302 of the Constitution of India
and is no more res extra commercium.
2. The word 'trade' used in Article 298 of the Constitution of India has
to be given the same meaning as 'trade' used in Article 301 of the Constitution
G of India. If State lotteries are not 'trade' under Article 301 of the Constitution
oflndia, it would not be 'trade' under Article 298 of the Constitution of India
too. In that event State would have no power to run its own lotteries until the
Parliament makes law in that respect. Thus, lotteries organised by the State
has to be treated as 'trade'.
H
3. The Lotteries (Regulation) Act is discriminatory piece of legislation
-'
B.R. ENTERPRISES v. STATE
1113
and is violative of Article 303 and Article 14 of the Constitution of India A
because it imposes restrictions on the lotteries organised by the States but
at the same time lottery organised by the Bhutan Government (a foreign
Government) is permitted under a Treaty dated 28.2.1995 between the
Government oflndia and the Government of Bhutan for ten years from 1995.
In fact, by a _cirr.ular dated 20.1.1998, the Government oflndia clarified that B
Section 5 of the Lotteries (Regulation) Act applies only to the State lotteries
and not to the lotteries of Bhutan.
4. Section 5 of the Lotteries (Regulation) Act authorises a State
Government to give preference to one State over the other and, therefore; is
discriminatory and is violative of Articles 303 and 14 of the Constitution of C
India. Section 5 also suffers from the vice of excessive delegation as the
power delegated under it upon the State Government is bereft of guidelines
and is uncanalised.
5. Section 5 of the Lotteries (Regulation) Act is discriminatory and
violative of Article 14 of the Constitution of India as under the said section D
a State Government can prohibit the sale of lotteries organised by other
States and at the same time continue to sell its own lotteries. No public
purpose is shown nor any reasonable nexus disclosed between the restriction
and the need to serve public interest. Even though reading down the provisions
of Section 5 of the Lotteries (Regulation) Act to mean that a State can ban
lotteries of other States only when it bans as a policy its own lotteries may E
reduce the discrimination, it cannot neutralise the violation of Article 303(1)
of the Constitution of India.
6. The provisions of Section 4(a), (g) and (h) of the Lotteries (Regulation)
Act are unreasonable and arbitrary. Clause (g) of Section 4 of the Lotteries F
(Regulation) Act required that the place of draw shall be within the concerned
State but situation prevailing in States such as Nagaland made it unsafe to
draw lotteries within the States concerned itself.
Disposing the Appeals and the Petitions, this Court
HELD : 1.1. Lotteries organised by the State is also gambling in
nature and State lotteries cannot be construed to be 'trade and business'
within the meaning of Articles 301 to 303 of the Constitution of India. Right
from ancient time lottery remains in the realm of gambling. Even where it
G
was state sponsored still it was looked down as an evil. Collection of funds
through lotteries was never considered laudable or conscienceable but has H
1114
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A been and is resorted on the exigencies of the situations recognised for a
limited purpose may be for a limited period. [1187-H; 11~1-C-F]
State of Bombay v. R.MD. Chamarbagwala, [1957] SCR 874, referred
to.
B
Phalen v. Virginia, (1850) 49 U.S. 163; The f(ing v. Connare, (1939)
51 CLR 596; United v. Kahriger, (1953) 345 US 22 and Lewis v . . United
States, (1955) 348 US 419, referred to. ·
Dyutasamahvaya Chapter 26; Rigvedi Chapter X Verse 34;
Encyclopaedia Britannica, 1980 Ed.; Boston College Law Review Vol., 34:11
C and Rigveda Hymn, XXXIV, referred to:
·
Sesha Ayyar v. Krishna Ayyar, AIR (1936) Mad. 225, referred to.
Halsbury 's Laws OJ England, 4th Ed., referred to.
1.2. There arc three ingredients in the sale of lottery tickets, namely,
D (a) prize (b) chance and (c) consideration. So; when one purchases a lottery
ticket, he purchases for a prize, which is by chance and the consideration
is the price of the ticket. The holder of such ticket knows, the consideration
which he has paid, may be for receiving nothing. However, there are few ~ho
may be lucky to receive the prize which is just by chance. This.element of
E chance makes the lottery a gambling. [1157-F]
Stgte v. Mabrey, 60 N.W. 2d 889.and Common Wealth v. Luad, 15A. 2d
839, referred to.
