The Hindu : Centre's help sought to ban lotteries from other States

Online edition of India's National Newspaper
Monday, Jan 19, 2004

Kerala

Kerala

Centre's help sought to ban lotteries from other States

By C. Maya

THIRUVANANTHAPURAM, JAN. 18. The tussle between the State Government and the on-line lottery operators here could take a new turn with the former writing to the Centre seeking an immediate ban on all on-line and paper lotteries of other States within its territorial jurisdiction, as these have been operating in violation of all rules.

This is further to the counter affidavit it had filed in the High Court, against on-line players, detailing the fraud committed in the name of on-line games. The seriousness with which the Government has reacted to the reports of public fraud and tax evasions allegedly being committed by the on-line lottery players here indicates that it means business.

The Government has also asked the Advocate General, Ratna Singh, to personally handle the case in the High Court. In his letter to the Union Secretary, Home Affairs, the Taxes Secretary, Sajan Peter, gives explicit details of the frauds and violations of the Lotteries (Regulation) Act of 1998, committed by various agencies, which are said to be operating on the behalf of the Royal Government of Bhutan and the State Governments of Karnataka, Meghalaya, Sikkim, Manipur, Mizoram, Nagaland and Arunachal Pradesh.

He has requested the Centre to invoke Section 6 of the Act and to issue immediate orders so that the sale of lottery tickets of these States are "temporarily suspended within Kerala, till the violations in rules are rectified".

Appraising Centre of the issues which are now before the court, he points out that he had earlier rejected all applications submitted by on-line lottery operators in the State, seeking provisional permission to continue operations, as preliminary inquiries had revealed the startling fact that several key provisions in the Lotteries Act of 1998 were being blatantly violated.

About 15 lakh persons in the State participating in these lotteries were being cheated every day since the safeguards prescribed in the Act were being ignored, Mr. Peter points out. One of the major violations that is pointed out is the fact that the on-line tickets are printed on the operator's stationery itself and that there are no means for the respective States to keep track of the actual number of tickets that are printed "on their behalf".

The on-line lottery operators claim that almost 90 per cent of the sales proceeds is disbursed as prize money, out of which more than 95 per cent is disbursed as prizes in denominations less than Rs. 5,000, across the counter, tax-free. The identity of the prize-winner thus does not have to be declared or recorded.

With one of the operators, Playwin, operating more than 15,000 terminals in 13 States, it was a distinct possibility that the prize money was being siphoned off in the name of fictitious ``prize winners" through fictitious terminals, especially since the printing of tickets and draws are conducted by private parties in violation of rules, the letter says.

``There are clear similarities in the names of different lotteries, tickets of which are being sold in Kerala. They follow the same prize pattern and the differences are intangible even to the educated.

This has obviously been done to circumvent Section 4 (h) of the Lotteries Act which specifies that no lottery shall have more than one draw in a week,'' the letter points out.

In the case of the on-line lotteries being operated on behalf of the Government of Sikkim, the documents show that the 'agreement' between the State Government and the agency, M/s Tashi Delek Gaming Solutions Pvt. Ltd. has been signed a week before the Sikkim On-line Network Lottery Rules came into effect.

The Government of Mizoram runs a number of schemes, each offering Rs. 5,000 only as the highest prize. This means that the Government has no control over the payment of prize money, as amounts up to Rs. 5,000 are disbursed over the counter and there is no means of keeping an account of the number or the identities of prize winners.

The State of Arunachal Pradesh is also running their lotteries through the marketing agent, M/s N. V. Marketing, New Delhi, blatantly violating the Lotteries Act. In fact, what is most startling is the

fact that the Arunachal Government's agreement with the said agency was made on October 10, 1997, even before the Central Act came into force in 1998!

The Central Act specifies that the State Government shall directly print the lotteries.

According to the agreement between Arunachal Government and the marketing agent, ``the total amount (sales proceeds) payable to the Government shall be paid by the sole distributor by demand draft, after deducting the payment to the paper supplier and for the printing presses''.

This establishes beyond doubt that the procurement of paper for printing of lottery tickets and the actual printing of tickets are not done by the Government of Arunachal Pradesh as required by the Act, but by the sole distributor or agents, Mr. Sajan Peter points out.

The lottery rules brought out by these State Governments would thus indicate that the fraudulent practices were being perpetrated with the full knowledge of the Governments and that the provisions in the Central Act has been `twisted' in such a manner that the entire business of running the lottery could be handed over to private players, the letter says.

Almost every one of the on-line lotteries that are being run in the State has games where prizes are offered on the basis of a single digit, which is expressly banned under the Central Act. Instead of the permitted one draw per week, the on-line outlets were conducting as many as 20 to 50 draws every day. Since the operators claim that around 90 per cent of the sales proceeds is disbursed as prize money, the States actually receive around five per cent of the sales proceeds, which could be used for development purposes, the letter says.

Also, according to the rules of one State Government, it was the responsibility of the buyer of the ticket to ascertain the genuineness of the lottery tickets.

While some permitted the marketing agent to conduct draws in the presence of just one judge, some States had entrusted the keys to the `high-security' rooms where the draw machines are kept, to the agent.

The letter says that none of the State Governments had formulated rules which insisted on fool-proof regulatory mechanisms to ensure that the private agencies conducted the lotteries in a transparent and legitimate manner.

Any violation of Section 4 of the Lotteries Regulation Act would mean that the said lottery is in fact not lottery, but gambling, attracting penal provisions of Section 294 (a) of IPC, the Taxes Secretary points out.

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