Sanjana Mishra, NMIMS School of Law
Anila Krishna, Pendekanti Law College
Anamika Chhabra, FIMT, IP University
EDITED BY: Smaraki Nayak ,Amity Law School, Noida
FACTS OF THE CASE:
The respondent who was not a resident of Bombay conducted a prize competition of a crossword puzzle through a newspaper which was printed and published in Bangalore. This paper was widely published in Bombay too. For this competition, depots were established so that the forms and fees can be collected. It attracted a lot of buyers for the ticket of that competition.
The state government then levied tax over the respondent’s company for contesting a prize competition in the state. The respondent challenged the Supreme Court and a question was raised whether tax can be levied upon a person who resides outside the territorial limits of the state.
ISSUE I- Whether the restrictions imposed by the impugned Act on the trade on business contravened the basic right of the petitioners, who were citizens of India, to carry on their trade or business under Art. 19(1)(g) of the Constitution?
It was submitted that, because the second petitioner was a corporation and thus the primary petitioner, who was a director thereof, had no rights independent of the second petitioner, neither of them could lay any claim to any fundamental right under Art. 19(1)(g) and little question could arise of any violation of the petitioner's alleged fundamental rights.
ISSUE II- Whether the Act infringed Article 301 of the Constitution to the degree that it imposed limits on commerce and intercourse between States?
It was argued that, as long as lotteries and prize competitions contradict public policy, there could be no "benefit" in promoting a lottery or prize competition and there was little question of violating the provisions of Article 301 of the constitution
The Supreme Court held prize competitions included under Categories (ii) and (iii) to be of a gambling nature, for the rationale that they were hooked in to chance and no substantial degree of skill was involved. The challenge arose with regard to the first definition and therefore the amended one. Thereafter, it had been held that although the amended provision included prize competition that an answer was or wasn't prepared beforehand, both were still intended to be of a gambling nature.
The court didn't substantially differentiate between the competitions where solution is ready beforehand and one that involves application of skill to deduce the right answer supported the hints provided, the latter features a larger scope because it included competitions that solutions were or weren't prepared beforehand. The Court didn't examine the background and reasons for the legislature to amend the aforesaid provision. Even if the said activity was brought under the ambit of being a gamble in nature, state does allow gambling in limited conditions. Here, when a license for conducting prize competitions is obtained by the Respondents, it is a legitimate business permitted by the State Government and hence there is no reason to deny protection under Articles 19(1)(g) and 301. The fact that there was issuing of license and payment which gives legitimacy to prize competitions, issuing of license to conduct prize competitions implies that the State has permitted conducting such business subject to certain conditions, such as, paying tax gives this a legitimacy.
The principal question that arose in the present petition was: whether the impugned Act was a law related to betting and gambling or a law with respect to trade and commerce. The Court held that the Act comprises only prize competitions which are in the nature of a lottery or gambling, and hence it is a law on betting and gambling under Entry 34, and not on trade and commerce under Entry 26 of List II. It placed reliance on the definition of ‘prize competition’ under the original and amended Section 2(1)(d) of the impugned Act. It is pertinent to mention that prior to 1952, Section 2(1)(d) recognized three categories of ‘prize competitions’:
(i) Cross-word prize competition, missing words prize competition, picture size competition, number prize competition, or any other competition, for which a solution is prepared beforehand by the promoters of the competition or that the answer is decided by lot.
(ii) Any competition during 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 generally known.
(iii) The other competition success which doesn't depend to a considerable degree upon the exercise of skill.
However, it did not include prize competition contained in a newspaper printed and published outside the State of Bombay.
The aforesaid amended Section incorporated the following changes in the definition:
1. The State of Bombay was dissolved with the formation of Maharashtra and Gujarat States on May 1, 1960.
2. The impugned Act was amended, vide, the Bombay Lotteries and Prize Competitions Control and Tax (Amendment) Act, 1952.
3. In category (I), the line “for which a solution is prepared beforehand…” was amended to read as, “for which the solution is or is not prepared beforehand…”
4. Deletion of the concluding sentence excluding prize competition printed and published outside Bombay.
At the outset, it is conceded that the Supreme Court rightly held prize competitions included under Categories (ii) and (iii) to be of a gambling nature, for the reason that they were dependent on chance and no substantial degree of skill was involved. The dispute arose with regard to the original and amended Category (i). While perusing the original provision, the Court held that a prize competition for which a solution was prepared beforehand was clearly a gambling competition, for the competitors were only invited to guess what the solution prepared beforehand by the promoters might be. Thereafter, it was held that although the amended provision included prize competition for which a solution was or was not prepared beforehand, both were still intended to be of a gambling nature.
The main concern that arose within the petition was if the act was a law associated with gambling, betting or law associated with trade and commerce. The Court held that the Act comprises only prize competitions which are within the nature of a lottery or gambling, and hence it's a law on betting and gambling under Entry 34, and not on trade and commerce under Entry 26 of List II. This gave rise to emphasis on the meaning and exact definition of prize competitions under the first and amended Section 2(1)(d) of the impugned Act.
It can be concluded that the legislative powers have been distributed in two folds between the centre and state. Federalism is a very complex mechanism though it is the very purpose for which a federal state is formed includes the distribution of powers between the union and the centre. Their power is partitioned by the constitution so that they should their independence over the executive and legislative authority. As our constitution is of federal structure it establishes dual polity between the union and state. Parliament has the power to make laws for any or whole part of India as well is conferred with the power to make laws for extra territorial operations. However, a state legislature is not competent enough to make laws for the extraterritorial operations.
Every Indian citizen has the freedom and personal freedom to exercise his / her fundamental rights, as enshrined in the Constitution. Article 19 guarantees freedom of expression and speech. Many of India’s landmark decisions are taken in compliance with the principles mentioned in Article 19. The Indian Constitution acknowledged trade rights as a constitutional right under Article 19(1)(g) of the Constitution which allows citizens “to practise any profession, or to carry on any occupation, trade or business.”
 Sehgal, D. R. Doctrine of Territorial Nexus. IPLEADERS(JUNE 18, 2019), https://blog.ipleaders.in/doctrine-of-territorial-nexus/