Words and Phrases (Permanent Edn.) Vol. 25A; Law.Lexicon by P.
F
Ramanatha Aiyar, (1997) Ed.; Words and Phrases by Butterworihs, 3rd Ed.;
Stroud's Judicial Dictionary, 5th Ed. and Black's Law DictiOnciry, 6th Ed;,
referred to.
1.3. 'Trade' is ari exchange of ariy article either by barter or for service
rendered. In other words, it is exchange between two parties, one who tenders
G the consideration and the other who returns for this consideration, goods,
money service or such other thing. Party paying consideration in any trade
is aware for what he is paying the consideration. He receives for the
· cons!deration an ascertained thing or service. It is neither hypothetical nor
it is a contract for any unascerl~ined thing. In any case, there is no element
or ingredient of chance under any 'trade'. On the other hand, an absence of
H chance inherently attached to any contract coupled with some skill makes
-
B.R. ENTERPRISES v. ST A TE
1115
it to be a 'trade'. So, trade is alw~s associated with some skill while in A
lottery there is absence of skill predominantly and essentially with the
ingredient of chance. [1158-F-H]
Municipality of Chopda v. Motilal Manakchand, AIR (1958) Born.
487, relied on.
Black's Law Dictionary, 6th Edn., referred to.
1.4. There could possibly be no two opinions that even in the State
lotteries the same element of chance remains with no skill. It remains within
B
the boundaries of gambling. The stringent measures and the conditions
imposed under the State lotteries are only to inculcate faith to the participant C.
of such lottery, that it is being conducted fairly with no possibility of fraud,
misappropriation or deceit and assure the hopeful recipients of high prizes
that all is fair and safe. [1166-B-C]
1.5. When character of both the State organised lotteries and other
lotteries remains the same by merely placing the apparel of the State with D
authority of law, would not make any difference. It remains gambling as
element of chance persist with no element of skill. A gambling may be taxed
and may be authorised for a specific purpose, but it would not attain the
status of trade like other trades or become res commercium. [1166-F-H]
E
H. Anraj & Ors. v. State of Maharashtra, [1984) 2 SCC 292; Gherulal
Parakh v. Mahadeodas, [1959) Suppl. 2 SCR 406 and Fateh Chand Himmatlal
v. State of Maharashtra, [1977] 2 SCC 670, distinguished.
Krishan Kumar Narula v. The State of Jammu and Kasmir & Ors.,
[1967) 3 SCR 50; Khoday Distilleries & Ors. v. State of Karnataka & Ors., F.
[1995) 1 S~C 574; State of Haryana v. Suman Enterprises, [1994) 4 SCC
217 and Nataraja Mudaliar v. State of Madras, referred to.
J. Bharati v. State of Maharashtra, [1985) 1 SCR 201, cited.
2.1. The State lotteries cannot be construed to be 'trade and commerce' G
within the meaning of Article 301 of the Constitution of India and there
could be no question of any discrimination or violation of Articles 301 or 303
of the Constitution of India. No one could seek it as a free 'trade' like other
4trades,, even though it may have the authority of Jaw. (1187-GJ
2.2. It is true that since 'trade' is used both in Articles 298 and 301 H
1116
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A of the Constitution oflndia, the same meaning should be given. But when the
two Articles used different words, in a different set of words conversely, the
different words use could only be to convey different meaning. So when
instead of the words 'trade and commerce' in Article 301 of the Constitution
of India, the words 'trade and business' is used in Article 298 of the
B Constitution of India it necessarily has different and wider connotation than
merely 'trade and commerce'. Use of the words 'business' and 'contract for
any purpose' widens the scope of State's activity under Article 298 of the
Constitution of India. Restrictive interpretation of Article 298 of the
Constitution of India would make these additional words superfluous and
would curtail State executive activities which is intended to be enlarged. Any
C other transaction or activity other than 'trade' would be 'business' of that
State. [ 1171-B-C; 1172-E-G]
Stroud's Judicial Dictionary, 5th Ed.; Words and Phrases Buttersworth,
3rd Ed.; Law L~icon, (1997) Ed., referred to.
D
S.R. Bommai & Ors. v. Union of India & Ors., [1994) 3 SCC 1, cited.
