ivil Appeal No 134 of 1956
Appeal under articles 132 1 and 133 I c of the Constitution of India from the Judgment and Order dated January 12 1955 of the Bombay High Court in Appeal No 72 of 1954 arising out of the Judgment and Order dated April 22 1954 of the Bombay High Court in its Original Civil Jurisdiction in Miscellaneous Application No 365 of 1952
C K Daphtary Solicitor General of India H M Seervai Porus A Mehta and R H Dhebar for the appellant
877 M C Setalvad Attorney General for India Sir N P Engineer N A Palkhivala R A Gagrat section V Subramanian and G Gopal Krishnan for the respondents
G R Ethirajulu Naidu Advocate General Mysore Porus A Mehta and T M Sen for the intervener
April 9
The Judgment of the Court was delivered by DAS CJ
This is an appeal by the State of Bombay from the judgment and order passed on January 12 1955 by the Court of Appeal of
the High Court of Judicature of Bombay confirming though on somewhat different grounds the judgment and order passed on April 22 1954 by a single Judge of the said High Court allowing with costs the present respondents  petition under article 226 of the Constitution of India
The said petition was presented before the High Court of Judicature at Bombay on December 18 1952
In the said petition there were two petitioners who are now the two respondents to this appeal
The first petitioner is an individual who claims to be a citizen of India and the founder and Managing Director of the second petitioner which is a company incorporated in the State of Mysore and having its registered head office at 2 Residency Road Bangalore in that State
That petition was further supported by an affidavit sworn by the first petitioner on the same day
The allegations appearing in the said petition and affidavit may now be shortly stated
In July 1946 the first petitioner applied for and obtained from the then Collector of Bombay a licence being Licence No 84 of 1946 for the period ending March 31 1947 to conduct what was known as the Littlewood s Football Pool Competitions in India
That licence was granted to the first petitioner under the provisions of the Bombay Prize Competitions Tax Act Bom
XI of 1939 hereinafter referred to as the 1939 Act which was then in force
The said licence was renewed for a period of one year from April 1 1947 to March 31 1948
During that period the first petitioner paid by way of competition tax to the Bombay Provincial 113 878 Government a sum of rupees one lakh per annum
The Government of Bombay having declined to renew the first petitioner s licence for a further period the first petitioner filed a petition under section 45 of the Specific Relief Act in the High Court of Bombay which was eventually after various proceedings dismissed by the court of appeal on or about March 28 1949
In the meantime in view of the delay and difficulty in obtaining a renewal of the licence in Bombay the first petitioner in or about August 1948 shifted his activities from Bombay to the State of Mysore where he promoted and on February 261949 got incorporated a company under the name of RMDC Mysore Limited which was the second petitioner in the High Court and is the second respondent before us
The first petitioner who was the promoter of the second petitioner became the Managing Director of the second petitioner
All the shareholders and Directors of the second petitioner are said to be nationals and citizens of India
The second petitioner also owns and runs a weekly newspaper called  Sporting Star  which was and is still printed and published at Bangalore in a Press also owned by the second petitioner
It is through this newspaper that the second petitioner conducts and runs a Prize Competition called the RMDC Crosswords for which entries are received from various parts of India including the State of Bombay through agents and depots established in those places to collect entry forms and fees for being forwarded to the head office at Bangalore
The 1939 Act was replaced by the Bombay Lotteries and Prize Competition Control and Tax Act Bom
LIV of 1948 hereinafter referred to as the 1948 Act which came into force on December 1 1948
The 1939 Act as well as the 1948 Act as originally enacted did not apply to prize competitions contained in a newspaper printed and published outside the Province of Bombay
So the Prize Competition called the RMDC Crosswords was not affected by either of those two Acts
On June 21 1951 the State of Mysore however enacted the Mysore Lotteries and Prize Competition 879 Control and Tax Act 195 1 which was based upon the lines of the said 1948 Act
That Mysore Act having come into force on February 1 1952 the second petitioner applied for and obtained a licence under that Act and paid the requisite licence fees and also paid and is still paying to the State of Mysore the tax at the rate of 15 latterly reduced to 121 of the gross receipts in respect of the RMDC Crosswords Prize Competition and continued and is still continuing the said Prize Competition through the said weekly newspaper The Sporting Star and to receive entry forms with fees from all parts of the territory of India including the State of Bombay
It is said on the strength of the audited books of account that after distribution of prizes to the extent of about 33 of the receipts and after payment of taxes in Mysore amounting to about 15 and meeting the other expenses aggregating to about 47 the net profit of the second petitioner works out to about 5 only
On November 20 1952 the State of Bombay passed The Bombay Lotteries and Prize Competitions Control and Tax Amendment Act Bom
XXX of 1952
This Act amended the provisions of the 1948 Act in several particulars
Thus the words  but does not include a prize competition contained in a newspaper printed and published outside the Province of Bombay which occurred in the definition of Prize Competition in section 2 1 d of the 1948 Act were deleted and the effect of this deletion was that the scope and the application of the 1948 Act so amended became enlarged and extended so as to cover prize competitions contained in newspapers printed and published outside the State of Bombay
After cl
d of section 2 1 the Amending Act inserted a new cl
dd which defined the word Promoter 
A new section was substituted for the old section 12 and another new section was inserted after section 12 and numbered as a 12A
By this new section 12A provision was made for the levy in respect of every prize competition contained in a newspaper or a publication printed outside the State of Bombay for which a licence was obtained under the Act of a tax at such rates as might be specified not exceeding the 880 rates specified in section 12 or in a lump sum having regard to the circulation or distribution of the newspaper or publication in the State of Bombay
It is pointed out that the margin of net profit being only 5 if tax has to be paid to the State of Bombay under the 1948 Act as amended hereinafter referred to as the impugned Act the second petitioner will be unable to carry on its prize competition except at a loss
Reference is also made to the rules framed by the State of Bombay called the Bombay Lotteries and Prize Competition Control and Tax Rules 1952 herein  after called the said Rules which came into force on and from December 8 1952
The said Rules require the petitioner to apply for and obtain a licence in Form  H  which imposes certain onerous conditions
The petitioners point out that it would be impossible for them in a commercial sense and from a practical point of view to run the prize competitions in the territory of India if they are required to comply not only with the restrictions and conditions imposed by the Mysore State where the newspaper is printed and published but also with the varying and different restrictions conditions and taxes imposed by the State of Bombay and other States in the territory of India where the said newspaper containing the advertisements of the said prize competitions are circulated
The petitioners submit that the provisions of the impugned Act and the Rules in so far as they apply to prize competitions contained in newspapers and other publications printed and published outside the State of Bombay are ultra vires void and inoperative in law
Upon the presentation of the petition a Rule was issued calling upon the State of Bombay to appear and show cause if any it had why the writ or orders prayed for should not be issued or made
The State of Bombay filed an affidavit raising several technical legal objections to the maintainability of the petition and refuting the allegations and submissions contained therein and in the supporting affidavit
It submitted that as the second petitioner was a corporation  and the first petitioner who was a Managing Director 881 thereof had no rights independent of the second petitioner neither of them could lay any claim to any fundamental right under article 191 g and no question could arise of any violation of the petitioner s alleged fundamental rights
It further submitted that having
Regard to the fact that lotteries and prize competitions were opposed to public policy there could be no  business  in promoting a lottery or a prize competition and the question of the violation of the petitioners  alleged rights under article 191 g of the Constitution did not arise
It was also contended that if the provisions of the Act and the Rules operated as restrictions then the same were reasonable and in the interest of the general public
Likewise it was submitted that having regard to the fact that lotteries and prize competitions are opposed to public policy there could be no business  in promoting a lottery or a prize competition and the question of the violation of the provisions of article 301 of the Constitution did not arise
It was denied that sections 10 and 12 of the Act violated the equal protection clause of the Constitution
An affidavit in reply was filed by the first petitioner traversing the allegations submissions and contentions set forth in the affidavit in opposition filed on behalf of the State of Bombay
The main contentions of the present respondents before the trial Judge were aThe impugned Act and particularly its taxing provisions were beyond the competence of the State Legislature and invalid inasmuch as they were not legislation with respect to betting and gambling under Entry 34 or with respect to entertainments and amusements under Entry 33 or with respect to taxation on entertainments and amusements betting
and gambling under Entry 62 of the State List
The legislation was with respect to trade and commerce and the tax levied by the Impugned Act was a tax on the trade or calling of conducting prize competitions and fell within Entry 60 of the State List
b The respondents  prize competition was not a lottery and could not be regarded as gambling 882 inasmuch as it was a competition in which skill knowledge and judgment had real and effective play
c The impugned Act itself contained distinct provisions in respect of prize competitions and lotteries  thereby recognising that prize competitions were not lotteries
d The said tax being in substance and fact a tax on the trade or business of carrying on prize competitions it offended against section 142A 2 of the Government of India Act 1935 and article 276 2 of the Constitution which respectively provide that such a tax shall not exceed fifty rupees and two hundred and fifty rupees per annum
e The impugned Act was beyond the legislative competence of the Bombay Legislature and invalid as it was legislation with respect to trade and commerce not within but outside the State
f The impugned Act operated extra territorially inasmuch as it affected the trade or business of conducting prize competitions  outside the State and was therefore beyond the competence of the State Legislature and invalid
g The impugned Act offended against article 301 of the Constitution inasmuch as it imposed restrictions on trade commerce and intercourse between the States and was not saved by article 304 b of the Constitution
h The restrictions imposed by the impugned Act on the trade or business of the petitioners were not reasonable restrictions in the interests of the general public and therefore contravened the fundamental right of the petitioners who were citizens of India to carry on their trade or business under article 19 1 g of the Constitution
i That sections 10 12 and 12A of the said Act offended against article 14 of the Constitution inasmuch as they empowered discrimination between prize competitions contained in newspapers or publications printed and published within the State and those printed and published outside the State
The State of Bombay which is now the appellant before us on the other hand maintained that 883 a The prize competitions conducted by the petitioners were a lottery
b The provisions of the impugned Act were valid and competent legislation under Entries 33 34 and 62 of the State List
cThe impugned Act was not extra territorial in its operation
dThe prize competitions conducted by the petitioners were opposed to public policy and there could therefore be no trade or business of promoting such prize competitions
eAs the petitioners were not carrying on a trade or business no question of offending their fundamental rights under article 19 1 g or of a violation of article 301 of the Constitution could arise
fThe second petitioner being a Corporation was not a citizen and could not claim to be entitled to the fundamental right under article 19 1 g of the Constitution
gIn any event the restrictions on the alleged trade or business of the petitioners imposed by the Act were reasonable restrictions in the public interest with in the meaning of article 19 6 and article 304 b of the Constitution
The trial Judge held aThe tax levied under sections 12 and 12A of the Act was not a tax on entertainment amusement betting or gambling but that it was a tax on the trade or calling of the respondents and fell under Entry 60 and not under Entry 62 of the State List
