Wagering Agreement & its Enforcement

Author: Ashwin Singh, Student, Symbiosis Law School, Pune (Symbiosis International Deemed University)

‘Wagering’ essentially means ‘bet’. Agreements of Wager are defined in Section 30 of the Indian Contract Act, 1872. Though this section doesn’t define ‘wager’, it says that no suit can be instituted for recovering anything won on any wager, or bailed or entrusted to a person to live up to the result of any game or other uncertain event on which wager is made as they are void.[1]

Such agreements depend upon the occurrence or non-occurrence of an uncertain event. In such agreement, one party bets on the happening of that event and the other on the non-happening of it. The losing party has to fulfil the decided obligation. The chance of winning or losing is equal for both parties.

Further, the section says that this section is not to be deemed to render unlawful a subscription or contribution or an agreement to subscribe, to contribute, made for to enter into any plate, prize or sum of money, worth or up to 500 rupees to be awarded to the winner of any horse race.

It also talks about Section 294A[2] that any transaction related to horse-racing to which Section 294a of the Indian Penal Code (45 of 1860) is applicable shall not be legalized by anything of this section.

Essentials of a Wagering Agreement:

1. Existence of two parties
2. Mutual possibility of gain or loss
3. Reliance on an uncertain event
4. Neither party having control over the event
5. Existence of no other interest than stake

The section has largely been adopted from the English Gaming Act of 1845. India is a hybrid legal system and includes Common Law principles along with Civil, Customary, and Religious Law. Judges have time and again adopted vital principles of the English Gaming act, 1845.[3]

However, Indian laws relating to Agreements Collateral to Wagering agreements differ from the English gaming Act, 1845 which proffers Collateral Agreements to be void. Indian law doesn’t render Collateral agreements void. In this regard, let’s move to the exceptional agreements in which the court doesn’t consider them as a Wagering Agreement.

Exceptions to Wagering Agreements & its Enforcement:

1. Insurance

An insurance transaction is similar to a wager. If the insurer has no interest in the occurrence for which insurance money is to be paid, the insurance contract is a wager. The insurance interest is usually based on the fact that the event is primarily harmful to the insurer’s interests. In Orissa Co-operative Ins. Society Ltd. v. Bhagaban Sahu[4], It was held that irrespective of the fact that the property may be with somebody else, the ostensible owner whose name is in the script as such in the Registration Book is to be considered as the owner of the Motor Vehicle. The form where the registration certificate is in accordance with the schedule of the Act contains the registered heading or the owner and not the owner or the actual owner.

2. Games requiring skills

Rummy – The State of Andhra Pradesh v. Satyanarayana[5] held the Card Game to be a game of skill and not a gambling game and hence, won’t be counted as a wager. This view was also reflected in Dr K.R. Lakshmann v. state of Tamil Nadu[6].

Horse Racing-  K.R. Lakshmanan (Dr) v State of Tamil Nadu[7], the Supreme decided upon the question of whether horse racing is to be rendered gaming as it was made under the Madras City Police Act 1888[8] and the madras gaming act. The court opined that gambling is paying a price for a game where’s a chance to win a prize. Games can be of chance combined with skill and luck. A game depending on luck is entirely or partly decided by luck. A skilful game – although the element of chance cannot essentially be done away with – is one where one’s success mainly rests on the player’s comprehension, astute, observation, experience and skill

3. Partnership & Collateral Agreements

Since Section 30[9] of the Indian Contract Act is based on the provisions of Section 18 of the Gaming Act, 1845[10], and although the wager shall be invalid and not executive, the wagering shall not, by law and consequently, be prohibited by law and the subject of a collateral agreement, in accordance toby Section 23[11] of the Indian Contract Act, shall not be he held unlawfully. In Gherulal Parakh v. Mahadeodas Maiya[12], It was questioned whether a partnership formed to enter into forwarding purchase and sale contracts to speculate on the fluctuation in the cost of wheat in the future would amount to wager as defined by section 30[13] of the Indian Contract Law, but the SC held that this kind of partnership couldn’t be held illegal despite the fact that the company that formed the partnership is involved in wagering.

4. Speculative Transactions & Wagering Agreements:

A Speculative transaction agreement is formed to settle the difference in the price of the contract and the market price of a specified product on a particular day. A wagering arrangement is speculative in nature, although not every speculation constitutes a wager.

