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FORTUNE'S FORMULA / LAYING THE ODDS: CASINO CAPITALISM IN SIKKIM.

Updated: Aug 16

Beginning from Mahabharata when the Pandavas lost their kingdom by a throw of dice, to the present day online betting business, the ‘Game of Chance' has always held a certain charm for the Indian psyche. Gambling is a popular pastime and has been a ubiquitous part of daily life from antiquity until the present. To even begin to understand the concept of gambling in India, and the legislation (or the lack of it) that governs the same, we will first need to understand definition and characterisation of gambling as per Indian Laws.


According to List II Entry 34 of the Constitution of India-


"‘gambling' includes any activity or undertaking whose determination is controlled or influenced by chance or accident and any activity or undertaking which is entered into or undertaken with consciousness of the risk of winning or losing (eg, prize competitions, a wagering contract) …where there is no actual transfer of goods but only payment or receipt of the difference according to the market price, which varies from the contract price."


The Public Gaming Act (PG Act) of 1867 is the main legal framework that regulates Gambling in India. The PG Act of 1867 was passed by the British, 150 years back, prohibiting gambling. However, this Act is still prevalent in India. Even the penalty is not revised, it is approx. 200 rupees or 3 months of imprisonment or both. Pakistan chose to not enforce this law in their country after partition.


The Public Gambling Act exempts "games of skill" from the purview of the law. For instance: betting in games like cricket, football, horse racing as it is based on pure skill, whereas rolling a dice and getting the exact number for winning is a probability.

In K.R. Lakshmanan v. State of Tamil Nadu (AIR 1996 SC 1153), the Supreme Court defined a ‘game of skill' to mean "one in which success primarily depends on the superior knowledge, training, attention, experience, and adroitness of the player".


Horse race betting is allowed in India because the Court used different references to explain how the same could be considered a game of skill as the betting is based on evaluative skills, and factors such as the skill and management of the rider.


In another landmark Supreme Court judgment in the State Of Andhra Pradesh vs. K. Satyanarayana&Ors (AIR 1968 SC 825), the card game "Rummy" was held to be a game of skill as the "fall of the cards had to be memorized", and considerable skill was required in "holding and discarding cards".


On the other hand, the legality of poker is ambiguous. Poker is one of the games which lies in the grey area. The Indian government has banned the games like teen patti (flush) however, on the other hand, playing rummy is not punishable. There is a lack of a comprehensive judgment by the Supreme Court on the subject, and hence, confusion prevails. Thus, the Act in itself is unclear, and the scope of Act is dependent upon judiciary interpretation. The Act allows gambling by sanctions. Most of the lotteries have been legalized through these sanctions.


Sikkim is considered one of the most liberal states when it comes to gambling laws. The primary legislations governing gambling in the State are:

  1. The Sikkim Casino Games (Control and Tax Rules), 2002 gives the Sikkim Government the authority to grant licenses to individual and business interested in operating casinos.

  2. The Sikkim Regulation of Gambling (Amendment) Act, 2005 gives the Sikkim Government the authority to give license to an individual who is interested in operating gambling and to authorize some gambling house, by way of a license.

  3. Sikkim also became the first Indian State to legalize internet gambling. The Government of Sikkim issued a memorandum on March 4, 2009, known as the Sikkim On-line Gaming (Regulation) Rules, 2009. Through this, the State has made games like Roulette, Black Jack, Pontoon, Punto Banco, Bingo, Casino Brag, Poker, Poker Dice, Baccarat, Chemin-de-for, Backgammon, Keno, and Super Pan 9 legal.These games can be legally played online however, the operator needs to get a license from the State government. The rules also specify that the games have to be safe, secure and fair.

However, the scenario in Sikkim is not as picture perfect as it may seem. The dream pilot project of the Government of Sikkim aimed to attract future investments in India's only state having on-shore operational casinos, has gotten embroiled in a string of controversies.

  1. The primary trouble lies with taxation. Pursuant to the Indo-Sikkim Treaty, Sikkim was incorporated into India as a State in 1975. This was made feasible in light of the fact that in a plebiscite held in Sikkim around 97.5% individuals opted for integration with India.

An imperative part of the treaty is that all the original citizens of Sikkim are EXEMPT from any type of tax assessment from the Central Government.


The result of the same is that Sikkim subject holders become exempted from paying Income Tax, however, Indians from the mainland or foreigners would be taxable under Indian Income Tax Laws.

