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Online Games Involving Money Now Banned in Karnataka

In a major setback to the Online Gaming platforms and all other gaming entities in Karnataka falling under the category of wagering or betting, the Karnataka Government on 5th October 2021 notified the Karnataka Police (Amendment) Act, 2021, (“Act”/”Amendment”) which prohibited all forms of online gaming involving a transfer of money.

The controversial legislation comes in the backdrop of the upcoming T20 World Cup involving a huge stake for online gaming companies, including MPL, Dream11, to name a few. Further, it is said to damage Bangalore/Karnataka’s position as the country’s start-up capital which houses about 92 gaming companies and employs over 4,000 persons. 

Key Amendments Made Through the Karnataka Police (Amendment) Act, 2021

The Amendment widened the scope of certain definitions under Section 2 of the Act. Some of the key amendments are:  

The definition of the term “Gaming” under Section 2(7) has been revised to include online games that involve “all forms of wagering or betting, including in the form of tokens valued in terms of money paid before or after issue of it, or electronic means and virtual currency, electronic transfer of funds in connection with any game of chance“.

Similarly, Section 2(11) that defines “Instruments of gaming” has been substantially expanded and now includes any article used or intended to be used as a subject or means of gaming, including computers, computer system, mobile app or internet or cyberspace, virtual platform, computer network, computer resource, any communication device, electronic applications, software and accessory or means of online gaming, any document, register or record or evidence of any gaming in electronic or digital form, the proceeds of any online gaming as or any winning or prizes in money or otherwise distributed or intended to be distrusted in respect of any gaming“.

The Amendment has also introduced a new Section 12(A) that defines “online gaming” as “games as defined in clause (7) played online by means of instruments of gaming, computer, computer resource, computer network, computer system or by mobile app or internet or any communication device, electronic application, software or on any virtual platform;

Further, Section 78 has been amended to criminalize activities related to opening certain forms of gaming centres and penalize anyone who opens, keeps or uses cyber cafes, computer resources, mobile apps, the internet, or any communication device as defined in the IT Act for online gaming. Offences under Section 78 have been made cognizable and bailable.

The Amendment has also increased the nature of, and scope of punishments for various offences. Offences under Section 78 and Section 87 of the Act that deals with gaming in public streets are punishable with imprisonment of up to six months or a fine of up to ten thousand rupees. 

Punishments under Section 79, which criminalizes keeping common gaming house, and Section 80, which criminalizes gaming in common gaming-house, have been increased to imprisonment of up to three years and a fine of up to one lakh rupees. 

Previously, Sections 79 and Section 80 did not apply to wager in games of pure skill. The Amendment removed this exception, bringing games of skill as well under the purview of the ban.

Judicial Stand on Similar Bans Placed on Online Gaming

Recently in the case of Junglee Games v. State of Tamil Nadu[1], the Madras High Court struck down the Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021, which was similar to the Amendment in Karnataka, holding that such a blanket ban was excessive and disproportionate and that it was violative of Article 19(1)(g) of the Constitution.

The Rajasthan High Court in Saahil Nalwaya v. State of Rajasthan and Ors. [2] held that online fantasy sports, which functions under the Charter for Online Fantasy Sports Platforms of the Federation of Indian Fantasy Sports, the self-regulatory body in the online fantasy gaming industry which we have discussed before, are protected under Article 19(1)(g) of the Constitution.

The Supreme Court in Avinash Mehrotra v. The State of Rajasthan[3], dismissed an SLP from a decision of the High Court of Rajasthan, thereby upholding the judgements of the Rajasthan High Court, the Punjab and Haryana High Court, and the Bombay High Court, that games such as Dream11 do not involve any commission of the offence of gambling and betting.

Considering these judicial stands, the constitutional and legal validity of the Amendment is also in question, and the Amendment will likely be challenged in Court.

 

Effects of the Amendment Banning Online Gaming in Karnataka

Immediately after the Amendment Act was notified, Online platforms started geotagging and blocking access to their apps for users in Karnataka. While MPL and PayTM First seem to have blocked access to their users in Karnataka, some other online fantasy sports apps are still trying to interpret and adhere to the new legislation.

Industry experts predict that the ban will impact over 10% of online transactions in the country and will cause around 7-12% loss of revenue to the online gaming industry other than damaging the investor-friendly tag of Karnataka. 

