State of Bombay vs R. M. D. Chamarbaugwala

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 134 of 1956

Decision Date: 9 April 1957

Coram: Bhuvneshwar P. Sinha, S. K. Das, P. B. Gajendragadkar

The case was styled State of Bombay versus R M D Chamarbaugwala and was decided on the ninth day of April, 1957 by the Supreme Court of India. The judgment was delivered by a bench consisting of Justices Bhuvneshwar P Sinha, S K Das and P B Gajendragadkar. The petitioner was the State of Bombay and the respondent was R M D Chamarbaugwala. The official citation of the decision is 1957 AIR 699 and 1957 SCR 874. The matters before the Court involved legislation concerning lotteries and prize competitions, the taxation of promoters who conducted such competitions through newspapers printed and published outside the State, the test of territorial nexus, and whether gambling could be regarded as trade and commerce within the meaning of the Constitution. The Court was asked to consider the constitutionality of the Bombay Lotteries and Prize Competition Control and Tax Act of 1948, as amended by the Bombay Lotteries and Prize Competition Control and Tax (Amendment) Act of 1952, particularly sections 2(I)(d) and 12A, and the relevance of Articles 19(1)(g) and 301 of the Constitution of India.

The first respondent, who was the founder and managing director of a company that was the second respondent in the appeal, had incorporated the company in the State of Mysore and conducted a prize competition known as the R M D C Cross‑words through a weekly newspaper that was printed and published at Bangalore. Although the newspaper was printed outside Bombay, it enjoyed a wide circulation within Bombay, and the respondents established collection depots in that State to receive entry forms and fees. They also appointed local collectors and placed advertisements in the newspaper inviting the public to take part in the competitions. On the twentieth day of November, 1952, the Bombay Legislature enacted the Bombay Lotteries and Prize Competitions Control and Tax (Amendment) Act of 1952, which broadened the definition of “prize competition” in section 2(1)(d) of the 1948 Act to include competitions carried on through newspapers printed and published outside the State. The amendment also introduced a new section, 12A, which imposed a tax on the promoters of such competitions for sums collected from the State. Consequently, on the eighteenth day of December, 1952, the respondents filed a petition before the High Court of Bombay under Article 226 of the Constitution, contending that the amended Act and the rules made thereunder, insofar as they applied to such prize competitions, were beyond the legislative competence of the State Legislature and infringed upon their fundamental rights under Article 19(1)(g) and the freedom of inter‑State trade guaranteed by Article 301. The Single Judge who heard the case at first instance, and who also acted as the appellate court, ruled in favour of the respondents, albeit on somewhat different grounds. The State of Bombay then appealed the decision. The principal issue that the Supreme Court was called upon to determine related to the validity of the impugned legislation. The State argued that the Act was a law dealing with betting and gambling and therefore fell within Entries 34 and 62 of List II in the Seventh Schedule to the Constitution, while the respondents asserted that the Act concerned trade and commerce and therefore fell within Entries 26 and 60 of that List.

In this case the respondents argued that the statute dealt with trade and commerce and therefore fell under Entries 26 and 60 of List II. The Court explained that to examine the validity of any legislation it first had to determine whether the subject matter lay within a field assigned to the legislature. If that were so, and the legislature was a State body whose law was intended to operate outside the State, the Court then had to see whether a sufficient territorial nexus existed to support such extraterritorial operation. Finally, the Court had to consider whether the Constitution placed any other limitations on the legislature’s power. Applying this three‑step test, the Court held that the impugned Act was a perfectly valid piece of legislation and its constitutionality could not be questioned. Looking at the purpose and scope of the Act as a whole, the Court found no doubt that every category of prize competition defined in section 2(1)(d) was of a gambling nature. The qualifying clause that followed clause (1) was read as applying to each of the five enumerated kinds, and the word “or” that appeared after “promoters” and before “for” was interpreted as “and”. Likewise, clause (ii), when properly understood, could not embrace any prize competition other than those that were gambling‑related. The earlier decision in Elderton v. Totalisator Co. Ltd. (1945) 2 All E.R. 624 was held not to apply. The Court also rejected the suggestion that the Act merely regulated commercial activity, emphasizing that its dominant purpose was to suppress gambling. Consequently, the Act was characterised as legislation concerning betting and gambling and was placed under Entry 34 of List II, which lay within the competence of the State Legislature.

The Court observed that taxes on gambling formed a well‑recognised class of indirect taxes. Section 12A of the Act imposed a levy on the gross amounts collected by the promoters, not on their profits. The Court explained that this method was merely a convenient way of reaching the money that gamblers actually possessed, and that this distinction did not alter the character of the tax. The tax remained essentially a levy on betting and gambling, not a tax on any trade, and therefore fell within Entry 62 of List II rather than Entry 60. The Court further held that a prize competition that did not depend substantially on skill for its solution was a gambling activity. An examination of the prize competitions presented by the respondents showed that each contained an element of chance at the outset, and consequently each fell within the mischief of the Act. The doctrine of territorial nexus, the Court noted, was a well‑established principle that could be applied only when two conditions were satisfied: first, the connection between the persons to be taxed and the State that enacted the law had to be real and not illusory; second, the liability imposed had to be directly related to that connection. The Court stated that whether a sufficient territorial nexus existed in any particular case was essentially a question of fact. The factual inquiry therefore required examination of the actual operations of the promoters and the flow of funds into the State. In the present matter, the Court found that the impugned Act satisfied both the substantive test of a valid legislative field and the territorial‑nexus test, and therefore could not be struck down on the ground of extra‑territoriality.

In this case, the Court observed that there was virtually no doubt that the law challenged satisfied every requirement of the territorial‑nexus test and therefore could not be struck down on the basis of extra‑territoriality. The Court emphasized that gambling activities are intrinsically outside the realm of commerce, even though they may sometimes be presented in a commercial guise. It noted that ancient Indian sages and law‑givers regarded gambling as a sinful and harmful vice, and that similar disapproval was expressed in the statutes of England, Scotland, the United States of America and Australia. Consequently, the framers of the Indian Constitution, whose aim was to create a welfare State, could not have intended to elevate betting and gambling to the status of trade, business, commerce or intercourse. On that ground, the petitioners could not claim any fundamental right under Article 19(1)(g) or any freedom of trade under Article 301 of the Constitution in relation to their prize competitions, and therefore no such right could be infringed by the impugned legislation. The Court held that the validity of the legislation, which is in substance a law regulating gambling, was not subject to scrutiny under Articles 19(6) and 304 of the Constitution. It cautioned that judicial decisions interpreting Article 1, Section 8, Sub‑section (3) of the United States Constitution and Section 92 of the Australian Constitution should be applied with great care when construing Articles 19(1)(g) and 301 of the Indian Constitution. The Court referred to the authorities State of Travancore‑Cochin v. The Bombay Co. Ltd. (1952) SCR 1112 and P. P. Kutti Keya v. The State of Madras, AIR (1954) Mad 621. It also discussed a series of foreign cases, namely The King v. Connare (1939) 61 CLR 596, The King v. Martin (1939) 62 CLR 457, Commonwealth of Australia v. Bank of New South Wales LR (1950) AC 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. The judgment then proceeded to the civil appellate jurisdiction of Civil Appeal No. 134 of 1956, filed under Articles 132(1) and 133(1)(c) of the Constitution, challenging the Bombay High Court’s order dated 12 January 1955 in Appeal No. 72 of 1954, which arose from the original judgment dated 22 April 1954 in Miscellaneous Application No. 365 of 1952. The parties were represented by counsel for the appellant and respondents, as well as an intervener, and the judgment was delivered on 9 April 1957 by Chief Justice Das.

The appeal was founded on the judgment and order dated 22 April 1954, which had been issued by a single judge of the Bombay High Court and which allowed, with costs, the petition filed by the present respondents under Article 226 of the Constitution of India. That petition had originally been presented before the High Court of Judicature at Bombay on 18 December 1952. The petition named two petitioners, and those two individuals are now the two respondents before this Court. The first petitioner was an individual who asserted that he was a citizen of India and who described himself as the founder and Managing Director of the second petitioner, a company incorporated in the State of Mysore with its registered head office at 2 Residency Road, Bangalore, Mysore. The petition was accompanied by an affidavit sworn by the first petitioner on the same day, and the contents of the petition and the affidavit were summarised as follows.

In July 1946 the first petitioner applied to the then Collector of Bombay for a licence to conduct the Littlewood’s Football Pool Competitions in India, and he was issued Licence No 84 of 1946 which was valid until 31 March 1947. The licence had been granted under the Bombay Prize Competitions Tax Act (Bombay Act XI of 1939), hereinafter referred to as the 1939 Act, which was then in force. The licence was subsequently renewed for a further one‑year period covering 1 April 1947 to 31 March 1948. During that renewal period the first petitioner paid to the Bombay Provincial Government a competition tax of one lakh rupees per year.

When the Government of Bombay refused to grant a further renewal of the licence, the first petitioner instituted proceedings under section 45 of the Specific Relief Act in the Bombay High Court. After a series of hearings, the appeal was dismissed by the Court of Appeal on or about 28 March 1949. Because of the delay and difficulty in obtaining another licence in Bombay, the first petitioner, around August 1948, transferred his business activities from Bombay to the State of Mysore. There, he promoted and, on 26 February 1949, incorporated a company named R.M.D.C. (Mysore) Limited, which was the second petitioner before the High Court and is now the second respondent before this Court.

The first petitioner, who had acted as the promoter of the company, became its Managing Director. All of the shareholders and directors of the second petitioner were reported to be nationals and citizens of India. The second petitioner also owned and operated a weekly newspaper titled “Sporting Star,” which was printed and published in Bangalore by a press also owned by the company. Through this newspaper the second petitioner conducted a prize competition known as the R.M.D.C. Crosswords, receiving entries from various parts of India, including the State of Bombay, via agents and depots established in those locations.

Entries for the R.M.D.C. Crosswords prize competition were collected through agents and depots set up in various locations and were then forwarded to the head office situated in Bangalore. The Bombay Lotteries and Prize Competition Control and Tax Act, Bombay Legislative Volume of 1948 (hereinafter referred to as the 1948 Act), replaced the earlier 1939 Act and became effective on 1 December 1948. Both the 1939 Act and the 1948 Act, as originally enacted, expressly excluded from their operation any prize competition that was contained in a newspaper printed and published outside the Province of Bombay. Consequently, the prize competition known as the R.M.D.C. Crosswords was not subject to either of those statutes. On 21 June 1951 the State of Mysore enacted its own Mysore Lotteries and Prize Competition Control and Tax Act, 1951, which was drafted on the lines of the 1948 Act. The Mysore Act came into force on 1 February 1952, and the second petitioner subsequently applied for and obtained a licence under that Act, paying the required licence fees. The petitioner also began paying, and continues to pay, a tax to the State of Mysore calculated at a rate of fifteen per cent of the gross receipts from the R.M.D.C. Crosswords competition, a rate that was later reduced to twelve point one per cent. The competition has been conducted continuously through the weekly newspaper “The Sporting Star”, and entry forms together with the associated fees have been received from all parts of India, including the State of Bombay. According to the audited books of account, after the distribution of prizes amounting to roughly thirty‑three per cent of the receipts, after payment of Mysore taxes of about fifteen per cent, and after meeting other expenses that together total approximately forty‑seven per cent, the net profit of the second petitioner works out to merely five per cent. On 20 November 1952 the State of Bombay passed the Bombay Lotteries and Prize Competitions Control and Tax (Amendment) Act, Bombay XXX of 1952, which amended several provisions of the 1948 Act. The amendment removed the words “but does not include a prize competition contained in a newspaper printed and published outside the Province of Bombay” from the definition of “prize competition” in section 2(1)(d) of the 1948 Act, thereby expanding the reach of the amended Act to cover prize competitions appearing in newspapers printed and published outside the State of Bombay. In addition, the amendment inserted a new clause (dd) after clause (d) of section 2(1) to define the term “Promoter”. The amendment also substituted a new section for the old section 12 and introduced a further new section, numbered 12A, immediately after section 12. Section 12A created a provision for levying a tax on every prize competition contained in a newspaper or other publication printed outside the State of Bombay for which a licence had been obtained under the

