Starting today, the Karnataka High Court will begin hearing the matter on which taxi aggregator Uber’s existence in the state hinges upon..Uber has challenged the state government’s competence to introduce the recently notified Karnataka On-demand Transportation Technology Rules, 2016. The Rules introduce sweeping changes to the functioning of app-based operators like Uber..Over the past few weeks, governmental authorities have been cracking down on Uber and Ola drivers for failing to meet the conditions required for a license under the new Rules. Subsequent to a writ petition filed by Uber, on June 1, the High Court ordered the state transport department to stop impounding vehicles in the interim..The final decision of the court will have a huge bearing, not only on Uber, but also on the drivers and subscribers of the app. In fact, the manner in which the Karnataka state government deals with app-aggregators could provide some idea of the path other States may tread..In this edition of #Debriefed, we look into the grounds for Uber’s challenge, and more..How did the new Rules come into being?.In October 2015, the Ministry of Transport of the central government issued an advisory for taxi aggregators. The advisory stated that all taxi aggregators were required to obtain a licence under Section 93 of the Motor Vehicles Act..Since road transport is found in List II of the Constitution, the state government is empowered to frame its own Rules in this regard. Pursuant to this, the Karnataka government notified the Rules on April 2 this year..What changes do the new Rules seek to effect?.One look at the Rules, and you will see that the state government is not taking things lying down. Among the conditions for grant of licence are a fleet of at least 100 taxis and a control room facility..Every taxi is required to have a contract carriage permit under Section 74 or Section 88(8) of the MV Act. Each cab must have the driver’s details and a display board with an illuminated ‘Taxi’ sign. A panic button which alerts the control room is also required to be installed in the cab..The Rules also put in place new stipulations for drivers, such as the the requirement of being a Karnataka resident for at least two years. The driver is also required to have a working knowledge of Kannada, and another language, “preferably English”. Further, he should not have been convicted for a cognizable offence in the past seven years..The government also seeks to fix the hire charges of the cabs, as per Rule 9(2). This effectively means no more surge pricing. Aggregators are also tasked with ensuring that cabs are available twenty-four hours a day, seven days a week..Also in place are stricter penal provisions, with the introduction of vicarious liability. Effectively, if a driver is accused of misdemeanour towards a passenger, the aggregator’s license stands to be revoked..What is Uber’s stance?.The petition states that Rules are not a reasonable restriction on Uber’s fundamental rights under Articles 14 and 19(1)(g) of the Constitution..The company has prayed that the notification directing them to comply with the Rules be struck down..The main contention of the aggregator is that government has failed to understand that Uber is not a transportation service, but merely a technological platform that connects independent drivers and subscribers..It has made it clear time and again in the writ petition that they are neither agents nor employers of the drivers. Therefore, it would not fall under the scope of Section 93 of the Act, under which the Rules have been framed. Section 93 states,.“Agent or canvasser to obtain licence. – (1) No person shall engage himself –.(i) as an agent or a canvasser, in the sale of tickets for travel by public service vehicle or in otherwise soliciting customers for such vehicles, or.(ii) as an agent in the business of collecting, forwarding or distributing goods carried by goods carriages,.unless he has obtained a licence from such authority and subject to such conditions as may be prescribed by the State Government.”.What have the courts previously held in this regard?.The Uttarakhand High Court last year decided on this very aspect in ANI Technologies v. State of Uttarakhand [pdf] where the state government had directed a ban on app-based taxi aggregators. .As regards the requirements under Section 93, the High Court held,.“Undisputedly the petitioner company neither sells the tickets for travel by public service vehicles nor is indulged in soliciting customers for use of particular taxi owner or the company….In my humble opinion, petitioner company does not fall with the four corners of Section 93 of the Act.”