2.3. The sale of lotteries tickets by the State Government, even if not
trade as understood in common parlance, as it is gambling, would still be
covered within the executive power of the State under Article 298 of the
Constitution of India being activity in the nature of 'business' and would in
E any case also be covered by the words 'contract for any purpose'. Hence the
submission that the sale of State lottery tickets is, necessarily 'trade and
commerce' as the word 'trade' used under Article 301 of the Constitution
of India has to be given the same meaning in Article 298 of the Constitution
oflndia cannot be accepted. (1172-H; 1173-A-B)
F
H. Anraj & Ors. v. State of Maharash~ra, (198~) 1 SCC 414 and Ch.
Khazan Singh & Ors. v. State ofU.P. & Ors., (1974) 1SCC295, distinguished.
3. There is no discrimination either on account of Article 303 or
Article 14 of the Constitution oflndia between States of the Union oflndia
G and the Bhutan lottery. The Lotteries (Regulation) Act is confined to the
State organised lotteries under Entry 40 of Listi of the Constitution oflndia
and as such Bhutan lottery cannot be controlled under the Lotteries
(Regulation) Act. However, under the terms of the Treaty between India and
Bhutan itself, the sale of Bhutan lotteries has been agreed and subjugated
to be, subject to the relevant laws in India. Once the Treaty itself stipulates
H it to be subject to any law in India, then if the sale of Bhutan lottery tickets
-
r
. .-----
B.R. ENTERPRISES v. STATE
1117
are not State organised IQtteries, it necessarily falls under other lotteries A
•under Entry 34, List II of the Constitution of India as there is no other Entry
pertaining to lottery. The sale of Bhutan lottery within India will be subject
to the laws of the State as is appiicable under Entry 34 of List II of the
Constitution of India. Thus, if the State prohibits within its State not only
sale of its own lottery but every-other lottery, then the sale of lottery tickets B
'
. of Bhutan will have to be subjected to the laws of that State. Thus, prohibition
to other lotteries will equally be applicable to the sale of Bhutan lottery.
Therefore, there is no dis~rimination either on account of Article 303 or
Article 14 of Constitution ~flndia. [1174~H; 1175-A-B, F-G; 1176-A-B-D)
Parag Ice & Oil Mills & Anr. v. Union of India, (1978) 3 SCC 459, c
cited.
4.1. Section 5 of the Lotteries (Regulation) Act provides that a ban on
the lotteries could only be imposed if it is applied to every other State. The
latter part of Section 5 of the Lotteries (Regulation) Act by which a State
can prohibit sale of lottery tickets organised by every other State leaves no D
scope of any discretion on the States to discriminate from one State to other.
Therefore, there is no di~crimination either on account of Article 303 or
Article 14 of the Constitution oflndia. [1184-E-F; 1185-C-D)
Hamdard Dawakhana (Wakj) Lal Kuan, Delhi & Anr. v. Union of India
& Ors., (1960] 2 SCR 671 and State of West Bengal v. Anwar Ali Sarkar, E
(1952] SCR 284, cited.
--
4.2. Under Section 5 ohhe Lotteries (Regulation) Act, once a State,
as a policy, decides to prohibit the sale of lottery tickets of other States it
must prohibit every other State, that is to say, all the States and such a F
delegation of power cannot be said to be either abduction of the legislative
power of the Parliament or to be unbridled or unguided. [1185-D)
Jayantilal Amritla/ Shodhan v. F.N. Rana & Ors., (1964) 5 SCR 294;
Tripura v. Sudhir Ranjan, [1997) 3 SCC 665, cited.
5.1. On a plain reading, Section 5 of the Lotteries (Regulation) Act, G
empowers the State Government to prohibit the sale of tickets of the lotteries
-
organised by every other State. There is nothing in the language of Section
5 of the Lotteries (Regulation) Act reading by itself so as to say, whether
such power can be exercised by the State while running its own lottery or
can be exercised only where such State does not run its own lottery. The H
1118
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A Construction that power under Section 5 of the Lotteries (Regulation) Act .
can be exercised by the State while running its own lottery leads to
discrimination and opens for criticism of unbridled delegation.(1186-F-G) ·
Atiabari Tea Co. Ltd v. The State of Assam & Ors., [1961) 1SCR809;
Automobile Transport (Rajasthan) Ltd. v. The State of Rajasthan & Ors.,
B (1962) 1 SCR 491, cited.