The amendment authorised the State of Bombay to levy a tax on each prize competition that appeared in a newspaper or other publication printed outside the State, either at rates that could be prescribed but could not exceed those specified in section twelve, or by a fixed amount calculated according to the circulation or distribution of the newspaper or publication within Bombay. The petitioners observed that, because the net‑profit margin on such competitions was only five per cent, the imposition of this tax under the 1948 Act, as amended, would render the second petitioner incapable of conducting its prize competition without incurring a loss. They further referred to the Bombay Lotteries and Prize Competition Control and Tax Rules of 1952, which had become effective on 8 December 1952. Those Rules required the petitioner to obtain a licence in Form “H” and imposed a series of onerous conditions on the licence holder. The petitioners argued that, from a commercial standpoint and in practical terms, it would be impossible for them to run prize competitions throughout India if they were obliged to comply not only with the restrictions and conditions imposed by the Mysore State, where the newspaper was printed, but also with the varying restrictions, conditions and taxes imposed by Bombay and other Indian States where the newspaper and its advertisements were circulated. Consequently, they contended that the provisions of the amended Act and the Rules, insofar as they applied to prize competitions appearing in newspapers and other publications printed outside Bombay, exceeded the legislature’s authority, were therefore void and could not be enforced. Upon the filing of the petition, a Rule was issued directing the State of Bombay to appear and show cause, if any, why the relief sought should not be granted. The State of Bombay responded with an affidavit that raised several technical objections to the petition’s maintainability and denied the allegations set out in the petition and its supporting affidavit. In that affidavit, the State argued that, because the second petitioner was a corporation and the first petitioner, its managing director, possessed no rights independent of the corporation, neither could claim any fundamental right under article 19(1)(g) of the Constitution, and thus no question of infringement of such a right arose. The State further submitted that, given the public‑policy opposition to lotteries and prize competitions, there could be no legitimate business in promoting a lottery or prize competition, and therefore the alleged violation of article 19(1)(g) did not arise. It also maintained that, even if the Act and the Rules operated as restrictions, those restrictions were reasonable and served the general public interest.

The State asserted that the provisions under consideration were reasonable and served the general public’s interest. In the same vein, the State maintained that, because lotteries and prize competitions were contrary to public policy, no legitimate business could exist in promoting either a lottery or a prize competition, and consequently no question of a breach of Article 301 of the Constitution arose. The State further denied that sections 10 and 12 of the Act contravened the Constitution’s equal‑protection clause. In response, the first petitioner filed an affidavit that contested every allegation, submission, and contention presented in the State’s opposing affidavit. Before the trial judge, the petitioners advanced the following principal contentions: first, that the impugned Act, especially its taxation provisions, exceeded the competence of the State Legislature and was therefore invalid, because the Act did not pertain to betting and gambling under Entry 34, nor to entertainments and amusements under Entry 33, nor to taxation on such entertainments, betting, or gambling under Entry 62 of the State List; instead, the legislation dealt with trade and commerce, and the tax imposed was on the trade or calling of conducting prize competitions, which fell within Entry 60 of the State List. Second, that the respondents’ prize competition was not a lottery and could not be characterized as gambling, since it was a contest in which skill, knowledge, and judgment exercised genuine and effective influence. Third, that the Act itself contained separate provisions for prize competitions and for lotteries, thereby acknowledging that prize competitions were distinct from lotteries. Fourth, that the tax, being in substance a levy on the trade or business of running prize competitions, violated Section 142A(2) of the Government of India Act, 1935 and Article 276(2) of the Constitution, which respectively limit such a tax to not more than fifty rupees and two hundred and fifty rupees per annum.

Fifth, that the Act was beyond the legislative competence of the Bombay Legislature and invalid because it legislated on trade and commerce that extended outside the State’s territory. Sixth, that the Act operated extra‑territorially, affecting the trade or business of conducting prize competitions beyond the State, and was therefore beyond the State Legislature’s authority and invalid. Seventh, that the Act infringed Article 301 of the Constitution by imposing restrictions on inter‑State trade, commerce, and intercourse, and that these restrictions were not saved by Article 304(b). Eighth, that the restrictions imposed by the Act on the petitioners’ trade or business were not reasonable in the public interest and consequently contravened the petitioners’ fundamental right under Article 19(1)(g) to carry on their trade or business, the petitioners being citizens of India. Ninth, that sections 10, 12, and 12A of the Act violated Article 14 of the Constitution by allowing discrimination between prize competitions printed and published within the State and those printed and published outside the State.

Sections 10, 12 and 12A of the impugned Act were held to be in violation of Article 14 of the Constitution because they authorised discrimination between prize competitions published in newspapers or other publications that were printed and released inside the State and those that were printed and released outside the State. The State of Bombay, which appeared as the appellant, set out several submissions. First, it argued that the prize competitions organised by the petitioners constituted a lottery. Second, it maintained that the provisions of the Act were valid legislation within the competence of the State Legislature, falling under entries 33, 34 and 62 of the State List. Third, it claimed that the Act did not operate extra‑territorially. Fourth, it asserted that the prize competitions were contrary to public policy and therefore could not be regarded as a legitimate trade or business. Fifth, it contended that because the petitioners were not engaged in a trade or business, there was no question of infringing their fundamental right under Article 19(1)(g) or of breaching Article 301. Sixth, it submitted that the second petitioner, being a corporation, was not a citizen and therefore could not invoke the right guaranteed by Article 19(1)(g). Finally, the State argued that any restrictions imposed by the Act on the alleged trade or business of the petitioners were reasonable in the public interest and fell within the scope of Article 19(6) and Article 304(b) of the Constitution.

The trial judge reached a different conclusion. He held that the tax levied under sections 12 and 12A was not a tax on entertainment, amusement, betting or gambling, but rather a tax on the respondents’ trade or calling, and that it fell under Entry 60 of the State List rather than Entry 62. He observed that the competitions organised by the petitioners were not lotteries and could not be described as betting or gambling, because they required skill, knowledge and judgment on the part of the participants. Consequently, the levy of the tax under the cited sections was declared void as it contravened Article 276(2) of the Constitution. The judge further found that the restrictions imposed by the Act and the Rules made thereunder violated Article 301 and were not saved by Article 304(b), since the restrictions were neither reasonable nor served the public interest. He also held that the second petitioner, although a company, was a citizen of India and therefore entitled to the protection of Article 19. Accordingly, the restrictions were deemed unreasonable, not in the interest of the general public, and void under Article 19(1)(g). As a result, the rule nisi was made absolute, and the State of Bombay, together with its servants and agents, was ordered to refrain from enforcing or taking any steps to enforce, implement, further or pursue any provision of the impugned Act and the 1952 Rules made thereunder.

The order specifically instructed the State of Bombay, together with its servants and agents, to refrain from enforcing any of the penal provisions against the petitioners, their directors, officers, servants or agents. It further directed the State to allow the petitioners to continue their trade and business of conducting the prize competition described in the petition, and to forbear from demanding, collecting or recovering from the petitioners any tax that might be imposed under the impugned Act or the Rules in respect of that prize competition. In addition, the State of Bombay was ordered to pay the petitioners the costs of the applications. Being dissatisfied with the decision of the trial judge, the State of Bombay filed an appeal on 8 June 1954. The Court of Appeal dismissed that appeal and upheld the trial judge’s order, although it did so on somewhat different grounds. Unlike the trial judge, the appellate court held that the legislature possessed competence to enact the legislation because the subject matter was “gambling,” which fell within Entry 34 of the State List. Nevertheless, the appellate court agreed with the trial judge that the tax imposed under section 12A was not a tax on gambling but rather a tax falling under Entry 60. The appellate court concluded that the legislature was competent to levy that tax, but declared the tax invalid because it failed to satisfy the restriction contained in Article 276 (2) of the Constitution. The court also held that, even if the tax were characterised as a tax on betting or gambling, it could not be justified because it did not fall within the ambit of Article 304 (b). The appellate court differed from the trial judge when it rejected the trial judge’s finding of fact that the scheme underlying the prize competitions was not a lottery; instead, the appellate court determined that the Act applied to the respondents’ prize competitions. Accordingly, the appellate court held that the petitioners’ challenge to the impugned provisions succeeded, because the restrictions imposed by the Act on the petitioners’ business could not be justified as the requirements of Article 304 (b) had not been met. The High Court had agreed with the trial judge that the petitioners’ prize competitions constituted their “business,” which was entitled to constitutional protection, and had held that although the activity was a lottery, it was not contrary to public interest; consequently, the provisions of Part XIII of the Constitution applied to the respondents’ business. Aggrieved by the appellate judgment, the appellant obtained a certificate of fitness for appeal to the Supreme Court under Articles 132 (1) and 133 (1) of the Constitution, and this appeal now stands before the Court. The principal issue for determination is whether the impugned Act is valid. The Court of Appeal has rightly

The Court observed that when a statute’s validity is challenged, the first inquiry must be whether the enactment falls within the subject matter jurisdiction of the legislature that passed it. If this condition is satisfied, the next step is to determine whether a law enacted by a provincial legislature—now a state legislature—has any operation beyond the limits of that province or state. This is because the constitutional scheme confers upon a legislature the authority to legislate only for its own territory or a part thereof, and in the absence of a territorial nexus a law cannot have extraterritorial effect. Once the statute clears both of these preliminary tests, the Court must then examine whether any other provision of the Constitution imposes a restriction on the legislative power of that body. Consequently, the impugned legislation must satisfy all three criteria. Turning to the first test, the Court recalled that the 1948 Act was originally enacted by the Provincial Legislature of Bombay while the Government of India Act, 1935, was still in force. Sections 99 and 100 of that Act authorised the Bombay Provincial Legislature to make laws for the province or any part of it concerning matters listed in List III of the Seventh Schedule to the 1935 Act. The Court further noted that the 1948 Act was later amended by Bombay Act XXX of 1952 after the Constitution of India had become operative. Under Articles 245 and 246 of the Constitution, subject to its provisions, the Legislature of the State of Bombay may make laws for the whole or any part of the State with respect to matters enumerated in List II of the Seventh Schedule to the Constitution. The appellant, the State of Bombay, therefore contended that the impugned Act, including section 12A, was enacted on topics covered by Entries 34 and 62 of List II of the Seventh Schedule, which correspond to Entries 36 and 50 of List II in the Seventh Schedule to the Government of India Act, 1935. In contrast, the petitioners, who are respondents, argued that the same Act should be regarded as legislation falling under Entries 26 and 60 of List II in the Seventh Schedule to the Constitution, which correspond to Entries 27 and 46 of List II in the Schedule to the Government of India Act, 1935. They further maintained that, insofar as section 12A imposes a tax, it ought to be classified under Entry 60 of List II—relating to taxes on professions, trades, callings, and employments—not under Entry 62, which deals with taxes on luxuries, including betting and gambling.

