Bombay High Court Dismisses PIL Against Dream11

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  • Arpit Jain June 22, 2019
  • 3 Minutes Read

Fantasy gaming behemoth Dream11, among other stakeholders of India’s fast-growing fantasy gaming industry, has recently been in the eye of a storm on charges of possible GST evasion. A Public Interest Litigation (PIL) filed by Advocate Gurdeep Singh Sachar recently also leveled a host of charges against Dream11, claiming that the company’s offerings comprised of games of chance and qualify as gambling and that Dream11 was indulging in GST evasion. In what comes as a shot in the arm for Dream11 and other fantasy sports operators, the Bombay High Court has rejected the charges and dismissed the PIL.

In their ruling, a division bench of Justice Ranjit More and Bharati Dangrestated that “fantasy league do not amount to ‘gambling’ or ‘betting’ or ‘wagering’ even if the definition contained in Finance Act, 1994 is taken into consideration.”

 

The Judgement – What It Says

Sachar in his petition had sought criminal action against the site for allegedly conducting illegal operations of gambling, betting and wagering under the guise of online fantasy sports gaming, and for GST evasion. Sachar argued that fantasy games are nothing but means to lure people into spending their money for quick earning by taking a chance and that most of them end up losing their money in the process.

Dismissing the charges, the bench called the entire case of the petitioner “untenable, misconceived and without any merit,” adding that “It can be seen that success in Dream11’s fantasy sports depends upon user’s exercise of skill based on superior knowledge, judgment and attention, and the result thereof is not dependent on the winning or losing of a particular team in the real world game on any particular day.”

Rejecting the charges of tax evasion, the court stated, “only, if their Online Fantasy Sports Gaming is ‘gambling’ or ‘betting’ (which it is clearly not), there is a scope to infer possibility of any tax evasion.”

Talking about the rate of GST, the court said that the format and fantasy sports gaming offered by Dream11 is liable to be taxed at 18% GST as mentioned in the explanatory notes for entry code 998439 (other online content n.e.c.).

This is the second judgment delivered by the judiciary in favor of Dream 11 in the last two years. Early in August 2017, while hearing a similar petition filed by Varun Gumber, the Punjab and Haryana HC had iterated that Dream11 is a “legitimate business activity protected under Article 19 (1) (g) of the Constitution of India.” and that Dream11’s fantasy sports arised out of user’s exercise of superior knowledge, judgment and attention. https://pokerguru.co.in/poker-news/punjab-haryana-high-court-recognizes-fantasy-sports-as-game-of-skill/. The High Court’s order was upheld in April 2018 by the Apex Court while hearing a special leave petition.

Referring to the past judgments, the Bombay High Court noted that the petitioner had attempted to reopen issues that are already decided upon by a three-judge bench of Supreme Court in KR Lakshmanan vs. State of Tamil Nadu, and subsequently by the Punjab & Haryana HC.

The bench also observed, “The petitioner has lost sight of the fact that the result of the fantasy game contest on the platform of respondent No.3, is not at all dependent on winning or losing of any particular team in the real world game. Thus, no betting or gambling is involved in their fantasy games.”

 

Ramifications of the Judgement

India’s online gaming industry has seen stupendous growth, and according to a 2019 KPMG report,the number of fantasy sports operators has increased seven times over 2016- 2018. https://assets.kpmg/content/dam/kpmg/in/pdf/2019/03/online-gaming-india-fantasy-sports.pdf

But in recent months, the gaming industry has come under increased scrutiny from various government and tax authorities. In April, reports came in indicating that the Indirect Tax department was looking into the accounts of some of the prominent online fantasy gaming firms to assess possible revenue leakage via GST evasion. https://pokerguru.co.in/poker-news/gaming-report-online-fantasy-gaming-gst-mgm-fanduel/

More recently,a similar PIL was filed in the Delhi High Court by social activist and CA Avinash Mehrotra naming websites offering games such as poker, teenpatti, sports betting, election betting etc., including Betway, BetRally India, 1xBet, Royal Panda, Dafabet etc. and domestic poker websites such as Adda52, PokerStars.in and Khelo365. He had sought directions from the Union Minister of IT and RBI to “bring illegal and illicit online gambling/ betting/ wagering/ gaming to an end.”

In this context, the Bombay High Court’s order that states that fantasy gaming is a skill game and not gambling will undoubtedly help Dream11 and other fantasy gaming companies (file:///C:/Users/HP/Downloads/ordjud%20(10).pdf) in the other various ongoing litigation and even others that may come up in the future.

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