Madras HC Refuses Interim Relief To Online Gaming Cos

The Madras High Court on Monday (July 3) did not grant any kind of interim relief to the online gaming companies on a batch of cases filed by them and the All India Gaming Federation (AIGF) challenging the constitutionality of Tamil Nadu government’s law which banned online gambling and gaming.

The South Indian state passed the Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Act, 2022, banning online gaming.

The gaming act’s challenge by the AIGF was listed alongside online gaming companies including Gameskraft, Junglee Games, Head Digital Works and Play Games 24×7, before the bench of Chief Justice SV Gangapurwala and Justice PD Audikesavalu of the High Court.

The bench said that they would prefer to take up the batch of writ petitions for a final hearing anytime rather than hearing the matter for interim relief since the arguments would be the same in both cases. 

The writ petitions challenge the Tamil Nadu government’s new law banning online gambling and classifying online rummy and poker as games of chance, something which the industry argues as being games of skill.

Abhishek Manu Singhvi and Mukul Rastogi represented the petitioners, pointing to the jurisprudence on games of skill and the issue of legislative competence.

While Rastogi contented that the new law is unconstitutional and goes against several Supreme Court and High Court judgements, Singhvi contended that three High Court judgments have recently struck down bans on online rummy passed by the Karnataka, Tamil Nadu and Kerala governments.

Meanwhile, the petitioners argued in the Madras High Court that rummy and poker being games of skill is a well-settled position and hence these games can’t be fully banned in the manner sought by the Tamil Nadu government.

Kapil Sibal, representing the Tamil Nadu government, argued that the petitioners had argued the same points before a division bench and that the same points were being argued again.

The court has listed the matter for hearing on July 13, 2023, allowing the petitioners to make submissions for interim relief. Sibal will then reply to those submissions on behalf of the Tamil Nadu government on July 20 or any other convenient date.

To be sure, while there is no clear consensus on what games of chance and games of skill are, the finance ministry is considering classifying online games into those two categories and levying a differential rate of Goods and Services Tax (GST).

The Finance Bill 2023 introduced two new Sections – 194BA (for TDS on winnings from online games for online intermediaries) and 115BBJ (for computation of taxes for those who earn income from winnings of online games).

As per the Bill, prize money earned from online games would be taxed at 30% from April 1. Before March 31, 2023, TDS was imposed on the winning amount of online games if it exceeded INR 10,000.

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