Salient Features Of The Nagaland Gaming Act, 2016

The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Bill, 2015 (“Bill”) has now become an applicable law and very soon rules would also be added to the same. Once the rules are added, actual implementation of the Nagaland Gaming Act, 2016 would be possible.

Surprisingly, the Nagaland Gaming Act, 2016 has not been made public by the government of Nagaland so far. Perry4Law Organisation (P4LO) has already contacted the Nagaland government and has requested for the official documents in this regard so that we can share the same with gaming stakeholders. For the time being, Perry4Law Law Firm has provided an analysis of the Nagaland Gaming Act, 2016 based on the publicly available information and inputs. Please see the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Bill 2015: Salient Features (pdf) for the complete analysis.

However, for those who are in a hurry, we have also provided an abridged version of this analysis. Please see the article titled Salient Features Of The Nagaland Prohibition Of Gambling And Promotion And Regulation Of Online Games Of Skill Act 2016 in this regard. Many online poker, online rummy and online fantasy sports entrepreneurs would be happy to apply for a licence in due course of time.

However, we at Perry4Law Law Firm believe that the Nagaland Gaming Act, 2016 has certain "legal infirmities" that must be immediately removed by the government of Nagaland. Otherwise, online gaming stakeholders would be vulnerable to legal risks and litigation threats across the nation.

Some of the salient features of the Nagaland Gaming Act, 2016 are as follows:

(1) The Act allows games of skills and prohibits games involving gambling elements.

(2) Some games have been specifically included in games of skill and this would reduce the confusion about the nature of gambling activities. However, inherent conflicts and inconsistency is there in the provisions of the Act and this would create problems for the gaming stakeholders in future.

(3) Severe fines have been prescribed by the Act for gambling activities. For instance, a fine of Rs 20 lakhs will be applicable in the first instance, followed by an imprisonment of 6 months if not remedied further.

(4) Games which have been declared by courts (Indian or International) as games of skill may be included in this list in future. The Finance Commissioner or any Licensing Authority will be permitted to add to this list the games of skill as long as it is in consonance with the definition of ‘Games of Skill’ under the Act.

(5) The Act applies to any territory in India in which “games of skill” are permitted and are recognised as being exempt from the ambit of “gambling”.

This would raise serious legal issues as till now the legality of games like online poker, online rummy, e-sports, fantasy sports, online card games, online fantasy games, online lotteries, etc is not clear.

P4LO has been managing a Blog titled Online Gaming And Gambling Laws And Regulations In India to help online gaming and online gambling stakeholders of India and other jurisdictions. This Blog can be used as a guidance by the gaming stakeholders and if they need our techno legal professional assistance, they can establish a client attorney relationship and seek our services.

(6) Indian place of business and Indian connections are essential for getting a licence from the Nagaland government. An interest in any online or offline gambling activities in India or abroad would bar an individual or entity from getting the licence.

(7) The State Government, may, by notification, designate an authority or body to monitor and regulate the activities of all licensees to ensure compliance with the provisions of this Act, and to settle all disputes arising from the activities conducted under this Act

(8) If the licensee operates in a state where the state government believes the company is violating the provisions of the act or its rules, or in violation of local laws, it may inform the licensing authority of Nagaland. The licensing authority shall then try and get the issues resolved.

P4LO welcomes this legislation from Nagaland government. However, there are certain techno legal issues that have skipped the attention of government of Nagaland. It would be prudent to cover those issues before the rules are notified by the Nagaland government.

Further, in their own interest, the online gaming stakeholders who are planning to explore Nagaland's market must also undergo a techno legal audit so that their online gaming business runs smoothly the moment it is started.

Is It Legal To Run An Online Fantasy Sports Website In India

As growing number of people have started using information and communication technology (ICT), as has also encouraged many entrepreneurs to launch ICT enabled e-commerce and business ventures. Few such ventures include online gaming, online gambling, online poker, online rummy, online games, e-sports websites, etc. Another related business venture is online fantasy sports websites that have become very popular across the world.

Fantasy sports have also become very popular in India. However, the legality of running and playing online fantasy sports in India is still a tricky issue. We at Perry4Law Law Firm are frequently approached regarding managing the legal issues of online gaming, online gambling, online poker, online rummy, online games, e-sports websites, online fantasy sports websites, etc in India and other jurisdictions. We have suggested all our client to comply with techno legal compliances associated with these online and virtual games. We have very categorically told them they should not launch their websites and business ventures before they comply with techno legal issues associated with these websites.