The petitioners submitted that the impugned legislation falls within Entry 50 of List II in the Seventh Schedule to the Constitution, a provision that corresponds to Entry 50 of List I in the Seventh Schedule to the Government of India Act, 1935. They further contended that because the tax imposed by the Act exceeds the amount of two hundred and fifty rupees, the tax is void under Article 276(2), which reproduces section 142A of the Government of India Act, 1935. From this point forward the Court will refer only to the relevant Entries of List II in the Seventh Schedule to the Constitution, because those Entries are substantially identical in language to the corresponding Entries of List I in the Seventh Schedule to the Government of India Act, 1935. For convenient reference the applicable Entries of List II in the Seventh Schedule to the Constitution are set out as follows: Entry 26 – trade and commerce within the State subject to the provisions of Entry 33 of List III; Entry 34 – betting and gambling; Entry 60 – taxes on professions, trades, callings, and employments; and Entry 62 – taxes on luxuries, including taxes on entertainments, amusements, betting and gambling. In order to correctly appreciate the rival contentions and to decide under which specific Entry or Entries the impugned Act, including section 12A, was enacted, it is necessary to examine the purpose and scope of the legislation. The 1939 Act was enacted to regulate and levy a tax on prize competitions in the Province of Bombay and dealt with no lotteries. That Act was repealed by the 1948 Act, which was enacted to control and levy a tax not only on prize competitions but also on lotteries. The inclusion of both lotteries and prize competitions in the 1948 Act indicates that, in the view of the Legislature, the two topics were regarded as allied. 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. Section 2(1)(d) of the impugned Act provides the definition of “prize competition”, a term that will be considered in greater detail later. Clause (dd) was inserted in section 2(1) in 1952 defining “promoter”. Section 3 declares that, subject to the provisions of the Act, all lotteries and all prize competitions are unlawful. This language clearly shows that the Legislature regarded lotteries and prize competitions as being on the same footing and declared both unlawful, subject, of course, to the provisions of the Act. Section 4 creates certain offences in connection with lotteries and prize competitions and specifies the punishments for such offences. Sections 5 and 6, which deal exclusively with lotteries, may be omitted, and the discussion proceeds to section 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 is obtained.

The Act required that the promoter obtain a licence for the prize competition, and the provisions of that licence were set out in the preceding section. Although the section contained two provisos, the Court noted that those provisos were irrelevant to the issue under consideration. Section 8 then prescribed an additional penalty that would be imposed on any person who violated the provisions of section 7. Section 9 dealt with the manner in which licences could be granted, specifying that the fees, conditions, and form of the licence must be prescribed by rules made under the Act. Under section 10 the Government, by issuing either a general or a special order, was authorised to prohibit the grant of licences for a lottery or prize competition, or for an entire class of such activities, throughout the State or in any specific area. Section II gave the Collector the power to suspend or cancel a licence that had been issued under the Act whenever the circumstances described in that section were present.

Section 12 authorised the imposition of a tax on lotteries and prize competitions at a rate of twenty‑five per cent of the total sum received or due in respect of the particular lottery or competition, and it directed that the tax be collected from the promoter of the relevant activity. Sub‑section (2) of section 12 further empowered the State Government, by means of a notification published in the official Gazette, to raise the tax rate to as much as fifty per cent of the total sum received or due, provided that the increase was specified in the notification. Section 12A, which the Court highlighted as especially significant for the appeal, provided that notwithstanding the provisions of section 12, a tax would also be levied on every lottery or prize competition that appeared in a newspaper or other publication printed and published outside the State, provided a licence had been obtained under sections 5, 6 or 7. The rate of that tax would be set by a notification in the official Gazette, would not exceed the rates fixed in section 12, and would be calculated on the basis of the sums declared by the promoter under section 15 or on a lump‑sum basis taking into account the circulation or distribution of the newspaper or publication within the State. Section 15 required each person who promoted any lottery or prize competition to keep proper accounts of the activity and to submit statements to the Collector in the form and at the intervals prescribed. The Court observed that, for the purpose of the present appeal, it was unnecessary to discuss the remaining procedural sections of the Act, except for section 31, which gave the State Government the authority to make rules to give effect to the provisions of the Act. Exercising that authority, the State Government had, by a notification in the official Gazette, issued the Bombay Lotteries and Prize Competitions Control and Tax Rules, 1952.

The Court referred to the Bombay Lotteries and Prize Competitions Control and Tax Rules, 1952, which would be cited hereafter. The petitioners argued that the purpose of the contested Act was to control and tax lotteries and prize competitions, not to prohibit either activity. They maintained that the Act treated prize competitions that resembled gambling in the same manner as prize competitions that required knowledge or skill for success, and they relied on the definition of “prize competition” contained in section 2(1)(d) of the Act to support this view. The petitioners further contended that the Act, taken as a whole or at least insofar as it regulated legitimate and innocent prize competitions, should be classified as legislation concerning trade and commerce under Entry 26 of the Constitution, rather than as legislation concerning betting and gambling under Entry 34. They also submitted that the taxing provisions, specifically sections 12 and 12A, functioned as taxes on the business of conducting prize competitions under Entry 60, and not as taxes on betting and gambling under Entry 62. The Court indicated that it could not accept these submissions and proceeded to explain the reasons for its conclusion. The Court noted that the impugned Act had replaced the 1939 Act, which dealt exclusively with prize competitions. Section 2(2) of the 1939 Act defined “prize competition” to include (a) crossword, missing‑words, picture, number, or any other competition whose solution was prepared in advance by the promoters or determined by lot; (b) any competition offering prizes for forecasts of the result of a future or past event whose outcome was not yet known or generally known; and (c) any other competition whose success did not largely depend on skill, expressly excluding prize competitions printed in newspapers or periodicals published outside the Province of Bombay. The Court observed that the 1948 Act, as originally enacted, reproduced this definition substantially in section 2(1)(d). The definition in the 1948 Act read: “Prize Competition” includes (i) crossword, missing‑words, picture, number, or any other competition for which the solution is prepared beforehand by the promoters or determined by lot; (ii) any competition in which prizes are offered for forecasts of the result of a future or past event whose outcome is not yet ascertained or generally known; and (iii) any other competition whose success does not depend to a substantial degree on the exercise of skill. This repeated wording, the Court explained, demonstrated that the legislative intent was to encompass competitions of a gambling nature within the statutory framework.

The provision stated that a prize competition which did not rely on the exercise of skill, and which was not published in a newspaper printed outside the Province of Bombay, fell within the definition. The phrasing of the first category of definitions in both the 1939 Act and the 1948 Act, as originally enacted, made it evident that the qualifying condition “for which the solution is prepared beforehand by the promoters of the competition or for which the solution is determined by lot” applied uniformly to each of the five types of prize competitions enumerated in that category and set out in a single continuous sentence.

This qualifying condition was composed of two separate parts, linked by the disjunctive word “or”. Both parts of the condition indicated that each of the five listed prize competitions was of a gambling character. Accordingly, a prize competition in which the solution had been prepared in advance was plainly a gambling competition, because the participants were merely invited to guess the predetermined solution that the promoters had created. As Lord Hewart C. J. observed in Coles v. Odhams Press Ltd. (1), the competitors were invited “to pay a certain number of pence to have the opportunity of taking blind shots at a hidden target.” Prize competitions to which the second part of the condition applied—those in which the solution was determined by lot—were necessarily gambling adventures.

The language employed in the definition sections of both the 1939 Act and the 1948 Act, as originally enacted, left no doubt that each of the five prize competitions included in the first category, to which the qualifying condition applied, was of a gambling nature. It has also never been disputed that the third category, described as “any other competition success in which does not depend to a substantial degree upon the exercise of skill,” likewise constituted a gambling competition.

Previously, the view had been expressed that for a competition to be characterized as gambling it had to depend entirely on chance, and that the presence of even a trace of skill would preclude it from being gambling. The Court of Appeal, whose judgment is under review, has demonstrated that this view has evolved since earlier decisions, and it is unnecessary to revisit the historical arguments. It suffices to state that the Court of Appeal held, and the present Court agrees, that a competition must depend to a substantial degree upon the exercise of skill in order to avoid the label of gambling. Consequently, a competition in which success does not depend to a substantial degree upon skill is now recognized as being of a gambling nature. From the foregoing discussion it follows that the definition of prize competition in both the 1939 Act and the 1948 Act, as originally enacted, treats the five prize competitions in the first category and the competition described in the third category as gambling competitions.

In relation to the definition of “prize competition” that appears in the 1939 Act and in the 1948 Act as originally passed, the Court observed that the five types of prize competitions listed in the first category together with the competition described in the third category were all considered to be of a gambling nature. Between those two gambling categories the legislature inserted a second category described as “competitions in which prizes were 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 is not yet generally known.” The Court noted that this placement was important and would be examined in greater detail later.

The Court then turned to the amendment made to the 1948 Act in 1952 by the Bombay Act XXX of 1952. Section 2(1)(d) of the amended Act now reads as follows: “Prize competition includes—(i) (1) cross‑word prize competition, (2) missing word prize competition, (3) picture prize competition, (4) number prize competition, or (5) any other prize competition, for which the solution is or is not prepared beforehand by the promoters or for which the solution is determined by lot or chance; (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 (iii) any other competition success in which does not depend to a substantial degree upon the exercise of skill.” The Court drew attention to the fact that the concluding sentence that had excluded a prize competition contained in a newspaper printed and published outside the Province of Bombay had been removed. The removal of that sentence, the Court said, had far‑reaching effect because it eliminated the previous exclusion of such newspaper competitions from the definition.

Despite the amendment, the definition continued to contain three categories as before. The wording of the second and third categories remained exactly the same as in the earlier definitions. Only the first category showed noticeable changes. The five kinds of prize competitions that were previously set out in a continuous sentence were now listed one below the other, each assigned a separate numeral. In addition, the qualifying clause that follows the fifth item was altered by inserting the words “or is not” after the word “is” and before the word “prepared,” and by adding the words “or chain ce” after the word “lot.” The qualifying clause still appears after the fifth item, and a comma follows each of the five items, including the fifth. The Court held that merely numbering the five items did not change the meaning, scope, or effect of that part of the definition. The numbering did not separate any of the items from the qualifying clause; if the clause were intended to apply only to the fifth item, there would not be a comma after the fifth item. Consequently, the Court concluded that the qualifying clause continues to apply to each of the five items just as it had before the amendment.

The Court observed that the amendment did not change the meaning, scope or effect of that portion of the definition. It held that assigning numbers to the five items did not separate any of those items from the qualifying clause. The Court explained that if the qualifying clause were meant to apply only to the fifth item, a comma would not have been placed after that fifth item. Consequently, the Court concluded that the qualifying clause continues to apply to each of the five items just as it did before the amendment. The Court found no grammatical obstacle to interpreting the qualifying clause as giving effect to each of the enumerated items. Accepting that the clause applies to all five kinds of prize competitions in the first category, the Court noted that it was urged that the amended clause shows the Legislature’s intention to bring innocent prize competitions within the definition, thereby subjecting every prize competition—whether legitimate or not—to the Act’s regulatory and tax provisions. The argument was presented in that form. The Court then described how the amendment divided the qualifying clause into three separate parts, each linked by the disjunctive word “or”. The three parts were: (1) competitions for which the solution is prepared beforehand by the promoters; (2) competitions for which the solution is not prepared beforehand by the promoters; and (3) competitions for which the solution is determined by lot or chance. The Court acknowledged that applying the first and third parts to the five listed prize competitions would render each of them gambling ventures. However, it was contended that the second part—competitions where the solution is not prepared beforehand—need not be gambling in nature, and many such competitions could be innocent. The Court regarded this argument as based on weak drafting. It observed that, in the earlier definitions, all five kinds of prize competitions listed in the first category were characterised as gambling activities. No convincing reason, and none suggested, was found for the Legislature—who had treated lotteries and prize competitions alike—to suddenly expand the first category to include innocent prize competitions. The Court warned that interpreting the first category to contain innocent prize competitions would contradict the clear purpose of the impugned Act. It recalled that the 1939 Act, which dealt solely with prize competitions, defined the first category exclusively as gambling competitions. The later 1948 Act combined lotteries and prize competitions, and the first category in its original definition was also purely gambling, as indicated by both parts of the qualifying clause. Section 3 of the Act declared all lotteries and all prize competitions unlawful, and there was no justification for declaring innocent prize competitions unlawful. The regulatory provisions concerning licensing and taxation applied to all prize competitions. If

If the legislature had intended to place innocent prize competitions within the first category, it would have created separate statutory provisions that imposed lighter regulations on legitimate competitions than on illegitimate ones. Applying the same taxation provisions to both legitimate and illegitimate competitions would be difficult because the tax on legitimate competitions could be treated as a tax under Entry 60 on a trader engaged in the trade of innocent and lawful competitions. In contrast, serious controversy has arisen over whether an illegitimate competition can even be regarded as a trade; some observers argue that the applicable tax must be justified as a tax on betting and gambling under Entry 62. After examining the nature, scope and effect of the impugned Act, the Court found no doubt that the first category of prize competitions does not encompass any innocent prize competition. This conclusion reflects the clear intention of the legislature as expressed in the whole of the Act. To give effect to that intention, the Court was obliged to read the word “or” that appears in the qualifying clause after the term “promoter” and before the term “for” as the word “and”. Well‑known canons of statutory construction permit such an interpretation, as discussed in Maxwell on the Interpretation of Statutes, 10th edition, page 238. A similar construction was argued with respect to clause (ii) of section 2(1)(d). The definition of prize competitions, as already noted, places a second category between the first and third categories, both of which are gambling in nature. This second category covers competitions that offer prizes for forecasts of the result of a future event or of a past event whose result is not yet ascertained or generally known. It has been suggested that such forecasts need not depend on chance because they can be made accurately by applying knowledge and skill derived from careful statistical study of similar past events. While expert statisticians may be able to form an idea of an uncertain future result, it is difficult to treat an invitation to the general public to join these competitions as an invitation to a game of skill. Ordinary participants generally lack the extensive statistical ability required to apply skill successfully; for most, the forecast amounts to nothing more than a shot at a hidden target. Moreover, it is improbable that the legislature, in enacting a law that treats both lotteries and prize competitions uniformly as indicated by section 3, would have inserted innocent prize competitions between two categories that are purely gambling in nature.