 

The Way Forward

This move is the latest of the numerous attempts by legislatures in different States of the Country to ban online gaming. Such actions are criticized for showcasing the misplaced concern of the legislature for online games, and critics advocate for regulation instead of an outright ban. While clarity is needed and perhaps the rules which are yet to be framed may help clear the air, the Gaming industry may not wait until then from moving to Court challenging the blanket ban.

References

[1] (2021) SCC OnLine Mad 2762.

[2] D.B. Civil Writ Petition No. 2026/2021.

[3] SLP (Civil) Diary No. 18478/2020.

 

Image Credits: Photo by Aidan Howe on Unsplash

The order of the Mumbai Tribunal has, indeed, widened the scope of ‘onus’ placed on the assessee to prove the genuineness of a particular transaction. Such ‘onus’ will not be deemed to be discharged by merely filing the documents before the tax authorities, but the assessee would have to go one step further to justify the rationale of such transactions in order to prove that the transaction has not been entered as a colorable device to defraud the Revenue.

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The Messi Exit: A Legal & Financial Perspective

Behind the passions of the fans, tackled goals, swanky parties and brand endorsements, there is a lot that goes into structuring a football team/club, registration as well as the transfer of a player while maintaining sustainable finances. 

In response to multiple financial irregularities in clubs such as Deportivo La Coruña, Racing Santander, Valencia, Real Zaragoza, Real Mallorca, Albacete, Real Betis etc., the economic control framework was introduced in 2013 to keep clubs financially afloat and maintain competitive sustainability.

At a later stage, FFP (Financial Fair Play) came into effect against errant clubs for breach of regulations. Spain’s economic control- La Liga controls the fire before it can damage (to an extent) by setting a limit to the amount a club can spend, thereby making it easier to stay within limits and preventing the creation of unsustainable debts. 

What were the legal reasons for Messi’ s exit from Barcelona?

 

Recently Argentinean professional footballer Lionel Andrés Messi, popularly known as Leo Messi, decided to part ways with the Spanish football club FC Barcelona and join the French football club Paris Saint-Germain. Messi had been with the Spanish club for the last 21 years and their association came to an end on 30th June 2021, when they decided to move on.

Messi had agreed to a new five-year contract with Barcelona, however on 8th August 2021, the legendary football player announced his exit from the Spanish club, by signing a two-year contract with the French club Paris Saint-Germain, with the option of further extension up to a year. FC Barcelona announced that despite the agreement between the club and Messi, they were not able to honour the new contract due to the Spanish football league’s (LaLiga’s) financial fair-play rules. 

 

What is LaLiga Financial Fair-play Rule? 

 

Under the LaLiga fair play rule, each club is provided with a cost limit for each season, which includes the wages of the players, the coaching staff, physios, reserve teams, etc. Clubs have the flexibility to decide how the wages are distributed, as long as the overall limit is not breached. Factors taken into consideration for setting the financial cap are inclusive of expected revenues, profits and losses from previous years, existing debt repayments, and sources of external financing among others. In this case, the Catalan club could not accommodate Messi’s contract within the financial limit for the upcoming year, even though Messi was allegedly willing to take a 50% pay cut. 

Considering the fact that Messi is Barcelona’s record scorer with 751 goals and 10 La Liga titles, Messi’s exit could mean a heavy blow for the world’s most valuable[1] European football club. 

A football clubs’ main revenue is generated from TV broadcasting rights, matchday sales, and commercial revenue which includes sponsorship contracts, merchandising sales, and digital content that the club creates. It is too early to say whether Messi’s departure will have an impact on how Barcelona performs in the ongoing season. However, there is no question over how Messi has played an important role in bringing laurels to Barcelona over the past few years, which has garnered a significant fan following, not just for the footballer, but also for the club. Thus, his exit may likely cause a dip in the viewership and fan following which will directly affect the Club’s revenue.

Typically for a footballer, his contract with any club would include basic salary, signing-on fees, royalty fees, and objectives based on games. Apart from these, some of the other key element included in a contract is his image rights, merchandising right and licensing deals, which form a major portion of any footballer’s gross income. 

 

What are Image Rights? 

Image rights are the expression of a personality in the public domain. For an athlete, it will include their name, photo, and likeness, signature, personal brand, slogans, or logos, etc. Generally, football clubs try to extract a greater percentage from the image rights of a player, in a club capacity as compared to their personal capacity. Club capacity is usually when the image rights of the player are used in connection with or combined with his name, colours, crest, strip, logos identifying him as a player for his club. Personal capacity is usually when the player is appearing in and conducting activities outside his role as a player at the club. 

