Can a state prohibit goods from another state in the federal structure? Supreme Court asks in lottery ban case

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While hearing a case brought by the state of Meghalaya seeking to sell their lottery outside of their own state, the Supreme Court orally asked whether a state banning goods from another state was allowed in a federal structure.

The background to the suit is that, pursuant to section 5 of the Lotteries (Regulation) Act 1998, the central government has authorized state governments to prohibit the sale of tickets of a lottery organised, conducted or promoted by another state. The state of Meghalaya, arguing that the regulation of lotteries run by other states was not a state matter, but a matter for central government, therefore sought permission to sell lotteries in other states. .

India’s Chief Justice N. V. Ramana while inquiring about the position of the central government on the matter, asked how a state could be allowed to invoke the provisions of the central law and prohibit lottery activities .

During the hearing of the case, the CJI noted orally that the sale of lottery is now done online. To this, lead attorney Mukul Rohatgi, representing the state of Meghalaya, informed the court that if the lottery is banned in a state, then it also cannot be sold online in that particular state.

The State of Meghalaya maintained that the Supreme Court, a long time ago, had already discussed this issue in the case of State of Haryana v Suman Enterprises (1994). For background, in this case, the Court, in deciding whether the State of Haryana could issue a notice prohibiting lotteries from other states, held that the regulation of lotteries run by other states was not a subject of the state but fell within the exclusive regulatory power. Parliament under heading 40 of list I.

It has been argued that Suman Enterprises (supra), distinguished between “state-run lotteries” and “state-authorized lotteries” and stated that no private organizer was allowed to sell lotteries, however, state-run lotteries were permitted. The petitioner stated that in the same judgment, “there was a path laid out for the Northeastern states to follow“.

Senior Solicitor AM Singhvi, mentioning he was appearing for the state of Sikkim, said banning states from selling their lotteries outside their states could not be allowed in a federal state. He said that after the COVID-19 pandemic, there had been a reduction in state revenue. However, the lottery had been the “lifeline” of the state and the money generated from the sale of the lotteries was used for the development of the state. He said that if Sikkim had not banned other states, neither should it be banned from selling lotteries in those other states.

Plaintiff Meghalaya had applied for an interim order. However, ASG Sanjay Jain said such an interim order would overrule the established law in the case of BR Enterprises v. State of UP (1999). In that case, the Supreme Court held that lotteries, being a form of gambling, could be banned by state legislatures because it was a matter of policy. ASG Jain also argued that all North Eastern states used State of Haryana v. Suman Enterprises only as “an eyewash”.

The CJI, while stating that in this case the government, not private organizers, were running a lottery, inquired about the position of the central government and asked–

How can the state invoke the provisions of the central law and prohibit lottery activity? … If in a federal structure one state prohibits another state’s lottery and tomorrow one state prohibits another state’s property … can this be allowed or allowed?

ASG has asked for time to respond.

The CJI further noted that–

I can understand that you ban private lotteries but allow government ones. But state agencies have some credibility.”

The case is now listed as August 13, 2022.

Meghalaya filed the original lawsuit naming the Union government and all other states as defendants.

CASE TITLE: STATE OF MEGHALAYA v. INDIA UNION AND ORS | Original Costume No. 1/2021


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