bThe prize competition conducted by the petitioners was not a lottery and it could not be said to be either betting or gambling inasmuch as it was a competition in which skill knowledge and judgment on the part of the competitors were essential ingredients
cThe levy of the tax under the said sections was void as offending against article 276 2 of the Constitution
dThe restrictions imposed by the impugned Act and the Rules thereunder offended against article 301 of the Constitution and were not saved by Art 884 304b inasmuch as the restrictions imposed were neither reasonable nor in the public interest
eThe second petitioner although it was a company was a citizen of India and was entitled to the protection of article 19 of the Constitution
fThe restrictions imposed by the impugned Act and the Rules made thereunder were neither reasonable nor in the interests of the general public and were void as offending against article 19 1 g of the Constitution
In the result the rule nisi was made absolute and it was further ordered that the State of Bombay its servants and agents do forbear from enforcing or taking any steps in enforcement implementation furtherance or pursuance of any of the provisions of the impugned Act and the 1952 Rules made thereunder and particularly from enforcing any of the penal provisions against the petitioners their Directors officers servants or agents and that the State of Bombay its servants and agents do allow the petitioners to carry on their trade and business of running the Prize Competition mentioned in the petition and do forbear from demanding collecting or recovering from the petitioners any tax as provided in the impugned Act or the said Rules in respect of the said Prize Competition and that the State of Bombay do pay to the petitioners their costs of the said applications
Being aggrieved by the decision of the trial Judge the State of Bombay preferred an appeal on June 8 1954
The Court of Appeal dismissed the appeal and confirmed the order of the trial Judge though on somewhat different grounds
It differed from the learned trial Judge on the view that he had taken that there was no legislative competence in the Legislature to enact the legislation
It held that the topic of legislation was I gambling  and the Legislature was competent to enact it under Entry 34 of the State List
It however agreed with the learned trial Judge that the tax levied under section 12A was not a tax on gambling but that it was a tax which fell under Entry 60
It held that there was 885 legislative competence in the Legislature to impose that tax but that the tax was invalid because it did not comply with the restriction contained in article 276 2 of the Constitution
It also took the view that the tax even assuming it was a tax on betting or gambling could not be justified because it did not fall under article 304 b
It differed from the learned trial Judge when he found as a fact that the scheme underlying the prize competitions was not a lottery and came to the conclusion that the Act applied to the prize competitions of the respondents
It held that the challenge of the petitioners to the impugned provisions succeeded because the restrictions contained in the impugned Act controlling the business of the petitioners could not be justified as the requirements of the provisions of article 304 b had not been complied with
The High Court agreed with the learned trial Judge that the petitioners  prize competitions were their business  which was entitled to the protection guaranteed under the Constitution
It took the view that although the activity of the petitioners was a lottery it was not an activity which was against public interest and therefore the provisions of Part XIII of the Constitution applied to the respondents  business
Being aggrieved by the said judgment of the Court of Appeal the appellant applied for and obtained under articles 1321 and 1331 of the Constitution a certificate of fitness for appeal to this Court and hence this appeal before us
The principal question canvassed before us relates to the validity or otherwise of the impugned Act
The Court of Appeal has rightly pointed out that when the validity of an Act is called in question the first thing for the court to do is to examine whether the Act is a law with respect to a topic assigned to the particular Legislature which enacted it
If it Is then the court is next to consider whether in the case of an Act passed by the Legislature of a Province now a State its operation extends beyond the boundaries of the Province or the State for under the provisions conferring legislative powers on it such Legislature can only make a law for its territories or any part thereof 114 886 and its laws cannot in the absence of a territorial nexus have any extra territorial operation
If the impugned law satisfies both these tests then finally the court has to ascertain if there is anything in any other part of the Constitution which places any fetter on the legislative powers of such Legislature
The impugned law has to pass all these three tests
Taking the first test first it will be recalled that the 1948 Act was enacted by the Provincial Legislature of Bombay when the Government of India Act 1935 was in force
Under sections 99 and 100 of that Act the Provincial Legislature of Bombay had power to make laws for the Province of Bombay or any part thereof with respect to any of the matters enumerated in List 11 in the Seventh Schedule to that Act
It will also be remembered that the 1948 Act was amended by Bombay Act XXX of 1952 after the Constitution of India had come into operation
Under articles 245 and 246 subject to the provisions of the Constitution the Legislature of the State of Bombay has power to make laws for the whole or any part of the State of Bombay with respect to any of the matters enumerated in List II of the Seventh Schedule to the Constitution
The State of Bombay which is the appellant before us claims that the impugned Act including section 12A is a law made with respect to topics covered by Entries 34 and 62 of List II in the Seventh Schedule to the Constitution which reproduce Entries 36 and 50 of List II in the Seventh Schedule to the Government of India Act 1935
On the other hand the petitioners who are respondents before us maintain that the impugned Act is legislation under Entries 26 and 60 in List 11 of the Seventh Schedule to the Constitution corresponding to Entries 27 and 46 of List II in the Schedule to the Government of India Act 1935 and that in any event section 12A of the impugned Act in so far as it imposes a tax comes under Entry 60 of List II in the Seventh Schedule to the Constitution corresponding to Entry 46 of List II in the Seventh Schedule to the Government of India Act 1935 and not under Entry 62 of List 11 in the Seventh Schedule to the Constitution corresponding to Entry 50 of List 11 in the Seventh Schedule to the 887 Government of India Act 1935 and that as the tax imposed exceeds Rs 250 it is void under article 276 2 which reproduces section 142A of the Government of India Act 1935
Reference will hereafter be made only to the relevant Entries of List II in the Seventh Schedule r to the Constitution for they are substantially in the same terms as the corresponding Entries of List 11 in the Seventh Schedule to the Government of India Act 1935
For easy reference the relevant Entries in List II in the Seventh Schedule to the Constitution are set out below  26
Trade and commerce within the State subject to the provisions of Entry 33 of List III
Betting and gambling
Taxes on professions trades callings and employments
Taxes on luxuries including taxes on entertainments amusements betting and gambling
 In order to correctly appreciate the rival contentions and to come to a decision as to the particular Entry or Entries under which the impugned Act including section 12A thereof has been enacted it is necessary to examine and to ascertain the purpose and scope of the impugned legislation
It may be mentioned that the 1939 Act was enacted to regulate and levy a tax on prize competitions in the Province of Bombay
It did not deal with lotteries at all
That Act was repealed by the 1948 Act which was enacted to control and to levy a tax not only on prize competitions but on lotteries also
It is not unreasonable to conclude that the clubbing together of lotteries and prize competitions in the 1948 Act indicates that in the view of the Legislature the two topics were in a way allied to each other
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
In section 21 d of the impugned Act will be found the definition of  prize competition  to which reference will be made hereafter in greater detail
Clause dd was inserted in section 21 in 1952 defining promoter
Section 3 declares that subject to the 888 provisions of the Act all lotteries and all prize com petitions are unlawful
This is a clear indication that the legislature regarded lotteries and prize competitions as on the same footing and declared both of them to be unlawful subject of course to the provisions of the Act
Section 4 creates certain offences in connection with lotteries and competitions punishable as therein mentioned
We may skip over sections 5 and 6 which deal exclusively with lotteries and pass on 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 has been obtained by the promoter thereof
There are two provisos to the section which are not material for our present purpose
Section 8 imposes certain a additional penalty for contravention of the provisions of section 7
Section 9 regulates the granting of licences on such fees and conditions and in such form as may be prescribed that is to say prescribed by rules
Section 10 makes it lawful for the Government by general or special order to inter alia prohibit the grant of licences in respect of a lottery or prize competition or class of lotteries or prize competitions throughout the State or in any area
Section II empowers the Collector to suspend or cancel a licence granted under this Act in certain circumstances therein specified
Section 12 authorises the levy of a tax on lotteries and prize competitions at the rate of 25 of the total sum received Or due in respect of such lottery or prize competition
This section directs that the tax shall be collected from the promoter of such lottery or prize competition as the case may be
Sub section 2 of section 12 empowers the State Government by a Notification in the official Gazette to enhance the rate of tax up to 50 of the total sum received or due in respect of such prize competition as may be specified in the Notification
Section 12A which is of great importance for the purpose of this appeal runs as follows  12A
Notwithstanding anything contained in section 12 there shall be levied in respect of every lottery or prize competition contained in a newspaper or publication printed and published outside the State 889 for which a licence has been obtained under section 5 6 or 7  a tax at such rates as may be specified by the State Government in a notification in the Official Gazette not exceeding the rates specified in section 12 on the sums specified in the declaration made under section 15 by the promoter of the lottery or prize competition as having been received or due in respect of such lottery or prize competition or in a lump sum having regard to the circulation or distribution of the newspaper or publication in the State
 Section 15 requires every person promoting a lottery or prize competition of any kind to keep and maintain accounts relating to such lottery or prize competition and to submit to the Collector statements in such form and at such period as may be prescribed
It is not necessary for the purpose of this appeal to refer to the remaining sections which are designed to facilitate the main purpose of the Act and deal with procedural matters except to section 31 which confers power on the State Government to make rules for the purpose of carrying out the provisions of the Act
In exercise of powers so conferred on it the State Government has by Notification in the Official Gazette made certain rules called the Bombay Lotteries and Prize Competitions Control and Tax Rules 1952 to which reference will be made hereafter
The petitioners contend that the object of the impugned Act is to control and to tax lotteries and prize competitions
It is not the purpose of the Act to prohibit either the lotteries or the prize competitions
They urge that the impugned Act deals alike with prize competitions which may partake of the nature of gambling and also prize competitions which call for knowledge and skill for winning success and in support of this contention reliance is placed on the definition of prize competition in section 21d of the impugned Act
We are pressed to hold that the impugned Act in its entirety or at any rate in so far as it covers legitimate and innocent prize competition is a law with respect to trade and commerce under Entry 26 and not with respect to betting and gambling under Entry 34
They also urge that in any event the taxing provisions 890 namely sections 12 and 12A are taxes on the trade of running prize competitions under Entry 60 and not taxes on betting and gambling under Entry 62
We are unable to accept the correctness of the aforesaid contentions for reasons which we proceed immediately to state
As it has already been mentioned the impugned Act replaced the 1939 Act which dealt only with prize competitions
Section 22 of the 1939 Act defined prize competition in the terms following 22 Prize Competition  includes a crossword prize competition missing words competition picture prize competition number prize competition or any other competition for which the solution is prepared beforehand by the promoters of the competition or for which the solution is determined by lot bany 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 c any other competition success in which does not depend to a substantial degree upon the exercise of skill but does not include a prize competition contained in a newspaper or periodical printed and published outside the Province of Bombay