  1. Sikkim has majorly four casinos, Casino Mahjong, Casino Sikkim, Delta Casino at Denzong Regency and Golden Gambling. Out of which, Casino Mahjong, which is in the Mayfair Resort, and Casino Sikkim in Royal Plaza, have strived to establish a monopoly in the State, which has led to a conflict of interest between the two. Casino Mahjong is owned and run by Trio Ventures Private Limited with co-managing directors Ugen Ladakhi and Bishal Chamling, who is the son of Chief Minister Pawan Chamling. Since gambling is a subject under State List, it creates vested interests against Casino Sikkim. The same was evident when Income Tax Officials carried out a raid at Casino Sikkim under section 133(A) of Income Tax Act 1961 for alleged tax evasion. Further, the licence issued to Casino Sikkim expired on April 2014, and TRPL (Teesta Rangit Private Limited, which runs the Casino) moved the licence renewal application, which is still pending in 2017 is clearly indicative of high red-tapism and excessive bureaucratic rigmarole. Gambling and politics have always been linked, largely because casinos and other gaming establishments are so heavily regulated, the number of licenses available is often limited, and so much money can be made by people who get those licenses. Lobbying (a common factor in the political system) can easily turn into influence peddling and bribery at all levels of government. Also, the government takes has taken steps to promote Sikkim as a gaming hub, by giving licenses to several casinos. But it is pertinent to note that the government offers no help directly or in terms of incentives for the same.


  1. The second most impacted sector is the local economy. Many local entrepreneurs, businessmen, bureaucrats have invested huge amounts in the casino and have ended up with large amounts of debts. Obviously, this has a trickle-down effect on the delicate economy of the region. The same has also promoted a lackadaisical culture among the youth because they would rather win their money than work for it. Losing money in gambling acts as a catalyst and sets off a chain reaction which is associated with a higher rate of crime. It is true that the Casinos have benefited the tourism industry, but every tax Rupee made is neutralized by the cost of hiring additional law enforcement, funding gambling treatment programs, as it often becomes an unhealthy compulsive obsession. The Government has to divert the funds earmarked for education and healthcare as there is an increased encumbrance on the State to address problems resulting from pathological gambling. The costs of legalized gambling far outweigh the benefits of it. Since there is no background check on the Casino visitors, the government also loses precious revenue owing to the black money involved.


  1. Lastly, the effects of the casino industry in Sikkim on its social fabric have also drawn its share of flak. Though the casinos have proved to be major revenue earners and have employed a lot of people; the majority of employees are involved in immoral acts. The women employees, in particular, have been reported to be engaged in immoral acts after duty hours. Stray tourists who visit Gangtok often pick up women near the Syari zones and this has prompted a surge in the flesh trade industry. Casino Sikkim was recently shut down for a month due to selling liquor of a dry day and promoting illegal acts inside its premises. The possible link between casino gambling and suicide rates has been the subject of much investigation. Vigilance is one of the acutest needs of this area as far as casino gambling is concerned because a lot of social evils like flesh trade, scamming and forced gambling have crept up. With the weeding out of these evils, the industry is sure to prosper.


  1. On 4th July 2016, The Sikkim government enacted a rule to ban locals from entering casinos and playing in the live casinos. Additionally, the notification has also doubled the entry fee to be charged from patrons at the time of entering casinos from five hundred rupees to one thousand rupees. It has drawn both commendation and criticism. Many casino visitors feel the notification is tyrannical and high-handed, to say the least. It is based on the principle that outlawing casinos is one way to protect people from their own bad judgment. Their contention being that choosing how to spend their own money is a part and parcel of personal liberty and the Government cannot dictate preferences as the same is in violation of Article 14 of the Constitution. However, a Sikkim state official said it was not so, and claims that the restriction is for the betterment of the local people and is not about moral policing.

CONCLUSION


Despite the importance and longevity of the practice of gambling in the daily life of Sikkim, and the opposition to it due to the potential for individual and societal harm, there is a surprising lack of contemporary curiosity and scholarly literature on pathological gambling from the region. The prohibitions against gambling are being increasingly challenged to change to a system of legalized and regulated gambling. To inform and guide public policy and future legislation, there is a serious need to initiate rational, scientific inquiries into the nature and impact of gambling in Sikkim. A good regulatory framework, proper infrastructure along with defined compliance and law adherence schemes will spell well for the Casino industry. The government can and should get involved to reign in the socio-economic ills that have been plaguing the industry.


And with that, Sikkim will become the Royal Flush of the Indian Gambling Scenario.



Author: Navin Kumar Jaggi

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