Author - Associate Aliza Abdin
This article would deal with the explanation of lucky draw and lottery and solve the most common question-Is lottery legal in India?
What is a Lucky Draw?
A typical kind of lucky draw is a type of game usually played in carnivals where contestants try their luck and pick out a gift from a container without looking. The gifts range from very expensive ones to cheaper smaller ones. It is also known as lucky dip. Nowadays, lucky draws are mostly all about spinning wheels, etc.
Lucky draws also include raffles in which a person buys a cheap raffle ticket and try their luck at winning big prizes like cars, bikes, mobile phones, refrigerators, etc. Raffles and lucky draws are most common in school fetes, carnivals, festivals, etc.
What is a Lottery?
Lottery is a type of gambling in which a person buys a lottery ticket bearing a specific number for a small amount. When all tickets had been sold out a number is drawn at random, for a prize. The prizes usually include big cash prizes for the top three contestants. Many countries have banned lotteries in an attempt to stop gambling and bankruptcy in the poor section of the country; while other countries organize national and state lotteries by following certain rules like licensed vendors to sell lottery tickets and a ban on selling to children. Lotteries were very popular worldwide during the 90s and were a source of income but since the start of the 21st century they have been made illegal in most countries.
There are many kinds of lotteries like single digit or double digit, a 50-50 draw where the lottery organizers give half the amount earned as prize money. The lotteries allow governments to make revenue without generating taxes.
Legal Status of Lotteries in India
So a big question be answered is- is lottery legal in India? Lottery in India is governed by the Lotteries Regulation Act, 1998, according to which the states are allowed to conduct a lottery following 11 conditions. A few years ago, the Supreme Court of India permitted all state governments to ban or allow lottery in India accordingly and refused to make the sale of lottery a fundamental right. This law however does not allow the sale of one digit lottery.
As of 2019 lottery in India doesn’t have all India ban but all states have banned lotteries except for the 13 states that include Kerala, Goa, Maharashtra, Madhya Pradesh, Punjab, West Bengal, Assam, Arunachal Pradesh, Meghalaya, Manipur, Sikkim, Nagaland and Mizoram. Lotteries are very popular in these states and the social activists are continuously trying to raise awareness about how the people are getting addicted to gambling.
But another concept to be added here is the legal online lottery in India. Lotto India is the legal online lottery in India for the players and has jackpots more that the others.
Is the Ban Effective?
As all bans, the bans on lotteries is also not very successful as most trade is carried out underground by illegal means and thus the trade still continues but the government does not get revenues. Some of the lotteries function online that give small prizes for single digit lotteries daily and big prizes for weekly draws. In spite of being banned, lotteries have not disappeared completely and are very popular for earning money illegally. The online version of lotteries does not require the players to disclose their identities and thus they can participate anonymously and avoid getting caught.
Why is Lucky Draw Legal in India whereas Lottery is not?
So to answer this question as to why is lucky draw legal in India recently the NITI Aayog clarified that the Lotteries Regulation Act, 1998 Section 2(b) states that the lucky draws which are conducted to promote digital transactions do not come under the category of lottery and are thus are not banned. The Act defines lottery as ‘a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets’
The Supreme Court permits state governments to ban lottery in India because it is a form of gambling and it makes the poorer section of the society an addict and bankrupt. However this is not the case in lucky draws because the lucky draw scheme which is included in the Lotteries Regulation Act, 1998 has to stay within the given parameters, and most lucky draws which are organized by the governments do not require a ticket purchase and the participants can directly come and try their luck, and thus this does not account to gambling.Online lucky draws require the payment of a small amount which is usually collected by companies like Mastercard or Rupay, or by other banks used for payment and hence the government on their side does not charge anything and offer prizes gratuitously. Therefore it is very clear that a lucky draw is very different from a lottery, and this would not fall under the category of gambling. So this answeres to the question if lottery legal in India.
The Section 2(1)(r) Consumer Protection Act, 1986 also prohibits any kind of unfair trade practice which includes “conducting any lottery or contests whether skill or chance to promote the sale, use or supply of any goods or for the provision of any service.” The NITI Aayog has clarified this too as offering lucky draws to promote digital transactions does not include any service and the customer does not pay anything for getting the reward. These kinds of lucky draws usually include small cash back offers for payment by digital means.
And thus the lucky draw scheme stays out of the ambit of consumer protection laws as well as the Lottery Regulation Act.