 The 1948 Act section 21d as originally enacted sub stantially reproduced the definition of  prize competition  as given in section 22 of the 1939 Act
Section 21d of the 1948 Act as originally enacted ran as follows 21d Prize Competition  includes i cross word prize competition missing words prize competition picture prize competition number prize competition or any other competition for which the solution is prepared beforehand by the promoters of the competition or for which the solution is determined by lot iiany 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 891 iiiany other competition success in which does not depend to a substantial degree upon the exercise of skill but does not include a prize competition contained in a newspaper printed and published outside the Province of Bombay  The collocation of words in the first category of the definitions in both the 1939 Act and the 1948 Act as originally enacted made it quite clear that the qualifying clause for which the solution is prepared beforehand by the promoters of the competition or for which the solution is determined by lot  applied equally to each of the five kinds of prize competitions included in that category and set out one after another in a continuous sentence
It should also be noted that the qualifying clause consisted of two parts separated from each other by the disjunctive word or
Both parts of the qualifying clause indicated that each of the five kinds of prize competitions which they qualified were of a gambling nature
Thus a prize competition for which a solution was prepared beforehand was clearly a gambling prize competition for the competitors were only invited to guess what the solution prepared beforehand by the promoters might be or in other words as Lord Hewart C J observed in Coles vs Odhams Press Ltd 1  the competitors are invited to pay 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 qualifying clause applied that is to say the prize competitions for which the solution was determined by lot was necessarily a gambling adventure
On the language used in the definition section of the 1939 Act as well as in the 1948 Act as originally enacted there could be no doubt that each of the five kinds of prize competitions included in the first category to each of which the qualifying clause applied was of a gambling nature
Nor has it been questioned that the third category which comprised  any other competition success in which does not depend to a substantial degree upon the exercise of skill constituted a 1 LR 1936 1 KB 416 892 gambling competition
At one time the notion was that in order to be branded as gambling the competition must be one success in which depended entirely on chance
If even a scintilla of skill was required for success the competition could not be regarded as of a gambling nature
The Court of Appeal in the judgment under appeal has shown how opinions have changed since the earlier decisions were given and it is not necessary for us to discuss the matter again
It will suffice to say that we agree with the Court of Appeal that a competition in order to avoid the stigma of gambling must depend to a substantial degree upon the exercise of skill
Therefore a competition success wherein does not depend to a substantial degree upon the exercise of skill is now recognised to be of a gambling nature
From the above discussion it follows that according to the definition of prize competition given in the 1939 Act as in the 1948 Act as originally enacted the five kinds of prize competitions comprised in the first category and the competition in the third category were all of a gambling nature
In between those two categories of gambling competitions were squeezed in as the second category 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 This juxtaposition is important and significant and will hereafter be discussed in greater detail
As already stated the 1948 Act was amended in 1952 by Bombay Act XXX of 1952
Section 21d as amended runs 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 893 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 It will be noticed that the concluding sentence  but does not include a prize competition contained in a newspaper printed and published outside the Province of Bombay has been deleted
This deletion has very far reaching effect for it has done away with the exclusion of prize competitions contained in a newspaper printed and published outside the State of Bombay from the scope of the definition
In the next place it should be noted that the definition of prize competition still comprises three categories as before
The second and the third categories are couched in exactly the same language as were their counterparts in the earlier definitions
It is only in the first category that certain changes are noticeable
The five kinds of prize competitions that were included in the first category of the old definitions are still there but instead of their being set out one after another in a continuous sentence they have been set out one below another with a separate number assigned to each of them
The qualifying clause has been amended 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 appears as before after the fifth item in the first category
It will be noticed that there is a comma after each of the five items including the fifth item
The mere assigning a separate number to the five items of prize competitions included in the first category does not in our judgment affect or alter the meaning scope and effect of this part of the definition
The numbering of the five items has not dissociated any of them from the qualifying clause
If the qualifying clause were intended to apply only to the fifth item then there would have been no comma after the fifth item
In our opinion therefore the qualifying clause continues to apply to each of the five items as before the amendment
There is grammatically no difficulty in reading 115 894 the qualifying clause as lending colour to each of those items
Accepting that the qualifying clause applies to each of the five kinds of prize competitions included in the first category it is urged that the qualifying clause as amended indicates that the Legislature intended to include innocent prize competitions within the definition so as to bring all prize competitions legitimate or otherwise within the operation of the regulatory provisions of the Act including the taxing sections
The argument is thus formulated
As a result of the amendment the qualifying clause has been broken up into three parts separated from each other by the disjunctive word  or 
The three parts are 1 for which the solution is prepared beforehand by the promoters 2 for which the solution is not prepared beforehand by the promoters and 3 for which the solution is determined by lot or chance
The first and the third parts of the qualifying clause it is conceded will when applied to the preceding five kinds of prize cometitions make each of them gambling a ventures gut it is contended that prize competitions to which the second part of the qualifying clause may apply that is to say prize competitions for which the solution is not prepared beforehand need not be of a gambling nature at all and at any rate many of them may well be of an innocent type
This argument hangs on the frail peg of unskilful draftsmanship
It has been seen that in the old definitions all the five kinds of prize competitions included in the first categorv were of a gambling nature
We find no cogent reason and none has been suggested why the Legislature_which treated lotteries and prize competitions on the same footing should suddenly enlarge the first category so as to include innocent prize competitions
To hold that the first category of prize competitions include innocent prize competitions will go against the obvious tenor of the impugned Act
The 1939 Act dealt with prize competitions only and the first category in the definition given there comprised only gambling competitions
The 1948 Act clubbed together lotteries and prize competitions and the first category of the prize competitions 895 included in the definition as originally enacted was purely gambling as both parts of the qualifying clause clearly indicated
Section 3 of the Act declared all lotteries and all prize competitions unlawful
There could be no reason for declaring innocent prize competitions unlawful
The regulatory provisions for licensing and taxing apply to all prize competitions
If it were intended to include
innocent prize competitions in the first category one would have expected the Legislature to have made separate provisions for the legitimate prize competitions imposing less rigorous regulations than what had been imposed on illegitimate prize competitions
It will become difficult to apply the same taxing sections to legitimate as well as to illegitimate competitions
Tax on legitimate competitions may well be a tax under Entry 60 on the trader who carries on the trade of innocent and legitimate competition
It may be and indeed it has been the subject of serious controversy whether an illegitimate competition can be regarded A a trade at all and in one view of the matter the tax may have to be justified as a tax on betting and gambling under Entry 62
Considering the nature scope and effect of the impugned Act we entertain no doubt whatever that the first category of prizecompetitions does not include any innocent prize competition
Such is what we conceive to be the clear intention of the Legislature as expressed in the impugned Act read as a whole and to give effect to this obvious intention as we are bound to do we have perforce to read the word or appearing in the qualifying clause after the word promoter and before the word for as and
Well known canons of construction of Statutes permit us to do so
See Maxwell on the Interpretation of Statutes 10th edition page 238
A similar argument was sought to be raised on a construction of cl
ii of section 21 d
As already stated in between the first and the third categories of prize competitions which as already seen are of a gambling nature the definition has included a second category of competitions in which prizes are offered for forecasts of the results either of a future event or of a past event 896 the result of which is not yet ascertained or not yet generally known
It is said that forecasts of such events as are specified in the section need not necessarily depend on chance for it may be accurately done by the exercise of knowledge and skill derived from a close study of the statistics of similar events of the past
It may be that expert statisticians may form some idea of the result of an uncertain future event but it is difficult to treat the invitation to the general public to participate in these competitions as an invitation to a game of skill
The ordinary common people who usually join in these competitions can hardly be credited with such abundance of statistical skill as will enable them by the application of their skill to attain success
For most if not all of them the forecast is nothing better than a shot at a hidden target
Apart from the unlikelihood that the Legislature in enacting a statute tarring both lotteries and prize competitions with the same brush as indicated by s  3 would squeeze in innocent prize competitions in between two categories of purely gambling varieties of them all the considerations and difficulties we have adverted to in connection with the construction of the first category and the qualifying clause therein will apply mutatis mutandis to the interpretation of this second clause
Reliance is placed on section 26 of the English Betting and Lotteries Act 1934 24 and 25 Geo
V c 58 in aid of the construction of the second category of prize competitions included in the definition given in the impugned Act
The relevant portion of section 26 of the aforesaid Act runs thus  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 success in which does not depend to a substantial degree upon the exercise of skill
897 It will be noticed that this section is not a definition section at all but is a penal section which makes certain competitions mentioned in the two clauses unlawful
Clause a of that section which corresponds to our second category is not sandwiched between two categories of gambling prize competitions
In Elderton vs Totalisator Co Ltd 1 on which the petitioners rely the question was whether the football pool advertised in newspapers by the appellant company came within the wide language of cl
a of that section which was in Part II of the Act
Whether the appellant company s football pool called for any skill on the part of the investors or whether it was of a gambling nature was not directly relevant to the discussion whether it fell within cl
The penal provisions of the English Act and the decision of the Court of Appeal throw no light on the construction of our definition clause
Seeing that prize competitions have been clubbed together with lotteries and dealt with in the same Act and seeing that the second category of the definition of  prize competition  is sandwiched in between the other two categories which are clearly of a gambling nature and in view of the other provisions of the impugned Act and in particular section 3 and the taxing sections we are clearly of opinion that the definition of  prize competition  on a proper construction of the language of section 21 d in the light of the other provisions of the Act read as a whole comprises only prize competitions which are of the nature of a lottery in the wider sense that is to say of the nature of gambling
The Court of Appeal took the view that although as a matter of construction the definition did include innocent prize competitions yet by the application of another principle namely that a literal construction will make the law invalid because of its overstepping the limits of Entry 26 which comprises only trade and commerce within the State the definition should be read as limited only to gambling prize competitions so as to make it a law with respect to betting and gambling under Entry 34
