Web firm wanted to know if betting on games such as chess is gambling.
A Delhi court has ruled that online games involving betting with the websites hosting it and charging a part of the winning prize from participants is illegal in the states where gambling is banned.
The court said this business does not enjoy protection granted by the Constitution to freedom of trade and banks can refuse to provide services to such websites.
Additional District Judge Ina Malhotra said this in an order on a petition filed by the founders of an Internet startup.
While betting or playing for money among players on a game of golf,chess,bridge or billiards may be permitted,they cannot be considered legal if operated by a gaming house. Such an online business activity would not be protected under Article 19 (1)(g) of the Constitution, the court said.
The courts opinion was sought by the Internet startup company founded by an IIT-Delhi alumnus and his friends having experience in online financial domains.
The company said that it was proposing to launch a website offering six games chess,billiards,rummy,poker,bridge and snooker. It sought the courts opinion whether these six are games of skills and if betting on such games makes it a gambling activity.
The petition said the six games are recognised as games of skill and that the company did not bet against any of its players.
The company stated that the website would charge a limited commission of under five per cent on the winning hand. Thats why it sought the courts opinion about the legalities involved.
The court,after going through the arguments advanced by the counsel for the petitioner and documents placed on record,said online games offering money are illegal in states which prohibits gambling,though betting on games of skill played physically has been held legal by the Supreme Court.
The company said it entered into an agreement on February 14 with an independent investor,wanting to make financial contribution which would grant it a share in the equity in the business.
It said the investor has agreed to invest Rs 5 lakh,subject to the courts opinion on the legalities of the issues involved in this business.
The court said: Sports betting is an offence in India and bookies earning money from bets laid on games of skill cannot be granted protection under Article 19(1)(g) of the Constitution.
It said there was no specific legislation banning wagering on online games of skill,and that the provisions of the Gambling Act were being given the go-by due to the nature of online games.
The court clarified that such games cannot be compared with real games and there is no illegality in websites where such games are offered free of charge. But when the service provider partakes a slice of the winning component,it is no better than a gaming house which is illegal, the court said.
Accordingly,the games of rummy,golf,chess,billiards and bridge played in the real form are games of skill. Poker is more in the form of gambling, it said.
The court warned that advertising or promoting such websites has to be curtailed and that sponsors advertising or promoting their products on such sites also attract penal consequences.