Supreme Court Issues Notice on Writ Petitions Filed by Online Rummy Companies

In a significant development, a 3-judge bench of the Supreme Court comprising of Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra has issued notice on writ petitions filed by prominent online rummy companies. While refusing to stay the showcause notices issued to these companies or pass any interim directions, the court has set the stage for a crucial legal battle.

The writ petitions were filed by the E-Gaming Federation, Head Digital Works Private Limited (operator of online rummy platform A23), and Play Games24x7 Private Limited (operator of My11Circle and RummyCircle). These companies have voiced their concerns over the showcause notices they have received from the authorities related to taxation on online gaming.

During the hearing, N. Venkatraman, Additional Solicitor General of India (ASG), stated that the Finance Ministry took cognizance of a news article and asked him to appear in the writ petitions. However, no caveat was filed and an advance copy of the writ petition was not served. ASG Venkatraman highlighted the seriousness and sensitivity of the matter, considering its implications for taxation on online gaming.

Senior Counsel Harish Salve, representing the E-Gaming Federation and the online rummy companies, argued that the issue holds nationwide significance. He expressed concern over the showcause notices, which if converted into demands, could potentially lead to bankruptcy for these companies. Salve requested an assurance from the court to keep the department from taking any action on the notices until the further hearing.

Chief Justice DY Chandrachud made reference to the Gameskraft matter, where the Supreme Court had issued an ad-interim stay on the Karnataka High Court judgment. The judgment had quashed a showcause notice of Rs. 21,000 crore issued to the company. CJI Chandrachud pointed out that there are similar GST issues pending adjudication before the court in the context of online gaming. As a result, no interim relief can be granted to the online gaming companies at this stage.

Taking note of the arguments presented, the Supreme Court directed copies of the writ petitions to be served on the ASG. The court also directed that these cases be tagged along with the Gameskraft matter and listed for further hearing on 8th January 2024, after the winter vacations of the apex court.

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