Any player leaving the club would have an impact on the commercial revenue generated by the club in the form of sponsorship contracts, merchandising sales as well as digital content. This would be especially notable for a player like Messi, whose personal brand value boasts over 130 trademarks. Messi’s trademark portfolio consists of mostly a single class trademark in his home country of Argentina, with others filed or registered in China, Brazil, EU, Malaysia, UK, Spain, Canada, Chile, and the US. The most common goods and services represented in Messi’s trademark portfolio are class 25 (clothing and footwear), class 28 (games, toys, and sporting apparatus) and class 9 (computer software). Apart from the above classes, class 18 has been filed in multiple applications.

The trademark consists of either the word mark MESSI/LIONEL MESSI or his logo. This means that Barcelona will no longer be able to use the footballer’s name or logo for apparel and merchandise sales, which will directly impact its revenue as most clubs collect a portion of the sales revenue. Also, Messi’s exit means that the club will have no control over his image rights to attract corporate sponsorships. Further, Messi’s huge online presence, with over 276 million Instagram followers, which is more than double of Barcelona’s official account (100 million), will have a direct impact on any advertising or publicity that the club may generate. 

A player of Messi’s stature, brand, and persona is significant to any club. How the present scenario is played with the new club and how much impact Messi’s presence will bring to Paris Saint-Germain is yet to be seen. 

A football clubs’ main revenue is generated from TV broadcasting rights, matchday sales and commercial revenue which includes sponsorship contracts, merchandising sales and digital content that the club creates. It is too early to say whether Messi’s departure will have an impact on how Barcelona performs in the ongoing season.

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The Concussion Conundrum

The first T20 International Cricket match between Australia Vs. India played on December 4, 2020, at Manuka Oval, Canberra witnessed an unusual controversy. During the inning break, on-field cameras captured the animated discussion between the match referee David Boon and the Australian head coach Justin Langer. The issue was centered on the decision of the match referee about concussion replacement player Yuzvendra Chahal for concussed player Ravindra Jadeja.

During the last over of India’s inning, a beaming delivery of Mitchell Starc hit Ravindra Jadeja on his helmet. Though Jadeja went on to complete that over without any complaint or call for help, later reported dizziness in the dressing room. As per the news reports, the team medics after examining the player suspected of concussion hence sought concussion replacement.

The team medics seem to have duly followed the ICC Rules on their part by completing the required formalities. Match Referee, David Boon who approved India’s concussion substitute had an animated conversation with Justin Langer followed by outbursts from certain Australian players and the decision being questioned by Cricket experts and scrutinized by the media.

ICC Rules & Guidelines on Concussion Replacement:

Well, to lay rest to these speculations and determine if the Indian team subverted the rules, it is important to look at the International Cricket Council (ICC) Rules and Guidelines concerning concussion replacement. The concussion rules were implemented to restrict a player from being unduly exposed to health risks and also to save a team from being disadvantaged if their player is concussed.

The concussion replacement issue is dealt with under Rule 1.2.7 of the ICC Men’s Twenty20 International Playing Conditions which was introduced in July 2019. The Rules allow a ‘like-for-like’ replacement in case a player is concussed, i.e., an injury is caused to the head or neck during the course of the match and the incident had occurred within the playing area.

The team medical representative is responsible for diagnosing the player and submitting the request for concussion replacement to the Match Referee. Rules 1.2.7.1.3.4 mandate that the concussion replacement request shall be a like-for-like for the player who has sustained the concussion or suspected concussion.

As per Rule 1.2.7.3, the ICC Match Referee should ordinarily approve a Concussion Replacement Request if the replacement is a like-for-like player whose inclusion will not excessively advantage his team for the remainder of the match. Further, the ICC Match Referee should consider the likely role the concussed player would have played during the remainder of the match, and the normal role that would be performed by the nominated Concussion Replacement. The decision of the match referee in this regard is final and cannot be appealed.

Did India and the Match Referee follow the Rules?

Let us analyze the core issues which became the point of discussion and disagreement and caused the stir.

a) Player Assessment

The major issue was that the player was not assessed after he was hit and hence there was a breach of protocol by team India. Let us look at the ICC’s concussion management guidelines and refer to section “Clear and immediate diagnosis of concussion” which reads as:

When should a team doctor/physio run out for an on-field assessment?