Just like any other online games, entrepreneurs engaged in fantasy sports in India are also required to comply with certain techno legal requirements. There is a need to change the mindset of online games entrepreneurs who are still not serious about legal issues in India. Even if some are interested in complying with the legal requirements of online gaming they are ill advised and do not comply with Indian laws properly. The fact remains that there are a set of legal compliances for running an online fantasy sports website in India.

This techno legal compliance must not be confused with a dedicated law for running an online fantasy websites in India that is still missing. The problem stems from the fact that there is no clear regulatory framework that can be looked upon to decide legality or illegality of online poker, online rummy, online card games, fantasy sports, etc in India. On the other hand, regulatory compliances are scattered among different laws of India and combining them together at a single place is a big challenge. Unfortunately, online gaming and fantasy sports websites in India are not complying with these techno legal requirements and they are on the wrong side of Indian laws. Merely because government has not taken legal actions against them does not mean that it is legal to run an online fantasy sports website without complying with the techno legal requirements.

As on date, online gaming, online gambling, fantasy sports and online lotteries websites are not complying with the internet intermediary compliances and cyber law due diligence (pdf) requirements prescribed under the Information Technology Act 2000. Similarly, almost all of the online poker websites in India are violating one or other laws of India. Although online gaming market in India is booming yet regulatory compliances cannot be ignored. It seems online gaming and online gambling industry of India is not considering regulations while conducting their businesses in India.

Perry4Law conducted a techno legal audit of various fantasy sports websites operating in India and we found the same problems with them as have been discussed above. Almost all of these fantasy sports websites have used a single cut-copy-paste criteria when it comes to techno legal compliances and drafting of legal documents of the websites. Clearly, these online fantasy sports websites are violating the laws of India and they may be prosecuted very soon. Those using mobile applications can also be prosecuted if they fail to comply with techno legal regulatory norms of India.

Even the banks, payment gateways and online payment merchants, mobile payment vendors, etc supporting these online poker, online rummy, online card games and fantasy sports websites can be held liable for not following cyber law due diligence norms as they have blindly approved online payment option to these illegal and law breaking websites. These banks and payment gateways can also be held liable for money laundering, FEMA violations and assisting in tax evasion. If such banks, payment gateways and online payment merchants have already approved such illegal and law breaking online poker, online rummy, online games and fantasy sports websites in India, it is in their own interest to cancel such approval immediately. The banks etc must ask them to first comply with applicable techno legal compliances and then support their claims with a proper techno legal consultancy from a reputed law firm.

If you need a techno legal compliance and legal consultancy from Perry4Law for your online games or fantasy sports, please establish a client attorney relationship so that we can start working upon your project. Perry4Law wishes all the best to all gaming stakeholders and entrepreneurs.

E-Commerce Websites And Online Pharmacy Companies Are Not Complying With Techno Legal Regulations Of India For Online Medicine Sales

Online pharmacies are poised to big growth in Asia and India is number one choice in this regard. There is no dearth of entrepreneurship in India and there are plenty of online pharmacy and healthcare entrepreneurs in India. As on date most of these entrepreneurs are stressing upon business growth and development rather than upon regulatory compliances. This is more so when we have no dedicated laws for online pharmacies, telemedicine, e-health, m-health, privacy protection, data protection (pdf), cloud computing, etc. Healthcare cyber security is another area of concern that most of the healthcare service providers in India are currently ignoring.

Nevertheless, telemedicine and online pharmacies businesses in India must comply with existing techno legal laws of India. But this is not happening as on date and many e-commerce portals have been facing heat of law enforcement agencies of India. For instance, Maharashtra’s FDA has already ordered filing of FIRs against Snapdeal, its CEO Kunal Bahl, directors and distributors for online sale of prescription drugs. Similarly the Indian government has just clarified about the Foreign Direct Investment (FDI) in e-commerce sector of India so that foreign exchange related violations can be better tackled. The Delhi High Court has already ordered the government to investigate 21 e-commerce websites for possible violations of foreign direct investment (FDI) laws. But as on date the techno legal compliances for e-commerce industry in India are not complied with by a dominant majority of e-commerce businesses.