In this case, the Court observed that innocent prize competitions were placed between two categories that were purely gambling varieties, and that the considerations and difficulties previously discussed with respect to the construction of the first category and its qualifying clause should apply mutatis mutandis to the interpretation of the second clause. The Court noted that reliance was placed on section 26 of the English Betting and Lotteries Act, 1934 (24 and 25 Geo. V c. 58) to aid the construction of the second category of prize competitions included in the definition given in the impugned Act. The Court reproduced the relevant portion of section 26, which read: “26. (1) It shall be unlawful to conduct in or through any newspaper, or in connection with any trade or business or the sale of any article to the public (a) any competition in which prizes are offered for forecasts of the result either of a future event, or of a past event the result of which is not yet ascertained or not yet generally known; (b) any other competition in which success does not depend to a substantial degree upon the exercise of skill.” The Court pointed out that this section was not a definition provision but a penal provision that made certain competitions mentioned in the two clauses unlawful. It further explained that clause (a) of that section, which corresponded to the second category under consideration, was not situated between two gambling prize‑competition categories. Referring to Elderton v. Totalisator Co. Ltd. (1), on which the petitioners relied, the Court explained that the issue in that case was whether the football pool advertised in newspapers by the appellant fell within the broad language of clause (a) of the English Act. The Court clarified that whether the football pool required skill on the part of the “investors” or was of a gambling nature was not directly relevant to the question of whether it fell within clause (a). Consequently, the penal provisions of the English Act and the Court of Appeal’s decision did not illuminate the construction of the definition clause in the Indian statute. Observing that prize competitions had been grouped together with lotteries and dealt with in the same Act, and noting that the second category of the definition of “prize competition” was positioned between two other categories that were clearly gambling in nature, the Court considered the other provisions of the impugned Act, particularly section 3 and the taxing sections. On the basis of this overall context, the Court held that a proper construction of the language of section 2(1)(d), read in light of the Act as a whole, limited the definition of “prize competition” to competitions that were essentially lotteries in the wider sense, that is, gambling competitions. The Court further recorded that the Court of Appeal had taken the view that, although the definition as construed could include innocent prize competitions, the application of the appropriate interpretative principle altered that conclusion.

In this case the Court considered another principle, namely that a literal construction of the provision would make the law invalid because it would exceed the limits of Entry 26, which is confined to trade and commerce within the State; therefore the definition should be read as limited only to gambling prize competitions so that the statute falls within the competence for betting and gambling under Entry 34. The Court found it unnecessary to examine whether the principle laid down in (1) (1945) 2 A.E.R. 624 by Sir Maurice Gwyer C. J. in the Hindu Women’s Right to Property Act case could be invoked to cut down the scope of a section by omitting one of two things when a proper construction of the section includes both, because it could not agree, with great respect, with the Court of Appeal’s view that the definition, on a proper construction, covers both gambling and innocent competitions. In the Court’s view, a true construction confines the definition to gambling prize competitions and the Act is therefore a law with respect to betting and gambling under Entry 34. Having reached this conclusion, the Court saw no need to refer to the language used in the third category or to invoke the rule of construction known as noscitur a sociis that had been relied upon by counsel for the appellant. The next point urged was that, although the Act may come under Entry 34, the taxing provisions of section 12A cannot be said to impose a tax on betting and gambling under Entry 62 but instead impose a tax on trade under Entry 60. Once it is held that the impugned Act is on the topic of betting and gambling under Entry 34, the tax imposed “by such a statute, one would think, would be a tax on betting and gambling under Entry 62”. The Court of Appeal expressed the view that section 12A does not fall within Entry 62 because it does not tax the gambler but levies a tax on the promoters who do not themselves gamble but only promote the prize competitions; accordingly, the tax levied from them can only be regarded as a tax on the trade of prize competitions carried on by them. “This,” with respect, “is taking a very narrow view of the matter.” Entry 62 speaks of taxes on betting and gambling and not of taxes on the persons who bet or gamble. It was therefore necessary to bear in mind the real nature of the tax. The tax imposed by section 12A is, in effect, a percentage of the sums specified in the declaration made under clause 15 by the promoter or a lump‑sum calculated with regard to the circulation and distribution of the newspaper or publication in the State, as indicated in (1) (1941) F.C.R. 12. Under section 15 the promoter of a prize competition carried on in a newspaper or publication …

When a competition is printed and published outside the State, the promoter is required to make a declaration in the form and at the time prescribed by law. The declaration must be submitted on Form “J,” which is prescribed by rule 11 (c). Form “J” obliges the promoter, among other things, to state the total number of tickets or coupons that have been received for the competition from the State of Bombay and also to state the total receipts that have been generated from the sale of those tickets or coupons within the State of Bombay. The percentage prescribed under paragraph 12A is to be calculated on the total sums that are specified in this declaration. Consequently, it is clear that the tax sought to be imposed by the impugned Act is a percentage of the aggregate of the entry fees that have been received from the State of Bombay. In the ultimate analysis, the tax therefore operates as a levy on each entry fee that is received from each individual competitor who remits the fee from the State of Bombay. In very large prize competitions, such as those that are undeniably conducted by the petitioners, it becomes extremely difficult and in fact almost impossible for the State to pursue each individual competitor. For that reason, the provision that allows the tax to be collected from the promoters after the entry fees have come into their possession serves only as a convenient method of gathering the tax. In other words, the taxing authority finds it administratively convenient to collect the duty that pertains to the gambling activities represented by each entry at the moment when the monies reach the hands of the promoters. The tax on gambling is a well‑recognised class of indirect taxes, as noted by Findlay Shirras in his Science of Public Finance, vol. II p. 680. It is a kind of tax which, in the language of J. S. Mill quoted by Lord Hobhouse in Bank of Toronto v. Lambe (1), is demanded from the promoter with the expectation and intention that the promoter will indemnify himself at the expense of the gamblers who have sent entrance fees to him. This, the Court thought, reflects the general tendency of the tax according to the common understanding of people. It is not difficult for promoters to shift the tax onto the gamblers; they may charge the proportionate percentage on the amount of each entry in the same way that a seller of goods adds the sales tax, or they may simply increase the entrance fee from four annas to five annas and six pies to cover the tax. If, in particular circumstances, it is economically undesirable or practically impossible to pass the tax on to the gamblers, that circumstance does not become a decisive or even a relevant factor for determining the true nature of the tax, because it does not alter the general tendency of the tax which remains unchanged. If taxation on betting and gambling is to be regarded as a means of controlling betting and gambling activities, then the easiest and most certain way of achieving that purpose is to target the promoters who encourage and promote the unsocial activities and who hold the gamblers’ money in their hands. To collect

The Court observed that the tax imposed upon the promoters was not intended to tax the promoters directly but rather served as a convenient mechanism for levying a tax on betting and gambling, thereby indirectly taxing the gamblers themselves. It noted that the tax was calculated as a percentage of the total amount received by the promoters from the State of Bombay as entrance fees, without any deduction for expenses. Because the tax was levied on the gross receipts rather than on the net profit, the Court concluded that the tax did not constitute a tax on a trade. Referring to the general understanding expressed by Lord Warrington of Clyffe in Rex v. Caledonian Collieries Ltd. (1), the Court emphasized the clear distinction between a tax on gross collection and a tax on income, the latter being understood for taxation purposes as gains and profits. The Court indicated that similar considerations should apply when evaluating a tax on a trade. Moreover, the Court found a further reason to regard the tax imposed by section 12A as a tax on betting and gambling. In enacting the statute, the Legislature clearly intended to legislate with regard to betting and gambling under Entry 34, as previously mentioned. By the amending Act XXX of 1952, the Legislature removed the concluding words of the definition of “prize competition,” specifically the phrase “but does not include etc., etc.,” thereby extending the operation of the Act to prize competitions conducted in newspapers printed and published outside the State of Bombay. The Court recognized that the Legislature was aware, under Article 276 which reproduced section 142A of the Government of India Act (1) L.R. (1928) A.C. 358. 1935, that it could not impose a tax exceeding Rs 250 on any trade or calling under Entry 60.

The Court considered that the tax could be classified either under Entry 60 or under Entry 62. In view of the limitation in Article 276(2) that would render section 12A at least partially, if not entirely, invalid as a tax on trade or calling under Entry 60, the Court applied the well‑established principle of construction laid down by the Federal Court of India. It held that the Legislature must have intended to enact a law concerning betting and gambling under Entry 62, since there was no constitutional ceiling on the quantum of tax that could be imposed by a law made under that entry. Accordingly, the Court was satisfied that section 12A was supportable as a valid piece of legislation under Entry 62. The petitioners then argued that, under Articles 245 and 246, a State Legislature could legislate only for the State or any part thereof, and therefore the Legislature had exceeded its legislative authority by enacting the impugned Act, which purported to affect persons residing and carrying on business outside the State. The petitioners further submitted that there was no sufficient territorial nexus between the State and the activities of the petitioners, who were not present within the State.

The Court observed that the doctrine of territorial nexus was well settled and that its principles were undisputed. It noted, following the petitioners’ counsel, that when a person who is to be taxed maintained a genuine connection with the State imposing the tax, the taxing statute could be sustained. The Court explained that establishing a sufficient territorial nexus required two considerations: first, the connection had to be real and not merely illusory; second, the liability that the statute sought to impose had to be directly related to that connection. The Court further clarified that, for the purpose of assessing the statute’s validity, it was irrelevant whether the liability imposed was proportionate to the territorial connection; the adequacy of the connection concerned the policy domain, not the constitutional validity of the legislation. Applying these principles, the Court set out to determine whether, in the present case, there existed a territorial nexus adequate to permit the Bombay Legislature to enact the impugned law. It emphasized that the inquiry into the presence of a sufficient nexus was essentially a factual determination. The trial court had concluded that the nexus was insufficient to uphold the challenged provision, whereas the Court of Appeal had examined the facts differently and had upheld the law. The Court aligned itself with the appellate view. In support of its conclusion, the Court described the factual situation: the newspaper titled “Sporting Star,” printed and published in Bangalore, enjoyed wide circulation within the State of Bombay. The petitioners had established collection depots inside Bombay to receive entry forms and the associated fees, and they had appointed local collectors to manage these depots. In addition to the regular newspaper circulation, the petitioners produced more than forty thousand extra coupons for distribution, which were made available through their local collectors. The competitions advertised by the petitioners featured an attractive invitation to participate, promising very large prizes that could amount to several thousand rupees and, on occasion, reach a lakh of rupees, while the entry fee was nominal, for example four annas per entry. These advertisements reached a substantial number of residents of Bombay. Individuals who wished to take part—referred to euphemistically as “competitors”—completed the entry forms and either deposited the forms together with the fees at the collection depots established in Bombay or sent them by post from Bombay. The Court noted that the activities that a participant was normally expected to carry out—receiving the invitation, completing the form, and paying the fee—occurred, for the most part if not entirely, within the State of Bombay. After submitting the entry forms and fees, the participants awaited the outcome, holding their hopes that fortune might favor them. In the Court’s judgment, the invitations, the completion of the forms, and the payment of money all took place within Bombay, which was the State seeking to tax only the amount it received from the petitioners in Bombay. The tax, although described as a tax on gambling, was therefore connected to activities that occurred within the territorial limits of the State.