.This is not the only petition pending before Indian courts..A challenge to surge pricing by aggregators like Uber and Ola is also pending in the Delhi High Court..Has the state overstepped its mandate under the MV Act?.It is Uber’s case that the state government’s subordinate legislation is ultra vires the MV Act. For example, Rule 14 fixes the security deposit for vehicles at Rs. 5 lakh for aggregators with more than 10,000 vehicles, whereas Section 93(2)(c)(ii) of the MV Act fixes the upper limit for the deposit at Rs. 50,000..Moreover, Uber contends that the requirement to obtain a special permit under Section 88(8) is redundant, given the fact that most drivers have all-India permit under S. 88(9). This, Uber alleges, is a direct contravention of the Act and is the primary reason why most cabs have been impounded by the state authorities..Is the government being vindictive? .Uber states that attempts to have a dialogue with the government have failed thus far. It says that the government did not consider any of its comments on the Draft Rules published on February 9 of this year..After the Rules were notified, Uber sent a correspondence seeking clarifications on some provisions, which received no response. Instead, the letter was met with a notification dated April 23 calling upon Uber to comply with the Rules..It also alleges that the transport department “comes up with a new requirement every day”, and is using “high handed and arm twisting tactics to drive the petitioner out of business”. For example, during an inspection, Uber was asked to produce a document certifying that the drivers had not been convicted for a cognisable offence in the last seven years..No guidance was provided by the government on how to obtain such a document..In another instance, the department insisted that all drivers have license issued only by the Karnataka government, something that is not contemplated by the Rules. The consequent impounding of vehicles has resulted in drivers staging strikes and protests and “unwarranted hostility” towards Uber..Do the Rules hinder innovation?.Uber contends that many requirements under the new Rules are wholly unnecessary. Among these are a panic button, when the Uber app already has an SOS button, a physical meter that prints out receipts when the app offers a paperless receipt to customers on their phones, and an illuminated display board with the word ‘Taxi’ on it..These requirements, the petition states, are “a step backward” and “regressive”..Who are the lawyers ?.Bangalore-based law firm Keystone Partners will be appearing for the petitioners, while Additional Advocate General AS Ponnanna will appear for the state.What does the future hold for various stakeholders?.Should the High Court refuse to entertain the prayers, drivers affiliated with Uber may be forced to opt out. The app could also lose a host of subscribers, as the rates prescribed by the government are Rs. 19.5 per kilometre, which is much higher than the average cost of a trip. Other transport services like autos, on the other hand, stand to benefit..For now, all eyes on the Karnataka High Court..Read the petition:
Starting today, the Karnataka High Court will begin hearing the matter on which taxi aggregator Uber’s existence in the state hinges upon..Uber has challenged the state government’s competence to introduce the recently notified Karnataka On-demand Transportation Technology Rules, 2016. The Rules introduce sweeping changes to the functioning of app-based operators like Uber..Over the past few weeks, governmental authorities have been cracking down on Uber and Ola drivers for failing to meet the conditions required for a license under the new Rules. Subsequent to a writ petition filed by Uber, on June 1, the High Court ordered the state transport department to stop impounding vehicles in the interim..The final decision of the court will have a huge bearing, not only on Uber, but also on the drivers and subscribers of the app. In fact, the manner in which the Karnataka state government deals with app-aggregators could provide some idea of the path other States may tread..In this edition of #Debriefed, we look into the grounds for Uber’s challenge, and more..How did the new Rules come into being?.In October 2015, the Ministry of Transport of the central government issued an advisory for taxi aggregators. The advisory stated that all taxi aggregators were required to obtain a licence under Section 93 of the Motor Vehicles Act..Since road transport is found in List II of the Constitution, the state government is empowered to frame its own Rules in this regard. Pursuant to this, the Karnataka government notified the Rules on April 2 this year..What changes do the new Rules seek to effect?.One look at the Rules, and you will see that the state government is not taking things lying down. Among the conditions for grant of licence are a fleet of at least 100 taxis and a control room facility..Every taxi is required to have a contract carriage permit under Section 74 or Section 88(8) of the MV Act. Each cab must have the driver’s details and a display board with an illuminated ‘Taxi’ sign. A panic button which alerts the control room is also required to be installed in the cab..The Rules also put in place new stipulations for drivers, such as the the requirement of being a Karnataka resident for at least two years. The driver is also required to have a working knowledge of Kannada, and another language, “preferably English”. Further, he should not have been convicted for a cognizable offence in the past seven years..The government also seeks to fix the hire charges of the cabs, as per Rule 9(2). This effectively means no more surge pricing. Aggregators are also tasked with ensuring that