5.1 Introduction: Rising Demand and Emerging Legal Concerns

With the rapid rise in popularity of poker among Gen Z and millennials, driven by increased exposure to global gaming culture, online platforms, and professional tournaments, poker has increasingly transitioned from a recreational pastime to a structured commercial activity. This growing demand has led entrepreneurs to seek physical venues such as poker houses, card rooms, and gaming clubs, prompting landlords to rent their properties for such purposes. However, given India’s fragmented and state-specific gambling laws, renting property for poker businesses raises significant legal and compliance considerations for property owners. A landlord’s failure to understand the applicable legal framework may expose them to seizure of property, criminal proceedings, or prolonged litigation, even where they are not directly involved in the business.

5.2 Legal Position of Landlords Renting Property for Poker House

Some landlords rent their property for poker house businesses because such ventures offer higher and more stable rental returns compared to ordinary commercial tenants, driven by the growing popularity of poker among Gen Z and millennials. Poker operators often seek long-term leases, invest in interior infrastructure, and are willing to pay a premium rent for strategically located, secure premises. Additionally, in states where poker is permitted or treated as a game of skill, landlords view these arrangements as commercially attractive and legally manageable, provided proper agreements and safeguards are in place.

A landlord is not automatically criminally liable merely because a tenant conducts poker activities on the leased premises. Indian criminal jurisprudence requires proof of mens rea that is knowledge, consent, or connivance for fastening liability. Courts have repeatedly held that an innocent landlord cannot be penalised for illegal acts committed by a tenant without the landlord’s knowledge or involvement. Therefore, landlords must adopt a legally structured approach when considering leasing property for poker-related businesses.

5.3 Rights of a Landlord

A lessor enjoys strong legal protection over his property under Indian law. The primary rights include the right to peaceful ownership, the right to receive agreed rent, and the right to terminate tenancy in case of breach of contractual terms or unlawful use of the premises. Importantly, criminal liability does not automatically attach to a lessor merely because an illegal activity is carried out by a tenant, unless knowledge, consent, or connivance of the lessor is established. Courts have consistently recognised that absence of mens rea shields an innocent landlord from penal consequences arising out of a tenant’s illegal acts.

5.4 Importance of a Proper Rent Agreement

1. Primary Legal Safeguard: A well-drafted rent or lease agreement operates as the principal legal and evidentiary safeguard for a lessor, clearly defining the scope of tenancy and limiting the landlord’s liability.
2. Judicial Scrutiny and Permitted Use: Courts closely examine the agreement to determine whether the lessor exercised due care. Clear specification of the permitted use of the premises is essential to prevent any inference of tacit approval of misuse.
3. Prohibitory and Termination Clauses: An express prohibition on illegal or unlawful activities, coupled with inspection rights and immediate termination clauses, demonstrates proactive intent to prevent misuse.
4. Evidentiary Value in Proceedings: In criminal or seizure proceedings, such contractual safeguards are often decisive in establishing the lessor’s bona fide conduct and negating allegations of complicity or vicarious liability.

5.5 Legal Position on Rent Received

1. Knowledge and Nexus Test: Mere receipt of rent does not render a lessor complicit in a tenant’s illegal activity. Courts consistently hold that liability depends on the existence of knowledge, consent, or connivance, not ownership of premises or receipt of rental income.
2. Proceeds of Crime Standard: In Vijay Madanlal Choudhary v. Union of India (2022) 10 SCC 353, the Supreme Court clarified that income constitutes “proceeds of crime” only where a direct or indirect nexus with a scheduled offence is established, coupled with conscious involvement.
3. Bona Fide Lease Protection: Rent received under a bona fide lease remains lawful unless it is shown that the lessor knowingly permitted unlawful use or benefited with awareness of illegality.
4. Protection of Innocent Owners: In Sunderbhai Ambalal Desai v. State of Gujarat (2002) 10 SCC 283, the Supreme Court cautioned against penalising innocent property owners in the absence of mens rea, a principle consistently applied in gambling and economic offence cases.

5.6 Precautions Every Lessor Must Take

To safeguard against legal exposure and to establish bona fide conduct, a lessor must exercise reasonable diligence before and during the tenancy. Indian courts consistently examine whether a landlord acted responsibly once property misuse comes to light. The following precautions are therefore crucial:

1. Tenant Verification and KYC: Prior to leasing, the lessor must conduct tenant verification and KYC to establish the tenant’s credibility. Such verification evidences proactive diligence and absence of intent to facilitate unlawful activity, whereas failure to do so may be viewed as negligence.
2. Written Agreement and Payment Records: A duly executed written lease agreement must be maintained, clearly defining the permitted use of the premises and expressly prohibiting illegal or unlawful activities. Proper documentation of rent payments through bank transfers, receipts, or digital records is essential to demonstrate that rental income constitutes lawful consideration.
3. Indemnity and Termination Clauses: The lease should mandatorily incorporate indemnity clauses holding the tenant solely liable for illegal acts, along with termination provisions empowering the lessor to immediately revoke the tenancy upon breach, thereby legally distancing the landlord from tenant misconduct.
4. Periodic Inspection: While respecting the tenant’s right to privacy, the lessor should conduct reasonable and legally permissible inspections with prior notice. Such oversight reflects vigilance and negates allegations of wilful blindness.
5. Prompt Remedial Action: Upon discovering any illegal use of the premises, the lessor must promptly issue written notices, initiate termination, and inform authorities where appropriate. Swift action reinforces the absence of consent or connivance and affirms the lessor’s bona fide conduct.