The Court noted that the tax in question was imposed on the promoters of the prize competitions and that this collection formed the basis of the State’s claim. All of the activities described, including the advertisements, entry forms, and payment of fees, occurred within the territory of Bombay, establishing a sufficient territorial nexus. The advertisements, which were placed in newspapers and other media, targeted a broad audience throughout the State, further embedding the contests within Bombay’s jurisdiction. Because of this nexus, the Court held that the State of Bombay was competent to levy a tax on gambling that took place inside its boundaries. The Court further stated that the statute could not be invalidated on the basis of extraterritorial operation, because the activities occurred within the State. Assuming that the impugned Act fell within the legislative competence of the Bombay Legislature and was not void for extraterritorial effect, the Court proceeded to examine other constitutional issues. The Court rejected the argument that the law could be set aside merely because it affected participants who might later travel beyond the State, emphasizing the locus of the transaction. The presence of these elements within Bombay gave the State a clear fiscal interest, allowing it to assert jurisdiction over the revenue generated by the gambling activities.

The petitioners argued that even if prize competitions were classified as gambling, they nonetheless constituted a trade or business protected by Article 19(1)(g) of the Constitution. Their interpretation of Article 19(1)(g) hinged on the notion that any activity generating profit, irrespective of its nature, fell within the protected sphere of trade or business. According to them, the impugned Act infringed their fundamental right to carry on a trade or business and the restrictions could not be justified as reasonable in the public interest under Article 19(6). They also contended that their operations were not confined to the State of Mysore but extended across state boundaries, into other Indian territories, and even beyond the Union, thereby invoking Article 301. The petitioners pointed out that the Constitution expressly seeks to prevent undue impediments to commerce that crosses State lines, thereby granting them a wider arena for their contests. In their view, the restrictions imposed by the Act violated the guarantee of free trade, commerce, and intercourse throughout India and could not be saved by Article 304(b) because the procedural requirements of its proviso had not been met. The State of Bombay rejected these arguments, asserting that prize competitions were contrary to public policy and therefore could not be characterized as a trade or business at all. The State further maintained that allowing the contests to continue would run counter to the moral objectives of the legislation, which aimed to suppress gambling’s social harms. Consequently, the State argued that there was no infringement of the petitioners’ Article 19(1)(g) right nor of the freedom guaranteed by Article 301, and even if those provisions were engaged, the restrictions were reasonable and fell within Articles 19(6) and 304(b). The State also contended that any residual impact on the freedom of trade was minimal compared with the public interest in curbing gambling. It was conceded that the legislation, known as Act XXX of 1952, which amended the 1948 Act, had been introduced without prior presidential sanction, thereby breaching the condition stipulated in the proviso. However, it was submitted that this defect was subsequently cured under Article 255 by the President’s assent to the Act. Thus, the Court was required to consider whether the subsequent presidential assent fully remedied the procedural defect or whether the Act remained constitutionally infirm.

The President eventually gave assent to the impugned Act. Counsel for the State acknowledged that, under Article 255, a later presidential assent can validate the Act provided the other requirement in Article 304(b)—that the restrictions be reasonable and in the public interest—is satisfied. However, counsel also pointed out that this subsequent assent does not validate the rules made under section 31 of the impugned Act because those rules were never presented to the President for approval, nor did they receive his assent or endorsement. The Court now proceeds to consider these opposing submissions. The first strand of argument before the Court raises a question of considerable breadth: whether the promotion of prize competitions that run counter to public policy may be described as “trade or business” within the meaning of Article 19(1)(g) or as “trade, commerce and intercourse” within the meaning of Article 301. The trial judge expressed the view that, had he been able to determine that the prize competitions organized by the petitioners were essentially gambling, he would have found them outside the protection of the Constitution without difficulty. The Court of Appeal, however, adopted a different approach. It observed that the legislature had not imposed an outright ban on gambling but had merely enacted provisions to regulate it, and it further noted that the State derived revenue from these prize competitions by imposing taxes on them. Consequently, the Court finds it necessary to examine the arguments presented by counsel for both sides in support of their respective positions. It is noted that Article 19(1)(g) in broad terms guarantees every citizen the right to pursue any occupation, trade or business, while clause (6) of Article 19 safeguards legislation that, in the interest of the general public, imposes reasonable restrictions on the exercise of that right. Likewise, Article 301 declares that trade, commerce and intercourse throughout the territory of India shall be free, but this declaration is subject to the other provisions of Part XIII of the Constitution. Articles 302 to 305, which belong to that part, set out specific restrictions that qualify the freedom proclaimed in Article 301. Article 302 empowers Parliament, by law, to impose restrictions on the freedom of trade, commerce or intercourse not only between one State and another but also within a State, provided such restrictions are required in the public interest. Article 304(b) likewise authorises State legislatures to impose reasonable restrictions on the freedom of trade, commerce or intercourse within the State, as may be necessary in the public interest, provided that the required procedural formalities are observed. Thus, Articles 19(1)(g) and 301 represent two aspects of the same principle—the freedom of trade—where Article 19(1)(g) looks at the freedom of the individual citizen, and Article 301 views it from the perspective of the nation’s trade and commerce as a whole.

The Court explained that Article 19(1)(g) examined the issue from the standpoint of individual citizens and safeguarded each person’s personal right to engage in trade or business, whereas Article 301 considered the matter from the perspective of the nation’s trade and commerce as a whole, distinct from individual interests, and it applied to trade, commerce or intercourse both between States and within a State. The Court said that the essential question before it was to determine the true meaning, import and scope of the freedom guaranteed and declared by the Constitution. The Court noted that it had been referred to numerous decisions relating to the Australian and American constitutions to aid in construing the relevant constitutional provisions. It observed that the Commonwealth of Australia Constitution Act (63 and 64 Vic. c. 12) contained Section 92, from which Article 301 was apparently derived. The Court reproduced the substantive part of Section 92, stating that it provided: “On the imposition of uniform duties of customs, trade, commerce and intercourse among the States, whether by means of internal carriage or ocean navigation, shall be absolutely free.” The Court then cited the decision in James v. Commonwealth of Australia, noting that that case held that the word “absolutely” served only to emphasize the breadth of the section and added no substantive limitation. In the same case, the Court reported that it was also decided that the section placed a restriction on the legislative power not only of the Commonwealth Parliament but also of the State Parliaments. Further, the Court said that authority had been placed on the proposition that the words “whether by means of internal carriage or ocean navigation” did not confine the section’s operation to activities carried by land or sea, but that the section extended to all activities conducted through inter‑State transactions, as affirmed in Commonwealth of Australia v. Bank of New South Wales. The Court added that the Privy Council, in the latter case, had observed at page 299 that it could no longer be argued that the section secured only freedom from customs or other monetary charges. The Court explained that the underlying idea of the Australian provision was to abolish frontiers between the States and to create a single Australia, a concept that encompassed freedom from customs duties, import‑, border prohibitions and all other restrictions, so that the people of Australia could trade with one another and move freely from one State to another without any hindrance, burden or restriction merely because they were not members of the same State, as again cited in James v. Commonwealth of Australia. The Court remarked that the language of the section was strikingly broad and general. It observed that such a wide declaration of freedom of inter‑State trade, commerce and intercourse was inevitably likely to create difficulties. Consequently, the Court held that the true import and full meaning of the general words must be examined over time, taking into account the changing facts and circumstances that arise as years pass.

The Court observed that the circumstances and conditions which periodically emerged forced it to recognise that the idea of freedom of trade, commerce and intercourse within a legally regulated community necessarily implied some limitation on individual conduct. It noted that as the facts and necessities changed, the Court was compelled to reach this conclusion, citing earlier authorities such as L.R. (1936) A.C. 578 at page 627 and L.R. (1950) A.C. 235 at pages 302‑303. The Court then turned to examples of statutes that restricted competition between privately owned motor vehicles and publicly owned railways, or that required motor users to contribute to road maintenance. Illustrative decisions included Willard v. Rawson, R. v. Vizzard and O. Gilpin Ltd. v. Commissioner of Road Transport and Tramways. In each of those three cases the Court affirmed that the State legislation did not offend section 92 of the Constitution.

Subsequent matters involved statutes justified on health grounds. In Ex parte Nelson (No. 1) a New South Wales law barred the entry of cattle from a tick‑infested region until the animals had been dipped. Applying the principle of pith and substance, the Court held that, when examined in their true light, such restrictions operated as aids to, rather than impediments of, the freedom of inter‑State trade, commerce and intercourse. By contrast, in Tasmania v. Victoria the absolute prohibition of importing potatoes from Tasmania into Victoria could not be supported on health grounds and was therefore struck down as a violation of section 92. The Court also examined the Dried Fruits Act 1928‑35 in James v. Commonwealth of Australia. That Act forbade the transport of any dried fruit between States without a licence and imposed penalties for contravention. The regulations authorised the Minister to direct a licence holder to export a specified percentage of dried fruits from Australia, and the Minister stipulated that condition in the licence. The appellant, having declined to obtain a licence, had his consignments of dried fruit shipped from Aide for delivery in Sydney seized, prompting him to sue for damages on the basis of wrongful seizure. After holding that the relevant constitutional provision bound the Parliament of the Commonwealth equally with the States, the Judicial Committee observed that the freedom declared in section 92 must be subject to some limitation. The Committee indicated that the only limitation logically emerging from the context was at the crucial point of State barriers, as noted on page 631. Later, in Commonwealth of Australia v. Bank of New South Wales, the Court reiterated that the words of section 92 must be read “secundum subjectam materiam” and could not be interpreted as granting an absolute, unrestricted right at every point of inter‑State trade.

In the judgment the Court observed that the Constitution did not protect merely the passage of goods under section 92, nor did it limit the stipulated freedom only at the State frontier, as suggested on page 308. Counsel for the State relied heavily on two decisions of the High Court of Australia that questioned the validity of the New South Wales Statute known as the Lotteries and Art Unions Act 1901‑1929. Section 21 of that Act provided that “whoever sells or offers for sale or accepts any money in respect of the purchase of any ticket or share in a foreign lottery shall be liable to a penalty.” In the first of the two cited cases, The King v. Connare (2), the appellant offered for sale in Sydney a ticket for a lottery that was lawfully conducted in Tasmania and was consequently convicted of an offence under section 21. The appellant challenged the statute on the ground that it interfered with the freedom of trade, commerce and intercourse among the States and therefore violated the provisions of section 92. The Court, by a majority of Starke, Dixon, Evatt and McTiernan JJ, with Latham C.J. and Rich J. dissenting, held that the provisions of section 21 did not contravene section 92 and that the appellant’s conviction was proper. Justice Starke discussed whether the sale in question was an “inter‑State or intra‑state transaction” but expressed that it was unnecessary to resolve that particular classification. After referring to Lord Wright’s observations in James v. The Commonwealth (3), Justice Starke noted that the freedom declared by section 92 meant freedom at the frontier. He further observed that the question of whether that freedom had been restricted or burdened depended on the true character and effect of the Act, a point he elaborated on pages 302‑303 of the Law Reports (see L.R. (1950) A.C. 235). At page 616 he took the view that the main purpose of the Act was to prevent or suppress lotteries, especially foreign lotteries covered by sections 19, 20 and 21, and that it was aimed at preventing what he graphically described as “illegitimate methods of trading” if sales of lottery tickets were regarded as trade. Justice Starke also took note of the fact that New South Wales law allowed State‑run lotteries, and he concluded that the true character of the impugned Act was to suppress gambling in foreign lottery tickets. Examining the statute from a historical perspective, considering its character, its function and its effect upon the flow of commerce, Justice Starke held that the Act did not, in his opinion, restrict or hinder the freedom of any trade across the State frontier. Justice Dixon, who then sat as a judge, gave two reasons for his agreement. First, he said that the transaction was not itself a transaction of inter‑State trade, commerce or intercourse because it was a sale in New South Wales of a ticket that was already in New South Wales. Second, he observed that, apart from the State lottery and permitted charitable raffles, the Act uniformly suppressed the sale of all such tickets, thereby indicating that its operation was not aimed at limiting inter‑State trade but at eliminating foreign gambling altogether.