  1. If called on by the umpire;
  2. If a player is down and players are calling for assistance;
  3. Immediately, if there is a head knock and the player is unable to resume after 3 to 4 seconds;
  4. If a player calls for a new helmet following a head injury; and
  5. At the end of the over, if the player resumes play after having sustained a blow to the head.

Analyzing, the above guidelines team India does not seem to have breached any protocol as the player was attended and assessed in the dressing room by the team medics immediately after the (final) over in which he was hit, therefore falling under the fifth scenario. Hence, the objection of an unfair advantage being taken solely on this ground cannot be sustained. Moreover, given the medical expertise and sensitive nature of the injury, the opinion of the medics can also not be called into question or be disregarded.

b)  Like-for-like replacement:

The second issue, which caused much furor was whether the replacement player (Yuzvendra Chahal in this case) could be considered a ‘like-for-like’ replacement (Ravindra Jadeja) where Jadeja is considered a bowling all-rounder while Chahal is purely a leg-spinner.

Rules 1.2.7.3 – 1.2.7.5 sets out the guidelines for Match Referee to address the issue of concussion replacement. As per the Rules, the Match Referee should assess the likely role the concussed player would have played during the remainder of the match and the normal role, which would be performed by the nominated replacement. It is not necessary that a player should be a ‘like-for-like’ replacement in terms of ability and standing. Such an interpretation would render the concussion rules infructuous as no two players are alike and no team can be expected to carry a squad containing an exact substitute for each of its players. The assessment is to be done on the basis of the ‘likely role’ to be played.

Moreover, if the Match Referee believes that the inclusion of the replacement would excessively advantage the team, the Match Referee is well within his rights to impose conditions upon the identity and involvement of the Concussion replacement, to neutralize any advantage being accrued. In the instant match, being an all-rounder, Jadeja was likely to complete his bowling quota. Since the replacement happened at the end of the batting innings, Chahal could be considered a ‘like-for-like’ replacement, as he would have played the role of Jadeja, which is to bowl his quota of four overs.

Conclusion:

An in-depth analysis of the ICC Rules & Guidelines and the subject issue of concussion replacement do not hint at any unfair or mala-fide intention neither on the part of the Indian cricket team nor the match referee. Another perspective; had Chahal not bowled the Indian team to victory and bagged the man of the match award, this issue would not have seen the light of the day. The whole matter seems to be no more than a tempest in a teacup.

Image Credits: Photo by Aksh yadav on Unsplash

Had Chahal not bowled the Indian team to victory and bagged the man of the match award, this issue would not have seen the light of the day. The whole matter seems to be no more than a tempest in a teacup.

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The football transfer: How the Barcelona – Messi matter turned murky

“In Barcelona, on 14 December 2000 and the presence of Messrs Minguella and Horacio (Gaggioli), Carles Rexach, Director of Football of F.C.B., hereby agrees under his responsibility and regardless of any dissenting opinions, to sign the player Lionel Messi, provided that we keep to the amounts agreed upon.”

 

Carles Rexach, the then Director of Football of F. C. Barcelona, scribbled this on a napkin to sign up a young Argentinian wonder kid, Lionel Messi, as he had never seen such a talent before and did not want to lose out on him. Thus, began the fairytale journey of Messi’s tryst with Barcelona and as history suggests this gamble that played out 20 years ago, turned out to be the most profitable for the club and rewarding for Messi.

Messi has been the Messiah for the club on several occasions, wriggling the club out of tough situations with his magic touch. With Messi on their side, Barcelona established itself as a formidable force that won everything that world football could offer. As all good things inevitably come to an end, this fairytale match appeared to have come to an end when Messi formally notified the club of his intention to unilaterally terminate his contract.

The events that transpired after the news broke out of Messi’s intention to leave highlight some troubling issues that are currently plaguing the football transfer market; in particular, the breakdown of relationships between a club and a player at the instance of their squabbling over better wages and contracts. Messi’s dispute with Barcelona revolves around the unique nature of a football contract and the role relationships play in such contracts.

 

In order to understand the dispute better, one must first have a formal understanding of the football transfer market.

 

What is a football transfer? Generally, a transfer in football is like any other business transaction that takes place between two football clubs and involves the transfer of a player who is under a contract with one club to another club in consideration of a fee known as a transfer fee.

 

A transfer is considered complete when the buying and selling clubs agree on the terms of sale and when the buying club enters into a contract with the player.

 

 

How does football transfer work?