5.2. Delegation of essential legislative power of the principal to the
delegatee would amount to abdication of its legislative power and if it is bereft
of any guidelines then it is unsustainable in the eyes of law. But this
C principle is to be tested by scanning the impugned legislation which may
differ one from the other in its nature, setting up or other circumstances
which may have bearing to conclude. [1178-C]
State of West Bengal v. Corporation of Calcutta, [1967) 2 SCR 170;
Hamdard Dawakhana (Wakf) Lal Kuan, Delhi..</? Anr. v. Union of India &
D Ors., [1960) 2 SCR 671; Hari Shankar Bang/a & Anr., v. The State of
Madhya Pradesh,- [1955) 1 SCR 380; A.N. Parasuraman v. State of Tamil
Nadu, [1989) 4 SCC 683; Rajnarain Singh v. The Chariman, Patna
._
Administrative Committee, Patna & Anr., [1955] 1 SCR 290; P. V. Narasimha
Rao v. State, [1998) 4 SCC 626; DTC v. DTC Mazdoor Sabha, [1991) Suppl.
1 SCC 600; Maharao Sahib Shri Bhim Singhji v. Union of India & Ors.,
E [1981) 1 SCC 166; Philips India Ltd. -v. Labour Court, Madras & Ors.,
(1985) 3 SCC 103; State of Punjab v. Kai/ash Nath, [1989) 1 SCC 321;
Registrar, Trivandrum v. K. Kunjambu, (1980) 1SCC340 and P. Orr & Sons
(P) Ltd v. Associated Publishers (Madras) Ltd., [1991) 1 SCC 301, referred
to.
F
Arminder Singh v. State of Punjab, [1979) 1 SCR 845, cited.
Papper v. Hart, (1993) 1 All ER 42, referred to.
5.3. Attempt should be made by the Courts to uphold the provisions
G charged of unconstitutionality. Thus, where there are two possible
interpretations, one invalidating the law and the another upholding, the latter
should be adopted. For this, the Courts, have been endeavouring, sometimes
to give restrictive or expansive meaning keeping in view the nature of
legislation, may be beneficial, penal or fiscal etc. For doing this, the Courts
have taken help from preamble, objects, the scheme of the Act, its historical
H background, the purpose for enacting such a provision, the mischief, if any,
B.R. ENTERPRISES v. ST ATE
1119
whic~ existed and which is sought to be eliminated. Cumulatively, it is to A
•
subserve the object of the legislation. These interpret1Jtions spring out
because of the concern of the Courts to salvage a legislation to achieve its
objective and not to let it fall merely because of a possible ingenious
interpretation. This equally helps to save an Act but also the cause of attack
on the Act. Here the courts have to play a cautious role of weeding out the B
wild from the crop, of course, without infringing the Constitution.
[1178-D-F-G]
Bengal Immunity Co. v. State of Bihar, [1955) 2 SCR 603; Hamdard
Dawakhana (Wakj), Lal Kuan, Delhi & Anr. v. Union of India & Ors.; (1960)
2 SCR 671 and Delhi Transport Corporation v. D.T.C. Mazdoor Congress, c
[1991) Suppl. 1 SCC 600, relied on.
The Registrar of Co-operative Societies, Trivandrum & Anr. v. K.
Kunjabmu & Ors., (1980] 1 SCC 340, referred to.
Seervai : Constitution of India 3rd Ed, referred to.
5.4. Old gold rule is respecting the wisdom of legislature that they are D
aware of the law and would never have intended for an invalid legislation.
This also keeps courts within its track and checks individual zeal of going
wayward. [1178-E]
5.5. The principle of reading down, however, will not be available where
E
the plain and literal meaning from bare reading of any impugned provisions
clearly shows that it confers arbitrary, uncanalised on unbridled power.
(1180-E]
5.6. In view of settled principle of interpretation, Section 5 of the
Lotteries (Regulation) Act has to be read down to mean that a State could F
only exercise such discretion if it decides not to have any lottery within its
territory including its own lottery. In this situation, the delegatee is tied
down by this limitation which itself is a clear guide to State and hence cannot
be said to be unbridled delegation. [1186-G-H]
5.7. The decision by a State to run State lottery has to be made with G
the conscience of its evil consequences on its subject. Thus, before deciding
..
the State has to equate the public welfare with the injury on its public. This
exercise has to be by each State, Union of India not coming in its way. It is
for each State to decide what is its public welfare al,ld what constitutes an
injury to the public interest. Every decision to have either lotteries authorised
by the State or organised by the State has to be in public interest, may be H
1120
SUPREME COURT REPORTS
[1999) 2 S.C.R.