The argument presented to the Court sought a declaration that section 92 of the Constitution created an overriding right to traffic in or invest in lotteries, provided that the trader could place some form of boundary between himself and the lottery conductor. Evatt J., addressing this contention at pages 619‑20, said that such a proposition could not be supported either in principle or by authority. He observed that the appellant’s argument effectively claimed a constitutional right for a citizen, who could rely on or artificially create an inter‑State connection in his business, to sell items such as indecent and obscene publications, diseased cattle, impure foods, unbranded poisons, unstamped silver, ungraded fruit and the like. Finding the consequences of accepting such extravagant arguments both inconvenient and undesirable, the learned Judge held at page 620 that, in interpreting section 92, it was permissible to adopt certain postulates or axioms demanded both by common sense and by an understanding of what the founders of the Australian Commonwealth intended. On that basis, Evatt J. concluded at page 621 that the guarantee contained in section 92 said nothing whatsoever about inter‑State lotteries and could not be invoked to prevent either the suppression of or the restriction, in the public interest, of gambling or investment in such lotteries. He further stated that lottery tickets could not be regarded as goods or commodities entitled to the protection of section 92. Accordingly, at page 628 he observed that if lottery tickets were to be treated as goods or commodities they would belong to a very special category, so special that, in the interests of its citizens, a State could legitimately exclude them from the realm of trade, commerce or business. He added that the indiscriminate sale of such tickets might cause business disturbance and loss, and that, on general policy grounds, the State was entitled to prevent or at least minimise that disturbance. McTiernan J. was even more forthright in placing gambling outside the scope of trade, commerce and intercourse. At page 631 he remarked that some trades are more adventurous or speculative than others, but trade or commerce as a branch of human activity belongs to an order entirely different from gaming or gambling, and that whether a particular activity falls within one order or the other is a matter of social opinion rather than jurisprudence. He described gambling as the purchase of a ticket or share in a lottery, stating that such a transaction does not belong to the commercial business of the country, because the purchaser merely stakes money in a scheme for distributing prizes by chance and is therefore a gamester. A little further, the learned Judge observed that it is not a commercial arrangement to sell a lottery ticket; it is merely the acceptance of money or a promise of money for a chance, and that the purchase of a lottery ticket merely creates a hope that something will happen in Tasmania to benefit the purchaser.

In this matter the appellant State’s counsel attempted to rely on the previously quoted observations of the learned judges to support the argument that gambling does not fall within the ambit of trade, commerce or intercourse as defined by section ninety‑two of the Australian Constitution and by article nineteen‑one‑g and article three‑hundred‑one of this Constitution. The counsel emphasized that the earlier case, The King v. Martin, presented essentially the same legal question for reconsideration. The factual distinction between the two cases lay solely in the manner of the transaction: in the New South Wales proceeding no literal sale and delivery of a lottery ticket occurred; rather, the agent of the Tasmanian promoter received money in New South Wales and transmitted it to Tasmania, from where the ticket was subsequently dispatched. Despite this difference, the State law was again upheld. The judges Latham C.J., Rich, Starke, Evatt and McTiernan each adhered to the opinions they had expressed in the earlier decision of The King v. Connare. Justice Dixon, who was then a member of the bench, furnished a fresh rationale for his position, holding that notwithstanding the inter‑State character of the transaction, section twenty‑one of the impugned Act remained valid. In his judgment at pages four‑six‑one to four‑six‑two he explained that the operation of the law did not depend upon any characteristic of lotteries or lottery dealings that would render them trade, commerce or intercourse, nor upon any inter‑State element inherent in their nature. The sole criterion for the Act’s application, according to him, was the aleatory description of the prohibited acts. He observed that there was no ban or restriction placed on any act connected with a lottery merely because the act or the lottery involved trade, commerce, intercourse, or movement into, out of, or communication between New South Wales and another State. He further clarified that the constitutional guarantee that inter‑State trade, commerce and intercourse shall be free means that no restraint or burden may be imposed on an act merely because it falls under those descriptions. In this view Justice Dixon upheld section twenty‑one of the challenged Act on the ground that its applicability was driven by the specific gambling character of the transactions it penalised, and not by any classification of those transactions as trade, commerce, intercourse, or by any inter‑State quality they might possess. Subsequently the Court considered the case known as Commonwealth of Australia v. Bank of New South Wales, often referred to as the Bank case, wherein it was held that section forty‑six of the Banking Act, 1947, was invalid because it contravened section ninety‑two of the Australian Constitution. Sub‑section one of that section provided that a private bank, after the commencement of the Act, could not continue to carry on banking business in Australia except as required, and the Court examined whether such a provision interfered with the constitutional freedom of trade, commerce or intercourse among the States.

The judgment described the provisions of section 46 of the Banking Act, 1947, in detail. Subsection (1) required each private bank to conduct its banking business in Australia in accordance with the section. Subsection (2) stipulated that every private bank must continue its banking operations in Australia and, except for proper reasons, must not cease to provide any facility or service that it had been offering as part of its banking business as of the fifteenth day of August 1947. Subsection (4) authorised the Treasurer, by publishing a notice in the official gazette and serving it in writing on a private bank, to require that bank to stop carrying on its business in Australia on a date specified in the notice. Subsection (8) provided that, from and after the date fixed in such a notice, the private bank to which the notice had been given was prohibited from conducting any banking business in Australia, and it imposed a penalty of ten thousand pounds for each day on which the contravention continued. The central issue presented to the Court was whether these provisions interfered with the freedom of trade, commerce, or intercourse among the States as guaranteed by section 92 of the Australian Constitution. The Court held that banking activities—including the creation and transfer of credit, the making of loans, the purchase and disposal of investments, and other related transactions—fall within the description of trade, commerce, and intercourse in section 92. Consequently, the impugned section 46, which left the Commonwealth and State banks untouched but prohibited private banks from carrying on banking business in Australia, was declared invalid because it contravened section 92. Lord Porter, delivering the judgment of the Judicial Committee, observed that it could no longer be argued that the section merely secured freedom from customs or other monetary charges.

Lord Porter then examined the distinction between regulations that were permissible and those that offended section 92. After discussing at length the earlier decisions in James V. Cowan and James v. the Commonwealth, he formulated two general principles. First, regulation of trade, commerce, and intercourse among the States was compatible with the principle of absolute freedom. Second, a violation of section 92 occurred only when a legislative or executive measure directly and immediately restricted trade, commerce, or intercourse, as opposed to creating an indirect or consequential impediment that might be regarded as remote. He noted that deciding whether a measure was merely regulatory or something more, and whether a restriction was direct or merely incidental, involved not only legal analysis but also political, social, and economic considerations. Referring to the case of Australian National Airways Proprietary Ltd. v. the Commonwealth, Lord Porter expressed agreement with the view that a straightforward prohibition was not merely regulation. However, he qualified his statement by indicating that he did not intend to establish a rule that, under no circumstances, could the exclusion of competition to create a monopoly—whether by a State, a Commonwealth agency, or another body—be justified. He emphasized that each case required assessment based on its own facts, time, and circumstances, and that in certain economic contexts and stages of social development, a prohibition aimed at establishing a State monopoly might be the only practical form of regulation, while still preserving the freedom of inter‑State trade, commerce, and intercourse.

The Court observed that a restriction of competition designed to create a monopoly, whether carried out by a State, a Commonwealth agency, or any other body, could not be justified, and that each case had to be examined on its own facts and in its own temporal and circumstantial setting. The Court noted that, in relation to certain economic activities at particular stages of social development, some authorities had held that prohibition aimed at a State monopoly was the only practical and reasonable mode of regulation and that inter‑State trade, commerce and intercourse, although prohibited and monopolised, remained absolutely free. His Lordship further added that regulation of trade might plainly take the form of denying certain activities to persons because of age or other circumstances rendering them unfit, or of excluding from passage across a State’s frontier creatures or things calculated to injure its citizens. Referring to the doctrine of “pith and substance,” his Lordship observed that the doctrine suitably raised the appropriate question in cases where the real issue concerned subject‑matter, namely whether a particular piece of legislation fell within the permitted field, and that it could also be useful in deciding whether an enactment that interfered with inter‑State trade, commerce and intercourse was nevertheless untouched by section 92 because it was essentially regulatory in character. The Court then turned to the last Australian case on the point cited before it, Mansell v. Beck(1). In that case the provisions of the Lotteries and Art Unions Act of New South Wales were examined, and the decisions in King v. Connare(11) and King v. Martin(1) were considered and approved. Dixon C.J. and Webb J. observed that the true content of the State law had to be ascertained to determine whether the law, as a whole, impaired the freedom protected by section 92. Their Lordships pointed out that lotteries not conducted under Government authority were suppressed as pernicious, and that the impugned legislation, in their view, was of a traditional kind directed against lotteries as such, entirely independent of trade, commerce and intercourse between States. McTiernan J. reiterated the views expressed in King v. Connare(2), stating that gambling was not trade, commerce or intercourse within the meaning of section 92, otherwise control of gambling in Australia would encounter constitutional difficulties. Williams J. did not deem it necessary to express a final opinion on whether there could be inter‑State commerce in respect of lottery tickets; he took the view that sections 20 and 21 of the New South Wales Act were, on their face, concerned only with intra‑State transactions and did not directly hinder, burden or delay any inter‑State trade, commerce or intercourse.

The Court observed that the provisions in question, on their face, dealt exclusively with transactions that occurred within a single State and that those provisions did not directly impede, burden, or postpone any trade, commerce, or intercourse that extended across State boundaries. The Court further noted that there was nothing in the reasoning of the judgment in the Bank case, nor in any subsequent decisions, to suggest that the earlier rulings in King v. Connare (1) and King v. Martin (2) had been decided incorrectly. In support of this view, the Court quoted with approval the observations made by Dixon J. in the Martin case.

Fullagar J. also held that the prior High Court decisions in Connare’s case (1) and Martin’s case (2) were properly decided for the reasons articulated by Dixon J. Kitto J. dissented from the majority opinion. Taylor J., who also supported the validity of the impugned legislation, remarked that no simple legislative device that attempts to transform trade and commerce into something else can remove the activity from the reach of section 92. He added that, while the scope of section 92 is broad, not every transaction that uses the forms of trade and commerce necessarily invokes the protection of that provision. He illustrated this by comparing the sale of stolen goods to the sale of any other goods, asking whether it could be doubted that a State Parliament may forbid the sale of stolen goods without violating section 92. He explained that the only distinguishing factor in such a transaction is the subject matter, not the means employed, and that, in substance, the transaction does not constitute trade and commerce as the term is commonly understood. He gave further examples such as the sale of a forged passport or counterfeit money, noting that although legislation against these acts might be justified under a police power, the subjects of those transactions are not, in any view, subjects of trade and commerce within the meaning of section 92, even though their completion may involve instruments commonly used in inter‑State trade.

