1 not under the guise of fair competition,

1 Hereinafter,

2 Hereinafter,

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3 Satish N. and Others v State of Karnataka, (2017) 2 Kant LJ 6.

4 Hereinafter,
‘Karnataka Rules’.

5 P. Ramanatha Aiyar, Advanced Law Lexicon (4th
edn., LexisNexis 2015). 

6 ibid.

7 Union of India and Ors. v S. Srinivasan, (2012) 7 SCC 683.

8 General Officer Commanding-in-Chief v Dr. Subhash Chandra Yadav,
(1988) 2 SCC 351.

9 Additional District Magistrate (Rev.) Delhi Administration v Shri Ram,
AIR 2000 SC 2143.


10 ibid 3.

11 State of A.P. v Nallamilli Rami Reddy,  (2001) 7 SCC

12 Shri Ram Krishna Dalmia v Shri Justice S.R. Tendolkar and Ors, 1958
AIR 538.



13 Motor Vehicles Act 1988, s. 85.

14 Foley v Padley, (1984)
154 CLR 349.

15 Delhi Commercial Driver Union v Union of India and Ors., W.P.(C)
3933/2017. This pending case deals with whether such drivers are entitled to various
benefits that are normally available to employees under labor law provisions. https://drive.google.com/file/d/0BzXilfcxe7yuMWNMNnVnZndISmc/view.

16 Barbara Ann Berwick v UBER Technologies Inc., Superior Court of
California, C. No. CGC-15-546378. http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1988&context=historical.   

17 S.G. Borello & Sons Inc. v Dept. of Industrial
Relations, (1989) 48 Cal. 3d 341.  

18 Yellow Cab Cooperative v Workers Compesation Appeals
Board, (1991) 226 Cal.App.3d 1288.

19 Mr Y Aslam, Mr J Farrar & Others v Uber B.V., Uber London
Ltd, Uber Britannia Ltd, 2016 WL 06397421.

20 See, https://www.theguardian.com/technology/2017/apr/19/uber-appeal-uk-employment-ruling-drivers-working-rights.

21 Rule 10(1) (p) of the Karnataka
Rules itself directs aggregators to allow the permit holder who is in
operation under his Company to operate his vehicle simultaneously with any
other aggregator as per his discretion.





The decisions of
the Bombay and Delhi High Court will go a long way in conclusively determining
the position of such aggregators vis a
vis the drivers and will also affect rights and liabilities of concerned
parties in the long run.

While regulation
of these technological platforms and aggregators may be necessary, the rules
enacted for the same must ensure parity and must not under the guise of fair
competition, unreasonably favour brick and mortar taxis. The subordinate
legislation must be framed keeping in mind the aim and scope of and must not be
permitted to contradict the provisions of the parent legislation.

While the
position of law relating to certain contentions is still unclear and remains to
be decided, the analysis of the Court in such cases is extremely important.
Considering the niche area of technological platforms, clarity with reference
to their functioning and subsequent regulation is imperative not only for the
Companies but also for those who provide their services as well as for the end


An argument on
behalf of such aggregator – Companies is however that, they are essentially
technology companies and not in the business of providing transportation
services. While this contention has been struck down in foreign jurisprudences
it is important to note that in India at least, the drivers who ply with such
aggregators do not exclusively provide their services to a particular
In light of such an arrangement, the drivers appear to be in the nature of
independent contractors and not employees, making vicarious liability
applicable under the Rules, incorrect.

A similar
observation was made in the United Kingdom as well.19
However these decisions are still under appeal and the question still remains
to be determined.20

“The question of control remains
highly pertinent to the distinction between employees and independent
contractors. The evidence showed that the company exercised pervasive control
over the driver and that the driver’s efforts were undertaken for the company’s
benefit, such that a characterization as an employer-employee relationship was

The Court also
looked at Yellow Cab Cooperative18
where it was held, that the drivers were not engaged in any occupation distinct
from that of the Company. Rather, their work was the basis for the Company’s
business. It was further held that,

Whether or not the work is an integral part of
the regular business of the principle/ alleged employer?

Whether the person performing services is
engaged in an occupation or business distinct from that of the principle?

As far as the
imposition of vicarious liability goes, the Rules misconstrue the relationship
between the aggregators and the drivers as that of an employer – employee
(apart from the fact that the same liability does not exist qua permit holders under other taxi
schemes). A similar question as to whether the drivers of the companies amount
to their employees is also pending before the Delhi High Court, and remains to
be decided.15
It is interesting to note that the Labour Court of California has ruled that
such drivers are in fact employees of Uber.16
In this case, the Court relied on S.G.
where some key questions for consideration were,

Vicarious Liability and Employer – Employee

In addition to this another
rudimentary dilemma arises with reference to S. 88 (9) of the Act. This section
deals with the issue of AITPs. The Act also provides that every permit issued
under this Act shall be complete in itself and shall contain all the necessary
particulars of the permit and the conditions attached thereto.13 These
permits are further valid for a period of five years. R. 5(20) thus appears to
outright prohibit these AITP vehicles from operating under the Rules and is
contradictory to the provisions of the parent Act. Common law has adequately
laid down that, “delegated legislation
can only regulate and it cannot outright prohibit”.14
The effect of this rule is an unlawful de – recognition of S. 88(9) and S. 85
of the Act. Further under S. 88(14) of the Act, only the Central Government is
empowered to make rules for carrying out the provisions relating to AITPs.

