Center Defends Online Gaming IT Rules before Delhi HC

23 Nov 2023

Little noticed amidst the whole turmoil caused by the wave of petitions against GST Enforcement notices demanding an egregious ₹1 lakh crore from the Indian online gaming industry, the Center is standing in another legal battle, this time defending the constitutional validity of the fresh amendments to the IT Rules 2021

Public Interest Litigation Challenges Legality of SROs

In a situation complex enough to necessitate the recent appointment of a new GoM (Group of Ministers) to iron out the discrepancies between the views towards online gaming of several Union Ministries before the long-awaited SROs (Self-Regulatory Organizations) could be put in operation, a PIL (Public Interest Litigation) at the High Court of Delhi has forced the Center to defend the legality of the very framework which was supposed to serve as basis for the functioning of these SROs.

In the latest development on the case, MeitY (the Ministry of Electronics and IT) submitted its response to the allegation that the Central Government had exceeded its legal competence by attempting to regulate over online money games, as gambling and betting fall within States’ legislative ambit according to the State List.

“Entry 31 and Entry 97 (residual entries) of the Union List allow the central government to legislate on matters pertaining to online gaming,” MeitY’s affidavit stated.

“Central government has the legislative competency to enact any law on online gaming, and in this particular instance, enacting the impugned amendments in the IT Rules, 2021,” the document added.

For reference, Entry 31 of List I – Union List, Constitution of India, Seventh Schedule, lists matters within the exclusive legal competence of the National Parliament: “Posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication.”

The final Entry 97 adds, “Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists.”

The Arguments Brought Forth by the PIL

The PIL was filed on the 1st of July 2023 by Noida-based NGO Social Organisation for Creating Humanity (SOCH), and besides questioning the Center’s legal competence, the petition claimed that the Union Government had created “regulatory confusion” by implementing a new set of legislative acts running parallel to the existing laws.

“The Rules outsource regulatory powers of the State to SRBs, which would be financed by online gaming companies with a vested self-interest in the regulation of the community, is wholly irrational, arbitrary and violative of Article 14 of the Constitution,” the petition by SOCH also raised concerns about the whole idea of self-regulation as it exists now.

“The Government cannot abdicate its role of overseeing and monitoring of the online gaming sector and outsource its responsibility to private bodies,” SOCH argued.

In its recent written response, MeitY pointed out that the amendments to the IT Rules were drawn up after extensive consultations with the industry and other stakeholders, and the functioning of SROs would be within a broader framework devised to protect customer safety and foster a favorable business climate.