cabs are available twenty-four hours a day, seven days a week..Also in place are stricter penal provisions, with the introduction of vicarious liability. Effectively, if a driver is accused of misdemeanour towards a passenger, the aggregator’s license stands to be revoked..What is Uber’s stance?.The petition states that Rules are not a reasonable restriction on Uber’s fundamental rights under Articles 14 and 19(1)(g) of the Constitution..The company has prayed that the notification directing them to comply with the Rules be struck down..The main contention of the aggregator is that government has failed to understand that Uber is not a transportation service, but merely a technological platform that connects independent drivers and subscribers..It has made it clear time and again in the writ petition that they are neither agents nor employers of the drivers. Therefore, it would not fall under the scope of Section 93 of the Act, under which the Rules have been framed. Section 93 states,.“Agent or canvasser to obtain licence. – (1) No person shall engage himself –.(i) as an agent or a canvasser, in the sale of tickets for travel by public service vehicle or in otherwise soliciting customers for such vehicles, or.(ii) as an agent in the business of collecting, forwarding or distributing goods carried by goods carriages,.unless he has obtained a licence from such authority and subject to such conditions as may be prescribed by the State Government.”.What have the courts previously held in this regard?.The Uttarakhand High Court last year decided on this very aspect in ANI Technologies v. State of Uttarakhand [pdf] where the state government had directed a ban on app-based taxi aggregators. .As regards the requirements under Section 93, the High Court held,.“Undisputedly the petitioner company neither sells the tickets for travel by public service vehicles nor is indulged in soliciting customers for use of particular taxi owner or the company….In my humble opinion, petitioner company does not fall with the four corners of Section 93 of the Act.”.This is not the only petition pending before Indian courts..A challenge to surge pricing by aggregators like Uber and Ola is also pending in the Delhi High Court..Has the state overstepped its mandate under the MV Act?.It is Uber’s case that the state government’s subordinate legislation is ultra vires the MV Act. For example, Rule 14 fixes the security deposit for vehicles at Rs. 5 lakh for aggregators with more than 10,000 vehicles, whereas Section 93(2)(c)(ii) of the MV Act fixes the upper limit for the deposit at Rs. 50,000..Moreover, Uber contends that the requirement to obtain a special permit under Section 88(8) is redundant, given the fact that most drivers have all-India permit under S. 88(9). This, Uber alleges, is a direct contravention of the Act and is the primary reason why most cabs have been impounded by the state authorities..Is the government being vindictive? .Uber states that attempts to have a dialogue with the government have failed thus far. It says that the government did not consider any of its comments on the Draft Rules published on February 9 of this year..After the Rules were notified, Uber sent a correspondence seeking clarifications on some provisions, which received no response. Instead, the letter was met with a notification dated April 23 calling upon Uber to comply with the Rules..It also alleges that the transport department “comes up with a new requirement every day”, and is using “high handed and arm twisting tactics to drive the petitioner out of business”. For example, during an inspection, Uber was asked to produce a document certifying that the drivers had not been convicted for a cognisable offence in the last seven years..No guidance was provided by the government on how to obtain such a document..In another instance, the department insisted that all drivers have license issued only by the Karnataka government, something that is not contemplated by the Rules. The consequent impounding of vehicles has resulted in drivers staging strikes and protests and “unwarranted hostility” towards Uber..Do the Rules hinder innovation?.Uber contends that many requirements under the new Rules are wholly unnecessary. Among these are a panic button, when the Uber app already has an SOS button, a physical meter that prints out receipts when the app offers a paperless receipt to customers on their phones, and an illuminated display board with the word ‘Taxi’ on it..These requirements, the petition states, are “a step backward” and “regressive”..Who are the lawyers ?.Bangalore-based law firm Keystone Partners will be appearing for the petitioners, while Additional Advocate General AS Ponnanna will appear for the state.What does the future hold for various stakeholders?.Should the High Court refuse to entertain the prayers, drivers affiliated with Uber may be forced to opt out. The app could also lose a host of subscribers, as the rates prescribed by the government are Rs. 19.5 per kilometre, which is much higher than the average cost of a trip. Other transport services like autos, on the other hand, stand to benefit..For now, all eyes on the Karnataka High Court..Read the petition:
