It was the dream pilot project of the Sikkim government, aimed to attract future investments in India’s only state having on-shore operational casinos. The bubble however seems to have burst and the dream has turned sour with Casino Sikkim, a major player, and the industry itself getting embroiled in a string of controversies.
The Sikkim government had notified the Sikkim Casino Games (Control and Tax) Rules, 2007, in its official gazette to set up casinos while the state tourism department issued licences for running casino games as per the provisions of this Act. According to the rules, apart from a one-time licence fee of Rs 5 crore for five years, the licence holder was required to pay Rs 1 crore or 10 per cent of the Gross Gaming Yield, whichever would be higher. The Act also mandated the casinos to be run from the premises of a five star hotel or facility.
Although Sikkim subject holders were exempted from paying Income Tax, Indians from the mainland or foreigners would be taxable under Indian IT Laws. Sales taxes and Custom Duties for importing equipment would have to be paid by the licence holder.
The first such casino was launched in Sikkim at Hotel Royal Plaza on 1 March 2009. Royal Plaza which started operations as a three star property was exempted from the mandatory five star property clause, since the Sikkim government viewed it as a pilot project. It was to be eventually upgraded to a five star category property, before the initial agreement term of five years expired as it would be critical for further renewal of the licence agreement.
This property initially belonged to Balchand Sarda, an old settler from the business community of Sikkim. Sarda had leased it to an old friend, the then Congress leader from Tezpur in Assam, Moni Kumar Subba, also known as the lottery baron of India.
Around the time that the casino was set up, Subba had a close relationship with Sikkim Chief Minister Pawan Chamling and entrusted the property to be built into a luxury hotel by his daughter Tara Subba and son-in-law Naresh Subba. Thus was born Teesta Rangit Private limited (TRPL), which runs the casino.
The beginning of trouble
Trouble started for Casino Sikkim when income tax officials carried out a raid under section 133(A) of Income Tax Act 1961 for alleged tax evasion after serving notice under section 148. Following the raid, TRPL approached the High Court to obtain a stay on further investigations.
Court documents, copies of which are with the correspondent, further reveal that despite the gaming fee, which was enhanced vide government notifications dated 30 March 2011 and 20 June 2012, TRPL had not paid up as per the amended provisions. TRPL then had Rs 1.88 crore pending to the Sikkim government.
However, as East District Police Superintendent Manoj Tiwari shares, the High Court of Sikkim passed an interim stay order on 24 January 2011 stating that no further actions were to be taken by the Central Income tax authorities on TRPL, owners of Casino Sikkim and Hotel Royal Plaza, until further orders of the Court.
The licence issued to Casino Sikkim expired on April 2014, but the hotel (Royal Plaza) was never upgraded to the requisite 5-star category as mandated by the Sikkim government’s Casino Act and rules, points out Tiwari.
Significantly, at around the same time that Casino Sikkim had to fight it out at the Court for its survival and continued operations, Moni Subba had been reduced to merely a shadow of his former political stature, having been stripped of portfolios and losing the elections in Assam. He had also fallen out with the Pawan Chamling-led government in Sikkim by then.
Conflict of interest?
Interestingly, at this point of time, Sikkim saw its next casino come to life, the Casino Mahjong. It is the first land-based, live five-star casino in the country with a full-fledged licence, owned and run by Trio Ventures Private Limited with co-managing directors Ugen Ladakhi and Bishal Chamling, son of chief minister Pawan Chamling.
The Sikkim government issued the licence to the Mayfair group owned by Odisha-based entrepreneur and hotelier Dilip Ray, which in turn authorised Trio Ventures Private Limited to run the facility. The group paid Rs 5 crore to the state for the five-year licence and Rs 3 crore was spent to set up the facility. The Mayfair resort was given a five-star tag by the Ministry of Tourism.
With the Ladakhi family known to be close to the Sikkim Chief Minister and his own son now running Casino Mahjong successfully, vested interests cannot be ruled out behind the woes faced by Casino Sikkim. Of course, the latter had not upgraded its property to five-star category, thus making the situation murkier for itself, as casino observers in Sikkim have pointed out.
On 11 November 2013, the High Court listed the next hearing on the TRPL case for 14 July 2014, while vacating the stay. On 18 February 2014, the Court noted the fact that TRPL has paid the amount due to the Sikkim government but has not yet renewed its operating licence. On 22 May this year, TRPL moved the licence renewal application which is still pending, with the new Government having taken over in April this year.
Social impact
Meanwhile, the socio-economic effects of the casino industry in Sikkim have also drawn its share of flak. The bulk of the clientele in the two operational casinos in Sikkim is comprised of locals, and emerging (but undocumented) trends indicate that Sikkim’s social fabric is under considerable stress.
Local entrepreneurs, youth, businessmen, and bureaucrats are reported to have invested money in the casino, often ending up with huge accumulated debt burdens. This has had a trickle-down effect in the close-knit society of this small state.
“Although casinos provide direct and indirect employment to many people, in Sikkim most of the employees are from outside the state, and there are reports of women employees of the casinos being involved in immoral acts beyond their duty hours,” says Tshering Doma, a social worker.
She also informs that in recent times, there have been several police raids across Gangtok town and many girls who were rounded up with their clients in alleged flesh trade cases admitted to being connected with the casinos.
Often stray tourists visiting Gangtok pick up partners from the casinos. In Syari area, close to Gangtok town, where the Royal Plaza Hotel and Casino Sikkim are located, a casual stroll during late evening or night confirms these contentions. In fact, Casino Sikkim had been shut down for a month by the administration on charges of selling liquor on a dry day, coupled with allegations of promoting immoral acts in its premises.
When contacted, Naresh Subba, owner of Casino Sikkim was unavailable for comments on these allegations.
There was only one case registered in the state under the Public Gambling Act (1867) in 2010, under a non-Indian Penal Code Section, as per CID Police records. However, under the Immoral Traffic (Prevention) Act 1956, there was one registered case in 2009, three in 2010, and again one in 2011. Police records indicate that in April 2013, there was a sharp increase in cases registered under both IPC and Non-IPC sections.
As things stand now, the casino industry can still be a revenue earner for the Sikkim government, provided the regulatory framework and infrastructure are in place, coupled with strict compliance and adherence to laws by the state and government departments involved, and enforcement by legal agencies where it is warranted.
Data available indicates that currently it is mostly locals who frequent these gaming venues, which is not a healthy trend. Ways need to be figured out to attract big gaming-tourists from within India and foreign countries too. The percentage of domestic tourists who come in now is only about 30 per cent. The Nepal model prohibiting locals to participate in casino activities, except in a few games, could perhaps be adopted by the Sikkim government; this could also arrest the socio-economic ills that have been plaguing local society since the casino industry set shop here.
