Karnataka HC Declines To Stay Order Limiting Service Charges Collected By Aggregators Such As Ola, Uber For Auto-Rickshaw Rides To 5%

The Karnataka High Court on Tuesday refused to stay an order of a single bench which limited the service charges to be collected by aggregators such as Ola, Uber and Rapido for auto rickshaw rides booked through their applications at 5 per cent, over and above the fare fixed by the state government.

A division bench of Chief Justice N V Anjaria and Justice K V Aravind said it would hear the matter finally on August 29. However, it stayed part of the single judge order dated May 27, which had directed the Registrar (Judicial) to forward a copy of this order to the Chairperson, Competition Commission of India, for information and action.

The single bench issued the direction after the Association of permit holders/drivers who were intervenors in the proceedings alleged that the aggregators were abusing their dominant position and prevailed upon the permit holders/drivers to accede to any terms and conditions imposed by the aggregators.

The bench had said, “If the submissions made by the intervenors is correct, then there is a cartelization which is resorted to by the aggregators who would be enterprises within such definition of the Competition Act, which has resulted in an anticompetitive agreement by abusing their dominant position in combination with each other which would have to be enquired by the Competition Commission.”

Both, Uber India Systems Private Limited and ANI Technologies Private Limited which operates OLA, had approached the court by filing a petition challenging the notification issued by the state government under Section 67 of the Motor Vehicles Act. Terming it to be illegal, and arbitrary.

Senior Advocate Dhyan Chinnappa appearing for Uber argued that the finding of the single judge that it was a transport service operator, would have consequences since it was an aggregator and did not have cars of its own.

Counsel for OLA had contended that they were an aggregator, providing services like GPS service, and data centre which are used by the customer and not a transport operator as held by the court.

Both the counsels urged the court to pass an interim order staying the single judge bench order contending that “Operations of these entities will come to a standstill if interim order of staying the single judge order is not passed.”

However, the court said it would go through the pleadings and hear the matter finally and refused to pass an interim order of stay.

Background

The single judge bench had in its order dated May 27, noted “Section 67 (MV Act) which provides power to the State Government to fix fares from time to time by notifying in the official gazette to issue directions both to the STA and RTA having regard to the passengers/customers' convenience, economically competitive fares, prevention of overcrowding, road safety, etc.”

Further, it had said the concept of fare would be an all-inclusive amount, which can only be fixed under Section 67 of the Act, and Section 93 does not provide for the same. The fare would have to be held to be excluding the tax applicable, which will have to be calculated on the basis of the applicable laws and collected. It would also be deemed to include a service/convenience fee.

Upholding the validity of the government notification the court had said, “Though in the present case by the impugned notification, the service fee/convenience fee is fixed by a separate notification under Section 67, there is no infirmity in the same; the service/convenience fee also forming part of the fare, it could be so fixed either by a single notification or multiple notifications, the power to fix the same being conferred on the state in term of Section 67.”

Observing that an autorickshaw was being used by a common man and woman to reach point A to point B, the court had said that it is required that fare for such autorickshaw rides be fixed at such prices which would be economical for a citizen since it was the least expensive transport available for hire.

Finally, the court refused the contention that the purpose of establishing the platform by the aggregator is to enable the passenger/customer to avail of the transport service and for the permit holder/driver to provide transport service. It held that the aggregator was responsible for providing transport services, and the responsibility was not restricted to the booking of vehicles on the aggregator platform.

Dismissing the petitions the court had clarified that the aggregators would be entitled to collect 5% service charges as per the impugned notification, over and above the fare fixed.

Case Title: Uber India Systems Private Limited AND State Of Karnataka And Others

Case No: WA 962/2024 C/w WA 1049/2024, WA 1091/2024