It is not necessary for us in this case to consider whether the 1 898 principle laid down by Sir Maurice Gwyer C J in the Hindu Women s Right to Property Act case 1 can be called in aid to cut down the scope of a section by omitting one of two things when the section on a proper construction includes two things for we are unable with great respect to agree with the Court of Appeal that on a proper construction the definition covers both gambling and innocent competitions
In our view the section on a true construction covers only gambling prize competitions and the Act is a law with respect to betting and gambling under Entry 34
As for the foregoing reasons we have already arrived at the conclusion just stated it is unnecessary for us to refer to the language used in the third category and to invoke the rule of construction which goes by the name of noscitur a sociis relied on by learned counsel for the appellant
The next point urged is 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 imposes 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 Appeal Court has expressed the view that section 12A does not fall within Entry 62 for it does not impose a tax on the gambler but imposes a tax on the peti tioners who do not themselves gamble but who only promote the prize competitions
So far as the promoters are concerned the tax levied from them can only be regarded as 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 talks of taxes on betting and gambling and not of taxes on the men who bet or gamble
It is necessary therefore to bear in mind the real nature of the tax
The tax imposed by section 12A is in terms a percentage of the sums specified in the declaration made under a 15 by the promoter or a lump sum having regard to the circulation and distribution of the newspaper or 1 899 publication in the State
Under section 15 the promoter of a prize competition carried on in a newspaper or publication printed and published outside the State is to make a declaration in such form and at such period as may be prescribed
Form J  prescribed by r 11 c requires the promoter to declare among other things the total number of ticketscoupons received for the competition from the State of Bombay and the total receipts out of the sale of the ticketscoupons from the State of Bombay
The percentage under a 12A is to be calculated on the total sums specified in the declaration
It is clear therefore that the tax sought to be imposed by the impugned Act is a percentage of the aggregate of the entry fees received from the State of Bombay
On ultimate analysis it is a tax on each entry fee received from each individual competitor who remits it from the State of Bombay
In gigantic prize competitions which the prize competitions run by the petitioners undoubtedly are it is extremely difficult and indeed well nigh impossible for the State to get at each individual competitor and the provision for collecting the tax from the promoters after the entry fees come into their hands is nothing but a convenient method of collecting the tax
In other words the taxing authority finds it convenient in the course of administration to collect the duty in respect of the gambling activities represented by each of the entries when the same reaches the hands of the promoters
The tax on gambling is a well recognised group of indirect taxes as stated 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 section Mill quoted by Lord Hobhouse in Bank of Toronto vs Lambe 1 is demanded from the promoter in the expectation and intention that he shall indemnify himself at the expense of the gamblers who sent entrance fees to him
That we think is the general tendency of the tax according to the common understanding of men
It is not difficult for the promoters to pass on the tax to the gamblers for they may charge the proportionate percentage on the amount of 1 900 each entry as the seller of goods charges the sales tax or he may increase the entrance fee from 4 annas to 5 annas 6 pies to cover the tax
If in particular circumstances it is economically undesirable or practically impossible to pass on the tax to the gamblers that circumstance is not a decisive or even a relevant consideration for ascertaining the true nature of the tax for it does not affect the general tendency of the tax which remains
If taxation on betting and gambling is to be regarded as a means of controlling betting and gambling activities then the easiest and surest way of doing so is to get at the promoters who encourage and promote the unsocial activities and who hold the gamblers  money in their hands
To collect the tax from the promoters is not to tax the promoters but is a convenient way of imposing the tax on betting and gambling and indirectly taxing the gamblers themselves
It is to be noted that the tax here is not on the profits made by the petitioners but it is a percentage of the total sum received by them from the State of Bombay as entrance fees without the deduction of any expense
This circumstance also indicates that it is not a tax on a trade
According to the general understanding of men as stated by Lord Warrington of Clyffe in Rex vs Caledonian Collieries Ltd 1 there are marked distinctions between a tax on gross collection and a tax on income which for taxation purposes means gains and profits
Similar considerations may apply to tax on trade
There is yet another cogent reason for holding that the tax imposed by section 12A is a tax on betting and gambling
In enacting the statute the Legislature was undoubtedly making a law with respect to betting and gambling under Entry 34 as here in before mentioned
By the amending Act XXX of 1952 the Legislature by deleting the concluding words of the definition of prize competition  namely  but does not include etc etc  extended the operation of the Act to prize competitions carried on in newspapers printed and published outside the State of Bombay
They knew that under article 276 which reproduced section 142A of the Government of India Act 1 901 1935 they could not impose a tax exceeding the sum of Rs 250 on any trade or calling under Entry 60
If the tax can be referable either to Entry 60 or to Entry 62 then in view of the fact that section 12A will become at least partially if not wholly invalid as a tax on trade or calling under Entry 60 by reason of article 2762 the court must in order to uphold the section follow the well established principle of construction laid down by the Federal Court of India and hold that the Legislature must have been contemplating to make a law with respect to betting and gambling under Entry 62 for there is no constitutional limit to the quantum of tax which can be imposed by a law made under that Entry
For reasons stated above we are satisfied that section 12A is supportable as a valid piece of legislation under Entry 62
The next point urged by the petitioners is that under articles 245 and 246 the Legislature of a State can only make a law for the State or any part thereof and consequently the Legislature overstepped the limits of its legislative field when by the impugned Act it purported to affect men residing and carrying on business outside the State
It is submitted that there is no sufficient territorial nexus between the State and the activities of the petitioners who are not in the State
The doctrine of territorial nexus is well established and there is no dispute as to the principles
As enunciated by learned counsel for the petitioners if there is a territorial nexus between the person sought to be charged and the State seeking to tax him the taxing statute may be upheld
Sufficiency of the territorial connection involves a consideration of two elements namely a the connection must be real and not illusory and b the liability sought to be imposed must be pertinent to that connection
It is conceded that it is of no importance on the question of validity that the liability imposed is or may be altogether disproportionate to the territorial connection
In other words if the connection is sufficient in the sense mentioned above the extent of such connection affects merely the policy and not the validity of the legislation
Keeping these principles in mind we have to ascertain if in the case before us there 116 902 was sufficient territorial nexus to entitle the Bombay
Legislature to make the impugned law
The question whether in a given case there is sufficient territorial nexus is essentially one of fact
The trial court took the  view that the territorial nexus was not sufficient to uphold the validity of the law under debate
The Court of Appeal took a different view of the facts and upheld the law
We find ourselves in agreement with the Court of Appeal
The newspaper Sporting Star printed and published in Bangalore is widely circulated in the State of Bombay
The petitioners have set up collection depots within the State to receive entry forms and the fees
They have appointed local collectors
Besides the circulation of the copies of the  Sporting Star  the petitioners print over 40000 extra coupons for distribution which no doubt are available from their local collectors
The most important circumstance in these competitions is the alluring invitation to participate in the competition where very large prizes amounting to thousands of rupees and sometimes running into a lakh of rupees may be won at and for a paltry entrance fee of say 4 annas per entry
These advertisements reach a large number of people resident within the Stat
The gamblers euphemistically called the competitors fill up the entry forms and either leave it along with the entry fees at the collection depots set up in the State of Bombay or send the same by poet from Bombay
All the activities that the gambler is ordinarily expected to undertake take place mostly if not entirely in the State of Bombay and after sending the entry forms and the fees the gamblers hold their soul in patience in great expectations that fortune may smile on them
In our judgment the standing invita tions the filling up of the forms and the payment of money take place within the State which is seeking to tax only the amount received by the petitioners from the State of Bombay
The tax is on gambling although it is collected from the promoters
All these we think constitute sufficient territorial nexus which entitles the State of Bombay to impose a tax on the gambling that takes place within its boundaries and the law cannot be struck down on the ground of extra territoriality
903 Assuming that the impugned Act is well within the legislative competence of the Bombay Legislature and that it is not invalid on the ground of extra territorial operation we have next to examine and see if there is anything else in the Constitution which renders it invalid
The petitioners contend that even if the prize competitions constitute gambling transactions they are nevertheless trade or business activities and that that being so the impugned Act infringes the petitioners  fundamental right under article 191g of the Constitution to carry on their trade or business and that the restrictions imposed by the Act cannot possibly be supported as reasonable restrictions in the interests of the general public permissible under article 196
The petitioners also point out that the trade or business carried on by them is not confined within the limits of the State of Mysore but extends across the State boundaries into other States within the territories of India and even into lands beyond the Union of India and they urge that in view of the inter State nature of their trade or business the restrictions imposed by the impugned Act offend against article 301 which declares that subject to the other provisions of Part XIII of the Constitution trade commerce and intercourse throughout the territory of India shall be free and cannot be supported under article 304b for the restrictions cannot be said to be reasonable or required in the public interest and because the procedural requirements of the proviso thereto had not been complied with
The State of Bombay repudiates these contentions and submits that as prize competitions are opposed to public policy there can be no trade or business in promoting a prize competition and the question of infraction of the petitioner s fundamental right to carry on trade or business guaranteed by article 191g or of the violation of the freedom of trade commerce or intercourse declared by article 301 does not arise at all and that in any event if article 191g or article 301 applies at all the restrictions imposed by the impugned Act are reasonable restrictions necessary in the interest of the general public and saved by article 196 and by article 304bof the Constitution
It is 904 conceded that the bill which became Act XXX of 1952 and amended the 1948 Act in the manner here in before stated was introduced in the Legislature of the State without the previous sanction of the President and consequently the condition precedent to the validity of the resulting Act as laid down in the proviso had not been complied with but it is submitted we think correctly that the defect was cured under article 255 by the assent given subsequently by the President to the impugned Act
It is however admitted by learned counsel appearing for the appellant State that under article 255 the subsequent assent of the President will save the Act if the other condition embodied in article 304b as to the restrictions imposed by it being reasonable in the public interest is held to be satisfied but it will not save the rules framed under a 31 of the impugned Act which had never been placed before the President or assented to or approved by him
We now proceed to examine and deal with these rival contentions
The first branch of the argument on this part of the appeal raises a question of a very far reaching nature
The question posed before us is Can the promotion of prize competitions which are opposed to public policy be characterised as a  trade or business  within the meaning of article 191g or trade commerce and intercourse within article 301  The learned trial Judge has expressed the view that if he were able to hold that the prize competitions conducted by the petitioners were of a gambling nature he would have had no difficulty in concluding that they were outside the protection of the Constitution