Online sale and purchase of prescribed drugs and medicines in India is still a neglected area as far as regulations are concerned. Till May 2016 we have no dedicated online pharmacies laws in India and telemedicine laws in India. As a result illegal and unregulated online sales of prescribed medicines in India have increased a lot. This fact also came to the knowledge of Indian government and now online pharmacies websites of India are under regulatory scanner and punishment may follow. In fact, the fast growing and uncontrollable number of online pharmacies, mostly based abroad, has posed a serious challenge to State drug control authorities. They are simply not in a position to regulate the affairs of these online pharmacies that are openly violating the laws of India.

The Drugs and Cosmetics Act, 1940, and the Drugs and Cosmetics Rules, 1945, have clear guidelines on the sale of Schedule H and Schedule X drugs. These can be sold only on prescription and there are specific rules, including for labelling. Even bar-coding of primary level packaging of export consignment of pharmaceuticals and drugs have been prescribed by India. The Directorate General of Foreign Trade (DGFT) has recently amended the procedure for implementation of the Track and Trace system for export of pharmaceutical and drug consignments from India.

Individuals and companies selling pharmaceutical products through website are also required to comply with various laws. These include laws related to medicines and pharmacy profession and cyber law of India. Surprisingly most of the online pharmacies stores and websites in India are not aware about the cyber law due diligence requirements and Internet intermediary liabilities. As a result they are violating the provisions of Information Technology Act, 2000.

In the absence of clear cut policies and guidance, e-health in India is facing legal roadblocks. Till now we do not have any dedicated e-health laws and regulations in India. The legal enablement of e-health in India is urgently required. In United States, the Health Insurance Portability And Accountability Act Of 1996 (pdf) and Health Information Technology for Economic and Clinical Health Act (HITECH Act), etc are some of the laws that take care of medico legal and techno legal issues of e-health and telemedicine. Laws like these are missing in India.

There is also a gross deficiency of data protection and privacy laws in India. Thus, private data and health records can be leaked by these online pharmacies with little grievance redressal and compensation mechanism. It is high time for Indian government to regulate illegal and unethical online pharmacies operating in India.

Amazon And Its Sellers Are Facing Investigation In India For Falsely Claiming Central Value Added Tax (Cenvat) Credit

E-commerce is a relatively new concept in India and as such various aspects related to it are still developing. One such aspect is legal issues associated with e-commerce in India especially with conflict of laws issues. E-commerce laws in India are still maturing as we have basic level legal framework regarding e-commerce in India as incorporated in the Information Technology Act, 2000 (IT Act 2000). However, there is no clarity regarding legal or illegal usage of e-commerce platforms in India as on date.

Recently, the Indian government clarified about the Foreign Direct Investment (FDI) in E-Commerce Sector of India. But FDI and taxation related violations are still happening in India as Indian government has not taken a firm stand in this regard. A software for calculating e-commerce exports was also developed by Indian government. Nevertheless, legal violations by big e-commerce platforms of India still continues especially for online pharmacies, telemedicine, online gambling, e-health, m-health, internet of things (IoT), etc. E-commerce disputes resolution is another area that requires urgent attention of Indian government. Technology driven initiatives like e-courts and online dispute resolution (ODR) must be encouraged by Indian government for resolution of e-commerce disputes in India.

Now it has been reported that Amazon and 50 of its sellers are facing investigations for allegedly falsely claiming Central Value Added Tax (Cenvat) credit and evading tax of about Rs 118 crore. Aggregators such as Amazon pay service tax to the seller. Some sellers had not deposited the service tax with the government even after claiming it from the e-commerce giant. The Directorate General of Central Excise Intelligence (DGCEI) is investigating the matter. Traders are alleged to have misused the Cenvat scheme, which allows a manufacturer or service provider a relief from the taxes paid on inputs to manufacturing of final products or services. DGCEI had detected that bogus invoices of declared goods were issued to merchants through dummy firms. Verifications revealed that the firms said to be providing the goods were non-existent.

Officers of the DGCEI have conducted search operations at Amazon's business premises across the country and at its headquarters in Bengaluru, in January. "So far, the total tax evasion we have been able to establish is to the tune of Rs 118 crore, which could increase. We will soon issue show cause notices to respective sellers," a senior officer said. "We have recorded the statement of Amazon executives and are assessing the details provided by them," he added. Amazon India has confirmed that the DGCEI had raised some questions around their promotion programme. Amazon has cooperated with the authorities to the fullest extent and provided them with all the information that they needed. The DGCEI is also probing if Amazon had any involvement in the merchants claiming Cenvat credit.