Today(on 27th May), The Karnataka High Court dismissed writ petitions contesting the State government’s notification imposing a service charge cap on app-based cab aggregators for auto rickshaw rides. Justice Suraj Govindaraj affirmed that aggregators can levy a 5% service fee as per the notification.
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BENGALURU: Today(on 27th May), The Karnataka High Court dismissed the writ petitions challenging the State government’s notification that set a cap on the service charges collected by app-based cab aggregators for auto rickshaw rides. Justice Suraj Govindaraj clarified that the aggregators would be entitled to collect a 5% service charge in accordance with the notification.
“The writ petitions have been dismissed. Nonetheless, it is clarified that the aggregators have the right to levy a 5% service fee, as stipulated in the contested notification, which has now been upheld, in addition to the prescribed fare.”
– the Court ordered.
The background of this matter dates back to November 25, 2022, when the Karnataka transport department issued a notification capping service charges for app-based auto rickshaw bookings at 5% plus applicable GST on the base fare. This move was immediately met with resistance from major players in the ride-hailing industry, including Uber, Ola, and Rapido.
These companies challenged the notification before the High Court, arguing that it contradicted the Motor Vehicle Aggregator Guidelines, which allow them to charge a commission of 20% along with a surge price of up to double the base fare. They contended that the State government’s notification was “illegal, arbitrary and irrational” and sought its quashing.
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In response to the petitions, the Court initially stayed the notification in January 2023, permitting the aggregators to continue their operations temporarily while charging a 10% convenience fee.
Justice CM Poonacha, presiding over the case at that time, observed that the State government, in issuing the notification, needed to consider the comprehensive framework provided by the Motor Vehicle Aggregator Guidelines rather than just the Motor Vehicles Act.
“When issuing the notification, the State government was obligated to consider the Motor Vehicle Aggregator Guidelines, which comprehensively cover the operations of transport aggregators, distinct from the Motor Vehicles Act.”
-Justice Poonacha noted during the proceedings.
Following months of deliberation, the Court ultimately dismissed the petitions on Monday, thereby reaffirming the State government’s position on the matter. This ruling represents a crucial juncture in the regulation of app-based cab aggregators, striving to strike a balance between consumer interests and those of service providers.
The order carries substantial ramifications for the ride-hailing sector in Karnataka. With the imposition of a 5% service charge cap, the State government seeks to promote equitable pricing and curb exorbitant fees on auto rickshaw trips booked via app-based platforms. This measure is anticipated to offer respite to consumers who frequently encounter elevated service charges during peak times and surge pricing intervals.
Meanwhile, the aggregators have expressed concerns about the impact of this ruling on their business models. The ability to charge a higher commission and surge pricing has been a key component of their revenue strategy. However, with the High Court’s dismissal of their petitions, these companies will need to comply with the new regulations and adapt their pricing strategies accordingly.
With the industry’s expansion, additional legal and regulatory hurdles are anticipated, emphasizing the importance of striking a delicate equilibrium between innovation, safeguarding consumer interests, and promoting equitable business practices.
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CASE TITLE:
Uber and Anr v. State of Karnataka and Ors.