The Court of Appeal however took a different view
What weighed with the Court of Appeal was the fact that the legislature had not prohibited gambling outright but only made provisions for regulating the same and further that the State was making a profit out of these prize competitions by levying taxes thereon
It is necessary to consider the arguments that have been adduced before us by learned counsel for the parties in support of their respective contentions
905 It will be noted that article 191 g in very general terms guarantees to all citizens the right to carry on any occupation trade or business and el
6 of article 19 protects legislation which may in the interest of the general public impose reasonable restrictions on the exercise of the right conferred by article 191 g
Likewise article 301 declares that trade commerce and intercourse throughout the territory of India shall be free but makes such declaration subject to the other provisions of Part XIII of the Constitution
articles 302305 which are in that Part lay down certain restrictions subject to which the declaration contained in article 301 is to operate
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 the State provided in either case such restrictions are required in the public interest
Article 304 b authorises the State Legislatures to impose reasonable restrictions on the freedom of trade commerce or intercourse with or within the States as may be required in the public interest provided the formalities of procedure are complied with articles 191 g and 301 it is pointed out are two facets of the same thing the freedom of trade article 191g looks at the matter from the point of view of the individual citizens and protects their individual right to carry on their trade or business article 301 looks at the matter from the point of view of the country s trade and commerce as a whole as distinct from the individual interests of the citizens and it relates to trade commerce or intercourse both with and within the States
The question which calls for our decision is as to the true meaning import and scope of the freedom so guaranteed and declared by our Constitution
We have been referred to a large number of decisions bearing on the Australian and American Constitutions in aid of the construction of the relevant articles of our Constitution
In the Commonwealth of Australia Constitution Act 63 and 64 Vic c 12 there is section 92 from which our article 301 appears to have been taken
The material part of a 92 runs thus 906 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
It has been held in James vs Commonwealth of Australia 1 that the word  absolutely  adds nothing but emphasis to the width of the section
In the same case it has also been stated and decided that the section imposes a fetter on the legislative power not only of the Commonwealth Parliament but also of the Parliament of the States
It has been equally authoritatively held that the words  whether by means of internal carriage or ocean navigation  occurring in the section do not restrict its operation to such things and persons as are carried by land or sea but that the section extends to all activities carried on by means of interState transactions Commonwealth of Australia vs Bank of New South Wales 2 
The Privy Council in the last mentioned case has also said at p 299 that it is no longer arguable that freedom from customs or other monetary charges alone is secured by the section
The idea underlying the section was that the Federation in Australia should abolish the frontiers between the different States and create one Australia and that conception involved freedom from customs duties import border prohibitions and restrictions of every kind so that the people of Australia would be free to trade with each other and to pass to and fro from one State to another without any let or hindrance or without any burden or restriction based merely on the fact that they were not members of the same State James vs Commonwealth of Australia1
One cannot but be struck by the sweeping generality of language used in the section
Such a wide enunciation of the freedom of inter State trade commerce and intercourse was bound to lead to difficulties
The full import and true meaning of the general words had to be considered as years went past in relation to the vicissitudes of altering facts and circumstances which from time to time emerged
The changing circumstances and the necessities compelled the court 1  627
2  302 303
907 to reach the conclusion that the conception of freedom of trade commerce and intercourse in a community regulated by law presupposed some degree of restriction on the individual
Cases arose out of statutes enacted for restricting competition of privately owned motor vehicles with publicly owned railways or to compel users of motor to contribute to the upkeep of the roads eg Willard vs Rawson 1 R vs Vizzard2 and O Gilpin Ltd vs Commissioner of Road Transport and Tramways1
In each of these three cases the State law was upheld as not offending against section 92
Cases arose under statutes which were sought to be supported on the ground of health
In Ex parte Nelson No 1 4 a New South Wales statute prohibited entry of cattle from tick infected area until dipped
Applying the principle of pith and substance it was held that the restrictions looked at in their true light were aids to and not restrictions upon the freedom of inter State trade commerce and intercourse
In Tasmania vs Victoria 5
the absolute prohibition of imports of potatoes from Tasmania to Victoria could not on facts be supported as a health measure and consequently was struck down as a violation of section 92
In James vs Commonwealth of Australia6 came up for consideration the Dried Fruits Act 1928 35 which prohibited the carrying of any dried fruit from one State to another except under a licence and which provided for penalty for its contravention
The regulations authorised the Minister to direct the licensee to export a certain percentage of dried fruits from Australia
The Minister by an order determined that it would be a condition of the licence
that the licensee should export a percentage of the dried fruits as therein mentioned
The appellant having refused to apply for a licence his consignments of dried fruits shipped from Aide for delivery at Sydney in performance of contracts for sale were seized
The appellant brought an action for damages for what he alleged to be a wrongful seizure
After holding that the section bound the Parliament of 1 1933 48 CLR316
4 1928 42CLR 209
2  51935  3  6  627 908 Commonwealth equally with those of the States the Judicial Committee proceeded to say that the freedom declared in section 92 must be somehow limited and the only limitation which emerged from the context and which could logically and realistically apply was freedom at what was the crucial point in inter State trade namely at the State barrier p 631
In the later case of Commonwealth of Australia vs Bank of New South Wales 1 it has been said that those words were to be read secundum subjectam materiam and could not be interpreted as a decision either that it was only the passage of goods which is protected by section 92 or that it is only at the frontier that the stipulated freedom might be impaired p 308
Learned counsel for the State has strongly relied on two decisions of the Australian High Court in both of which the validity of a New South Wales Statute called the Lotteries and Art Unions Act 1901 1929 was called in question
Section 21 of that Act provided 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 those two cases The King vs Connare2 the appellant offered for sale in Sydney a ticket in a lottery lawfully conducted in Tasmania and was convicted of an offence under section 21
He challenged the validity of the law on the ground that it interfered with the freedom of trade commerce and intercourse among the States and consequently violated the provisions of section 92
It was held by Starke Dixon Evatt and McTiernan JJ
Latham CJ and Rich J dissenting that the provisions of section 21 did not contravene section 92 and the appellant was properly convicted
Starke J discussed the question as to whether the sale in question was an inter State or intra state transaction but did not think it necessary to decide that question
After referring to the observations of Lord Wright in James vs The Commonwealth 3 that the freedom declared by section 92 meant freedom at the frontier the learned Judge observed that the question 1  302 303 2 1939 51 CLR596
3 627 909 whether that freedom had been restricted or burdened depended upon the true character and effect of the Act
He took the view at p 616 that the main purpose of the Act was to prevent or suppress lotteries and particularly in sections 19 20 and 21 foreign lotteries and that it was aimed at preventing what he graphically described as illegitimate methods of trading if sales of lottery tickets were regarded as trading
The learned Judge took note of the fact that New South Wales law allowed State lotteries and concluded that the true character of the impugned Act was to suppress gambling in foreign lottery tickets and examined from the historical point of view from the character of the Act its function and its effect upon the flow of commerce the Act did not in his view restrict or hinder the freedom of any trade across the frontier of the States
Dixon J as he then was gave two reasons for his opinion namely that the transaction was not in itself a transaction of inter State trade  commerce or intercourse but was a sale in New South Wales of a ticket then in New South Wales and that apart from the State lottery and permitted charitable raffles the Act suppressed uniformly the sale of all lottery tickets in New South Wales
Adverting to the argument which in substance asked the Court to declare that section 92 had created an overriding constitutional right to traffic or invest in lotteries so long as the trafficker or investor could succeed in placing some boundary or other between himself and the conductor of the lottery Evatt J said at pp
619 20 it in my opinion such a proposition cannot be supported in principle or by reference to authority
For it is obvious that the appellant s argument also involves the assertion of the constitutional right of a citizen so long as he can rely upon or if necessary artificially create some inter State connection in his business to sell indecent and obscene publications diseased cattle impure foods unbranded poisons unstamped silver ungraded fruit and so forth
 The obvious inconvenience and undesirability of the effects to be produced if such extravagant arguments 117 910 were to prevail led the learned Judge to think at p 620 that in the interpretation of section 92 it was permissible to accept some postulates or axioms demanded alike by the dictates of common sense and by some knowledge of what was being attempted by the founders of the Australian Commonwealth
Making these assumptions and concessions Evatt J opined at p 621 that the guarantee contained in section 92 had nothing whatever to say on the topic of inter State lotteries and could not be invoked to prevent either the suppression or the restriction in the public interest of the practice of gambling or investing in such lotteries
The learned Judge did not think that lottery tickets could be regarded as goods or commodities which were entitled to the protection of section 92 and concluded thus at p 628  If they are goods or commodities they belong to a very special category so special that in the interests of its citizens the State may legitimately exile them from the realm of trade commerce or business
The indiscriminate sale of such tickets may be regarded as causing business disturbance and loss which on general grounds of policy the State is entitled to prevent or at least minimize McTiernan J was even more forthright in placing gambling outside the pale of trade commerce and intercourse
At p 631 he said  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
Whether a particular activity falls within the one or the other order is a matter of social opinion rather than jurisprudence    
It is gambling to buy a ticket or shard in a lottery
Such a transaction does not belong to the commercial business of the country
The purchaser stakes money in a scheme for distributing prizes by chance
He is a gamester
 A little further down the learned Judge observed It is not a commercial arrangement to sell a lottery ticket for it is merely the acceptance of money 911 or the promise of money for a chance
In this case the purchase of a lottery ticket merely founds a hope that something will happen in Tasmania to benefit the purchaser
 Naturally enough learned counsel for the appellant State seeks to fasten upon the observations quoted or referred to above in support of his thesis that gambling is not trade commerce or intercourse within the meaning alike of section 92 of the Australian Constitution and our article 191g and article 301
In the second case The King vs Martin 1 the same question came up for reconsideration
The only difference in fact was that there was no actual sale by delivery of a lottery ticket in New South Wales but money was received by the agent of the Tasmania promoter in New South Wales and transmitted to Tasmania from where the lottery ticket was to be sent
The State law was again upheld
Latham CJ Rich Starke Evatt and Mctiernan JJ
adhered to their respective opinions expressed in the earlier case of The King vs Connare 2 
Dixon J as he then was gave a new reason for his opinion that notwithstanding the inter State character of the transaction section 21 of the impugned Act was valid
Said the learned Judge at pp
461 462  The reason for my opinion is that the application of the law does not depend upon any characteristics of lotteries or lottery transactions in virtue of which they are trade or commerce or intercourse nor upon any inter State element in their nature
