TRANSACTION SIMILAR TO WAGER

Transactions similar to Wager (Gambling)

(i) Lottery transactions: A lottery is a game of chance and not of skill or knowledge. Where the prime motive of participant is gambling, the transaction amounts to a wager. Even if the lottery is sanctioned by the Government of India it is a wagering transaction. The only euect of such sanction is that the person responsible for running the lottery will not be punished under the Indian Penal Code. Lotteries are illegal and even collateral transactions to it are tainted with illegality (Section 294A of Indian Penal Code).

(ii) Crossword Puzzles and Competitions: Crossword puzzles in which prizes depend upon the correspondence of the competitor’s solution with a previously prepared solution kept with the editor of a newspaper is a lottery and therefore, a wagering transaction.

Case Law: State of Bombay vs. R.M.D. Chamarbangwala AIR (1957)

Facts: A crossword puzzle was given in magazine. Above mentioned clause was stated in the magazine. A solved his crossword puzzle and his solution corresponded with previously prepared solution kept with the editor. Held, this was a game of chance and therefore a lottery (wagering transaction).
Crossword puzzles, picture competitions and athletic competitions where prizes are awarded on the basis of skill and intelligence are the games of skill and hence such competitions are valid. According to the Prize Competition Act, 1955 prize competitions in games of skill are not wagers provided the prize money does not exceed ` 1,000.

(iii) Speculative transactions: an agreement or a share market transaction where the parties intend to settle the diuerence between the contract price and the market price of certain goods or shares on a specified day, is a gambling and hence void.

(iv) Horse Race Transactions: A horse race competition where prize payable to the bet winner is less than ` 500, is a wager.

Example: A and B enter into an agreement in which A promises to pay ` 2,00,000 provided ‘Chetak’ wins the horse race competition. This is a wagering transaction.

However, Section 30 is not applicable in an agreement to contribute toward plate, prize or sum of money of the value of `5,00,000 or above to be awarded to the winner of a horse race.