These precautions demonstrate due diligence and reinforce the lessor’s bona fide conduct in the eyes of law.

5.7 Remedies available to the Bonafide Lessor

Where illegal poker is conducted from a rented premises, the police generally seize the property under Section 102 of the Code of Criminal Procedure, 1973, read with Section 5 of the Public Gambling Act, 1867 or the relevant State Gambling Act, treating the premises as a suspected “common gaming house.” As a defence, the owner can lawfully assert:

1. absence of knowledge or consent, thereby negating mens rea, and
2. contractual prohibition, where the rent agreement expressly disallows any illegal activity, clearly severing the owner’s liability for the tenant’s acts. On this basis, the owner is entitled to seek release or interim custody of the property under Sections 451 and 457 CrPC, and to invoke Article 300A of the Constitution (right to property), since confiscation without proof of complicity is impermissible.

The Supreme Court in Sunderbhai Ambalal Desai v. State of Gujarat, (2002) 10 SCC 283 authoritatively held that seized property should not be retained unnecessarily and must be returned to the lawful owner when continued seizure is unjustified reinforcing that an innocent landlord cannot be penalised merely because an offence occurred on leased premises without his knowledge or consent, especially where the lease expressly forbids illegal business.

5.8 Verification Process for a Lessor to Assess a Lessee Company and Its Operations

1. Heightened Due Diligence: Leasing premises for poker or gaming attracts enhanced due diligence obligations due to India’s state-centric and fragmented gaming laws. Courts and enforcement authorities assess whether the lessor exercised reasonable care to verify the legality of the lessee’s proposed operations before granting possession.
2. Corporate and Legal Validation: At the pre-lease stage, the lessor must verify the lessee’s incorporation status, authorised signatories, and objects clause to ensure gaming or entertainment activities fall within its lawful business scope, including whether the proposed activity is claimed as a game of skill and is permissible under applicable State law.
3. Regulatory and Operational Scrutiny: The lessor should verify requisite licences or permissions and examine the disclosed operational model, including fee structures, prize mechanisms, and compliance with age and responsible gaming norms, to demonstrate the absence of wilful blindness or facilitation of unlawful activity.
4. Evidentiary and Contractual Safeguards: Documented pre-lease verification, coupled with lease clauses prohibiting illegal gambling, reserving inspection rights, and enabling termination upon breach, serves as critical evidence of the lessor’s bona fide conduct and absence of mens rea in enforcement proceedings.

5.9 Diwali Card Play: Cultural Ritual or Legal Risk?

In India, playing poker or cards during Diwali whether in residential or commercial settings is traditionally viewed as a social and ritualistic activity, rooted in custom rather than commercial gambling. Legally, this practice is assessed through the lens of the Public Gambling Act, 1867 and corresponding State Gambling Laws, which generally prohibit running or visiting a “common gaming house” but carve out an important distinction for games played in a private setting without profit or public access. Courts have consistently held that social card games played among friends or family in a private residence, without stakes or with nominal stakes purely incidental to recreation, do not constitute gambling and are therefore outside the scope of penal action. Even where small amounts are involved, enforcement agencies typically exercise restraint during Diwali, recognising the cultural context unless the activity is organised, habitual, or profit-driven. Diwali is generally tolerated and often lawful, organised or profit-oriented poker even during the festival and remains subject to statutory prohibitions and enforcement.

5.10 Conclusion

The law mandates the exercise of reasonable care, due diligence, and contractual safeguards at the inception and during the subsistence of the tenancy. A clearly drafted rent agreement, lawful and transparent receipt of rent, and proactive preventive measures collectively operate to protect the lessor’s property rights under Article 300A of the Constitution of India, ensuring that civil or criminal liability does not arise for acts committed without the lessor’s knowledge, consent, or control.

Equally, a lessor is not required to undertake a forensic or investigative role into the tenant’s activities. What is expected is risk-proportionate, documented due diligence, including verification of the lessee’s identity, licenses, declared purpose of use, and ongoing compliance with the terms of the lease. Such diligence, when reinforced through robust lease covenants, indemnity clauses, and termination rights, constitutes the most effective legal safeguard against vicarious liability and serves as compelling evidence of the lessor’s bona fide conduct and good faith in the eyes of the law.

Co- Authors - Aishwarya Mahajan & Vaibhav Karotia

Note:

This concludes Part V of a six-part analytical series on Poker. Part VI will examine the Poker as a Business, focusing on taxation and Proceeds of crime.