The only criterion of its operation is the aleatory description of the acts which it forbids
There is no prohibition or restraint placed upon any act in connection with a lottery because either the act or the lottery is or involves commerce or trade or intercourse or movement into or out of New South Wales or communication between that State and another State     
To say that inter State trade commerce and intercourse shall be free means I think that no restraint or burden shall be placed upon an act falling under that description because it is trade or commerce or 1  2  912 intercourse or involves inter State movement or communication
 In this view of the matter Dixon J now upheld section 21 of the impugned Act on the ground that the criterion of its application was the specific gambling nature of the transactions which it penalised and not anything which brought the transactions under the description of trade commerce or intercourse or made them interState in their nature
Then came the case of Commonwealth of Australia vs Bank of New South Wales1 commonly called the Bank case where it was held that section 46 of the Banking Act 1947 was invalid as offending against section 92 of the Australian Constitution
Sub section 1 of section 46 provided that a private bank should not after the commencement of the Act carry on banking business in Australia except as required by the section
Subsection 2 laid down that each private bank should carry on banking business in Australia and should not except on appropriate grounds cease to provide any facility or service provided by it in the course of its banking business on the fifteenth day of August one thousand nine hundred and forty seven
Sub section 4 authorised that the Treasurer might by notice published in the gazette and given in writing to a private bank require that private bank to cease upon a date specified in the notice carrying on business in Australia
Sub section 8 provided that upon and after the date specified in a notice under sub section
4 the private bank to which that notice was given should not carry on banking business in Australia
It also provided a penalty of pound 10000 for each day on which the contra vention occurred
The question was Whether this section interfered with the freedom of trade commerce or intercourse among the States declared by section 92 of the Australian Constitution  It was held that the business of banking which consisted of the creation and transfer of credit the making of loans the purchase and disposal of investments and other kindred transactions was included among those activities described as trade commerce and intercourse in section 92 1 913 and accordingly the impugned section 46 which while leaving untouched the Commonwealth and State Banks prohibited the carrying on in Australia of the business of banking by private banks was invalid as contravening section 92
Lord Porter delivering the judgment of the Judicial Committee pointed out that it was no longer arguable that freedom from customs or other monetary charges alone was secured by the section
Then after reviewing and explaining at some length the two cases of James V Cowan 1 and James vs The Common wealth2 his Lordships proceeded to make certain observations on the distinction between restrictions which are regulatory and do not offend against section 92 and those which are something more than regulatory and do so offend
His Lordship deduced two general propositions from the decided cases namely 1 that regulation of trade commerce and intercourse among the States was compatible with absolute freedom and 2 that section 92 was violated only when a legislative or executive act operated to restrict trade commerce and intercourse directly and immediately as distinct from creating some indirect or consequential impediment which might fairly be regarded as remote
The problem whether an enactment was regulatory or something more or whether a restriction was direct or only remote or only incidental involved his Lordship pointed out not so much legal as political social or economic considerations
Referring to the case of Australian National Airways Proprietory Ltd vs The Commonwealth 3 his Lordship expressed his agreement with the view that simple prohibition was not regulation
A little further down however his Lordship made a reservation that he did not intend to lay down that in no circumstances could the exclusion of competition so as to create a monopoly either in a State or Commonwealth agency or in some body be justified and that every case must be judged on its own facts and in its own setting of time and circumstances and that it might be that in regard to some economic activities and at some stage of social development it might be 1 3  2LR  627 914 maintained that prohibition with a view to State monopoly was the only practical and reasonable manner of regulation and that inter State trade commerce and intercourse thus prohibited and thus monopolised remained absolutely free
His Lordship further added that regulation of trade might clearly take the form of denying certain activities to persons by age or circumstances unfit to perform them or of excluding from passage across the frontier of a State creatures or things calculated to injure its citizens
Referring to the doctrine of pith and substance his Lordship observed that it no doubt raised in convenient form an appropriate question in cases where the real issue was one of subject matter as when the point was whether a particular piece of legislation was a law in respect of some subject within the permitted field but it might also serve a useful purpose in the process of deciding whether an enactment which worked some interference with trade commerce and intercourse among the States was nevertheless untouched by section 92 as being essentially regulatory in character
The last Australian case on the point cited before us is Mansell vs Beck1
In this case also the provisions of the Lotteries and Art Unions Act of New South Wales came up for consideration and the decisions in the King vs Connare 11 and the King vs Martin1
were considered and approved
Dixon CJ and Webb J observed that the true content of the State law must be ascertained to see whether the law that resulted from the whole impaired the freedom which section 92 protected
Their Lordships pointed out that lotteries not conducted under the authority of Government were suppressed as pernicious
The impugned legislation was in their Lordships  view of a traditional kind directed against lotteries as such independently altogether of trade commerce and intercourse between States
McTiernan J reiterated the views he had expressed in the case of the King vs Connare 2 in the following words 1 Australian Law journal Vol
No 2  3  915 It is important to observe the distinction that gambling is not trade commerce and intercourse within the meaning of section 92 otherwise the control of gambling in Australia would be attended with constitutional difficulties
 Williams J did not consider it necessary to express any final opinion on the question 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 and concerned only with intra State transactions and that their provisions did not directly hinder burden or delay any inter State trade commerce or intercourse
His Lordship observed that there was nothing in the reasoning in the judgment in the Bank case or in subsequent decisions to indicate that the King vs Connare1 and  King vs Martin2 were not rightly decided
He quoted with approval the observations of Dixon J in Martin s case
Fullagar J also took the view that the previous decisions of the High Court in Connare s case 1 and Martin s case2 were rightly decided for the reasons given by Dixon J Kitto J dissented from the majority view
Taylor J who was also in favour of the validity of the impugned law observed  No simple legislative expedient purporting to transmute trade and commerce into something else will remove it from the ambit of section 92
But whilst asserting the width of the field in which section 92 may operate it is necessary to observe that not every transaction which employs the forms of trade and commerce will as trade and commerce invoke its protection
The sale of stolen goods when the transaction is juristically analysed is no different from the sale of any other goods but can it be doubted that the Parliament of any State may prohibit the sale of stolen goods without infringing section 92 of the Constitution  The only feature which distinguishes such a transaction from trade and commerce as generally understood is to be found in the subject of the transaction there is no difference in the means adopted for carrying it out
Yet it may be said that in essence such a transaction 1 193  2  916 constitutes no part of trade and commerce as that expression is generally understood
Numerous examples of other transactions may be given such as the sale of a forged passport or the sale of counterfeit money which provoke the same comment and although legislation prohibiting such transactions may possibly be thought to be legally justifiable pursuant to what has on occasions been referred to as a Police power I prefer to think that the subjects of such transactions are not on any view the subjects of trade and commerce as that expression is used in section 92 and that the protection afforded by that section has nothing to do with such transactions even though they may require for their consummation the employment of instru ments whereby inter State trade and commerce is commonly carried on
 After referring to the history of lotteries in England the learned Judge concluded  The foregoing observations give some indication of the attitude of the law for over two and a half centuries towards the carrying on of lotteries
But they show also that in this country lotteries were from the moment of its first settlement common and public nuisances and that in general it was impossible to conduct them except in violation of the law
Indeed it was impracticable for any person to conduct a lottery without achieving the status of a rogue and a vagabond
 In the Constitution of the United States of America there is no counterpart to article 301 of our Constitution or section 92 of the Australian Constitution
The problem of gambling came up before the courts in America in quite different setting
Article 1 section 8 sub section
3 of the Constitution of the United States compendiously called the commerce clause gives power to the Congress to regulate commerce with foreign nations and among the several States and with the Indian tribes
Congress having made law regulating gambling activities which extended across the State borders the question arose whether the making of the law was within the legislative competence of the Congress that is to say whether it could be brought within the commerce 917 clause
The question depended for its answer on the further question whether the gambling activities could be said to be commerce amongst the States
If it could then it was open to Congress to make the law in exercise of its legislative powers under the commerce clause
More often than not gambling activities extend from State to State and in view of the commerce clause no State Legislature can make a law for regulating inter State activities in the nature of trade
If betting and gambling does not fall within the ambit of the commerce clause then neither the Congress nor the State Legislature can in any way control the same
In such circumstances the Supreme Court of America thought it right to give a wide meaning to the word commerce so as to include gambling within the commerce clause and thereby enable the Congress to regulate and control the same
Thus in Champion vs Ames1 the carriage of lottery tickets from one State to another by an express company was held to be inter State commerce and the court upheld the law made by Congress which made such carriage an offence
In Hipolite Egg Co vs United States2 the Pure Food Act which prohibited the importation of adulterated food was upheld as an exercise of the power of the Congress to regulate commerce
The prohibition of transportation of women for immoral purposes from one State to another or to a foreign land has also been held to be within the commerce clause see Hoke vs United States 3 
SO has the prohibition of obscene literature and articles for immoral use
Reference has also been made to the cases of United States vs Kahriger4 and Lewis V United States5 to support the contention of the appellant State that the Supreme Court of the United States looked with great disfavour on gambling activities
In the last mentioned case it was roundly stated at p 480 that there is no constitutional right to gamble 
1   2   3   4   5   918 In construing the provisions of our Constitution the decisions of the American Supreme Court on the commerce clause and the decisions of the Australian High Court and of the Privy Council on section 92 of the Australian Constitution should for reasons pointed out by this Court in State of Travancore Cochin 1
The Bombay Co Ltd 1 be used with caution and circumspection
Our Constitution differs from both American and Australian Constitutions
There is nothing in the American Constitution corresponding to our article 191 g or article 301
In the United States the problem was that if gambling did not come within the commerce clause then neither the Congress nor any State Legislature could interfere with or regulate inter State gambling
Our Constitution however has provided adequate safeguards in cl
6 of article 19 and in articles 302 305
The scheme of the Australian Constitution also is different from that of ours for in the Australian Constitution there is no such provision as we have in article 196 or articles 302 304 of our Constitution
The provision of section 92 of the Australian Constitution being in terms unlimited and unqualified the judicial authorities interpreting the same had to import certain restrictions and limitations dictated by common sense and the exigencies of modern society