A for collection of public revenue for a public purpose. [1186-IJ..D]
Central Inland Water Transport Corp. Ltd& Anr. v. Broja Nath Ganguly
...
& Anr., AIR (1986) SC 1571 and Rattan Chand Hira Chandv. As/car Naw~
Jung, [1991) 3 sec 67, referred to.
B
Fender v. St. John-Mildmay, (1938) AC 1 and R. v. Registrar General,
~
Exparte Smith, (1991) All ERi 88, cited.
De Smith-Judicial Review. of Administrative Action, 5th Ed., referred
to.
c
6. There is no merit in the submission that the provision of Section
4(g) of the Lotteries (Regulation) Act is ultra vires as the condition of law
and order in the State of Nagaland is not such where a draw of lottery could
be held. It is question of policy and it is for the State executive to take
(
decision pertaining to law and order, for that reason no legislation can be
D held to be ultra vires or struck down. Similarly other conditions in Section
4 of the Lotteries (Regulation) Act are all those which cannot be said to be
such to hold these provisions to be ultra vires or invalid. [1187-E-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2747 of
1999 Etc. Etc.
E
From the Judgment and Order dated 2.5 .. 97 of the Allahabad High Court
in W.P. No. 1689of1997.
~
R.N. Trivedi, and C.S. Vaidyanathan, Additional Solicitor Generals, A.K.
Ganguli, F.S. Nariman, H.N. Salve, G.L. Sanghi, S.S. Ray, Dr. Rajeev Dhawan,
F Shanti Bhushan, R.F. Nariman, P.K. Goswami, Rakesh Dwivedi, S.K. Dholakia,
K.K. Venugopal, Sr. Advs., Arvind Kr. Shukla, Mukesh K. Giri, (A.K. Goel),
Addi Adv. Genl. U.P., Kanllendra Misra, R.B. Misra, Ashish Shukla, Ajay K.
Agarwal, (R.P. Goyal) Adv. General for U.P., Ramesh Kumar Singh, Addi. Adv.
Genl, U.P., Rakesh Bajkpayee, Y.P. Mahajan, T.C. Sharma, R.V. Ratnam, P.
G Parmeswaran, Mrs. Sheela Goel, H.A. Raichura, R. Bana, B.V. Balaram Das, A.
Mariarputham, Mrs. Aruna Mathur, Prashant Kumar, Sushi! Kr. Jain, Pradeep
Aggarwal, A.P. Dhamija, Umesh Bohare, A. Mishra, L. P. Singh, Ms. Pratibha
,,
Jain, V.G. Pregasam, Kailash Vasdev, Rajiv Mehta, K.H. Nobin Singh, Ms. H
Wahi, Goodwill lndeevar, Ms. Sumita Hazarika, Hari Shankar, K. Brijender
Chahar, Vimal Dave, Ms. Indu Malhotra, Vijay Hansaria, J.K. Bhatia, Ajay
H Kumar Gupta, S.K. Agnihotri, Ms. Madhur Dadlani, Aruneshwar Gupta, Srilok
;
B.R. ENTERPRISES v. ST ATE [MISRA, J .)
1121
Nath Rath, G. Prakash and Ms. Beena Prakash for the appearing parties.
A
The Judgment of the Court was delivered by
MISRA, J. Special leave granted in all the special leave petitions. We
are witnessing in this case exhibition of Federalism in true spirit. Contrary to
the usual pouring in of citizen's writ petitions for vending their grievances B
against the States, here we are drawn to decide issue inter se between two
distinct sets of· States, one challenging and the other upholding certain.
provisions of The Lotteries (Regulation) Ordinance 1997 (Ordinance No. 20
cf 1997) (hereinafter referred to as the "Ordinance No 20") and now the
Lotteries (Regulation) Act, 1998 (hereinafter referred to as the "1998 Act").
The Union Government, of course has joined this issue with one such set of C
States for upholding its Act. The issue here is confined to the State lotteries
under Entry 40, List I of the Seventh Schedule of the Constitution of India.