After referring to the historical development of lotteries in England, the learned Judge concluded that the foregoing observations reflected more than two and a half centuries of legal attitude toward lotteries. He stated that, in England, lotteries had long been regarded as common public nuisances and that, from the time of the first settlement, it was generally impossible to conduct them without violating the law.

The passage explained that conducting a lottery was impossible without violating the law, and that any individual who attempted to run a lottery would inevitably become regarded as a rogue and a vagabond. It then observed that the Constitution of the United States did not contain any provision comparable to Article 301 of the Indian Constitution or to section 92 of the Australian Constitution. The issue of gambling had arisen before American courts in a context that differed from the Indian context. Article I, section 8, clause 3 of the United States Constitution, commonly known as the commerce clause, granted Congress the authority to regulate commerce with foreign nations, among the several states, and with Indian tribes. Congress had enacted legislation that regulated gambling activities which crossed state boundaries, and this raised the question of whether such legislation fell within Congress’s legislative competence—that is, whether it could be justified under the commerce clause. The answer to that question depended on a further inquiry as to whether gambling activities could be characterized as interstate commerce. If gambling were deemed interstate commerce, then Congress could validly legislate on it under the powers granted by the commerce clause. Frequently, gambling activities did extend from one state to another, and, under the commerce clause, a state legislature did not possess the power to enact laws governing interstate trade‑type activities. Conversely, if betting and gambling were held not to fall within the scope of the commerce clause, then neither Congress nor any state legislature would have authority to regulate them. In that situation, the United States Supreme Court had chosen to interpret the term “commerce” broadly so as to include gambling within the reach of the commerce clause, thereby permitting Congress to regulate and control such activities. Accordingly, the Court cited several decisions. In Champion v. Ames (1903) 188 U.S. 321, 47 L.Ed. 492, the Court held that the transportation of lottery tickets from one state to another by an express company constituted interstate commerce and upheld the congressional statute that made such transportation an offence. In Hipolite Egg Co. v. United States (1911) 220 U.S. 45, the Court upheld the Pure Food Act, which prohibited the importation of adulterated food, as an exercise of congressional power to regulate commerce. The Court also referred to Hoke v. United States (1913) 227 U.S. 308, 57 L.Ed. 523, which held that the prohibition of transporting women for immoral purposes across state lines or to foreign lands fell within the commerce clause, and similarly applied the principle to the prohibition of obscene literature and objects intended for immoral use. Further authority was drawn from United States v. Kahriger (1953) 345 U.S. 22, 97 L.Ed. 754, and Lewis v. United States (1955) 348 U.S. 419, 99 L.Ed. 475, to support the appellant State’s submission that the United States Supreme Court looked unfavourably on gambling activities. In the latter case, the Court emphatically stated on page 480 that “there is no constitutional right to gamble.”

The Court noted that when interpreting our Constitution, decisions of the United States Supreme Court on the commerce clause should be used with caution. Similarly, judgments of the Australian High Court and the Privy Council on section 92 of the Australian Constitution must also be applied circumspectly. The Court explained that this caution is required because our Constitution differs fundamentally from both the American and Australian Constitutions. In particular, there is no provision in the American Constitution comparable to our Article 19(1)(g) or Article 301. The American problem, as the Court observed, was that if gambling did not fall within the commerce clause, neither Congress nor any State legislature could regulate inter‑State gambling. Our Constitution, the Court said, provides adequate safeguards in clause (6) of Article 19 and in Articles 302 to 305. The Australian scheme is also different because the Australian Constitution contains no provision analogous to our Article 19(6) or Articles 302 to 304. The cited American cases are 55 L. Ed. 364, (3) [1913] 227 U.S. 308; 57 L. Ed. 523, (4) [1953] 345 U.S. 22; 97 L. Ed. 754, (5) [1955] 348 U.S. 419; 99 L. Ed. 475. The Court explained that Australian judges, faced with the broad and unlimited language of section 92, had to introduce restrictions guided by common sense and modern societal needs. They sometimes held that certain activities did not constitute trade, commerce or intercourse, and at other times they applied the doctrine of pith and substance to declare the challenged law unrelated to trade or commerce.

The Court asserted that the difficulty encountered by Australian courts in interpreting section 92 cannot arise under our Constitution. Our Constitution does not stop at declaring through Article 19(1)(g) a fundamental right to carry on trade or business. Nor does it stop at proclaiming by Article 301 the freedom of trade, commerce and intercourse throughout the territory of India. Instead, it proceeds to make provision in Article 19(6) and in Articles 302 to 305 for reasonable restrictions in the public interest on the rights guaranteed by Article 19(1)(g) and Article 301. The Court quoted a passage from P. P. Kutti Keya (1) (1952) S.C.R. 1112 at page 1121. It stated that the framers of our Constitution, aware of the difficulties encountered by the Australian Government under section 92, deliberately placed limitations in Part XIII on the freedom guaranteed by Article 301. Consequently, the Court's task is to interpret our Constitution and decide whether the prize competitions covered by the impugned Act, all of which involve gambling, and whether they can be said to be a ‘trade or business’ under Article 19(1)(g) or ‘trade, commerce and intercourse’ under Article 301.

In this matter, the Court examined the expression “intercourse” as it appears in Article 301 of the Constitution. The Court explained that the overall scheme of the Constitution was intended to safeguard each citizen’s freedom to engage in his own trade or business, a protection expressly provided by Article 19(1)(g). However, that guaranteed right was not absolute; Article 19(6) authorized the enactment of laws that, in the interest of the general public, could impose reasonable restrictions on the exercise of the right guaranteed by Article 19(1)(g). The Constitution also declared, through Article 301, a freedom of trade, commerce and intercourse throughout the territory of India, a freedom that was subject to Articles 302 to 305, which allowed Parliament and the State Legislatures to impose reasonable restrictions.

The Court noted that the underlying purpose of making trade, commerce and intercourse free between and within the States was to emphasize national unity and to prevent the creation of barriers that might jeopardise that unity. An important observation made by the Court was that the language used in Article 19(1)(g) and Article 301 was intentionally broad, and that the provisions for limiting the exercise of the fundamental right and the declared freedom of trade, commerce and intercourse were placed in separate sections—namely Article 19(6) and Articles 302 to 305. Learned counsel for the petitioners emphasized this circumstance and argued that the rights guaranteed by Article 19(1)(g) and the freedom declared by Article 301 should initially be given a wide and liberal construction, after which any reasonable restrictions could be super‑imposed in the public interest under Article 19(6) or Articles 302 to 305.

The Court referred to the authority in A.I.R. 1954 Mad 621, which held that the words “trade”, “business” and “commerce” ought to be interpreted in their fullest sense to include any activity undertaken or continued with a view to earning profit. According to that authority, there was nothing in Articles 19(1)(g) and 301 that qualified or narrowed the meaning of those critical words. Counsel further contended that there was no justification for excluding from those terms activities that the State or the courts might view unfavourably because they were detrimental to public morality or public interest. The argument advanced was that if a trade or business possessed such a character, the appropriate legislature could impose restrictions that would be justiciable, and in appropriate cases, those restrictions could even amount to a total prohibition.

The Court also observed that Article 25 contains the limiting phrase “subject to public order, morality and health”, a phrase that does not appear in Article 19(1)(g) or Article 301. In summary, the petitioners’ position was that Article 19(1)(g) and Article 301 guarantee and declare the freedom of all activities undertaken for profit, while the safeguards against abuse of that freedom were provided by Article 19(6) and Articles 302 to 305. The proper

The Court observed that the method of interpreting the constitutional provisions in question was being advocated as one that began with the assumption of complete liberty and then allowed the State to diminish that liberty, if required, by imposing restrictions that could even amount to an absolute ban. According to that line of reasoning, every criminal activity pursued for profit would initially enjoy protection as a fundamental right until the legislature enacted a law to limit it. Consequently, the argument would create a guaranteed entitlement to operate enterprises such as hiring armed thugs to perpetrate assaults or murders, engaging in burglary, distributing obscene images, trafficking women, and similar illicit pursuits, all of which would remain protected until a statute intervened to curtail or terminate them. The Court found this proposition utterly unrealistic and contradictory to the purpose of the Constitution.

The Court further noted that there were unquestionably certain activities that, despite employing ordinary commercial forms and instruments, could never be classified as trade, business, or commerce. Excluding such activities from the meaning of the relevant constitutional words did not represent a narrowing of those words; rather, it simply recognized that those activities lay outside the true scope of the terms. While counsel conceded that there could be no “trade” or “business” in crime, counsel also contended that this principle should not be extended and argued that there was no reason to hold that gambling failed to fall within the expressions “trade” or “business” or “commerce” as used in the articles under consideration.

The Court then turned to the broader question of whether the framers of the Constitution had ever intended gambling to be a fundamental right within the meaning of Article 19(1)(g) or to be encompassed by the protected freedom declared in Article 301. Emphasising that the declared purpose of the Constitution was to establish a welfare State, the Court recalled the directive principles set out in Part IV, which obligate the State to promote the welfare of the people by securing a social order in which justice—social, economic and political—permeates all national institutions. These principles impose on the State the duty to ensure that every citizen, male or female, has an adequate means of livelihood, that the health and strength of workers are not abused, and that children are protected from exploitation, moral decay and material abandonment. The State is further tasked with guaranteeing a living wage, decent working conditions, a reasonable standard of life, leisure, and access to social and cultural opportunities, as well as protecting weaker sections from social injustice and all forms of exploitation, raising the overall standard of living, and improving public health.

In light of these constitutional objectives, the Court asked whether the framers, who envisioned such an ideal of a welfare State, could have intended to elevate betting and gambling to the status of a protected trade, business, or commerce, thereby guaranteeing every citizen the right to engage in it. The Court concluded that such an intention was implausible, given the Constitution’s social welfare aims and the historical condemnation of gambling as a pernicious vice.

The Court observed that the Constitution guarantees every citizen the right to engage in trade, business or commerce, and that this guarantee must be interpreted in light of the nation’s historical attitude toward gambling. From the earliest periods, Indian sages and legislators regarded gambling as a sinful and harmful vice and openly condemned it. The Court cited Hymn XXXIV of the Rigveda, which explicitly declares gambling to be detrimental. It quoted verses 7, 10 and 13, which state: “Dice verily are armed with goads and driving hooks, deceiving and tormenting, causing grievous woe. They give frail gifts and then destroy the man who wins, thickly anointed with the player’s fairest good. The gambler’s wife is left forlorn and wretched: the mother mourns the son who wanders homeless. In constant fear, in debt, and seeking riches, he goes by night unto the home of others. Play not with dice: no, cultivate thy corn‑land. Enjoy the gain, and deem that wealth sufficient. There are thy cattle, there thy wife, O gambler. So this good Savitar himself hath told me.” The Court further noted that the epic Mahabharata denounces gambling by portraying the tragic fate of the Pandavas, who lost their kingdom through a game of chance. The ancient law‑giver Manu is recorded as forbidding gambling altogether; the Court listed several specific verses attributed to Manu. Verse 221 advises a king to exclude gambling and betting from his realm because those vices threaten the destruction of a princely kingdom. Verse 224 commands a king to punish corporally every person who gambles, bets, or provides the opportunity for such acts. Verse 225 requires the immediate banishment of all gamblers from a town. In verse 226 gamblers are described as secret thieves who continually harass good subjects through forbidden practices. Verse 227 labels gambling a vice that engenders great enmity and urges wise men not to indulge even for amusement. The concluding verse 228 authorises a king, at his discretion, to punish any man who becomes addicted to the vice, whether secretly or openly.