This they did in some cases by holding that certain activities did not amount to trade commerce or intercourse and in other cases by applying the doctrine of pith and substance and holding that the impugned law was not a law with respect to trade commerce or intercourse
The difficulty which faced the judicial authorities interpreting section 92 of the Australian Constitution cannot arise under our Constitution for our Constitution did not stop at declaring by article 191 g a fundamental right to carry on trade or business or at declaring by article 301 the freedom of trade commerce and inter
course but proceeded to make provision by article 196 and articles 302 305 for imposing in the interest of the general public reasonable restrictions on the exercise of the rights guaranteed and declared by article 19 1 g and article 301
As one of us said in P P Kutti Keya 1  at p 1121 919 vs The State of Madras1 the framers of our Constitution being aware of the problems with which the Australian Government had been confronted by reason of section 92 sought to solve them by enacting limitations in Part XIII itself on the freedom guaranteed in article 301
Our task therefore will be to interpret our Constitution and ascertain whether the prize competitions falling within the definition of the impugned Act all of which are of a gambling nature can be said to be a trade or business within the meaning of article 191 g or trade commerce and intercourse  within the meaning of article 301 of our Constitution
The scheme of our Constitution as already indicated is to protect the freedom of each individual citizen to carry on his trade or business
This it does by article 191g
This guaranteed right is however subject to article 196 which protects a law which imposes in the interest of the general public reasonable restrictions on the exercise of the fundamental right guaranteed by article 191 g
Our Constitution also proclaims by article 301 the freedom of trade commerce and intercourse throughout the territory of India  subject to the provisions of articles 302 305 which permit the imposition of reasonable restriction by Parliament and the State Legislatures
The underlying idea in making trade commerce and intercourse with as well as within the States free undoubtedly was to emphasise the unity of India and to ensure that no barriers might be set up to break up the national unity
One important point to note is that the language used in article 191 g and article 301 is quite general and that the provisions for restricting the exercise of the fundamental right and the declared freedom of the country s trade commerce and intercourse are made separately eg by article 196 and articles 302 305
This circumstance is fastened upon by learned counsel for the petitioners for contending that the right guaranteed by article 191g and the freedom declared by article 301 should in the first instance and to start with be widely and liberally construed and then reasonable restrictions may be superimposed on that right under article 196 or articles 302 305 in the interest of the general public
According 1 AIR 1954 mad
920 to him the words trade or business or commerce should be read in their widest amplitude as meaning any activity which is undertaken or carried on with a view to earning profit
There is nothing in those two articles 191g and 301 which he says may qualify or cut down the meaning of the critical words
He contends that there is no justification for excluding from the meaning of those words activities which may be looked upon with disfavour by the State or the Court as injurious to public morality or public interest
The argument is that if the trade or business is of the last mentioned character then the appropriate Legislature may impose restrictions which will be justiciable by the courts and this restriction may in appropriate cases even extend to total prohibition
Our attention has been drawn to article 25 where the limiting words  subject to public order morality and health  are used and it is pointed out that no such limiting words are to be found in article 191g or article 301
In short the argument is that article 191 g and article 301 guarantee and declare the freedom of all activities undertaken and carried on with a view to earning profit and the safeguard is provided in article 196 and articles 302 305
The proper approach to the task of construction of these provisions of our Constitution it is urged is to start with absolute freedom and then to permit the State to cut it down if necessary by restrictions which may even extend to total prohibition
On this argument it will follow that criminal activities undertaken and carried on with a view to earning profit will be protected as fundamental rights until they are restricted by law
Thus there will be a guaranteed right to carry on a business of hiring out goondas to commit assault or even murder of housebreaking of selling obscene pictures of trafficking in women and so on until the law curbs or stops such activities
This appears to us to be completely unrealistic and incongruous
We have no doubt that there are certainactivities which can under no circumstance be regarded as trade or business or commerce although the usual forms and instruments are employed therein
To exclude those activities from the meaning of those words is not to cut down their meaning at all 921 but to say only that they are not within the true meaning of those words
Learned counsel has to concede that there can be no trade or business in crime but submits that this principle should not be extended and that in any event there is no reason to hold that gambling does not fall within the words trade or business or commerce as used in the Articles under consideration
The question arises whether our Constitution makers ever intended that gambling should be a fundamental right within the meaning of article 191g or within the protected freedom declared by article 301
The avowed purpose of our Constitution is to create a welfare State
The directive principles of State policy set forth in Part IV of our Constitution enjoin upon the State the duty to strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice social economic and political shall inform all the institutions of the national life
It is the duty of the State to secure to every citizen men and women the right to an adequate means of livelihood and to see that the health and strength of workers men and women and the tender age of children are not abused to protect children and youths against exploitation and against moral and material abandonment
It is to be the endeavour of the State to secure a living wage conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities to protect the weaker sections of the people from social injustice and all forms of exploitation to raise the standard of living of its people and the improvement of public health
The question canvassed before us is whether the Constitution makers who set up such an ideal of a welfare State could possibly have intended to elevate betting and gambling on the level of country s trade or business or commerce and to guarantee to its citizens the right to carry on the same
There can be only one answer to the question
From ancient times seers and law givers of India looked upon gambling as a sinful and pernicious vice and deprecated its practice
Hymn XXXIV of the 922 Rigveda proclaims the demerit of gambling
Verses 7 10 and 13 say  7 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
10 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
11 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 Mahabharata deprecates gambling by depicting the woeful conditions of the Pandavas who had gambled away their kingdom
Manu forbade gambling altogether
Verse 221 advises the king to exclude from his realm gambling and betting for those two vices cause the destruction of the kingdom of princes
Verse 224 enjoins upon the king the duty to corporally punish all those persons who either gamble or bet or provide an opportunity for it
Verse 225 calls upon the king to instantly banish all gamblers from his town
In verse 226 the gamblers are described as secret thieves who constantly harass the good subjects by their forbidden practices
Verse 227 calls gambling a vice causing great enmity and advises wise men not to practise it even for amusement
The concluding verse 228 provides that on every man who addicts himself to that vice either secretly or openly the king may inflict punishment according to his discretion
While Manu condemned gambling outright Yajnavalkya sought to bring it under State control but he too in verse 2022 provided that persons gambling with false dice or other instruments should be branded and punished by the king
Kautilya also advocated State control of gambling and as a practical person that he was was 923 not averse to the State earning some revenue therefrom
Vrihaspati dealing with gambling in chapter XXVI verse 199 recognises that gambling had been totally prohibited by Manu because it destroyed truth honesty and wealth while other law givers permitted it when conducted under the control of the State so as to allow the king a share of every stake
Such was the notion of Hindu law givers regarding the vice of gambling
Hamilton in his Hedaya vol
IV book XLIV includes gambling as a kiraheeat or abomination
He says 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 band nothing be hazarded it is useless and vain The wagering con
tracts of the type which formed the subject matter of the case of Ramloll vs Soojumnull 1 and was upheld by the Privy Council as not repugnant to the English Common Law were subsequently prohibited by Act XXI of 1948 which was enacted on the suggestion of Lord Campbell made in that case and introduced in India provisions similar to those of the English Gaming Act 8  9 Vict c 109
Bengal Gambling Act Ben
II of 1867 provided for the punishment of public gambling and the keeping of common gaming house in the territories subject to the Lieutenant Governor of Bengal
Lottery has been since 1870 made an offence under section 294A of the Indian Penal Code
Gambling agreements have been declared to be void under the section 30
This in short is how gambling is viewed in India
Before the Legislature intervened gambling and wagering were not prohibited by the English Common Law although the English courts looked upon it with disfavour and discouraged it on grounds of public policy by denying procedural facilities which were granted to other litigants
The Scottish courts however have always refused to recognise the validity of wagering contracts and have held that sponsiones ludicroe as they style such contracts are void by the Common Law of Scotland
Gambling and Betting Act 1 1848 4 MIA 339
924  c 7 was directed against fraudulent and excessive gambling and betting at games or sports
This was followed by the Gaming Act of 1710 9 Annec
The Marine Insurance Act 1745 19 Geo
11 C 37 for the first time prohibited wagering policies on risks connected with British shipping
This was supplemented by the Marine Insurance Act 1788 28 Geo
III c 56
The Life Insurance Act 1774 14 Geo
III c 48 though not intended to prohibit wagering in general prohibited wagering under the cloak of a mercantile document which purported to be a contract of insurance
Then came the Gaming Act of 1845 8 and 9 Vict
c 109 which for the first time declared all contracts made by way of gaming or wagering void irrespective of their form or subject matter
The provisions of this Act were adopted by our Act XXI of 1948 as here in before mentioned
The Gaming Act of 1892 55 and 56 Viet
c 9 further tightened up the law
As far back as 1850 the Supreme Court of America in Phalen vs Virginia1 observed  Experience has shown that the common forms of gambling are comparatively innocuous when placed in contrast with 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
The observations were quoted with approval in Douglas vs Kentucky 2 
After quoting the passage from Phalen vs Virginia 1 the judgment proceeded 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 US 163 1033
2    555 925 It will be abundantly clear from the foregoing observations that the activities which have been condemned in this country from ancient times appear to have been equally discouraged and looked upon with disfavour in England Scotland the United States of America and in Australia in the cases referred to above
We find it difficult to accept the contention that those activities which encourage a spirit of reckless propensity for making easy gain by lot or chance which lead to the loss of the hard earned money of the undiscerning and improvident common man and thereby lower his standard of living and drive him into a chronic state of indebtedness and eventually disrupt the peace and happiness of his humble home could possibly have been intended by our Constitution makers to be raised to the status of trade commerce or intercourse and to be made the subject matter of  a fundamental right guaranteed by article 191 g
We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient country s trade commerce or intercourse to be declared as free under article 301
It is not our purpose nor is it neces sary for us in deciding this case to attempt an exhaustive definition of the word trade business or intercourse
We are however clearly of opinion that whatever else may or may not be regarded as falling within the meaning of these words gambling cannot certainly be taken as one of them
We are convinced and satisfied that the real purpose of articles 191 g and 301 could not possibly have been to guarantee or declare the freedom of gambling
Gambling activities from their very nature and in essence are extra commercium although the external forms formalities and instruments of trade may be employed and they are not protected either by article 19 1 g or article 301 of our Constitution
The Court of Appeal we have already said took the view that it was not open to the State which had not thought fit to prohibit these prize competitions but had sought to make a profit out of them by levying a tax to contend at the same time that it was illegal or was not a trade at all