As a consequence of the order passed by the State of U.P. banning State
lott~ries of other States by virtue of power entrusted under Section 5 of the
impugned Ordinance Act, various affected States, challenged the provisions D
in different High Courts. In some of them, interim orders were passed and in
others, the High Courts finally disposed of the petitions. The Gujarat High
Court upheld the validity, while the Guwahati High Court struck down some
of its provisions as ultra vires. Against all the aforesaid orders and judgments,
the aforesaid appeals have been filed. One writ petition under Article 32 has
also been filed raising the sa!lle issue. Some of the aforesaid petitions are E
transfer petitions seeking transfer of petitions pending in the various High
Courts raising similar issues. We permitted learned counsel for the petitioners
in these transfer petitions to argue the common points which, if fact, is the
bone of contentions of all the parties. As in all these petitions, common
issues are raised, we are disposing of all, after hearing learned counsel for the F
parties, by this composite judgment. Apart from the common issues, we are
not disposing of nor propose to dispose of any of the individual residuary
points, if any, remain after our this adjudication.
In order to adjudicate issues in this case, one of the fundamental
question raised is, what is the character of State lotteries. If lotteries are G
gambling in nature, does it loose its character as such when it takes on the
cloak of State lotteries? Whether such cloak dissolves its character as res
extra Commercium? In any case, even it is legalised, would it qualify to be
or can it be held to be a trade within the meaning of Chapter XIII of the
Constitution of India? If it is a trade, are the provisions of the impugned Act
violative of the Articles of Chapter XIII? Challenge to some of the provisions H
1122
SUPREME COURT REPORTS
(1999] 2 S.C.R.
A are based on the ground of it being discriminatory and arbitrary, hence
violative of Article 14 of the Constitution. Finally, entrustment of power to the
States under Section 5 is attacked as it being unbridled without any guideline
thus liable to be struck down.
· ·
Before ·taking up for consideration the various points raised; it is
B necessary to dwell certain bare facts to reveal the resulting cause of filing of
various petitions in the various High Court is before finally reaching this
Court for adjudication. The \\hole gambit of sale of lottery tickets in India,
both private and State lotteries, from the very inception is drawing with
concern attention of various authorities and Government including courts, as
C to how to control the evil effects of lotteries on its people at large, more so,
when in complete banning, it effects in times of need, the very useful source
of State revenue. Basically, lotteries are gambling and its business is res extra
commercium; but to shed off this, the State in the interest of State revenue
has been finding avenues to legitimate it through some legitimisation under
the law to eliminate the impediments in collecting the State revenue and dilute,
D if possible, the exploitation of the people. The details of which we shall be
referring hereinafter. The immediate reference to which we are concerned is
Ordinance No. 20of1997 which was issued on 1st October, 1997, which came
into force on 2nd October, 1997 which restricted the lottery business organised
by the States and enabled the State Government to prohibit sale of tickets of
E lotteries of other States. Under the said Ordinance, the State of U.P. issued
notification dated 7th October, 1997 banning sale of lottery tickets of the State
ofNagaland in the State ofU.P. This notification and the aforesaid Ordinance
was challenged by the State of Nagaland in the Gauhati High Court in Civil
Rule No. 4986of1997. The High Court stayed this notification. This Ordinance
was also subject matter of challenge in the High Court of Gujarat where in
F Special Civil Appeal No. 7903of1997 (The Gujarat Lottery Sellers Association
v. The State of Gujarat and another), the High Court upheld this Ordinance
and the notification of Gujarat Government which banned the State lotteries
within the State of Gujarat. Against this, Civil Appeal arising out of SLP (C)
No. 22423 of 1997 has been filed which we are considering and disposing of
G by means of this judgment. The State of U.P. filed Civil Appeals arising out
of SLP(C) Nos. 21304-21307 of 1997 as against the aforesaid interim order
passed by the Guwahati High Court staying the Ordinance in which this Court
directed the State of U.P. to move the Gauhati High Court. This order was
passed as an interim measure. In a Writ Petition No. 2200 of 1997 filed before
the Allahabad High Court (Lucknow Bench) by Mis. Ganga Agencies (Manipur
H State Lotteries), the High Court ordered that so long the interim order of the
..
B.R. ENTERPRISES v. STATE [MISRA, J.]
1123
Gauhati High Court is operative the sale of lottery tickets shall be permitted A
to be sold in U.P.