If a transfer has to take place, the buying club must first approach the selling club and inform in writing before entering into negotiation with the player. This is legally mandated under Article 18(3) of the FIFA Regulations on the Status and Transfer of Players (the ‘Transfer Regulations’).

 

It is important to note however that the ultimate bargaining power in a transfer still lies with the selling club.

 

 

What is a transfer request?

A player, who is dissatisfied with his current club and finds himself in a position wherein the club has rejected all transfer bids from other clubs, may put in an official transfer request to the club. The only drawback is that such a request has no legal bearing and the club may choose to reject the plea.

 

 

When can a football transfer happen?

A transfer can take place during the “registration periods” which are provided by the governing bodies of the respective national associations.

In Europe, there are officially two periods during which transfers can take place – summer (July 1st – August 31st) and winter (January 1st – 31st) transfer window.

 

What is the duration of contracts between the players and the clubs?

The duration of a contract entered into by a player with the club may vary from short term to long-term depending on a variety of factors such as the age of the player, their skill, commercial value, potential growth and injury risk of the player. The term of a contract is determined mostly by these factors.

According to Article 18 (2) of the Transfer Regulations, the minimum term of a contract shall be from its effective date until the end of the season, while the maximum term of a contract shall be five years. Players under the age of 18 may not sign a professional contract for a term longer than three years.

 

Having garnered a basis of what and how a football transfer works, it is necessary to understand the terms of the contract between Messi and FC Barcelona that enables him to leave Barcelona on a free transfer and the reason behind the current situation between two.

 

What enabled Messi to leave Barcelona for free? Messi extended his contract with Barcelona in 2017 for a duration of 4 years, which was a deal that would enable him to retire at the club. However, on the insistence of Messi, an additional clause was added in the contract, which granted Messi the right to unilaterally terminate the contract at the end of each season and leave for free, provided that he notified the club prior to June 10th.

 

 

What was the legal issue involved in their dispute?

The legal issue involved the interpretation of the terms of the unilateral termination clause in light of the unprecedented COVID–19 pandemic that led to the interruption and the subsequent extension of the season.

 

Messi claimed that since the pandemic had suspended the season temporarily and it restarted only after June 10th (La Liga re-started on June 11th, 2020), it was impossible for him to exercise such a right before June 10th. Messi thus wished for the terms of the contract to be viewed liberally in light of the unprecedented events.

 

The Barcelona Board however contested that the terms of the contract strictly mentioned June 10th, hence Messi could not unilaterally terminate the contract post that date. The issue therefore would depend on whether the terms of the contract specifically mention a “specific date” or whether it is termed as the “end of the season”. In any case, according to Article 16 of the Transfer Regulation, a contract cannot be unilaterally terminated during the course of a season.

 

 

Relationship v Contract: what matters more?

The reason behind this issue turning unpleasant is largely due to the long-standing relationship that Messi had with Barcelona ever since he was a young boy. On a deeper analysis, the issue throws light on an important question – what is the nature of a football contract; is it purely a business transaction or does it involve the building of a relationship of trust, faith and respect?

 

Generally, the nature of any football contract is such that a player is associated with a club for a period of 3-4 years. It is unlike a business transaction of sale wherein it involves a single transaction. Instead, football contracts bind a player to the club for a considerable period of time and hence building a definitive relationship with the club is essential for the success of the contract. While the contract may describe the legal relationship, the true essence of the deal is the personal relationship.

 

Therefore, if a football contract failed to build a human connection between the player and the club, it would only increase the chances of the player leaving mid-contract and create a hostile environment for both parties.

 

 

Conclusion

In this case, Barcelona should have gauged the reasoning behind Messi’s intention to include a clause to unilaterally terminate his contract at the end of each season. Adding to the misery, the club management seems to have created a situation, which ultimately drove him to the point of making a decision to leave.

 

Barcelona’s actions, post Messi’s notification to leave, has been criticized as a tactical move to ensure that Messi had no other option but to stay at the club or could only leave provided the Club received his hefty release amount of € 700 million.

 

While Messi decided not to take the matter to Court, Barcelona seems to have made a big commotion out of it by forcing him to change his decision and stay with the club, perhaps until next June, thereby destroying the long-standing relation between the two.

 

Image Credits: Photo by Connor Coyne on Unsplash

If a football contract failed to build a human connection between the player and the club, it would only increase the chances of the player leaving mid-contract and create a hostile environment for both parties.

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