But as pointed out in United 119 926 States vs Kahrigar 1 the fact of issuing a licence or imposing a tax means nothing except that the licensee shall be subject to no penalties under the law if he pays it
Lewis vs United States of America 2 also recognises that the Federal Government may tax what it also forbids and that nobody has a constitutional right to gamble but that if he elects to do so though it be unlawful he must pay the tax
In this connection reference may be made to the observation of Rowlatt J in Mann vs Nash 3   The revenue authorities representing the State are merely looking at an accomplished fact
It is not condoning it or taking part in it
Further down he said  It is merely taxing the individual with reference to certain facts
It is not a partner or a sharer in the illegality
 That crime is not a business is also recognised in F A Lindsay A E Woodward and W Hiscox vs The Commissioners of Inland Revenue 4per Lord President Clyde and per Lord Sands and in Southern H M Inspector of Taxes vs A B
The fact that regulatory provisions have been enacted to control gambling by issuing licences and by imposing taxes does not in any way alter the nature of gambling which is inherently vicious and pernicious
We also arrive at the same result by applying the doctrine of pith and substance 
As Lord Porter pointed out  The phrase raised in a convenient form an appropriate question in cases where the real issue is one of subject matter and it may also serve a useful purpose in the process of deciding whether a particular enactment is a law with respect to trade commerce or intercourse as such or whether it is a law with respect to some other subject which incidentally trenches upon trade commerce and intercourse
 Reference has already been made to the observations 1   2  99 L Ed 475
3 L R1932 1 KBD 752 at P 757
4 5  927 of Dixon J as he then was in King vs Martin 1
Adapt ing his language we may say that when article 191g guarantees or article 301 declares the freedom of trade they describe human activities in a specific aspect
They single out attributes which the act or transaction may wear and make the freedom which they confer depend upon those attributes
The freedom secured by the two Articles we think implies that no unreasonable restraint or burden shall be placed upon an act falling under that description because it is trade or commerce or intercourse
We have analysed the provisions of the impugned Act and it is quite clear that the Act does not purport directly to interfere with trade commerce or intercourse as such for the criterion of its application is the specific gambling nature of the transaction which it restricts
The purpose of the Act is not to restrict anything which brings the transactions under the description of trade commerce or intercourse
In other words the Act is in pith and substance an Act with respect to betting and gambling
To control and restrict betting and gambling is not to interfere with trade commerce or intercourse as such but to keep the flow of trade commerce and intercourse free and unpolluted and to save it from anti social activities
In our opinion therefore the impugned Act deals with gambling which is not trade commerce or business and therefore the validity of the Act has not to be decided by the yardstick of reasonableness and public interest laid down in articles 196 and 304
The appeal against the stringency and harshness if any of the law does not lie to a court of law
In the view we have taken it is not necessary for us to consider or express any opinion on this occasion as to the vexed question whether restriction as con
templated in articles 196 and 304b may extend to total prohibition and this is so because we cannot persuade ourselves to hold that article 191g or article 301 comprises all activities undertaken with a view to profit as trade within the meaning of those Articles
Nor is it necessary for us on this occasion to consider 1  928 whether a company is a citizen within the meaning of Art  19 and indeed the point has not been argued before us
The last point urged by the petitioners is that assuming that the impugned Act deals only with gambling and that gambling is not trade or business or commerce and is therefore not entitled to the protection of our Constitution the prize competitions run by them are in fact not of a gambling nature
The trial court accepted this contention while the Court of Appeal rejected it
We have examined the scheme and the rules and the official solutions and the explanations in support thereof and we have come to the conclusion that the competition at present run by the petitioners under the name of RMDC Crosswords are of a gambling nature
Our view so closely accords with that of the Court of Appeal that we find it unnecessary to go into the details of the scheme
To start with we find that the Board of Adjudicators pick up nine of the clues and select only those competitors whose answers correspond with the official solution of those nine clues
Those nine clues may be from the top may be from the bottom or may be selected at random
It is said that they are like nine compulsory questions in a school examination but then in a school examination the students are told which are the nine compulsory questions and they can take particular care with regard to those but in this scheme there is no knowing which nine will be selected and those competitors whose answers do not accord with the official solution are debarred from being considered for the first prize
A competitor may have given correct answers to eight of the nine selected clues and may have given correct answers to the remaining eight so that he has sent in sixteen correct answers but he will nevertheless not be considered for the first prize because his answers to the nine selected questions did not agree with the official solutions of those nine clues
This is a chance element to start with
We have then seen that the competing words out of which one is to be selected are in some cases equally apt
We are not satisfied that the word selected by the Board is the 929 more apt word in many
cases
The reasons given by them appear to us to be laboured and artificial and even arbitrary in some cases
On the whole we have come to the conclusion that the Court of Appeal was right in its conclusion that in point of fact the prize competitions run by the petitioners partake of a gambling nature and therefore fall within the definition and are to be governed by the regulatory and taxing provisions of the Act
For the reasons stated above we have come to the conclusion that the impugned law is a law with respect to betting and gambling under Entry 34 and the impugned taxing section is a law with respect to tax on betting and gambling under Entry 62 and that it was within the legislative competence of the State Legislature to have enacted it
There is sufficient territorial nexus to entitle the State Legislature to collect the tax from the petitioners who carry on the prize competitions through the medium of a newspaper printed and published outside the State of Bombay
The prize competitions being of a gambling nature they cannot be regarded as trade or commerce and as such the petitioners cannot claim any fundamental right under article 191g in respect of such competitions nor are they entitled to the protection of article 301
The result therefore is that this appeal must be allowed and the order of the lower court set aside and the petition dismissed and we do so with costs throughout
Appeal allowed


Summary:
The first respondent was the founder and Managing Director of a company the second respondent in the appeal which was incorporated in the State of Mysore and conducted a Prize Competition called the R M D C Cross words through a weekly newspaper printed and published at Bangalore
This paper had a wide circulation in the State of Bombay where the respondents set up collection depots to receive entry forms and fees appointed local collectors and invited the people by advertisements in the paper to participate in the competitions
On November 20 1952 the Bombay Legislature passed the Bombay Lotteries and Prize Competitions Control and Tax Amendment Act of 1952 and widened the scope of the definition of prize competition  contained in section 21 d of the Bombay Lotteries and Prize Competition Control and Tax Act of 1948 so as to include prize competitions carried on through newspapers printed and published outside the State and inserted a new section section 12A levying a tax on the promoters of such competitions for sums collected from the State
Thereupon on December 18 1952 the respondents moved the High Court of Bombay under article 226 of the Constitution and contended that the Act as amended and the Rules framed thereunder in so far as they applied to such prize competitions were ultra vires the State Legislature and violated their fundamental rights under article 191 g and freedom of inter State trade under article 301 of the Constitution
The Single Judge who heard the matter in the first instance as also the court of appeal found in favour of the respondents though on somewhat different grounds and the State of Bombay preferred the appeal
The principal question canvassed in this Court related to the validity
or otherwise of the impugned Act
It was contended on behalf of the appellant that the impugned Act was a law relating to betting and gambling and as such was covered 875 by Entries 34 and 62 of List II in the Seventh Schedule to the Constitution whereas the contention of the respondents was that the Act was with respect to trade and commerce and came under Entries 26 and 60 of that List
Held that in testing the validity of an Act it was necessary in the first place to decide whether it was with respect to a topic assigned to the legislature and secondly where it was so and the legislature was a State Legislature and the Act purported to operate beyond the State whether there was sufficient territorial nexus to validate such operation and lastly whether the powers of the legislature were in any other way fettered by the Constitution
So judged the impugned Act was a perfectly valid legislation and its constitutionality was beyond question
Regard being had to the purpose and scope of the Act read as a whole there could be no doubt that all the categories of prize competitions included in the definition contained in section 21 d of the Act were of a gambling nature
The qualifying  clause appearing at the end of cl
1 must apply to each of the five kinds enumerated therein and the word or  appearing after the word I promoters  and before the word for  in the clause must be read as and 
Similarly cl
ii properly construed could not include any prize competitions other than those of a gambling nature
Elderton vs Totalisator Co Ltd  held inapplicable
The impugned Act was therefore a legislation with respect to betting and gambling and fell under Entry 34 of List II of the Seventh Schedule to the Constitution and was within the competence of the State Legislature
Taxes on gambling are a well recognised group of indirect taxes and section 12A of the Act in seeking to tax the gross collections in the hands of the promoters and not their profits was only following an easy and convenient way of getting at the gambler s money in their hands and this made no difference in the character of the tax essentially one on betting and gambling and not on any trade and consequently the section fell within Entry 62 and not Entry 6o of List II of the Seventh Schedule to the Constitution
A prize competition that did not to a substantial degree depend upon the exercise of skill for its solution would be of a gambling nature and a scrutiny of the prize competitions offered by the respondents clearly showed that there was an element of chance to start with and consequently they must be of a gambling nature and fell within the mischief of the Act
The doctrine of territorial nexus was a well established doctrine and could apply only when 1 the territorial connection between the persons sought to be taxed and the legislating State was real and not illusory and 2 the liability sought to be imposed was pertinent to that connection
The existence of sufficient 876 territorial nexus in a particular case was essentially a question of fact
There could hardly be any doubt in the instant case that the impugned Act satisfied all these tests and consequently it was unassailable on the ground of extra territoriality
Gambling activities were in their very nature and essence extra commercium although they might appear in the trappings of trade
They were considered to be a sinful and pernicious vice by the ancient seers and law givers of India and have been deprecated by the laws of England Scotland United States of America and Australia
The Constitution makers of India out to create a welfare State could never have intended to raise betting and gambling to the status of trade business commerce or intercourse
The petitioners therefore had no fundamental right under article 191 g or freedom under article 301 Of the Constitution in respect of their prize competitions that could be violated and the validity of the impugned Act in pith and substance an Act relating to gambling did not fall to be tested by articles 196 and 304 Of the Constitution
judicial decisions on article 1 section 8 sub section
3 Of the Constitution of the United States and section 92 of the Australian Constitution should be used with caution and circumspection in construing articles 191 g and 301 of the Indian Constitution
State of Travancore Cochin vs The Bombay Co Ltd  and P P Kutti Keya vs The State of Madras AIR 1954 Mad 621 referred to
The King vs Connare   The King vs Martin   Commonwealth of Australia vs Bank of New South Wales LR 195o AC 235 Mansell vs Beck Australian Law journal Vol
3o NO  Champion vs Ames   Hipolite Egg Co vs United States   Hoke vs United States   United States vs Kahriger  and Lewis vs United States 99 LEd475 discussed