This Court finally disposed of SLP (C) Nos. 21304-21307of1997 (Civil
Appeal No. 8858-8861of1997) by observing that Gauhati High Court is free
to dispose of the petition pep.ding before it in accordance with law, since
hearing had already completed. As the Ordinance No. 20 was lapsing, Ordinance B
No. 31/97 (second Ordinance) was promulgated. Under it, the notification
dated 29th October; 1997 of the State ofU.P. was also stayed by the Guwahati
High Court. Against this order, also SLP (C) No. 4710-4712 of 1998 State of
U.P. v. State of Mizoram and others, was filed in this Court. Finally, the
Guwahati High Court declared the Ordinance No. 20 to be unconstitutional C
on the ground that Ordinance was not legislation by the Parliament within
Article 298 of the Constitution of India, hence it could not restrict executive
powers of the State to carry on lottery business. It also held Section 5 to be
ultra vires the Central Legislative powers on the ground of excessive delegation
and also violative of Articles 301 and 303 of the Constitution. It further held
that Section 4(a), (f) and (g) imposes unreasonable restrictions, therefore,
unconstitutional. Against this, the State ofU.P. filed Civil Appeals arising out
of SLP (C) No. 5224-28 of 1998 and the Union of India filed Civil Appeals
arising out of SLP (C) Nos. 5081-5085 of 1998, which is also the subject matter
of consideration through this judgment.
In order to maintain the continuity, the Central Government issued the
D
E
Lotteries (Regulation) Ordinance, 1998 (No. 6of1998) (third Ordinance) on
23rd April, 1998. This last Ordinance was also challenged along with Notification
dated 29th October, 1997 of State ofU.P. in Civil Rule 2315of1998 Mis. Jyoti
Agencies & Anr. v. Union of India & Ors. before the Gauhati High Court
which was aiso stayed by means of interim order dated 22nd May, 1998. Civil F
Appeal arising out of SLP (C) No. 15978 of 1998 has been filed against this
order by the State of U.P. The Ordinance No. 6of1998 (third ordinance) has
finally rolled into the Lotteries (Regulation) Act, 1998 (No. 17 of 1998)
(hereinafter referred to as '1998 Act'). This Act along with Notifications dated
29th October, 1997, 17th March, 1998 and 20th April, 1998 of the State ofU.P. G
were challenged in Civil Rule No. 3296 of 1998 State of Naga/and v. Union
of India & Ors. before the Guwahati High Court. The Guwahati High Court
by order dated 10th July, 1998 stayed the provisions of Section 4(a), (g), (h),
G) Sections 5 and 6 of the 1998 ·Act and also the aforesaid notifications issued
by the State of U.P. : Even SLP against this order has been filed before this
Court being SLP (C) No. 17566 of 1998.
H
1124
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A
The Gujarat Lottery Sellers' Association has challenged the constitutional
validity of the Ordinance No. 20 promulgated on 1st October, 1997 and also
challenged the Notification dated 30th September, 1997, issued by Government
of Gujarat, banning the instant lotteries within thr. State w .e.f. 1st November,
1997. One of the grounds raised by the petitioner before the Gujarat High
B Court was that the State notification dated 30th.September, 1997 was issued
41
even before the Ordinance which came into force on 2nd October, 1997, hence
without authority of law. The uujarat High Court by its judgment and order
dated 24th. October, 1997 dismissed the petition holding that instant lottery
is gambling and can be restrained by the State Government. The High Court
held the Ordinance No.20 to be valid. Aggrieved by this, the aforesaid Civil
C Appeal raising out of SLP(C) No. 22423 of 1997 was filed. Similar matter also
came in the Delhi High Court, when it, by means of interim order dated 3rd
December, 1997 in Civil Writ Petition No. 5105of1997 disagreed with the view
of the Quwahati High Court and agreeing with the view of the Gujarat High
Court, dec,ined to stay the impugned Ordinance. Hence, the State Ordinance
D remained in operation within the National Capital Territory of Delhi. The
Guwahati High Court ori 30th March, 1998 in Miscellaneous Case No. 310 of
1998 in C.R. No. 31of1998 State of Nagalandv. U.O.L and Others stayed
the order of the Government of Delhi directing implementation of the aforesaid
order passed by the Delhi High Court. Thereafter, on 30th April, 1998 the
Delhi High Court observed that the Delhi Government may move the appropriate
E forum against this order of the Guwahati High Court. This led to flling of
Transfer Petition by the National Capital Territory of Delhi in this Court being
Transfer Petition No. 670 of 1998.
