Lotteries (Regulation) Act: Section 9 – Offences by companies

(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was incharge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Explanation.—For the purposes of this section,—

(a) “company” means any body corporate and includes a firm or other association of individuals; and

(b) “director”, in relation to a firm, means a partner in the firm.

The primary goal of the Lotteries (Regulation) Act is to bring the lottery industry under government control, ensuring that it operates within a legal framework that protects consumers and promotes responsible gaming practices. By regulating how lotteries are conducted, the Act seeks to prevent fraud and exploitation while allowing states to generate revenue through legitimate lottery operations.

Simplified Explanation

This section of the Lotteries (Regulation) Act, 1998, addresses accountability and liability when offences are committed by a company or an organization. Let’s examine its components:

Sub-section (1): Responsibility of Persons in Charge

• Provision:
  • If an offence under the Act is committed by a company, both the company itself and every individual responsible for managing its operations will be considered guilty and held liable.
  • Such individuals include those who were in charge of or responsible for the conduct of the company’s business at the time of the offence.
• Defense Clause:
  • A person can avoid liability if they prove that:
    • The offence was committed without their knowledge, or
    • They exercised due diligence to prevent the commission of the offence.

Sub-section (2): Liability of Specific Officers

• Provision:
  • If it is proven that the offence was committed due to:
    • Consent,
    • Connivance, or
    • Neglect
      by any director, manager, secretary, or officer of the company, such individuals will also be deemed guilty.
• Implication:
  • This sub-section ensures that individuals in senior positions cannot escape liability if they were complicit in the offence, either actively or passively.

Explanation

The explanation clarifies the terms used in this section:

• “Company”:
  • Refers to any body corporate, including a firm or an association of individuals.
• “Director”:
  • In the context of a firm, a director includes any partner in the firm.

Purpose of Section 9

1. Accountability in Corporate Entities:
   • Companies often manage lottery operations, making it essential to hold them and their responsible officers accountable.
2. Prevention of Negligence:
   • Encourages senior management and operational heads to exercise strict oversight to prevent violations.
3. Shared Responsibility:
   • Ensures that liability is not confined to the organization alone but extends to individuals responsible for its actions.

Illustrative Examples

1. Case of Negligence (Sub-section 1):
   • A lottery company violates Section 4 by organizing a draw outside the prescribed period.
   • The company’s general manager, in charge of operations, can be held liable unless they prove they were unaware of the violation and had taken steps to ensure compliance.
2. Case of Connivance (Sub-section 2):
   • A director allows the sale of lottery tickets in a state where it is prohibited (violating Section 5).
   • If proven that the director consented to or neglected their duty to prevent this, they can be prosecuted.

Key Takeaways

1. Dual Liability:
   • Both the company and responsible individuals are liable for offences under the Act.
2. Defenses Available:
   • Lack of knowledge and due diligence can be valid defenses for individuals.
3. Deterrence Against Mismanagement:
   • Promotes accountability and oversight within corporate entities involved in lotteries.

Enforcement Challenges

• Proving consent, connivance, or neglect may require substantial evidence, such as emails, memos, or other documentation indicating complicity.
• Directors or officers may argue lack of involvement, making it critical for investigators to link them directly to the offence.