Many transactions commercial in nature change into wagering agreements when the dealers or parties consent to enter into an agreement to sell or procure or produce goods at a certain value and time. If the parties intend an actual transfer of goods, it is a valid contract; on the other hand, if they never intended an actual transfer of goods at all but intended only to pay or receive the difference according to as the market price should vary from the contract price then that becomes a wagering agreement.

Enforceability of Wagering Agreements    

• Section 30[14] of the ICA of 1872 explicitly states that the contracts for wagering are null and void.
• Section 65[15] also does not apply, as wagering contracts are void-ab-initio, to the obligation of the person receiving an advantage by virtue of the invalidation agreement or contract that becomes void. But none of these agreements has been mentioned as prohibited by law. It also states that there can be no action to retrieve something allegedly won or delegated to another party to comply with the outcome of an unknown happening or game that is essentially a wager.
• If a promissory note is carried out to pay the debt through a wagering agreement or transaction, even such a promising note executable for debt payment can be rendered invalid.[16] But as aforementioned, agreements collateral to wagering agreement is not void and is nowhere held illegal.
• Therefore, in Partnerships, to carry out wagering transactions, any partner can bring an action against the other partner to recover a share of loss in instances of loss that occurred during the partnership. This law can be different in some states. For instance, Bombay Act III, 1856 of the Indian Contract Act held agreements collateral to Wagering agreements to be void[17].

Conclusion

In the strictest sense, betting is not illegal. Void is the status rendered to them, and it is not illegal to issue a cheque or pay money for them, but reimbursement cannot be compelled. The cause of wagering agreements being unlawful is their relation to public policy. It is held to be against public policy and morality as under English Law as well as Indian law.

Gambling has been held illegal for a long time, but in my opinion, times have changed now and gambling should be legalized now as Government has been failing in controlling large-scale illegal betting.[18] Legalizing it would at least allow regulation and tax this activity and would pertinently increase employment generation also.

And with respect to exceptions to wagers, not an only horse race, many other games rely on skills, but if in those, the one who bets could comprehend the skills of any player and he is betting on and in such cases, the possibility of uncertainty might decrease. So cricket sports and sports based on skills can simply be regarded as sports based on luck, but section 30[19] of ICA did not exempt any other sport other than horse racing.[20] Besides this, Section 30[21] of ICA, 1872 does not explains ‘wager’ or wagering agreement. It merely says that “agreement by way of wager is void”. There is undeniably a need to amend Section 30[22] and add a requisite definition of ‘wager’ and ‘wagering agreement’. and also include the circumstances where wagering would not be held void. This unfortunate feature of ambiguity has been causing a lot of trouble to court as well.

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[1]The Indian Contract Act, 1872, No. 9, Imperial Legislative Council, 1872 (India).

[2] The Indian Penal Code, 1860, No. 45, Imperial Legislative Council, 1860(India).

[3] Raghav Nagar, What is common law? Does it happen in India?, iPLEADERS (Jun. 7, 2021, 3:56 PM), https://blog.ipleaders.in/common-law-apply-india.

[4] Orissa Co-operative Ins. Society Ltd. V. Bhaghban sahu, (1971) ACJ 49.

[5] The State of Andhra Pradesh v. Satyanarayana, AIR 1981 AP 125.

[6] Dr. K.R. Lakshmann v. state of Tamil Nadu, 1996 SCC (2) 226.

[7] Id.

[8] The Madras city Police Act,1888, No. 3, Governor of Fort St. George in Council, 1888(India).

[9] See supra note 1.

[10] The Gaming Act, 1845, The Parliament of United Kingdom, 1845.

[11] See supra note 1.

[12] Gherulal Parakh v. Mahadeodas Maiya, AIR 1959 SC 781.

[13] See supra note 1.

[14] Id.

[15] See supra note 2.

[16] Raghav Sehgal, Wagering Agreements and Their Enforceability Under Indian Contract Law, LAWTIMESJOURNAL (Jun. 7, 2021, 4:46 PM), https://lawtimesjournal.in/wagering-agreements-and-their-enforceability-under-indian-contract-law.

[17] Akanksha Rathore, Wagering Agreements: The Position of Law, LEGAL SERVICES INDIA (Jun. 7, 2021, 4:49 PM), http://www.legalservicesindia.com/article/283/Wagering-Agreements.html.

[18] Civil Services India, Should gambling be legalised?, CIVIL SERVICES INDIA.COM (Jun. 7, 2021, 3:51 PM), https://www.civilserviceindia.com/current-affairs/articles/should-gambling-be-legalized.html.

[19] See supra note 2.

[20] See supra note 16.

[21] See supra note 1.

[22] Id.