A Writ Petition {C) No. 226 of 1998 is also filed in this Court by the
Government Lottery Agencies and Sellers Association (Regd.) and another
F challenging the aforesaid Ordinances 20 and 31 of 1997 including the
notification issued by Government of National Capital Territory of Delhi
pursuant to the power conferred under Section 5. During the pendency, the
Parliament enacted. the Lottery (Regulation) Act 17 of 1998 repealing/
substituting the earlier Lottery (Regulation) Ordinance of 1997. Thereafter,
G various State Governments including the State of Arunachal Pradesh and
Nagaland as well as other distributors tiled writ petition challenging the
legality and validity of Section 4(a), (t), (g), (i), Section 5 and Section 7 of the·
said 1998 Act being ultra vires. On 17 July, 1998 the High Court of Guwahati
observed that the provisions, under challenge, of this Act as well as provisions
of the Ordinances being pari materia and since provisions of the Ordinances
H have already been struck down by that Court, hence, granted stay of the
B.R. ENTERPRISES v. ST ATE [MISRA, J.]
1125
aforesaid provisions including the notification of the Government of National A
Capital Territory of Delhi and other States. In the aforesaid writ petition filed
by the Government Lottery Agencies and Sellers Association (Regd.) and
others, an amendment was sought to challenge the aforesaid 1998 Act as it
substituted the earlier Ordinance. Except for Section 5 of the Ordinance, in
which some modification was brought through this Act, to which we shall be B
referring to later, other provisions remained the same.
Civil Appeal arising out ofS.L.P. C No. 10356of1997 (B.R. Enterprises
v. State of U.P. & Anr.,) is against the order of the Allahabad High Court
dismissing the writ petition filed by an agency of State lottery Manipur
holding such dispute between the State of Manipur and State of U.P. could C
only be decided by the Supreme Court. It held, so far manipur lotteries, unless
it was declared to be State lottery, the petitioner has no locus standi, hence
writ was dismissed. Another Civil Appeal arising out of SLP C No. 10357 of
1998 is filed by the State of U.P. against an order passed by the Allahabad
High Court confirming the interim stay order. Civil Appeal arising out of SLP
Cl No. 15978of1998 is filed by the State ofU.P. against an interim order of D
Guwahati High Court staying the Ordinance No. 6198. Civil Appeals arising
out ofSLP C Nos. 16021, 16617, 17566 and 17782of1998 are all filed against
the interlocutory orders passed by the Guwahati High Court staying Section
4 (a), (g), (h), Sections 5 and 7 of the Central Act No. 17/98. The first and third
of these SLPs are filed by the State of U.P. and the second by Government E
ofN.C.T. of Delhi. Remaining petitions are transfer petitions seeking transfer
of the cases from Madras High Court, Karnataka High Court. Andhra Pradesh
High Court and Delhi High Court to this Court. These also challenge either
the Ordinances or Lotteries (Regulation) Act, 1998 (Act No. 17 /98) (hereinafter
referred to as 'Lotteries Act'). They all raise the same issues, as aforesaid .
. For p~oper appreciation of the submissions of learned counsels for the parties, · F
we herewith quote Sections 4, 5 and 7 of the Act, which are the subject matter
of challenge :
·
"4. A State Government may organise, conduct or promote a
lottery, subject to the following conditions, namely :-
(a) prizes shall not be offered on_ any preanounced number or on the
basis of a single digit;
(b) the State Government shall print the lottery tickets bearing the
imprint and logo of the State in such manner that the authenticity of
G
the lottery ticket is ensure;
H
1126
SUPREME COURT REPORTS
[1999] 2 S.C.R.
A
(c) the State Government shall sell the tickets e~ther itself or through
distributors or selling agents;
B
c
D
E
( d) the proceeds of the sale of lottery tickets shall be credited into the
public account of the State;
( e) the State Government itself shall conduct the draws of all the
lotteries;
(f) the prize money unclaimed within such time as may be prescribed
by the State Government or not otherwise distributed, shall become
the property of that Government;
(g) the place of draw shall· be located within the state concerned;
(h) no lottery shall have more than one draw in a week;
'I
(i) the draws of all kinds of lotteries shall be conducted between such
period of the day as may be prescribed by the State Government;
(j) the number of bumper draws of a lottery shall not be more than six
in a calendar year;
(k) such other conditions as may be prescribed by the Central
Government.
5.