The Court continued by examining later treatises that addressed gambling. While Manu condemned the practice outright, the sage Yajnavalkya attempted to bring gambling under state regulation; nevertheless, in verse 202(2) he prescribed that anyone who gambles with false dice or other cheating devices should be branded and punished by the king. The Court observed that Kautilya also advocated state control of gambling and, being a pragmatic administrator, did not oppose the state deriving revenue from regulated gambling activities. Vrihaspati, in chapter XXVI verse 199, recognised that Manu had completely prohibited gambling because it destroyed truth, honesty and wealth, yet noted that other law‑givers allowed gambling when it was conducted under state supervision so that the monarch could receive a share of each stake. This, the Court explained, reflects the broader perspective of Hindu legal scholars on the vice of gambling. Finally, the Court referenced Hamilton’s work “Hedaya”, volume IV, book XLIV, which classifies gambling as a “kiraheeat” or abomination, quoting Hamilton: “It is an abomination to play at chess, dice or any other game; for if anything is staked it is gambling, which is expressly prohibited in the Koran; or if, on the other hand, nothing is staked it is useless and vain.” These historical and doctrinal sources, the Court concluded, demonstrate a long‑standing Indian tradition of viewing gambling as a prohibited and immoral activity, informing the contemporary constitutional interpretation of the right to trade or commerce.

In the passage quoted earlier, the author observed that if nothing is staked the activity is useless and vain. The Court then turned to the nature of wagering contracts such as those that were the subject of the decision in Ramloll v. Soojumnull, a case which the Privy Council had upheld as not being inconsistent with English common law. After that decision, Parliament enacted Act XXI of 1948, acting on a suggestion made by Lord Campbell in the same case, and introduced into Indian law provisions that were substantially similar to the English Gaming Act of 8 and 9 Vict. c. 109. Earlier legislation, namely the Bengal Gambling Act of 1867 (referred to as Ben. II of 1867), had prescribed punishments for public gambling and for the operation of common gaming houses within the territory administered by the Lieutenant Governor of Bengal. In addition, since the year 1870, the Indian Penal Code, under section 294A, has classified the conduct of a lottery as an offence. The Indian Contract Act of 1872, in its section 30, declares that agreements founded upon gambling are void. These statutes together illustrate the manner in which gambling is treated under Indian law. Prior to legislative intervention, English common law did not forbid gambling or wagering, although English courts regarded the practice with disfavour and discouraged it on public‑policy grounds by withholding the procedural rights that were ordinarily available to other parties in litigation. By contrast, the courts of Scotland have consistently refused to recognise wagering contracts, describing them as “sponsiones ludicrae” and holding that such contracts are void according to Scottish common law. Various pieces of legislation in England also addressed gambling. The Gambling and Betting Act of 1848 (recorded in 4 M.I.A. 339) targeted fraudulent and excessive gambling and betting in games and sports. That Act was preceded by the Gaming Act of 1710 (9 Anne c. 19). The Marine Insurance Act of 1745 (19 Geo. 11 c. 37) for the first time prohibited wagering policies on risks related to British shipping, a prohibition later reinforced by the Marine Insurance Act of 1788 (28 Geo. III c. 56). The Life Insurance Act of 1774 (14 Geo. III c. 48), although not intended to ban wagering generally, barred wagering that was disguised as a mercantile document purporting to be an insurance contract. Subsequently, the Gaming Act of 1845 (8 and 9 Vict. c. 109) declared all contracts involving gaming or wagering to be void, irrespective of their form or subject‑matter, and the provisions of that Act were incorporated into India’s Act XXI of 1948 as previously noted. The Gaming Act of 1892 (55 and 56 Vict. c. 9) later strengthened the legal position further. Even in the United States, the Supreme Court observed in Phalen v. Virginia (1850) that “experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with the widespread pestilence of lotteries. The former are confined to a few persons and places, but the latter infests the whole community; it enters every dwelling; it reaches every class; it preys upon the hard earnings of the poor; it plunders the ignorant and the simple.” Those remarks were later quoted with approval in Douglas v. Kentucky.

After reproducing the passage from Phalen v. Virginia (1), the judgment continued with a rhetorical question: “Is the state forbidden by the supreme law of the land from protecting its people at all times from practices which it conceives to be attended by such ruinous results? Can the Legislature of a State contract away its power to establish such regulations as are reasonably necessary from time to time to protect the public morals against the evils of lotteries?” (1) [1850] 49 U.S. 163; 12 L. Ed. 1030, 1033. (2) [1897] 168 U.S. 488; 42 L. Ed. 553, 555. The Court observed that the foregoing statements make it abundantly clear that activities condemned in this country since ancient times have likewise been discouraged and viewed with disfavor in England, Scotland, the United States of America and Australia, as illustrated by the cited cases. The Court then expressed difficulty in accepting the contention that activities which promote a reckless tendency to obtain easy gain by lot or chance—activities that cause the loss of hard‑earned money of the unsophisticated and imprudent common person, lower his standard of living, plunge him into chronic indebtedness, and ultimately disturb the peace and happiness of his modest household—could have been intended by the makers of the Constitution to be elevated to the status of trade, commerce or intercourse and thereby become the subject of the fundamental right guaranteed by Article 19(1)(g). The Court also found it hard to persuade itself that gambling was ever meant to form any part of the ancient nation’s trade, commerce or intercourse that would be declared free under Article 301. The Court clarified that it was not its purpose, nor necessary for the decision, to provide an exhaustive definition of the terms “trade,” “business,” or “intercourse.” Nevertheless, the Court was of the opinion that, whatever may or may not be regarded as falling within those meanings, gambling cannot be said to be included among them. Accordingly, the Court was convinced and satisfied that the genuine purpose of Articles 19(1)(g) and 301 could not have been to guarantee or declare freedom of gambling. The Court noted that gambling activities, by their very nature, are extra‑commercium; although the external forms, formalities and instruments of trade may be employed, gambling is not protected by either Article 19(1)(g) or Article 301 of the Constitution. The Court recalled that the Court of Appeal had previously held that it was not permissible for the State, which had chosen not to prohibit prize competitions but instead to generate revenue from them by imposing a tax, to simultaneously claim that such competitions were illegal or did not constitute a “trade.” Finally, the Court referenced United States v. Kahrigar (1) to emphasize that the mere issuance of a licence or the imposition of a tax conveys no significance beyond the requirement that the licensee comply with the tax‑paying obligations.

In this case, the Court observed that a licensee who paid the tax was not subject to any penalties under the law. The Court referred to Lewis v. United States of America (2) which recognized that the Federal Government could levy a tax on conduct it also prohibited, and that no constitutional right to gamble existed; nevertheless, a person who chose to gamble, although unlawfully, was still required to pay the tax. The Court then cited the observation of Rowlatt J. in Mann v. Nash (3) that revenue authorities, representing the State, merely considered an already existing fact and were not condoning or participating in the illegal activity. He further explained that the taxation was simply imposed on the individual with respect to certain facts and did not make the authority a partner or sharer in the illegality. The Court noted that the proposition that a crime is not a business had also been recognized in the decision of F. A. Lindsay, A. E. Woodward and W. Hiscox v. The Commissioners of Inland Revenue (4), per Lord President Clyde and per Lord Sands, and in Southern (H. M. Inspector of Taxes) v. A. B. (5). The Court held that the existence of regulatory provisions that controlled gambling by issuing licences and imposing taxes did not change the inherent vicious and pernicious nature of gambling. Applying the doctrine of pith and substance, the Court quoted Lord Porter’s remark that the phrase raised a convenient question when the real issue concerned the subject‑matter, and that such a question helped determine whether an enactment was a law with respect to trade, commerce or intercourse, or a law concerning some other subject that incidentally affected trade, commerce or intercourse. The Court recalled earlier references to the observations of Dixon J., then sitting in King v. Martin (1), and adapted his language to state that when Articles 19(1)(g) and 301 guaranteed freedom of trade, they described human activities in a specific aspect, singled out particular attributes of the act, and made the freedom dependent on those attributes. The Court concluded that the freedoms guaranteed by those Articles implied that no unreasonable restraint should be placed upon an act that fell within the description of trade, commerce or intercourse. After analysing the provisions of the impugned Act, the Court found that the Act did not directly interfere with trade, commerce or intercourse as such, because its application was based on the specific gambling nature of the transaction it sought to restrict. The purpose of the Act was not to restrict anything falling under the description of trade, commerce or intercourse.

In this case the Court observed that the legislation does not bring the transactions within the meaning of trade, commerce or intercourse. In other words, the Act is essentially an enactment dealing with betting and gambling. The purpose of the legislation, the Court explained, is to control and restrict betting and gambling, which is not intended to interfere with trade, commerce or intercourse as such, but rather to keep those activities free from pollution and from anti‑social influences. Accordingly, the Court held that the impugned Act concerns gambling, which is not characterised as trade, commerce or business, and therefore the validity of the Act should not be examined by the yardstick of reasonableness and public interest laid down in Articles 19(6) and 304. The Court further stated that an appeal against the alleged stringency or harshness of the law does not lie before a court of law. In the opinion of the Court, it was unnecessary to address the difficult question of whether a restriction contemplated in Articles 19(6) and 304(b) could extend to total prohibition, because the Court could not be persuaded that Article 19(1)(g) or Article 301 embraces every activity pursued for profit as “trade” within the meaning of those provisions. Nor was it necessary to consider the point raised in (1) (1939) 62 C.L.R. 457 concerning whether a company qualifies as a citizen within the meaning of Article 19, since that issue had not been argued before the Court.

The petitioners’ final argument was that, assuming the impugned Act deals only with gambling and that gambling does not constitute “trade”, “business” or “commerce” and therefore falls outside constitutional protection, the prize competitions they organise are in fact not of a gambling nature. The trial court had accepted this contention, but the Court of Appeal rejected it. The Court examined the scheme, the rules, the official solutions and the explanations supporting them, and concluded that the competitions presently conducted by the petitioners under the name R.M.D.C. Crosswords are indeed of a gambling nature. The Court’s view aligns closely with that of the Court of Appeal, making a detailed analysis of the scheme unnecessary. The Court observed that the Board of Adjudicators selects nine clues from the set of clues and then admits only those competitors whose answers correspond with the official solution to those nine clues. The nine clues may be taken from the top, from the bottom or may be chosen at random. Although the Board describes these nine clues as comparable to nine compulsory questions in a school examination, the comparison is misleading because, in a school exam, students are informed which nine questions are compulsory and can focus their preparation accordingly. In the present scheme, competitors do not know which nine clues will be selected, and any competitor whose answers do not match the official solutions for the chosen clues is excluded from consideration for the prize.

The Court noted that a competitor could answer correctly eight of the nine clues that the Board selected and could also answer correctly the eight clues that were not selected, thereby submitting a total of sixteen correct answers. Nevertheless, the competitor would be excluded from consideration for the first prize because the answers to the nine selected clues did not match the official solutions. The Court described this circumstance as introducing a chance element into the competition. Further, the Court observed that the alternative words from which the Board chose a winner were sometimes equally appropriate, and it was not satisfied that the word chosen by the Board was the more suitable one in many instances. The Court found the Board’s reasons to be strained, artificial, and at times arbitrary. Consequently, the Court agreed with the Court of Appeal that, in fact, the prize competitions conducted by the petitioners possessed a gambling character and therefore fell within the definition of gambling covered by the regulatory and taxing provisions of the Act. For these reasons, the Court concluded that the impugned statute constituted a law relating to betting and gambling under Entry 34, while the challenged taxing provision related to tax on betting and gambling under Entry 62, and that the State Legislature possessed the competence to enact such measures. The Court held that a sufficient territorial nexus existed to permit the State Legislature to levy the tax on the petitioners, even though the newspaper used to conduct the competitions was printed and published outside the State of Bombay. Because the competitions were of a gambling nature, the Court determined that they could not be characterized as trade or commerce; consequently, the petitioners could not invoke the fundamental right guaranteed by Article 19(1)(g) nor the protection of Article 301. In view of these findings, the Court allowed the appeal, set aside the order of the lower court, dismissed the petition, and awarded costs to the State throughout. Appeal was allowed.