Contradictory Provisions.

In the present case, where the object of the Rules is to ensure fair
competition, the conditions imposed on the aggregators and taxis plying with
them tend to rather tilt the scale in favour of brick and mortar taxis. Even if
it is assumed that the two classes of taxis are distinct, the second essential
of ‘reasonable classification’ is not fulfilled. Unfair and discriminatory
conditions imposed in the name of fair competition would thus violate Art. 14
of the Constitution of India.

differentia must have a rational relation to the object sought to be achieved.”

the classification is founded on intelligible differentia which distinguishes
persons or things that are grouped together from others left out of the group

“In order to pass the test of
permissible classification two conditions must be fulfilled,

The Court based
its reasoning on the position that if the legislature reasonably classifies
persons for legislative purposes so as to bring them under a well-defined
class, it is not open to challenge on the ground of denial of equal treatment
that the law does not apply to other person.11 There
however arises a fundamental problem with the Courts reasoning in the above
case. In the case of Shri Ram Krishna
Dalmia, 12
the Supreme Court held that,

“Merely because the Operator and
the aggregators are engaged in providing taxi service to the passenger, this by
itself would not place both of them on identical footing. Their function may be
similar, but their status and the provision under which they are covered are
different. Hence, they form two separate and distinct classes. Therefore, they
can be subjected to two different sets of conditions, rules and regulations.”

In Satish N.10 the
Court held that, earlier schemes deal with the owners of taxis who have been
granted permits under Section 74 of the Act; the Aggregator Rules do not deal
with the owners of the taxis. It deals with the aggregators, who are merely
canvassers for the permit holder. Further,

As far as R. 5
of the Rules as concerned, they lay down unfair conditions which have to be
satisfied by vehicles plying under the said Rules. Taxis operating under
earlier schemes, such as City Taxis and Black and Yellow taxis, have however been
exempted from these conditions. The deeming provision of R. 5(3) is also
extremely arbitrary and unfair.

Discriminatory Rules.




R. 5 Vehicles Profile

Each taxi is to have an engine capacity of 980 CC,
while 30% of the total taxis attached to an aggregator shall have a 1400 CC engine
Vehicles attached are to operate under an “App
Based City Taxi Permit”
If any taxi is operating under a permit under S. 74
of the Act and gets attached to an aggregator, it will be deemed to be
operating under the permit issued by the said Rules.
Requirement of temperature control devices.
Vehicles operating under the Rules are to be driven
on clean fuel. Conversion of existing vehicles to clean fuel within one year.
Taxis to be painted in a specified colour.
Exemption granted to taxis operating under previous schemes.
Taxis with All India Tourist Permits (AITPs) not
permitted to operate under the Rules.

R. 7 Driver’s Profile
(5) & (6)

Vicarious liability imposed on the licensee with
reference to quality of drivers, conduct with passengers, police
verification, profile of drivers and ownership of vehicle.
Joint and several responsibility for unauthorized
use of permit or violation of any provisions contained in the Rules.

R. 9 Fees

Discriminatory imposition of license fee according
to engine capacity.

The various
Rules under challenge as discriminatory can be summarized as hereunder,

Unfair and Discriminatory Nature of the

If either of
these two conditions is not fulfilled, the rule so framed would be void.8
Thus, a rule cannot travel beyond the scope of an enabling act.9

(2) it must also
come within the scope and purview of the rule making power of the authority
framing the rule.

(1) it must
conform to the provisions of the statute under which it is framed; and

While this seems
to be the established law for the time being, it can still be argued that the
aggregators do not canvass or solicit for a particular known individual. They
are only advertising for their platform and are not pleading with passengers on
behalf of any individual driver. If this view were to be accepted the Rules
would fall foul of the parent Act as enlarging the scope of the Act. It is a
well established provision of law that if a rule goes beyond the rule making
power conferred by the statute or supplants any provision for which power has
not been conferred, it becomes ultra
Before a rule can have the effect of a statutory provision, two conditions must
be fulfilled, namely

“… by making alluring offers, the
petitioner-Company is entreating the passenger to register with its platform,
for the purpose of taking taxis, owned by the permit holder. Therefore, the
petitioner-Company, as an aggregator, is certainly soliciting the
customer/passenger strictly for the purpose of taking only those vehicles which
are registered on its platform, and which belong to the permit holder.” 

As far as the
activity of soliciting was concerned, the Court concluded,

“The permit holder allows the
aggregator to use advertising and marketing “to attract new Users
(passengers).” The aggregator attracts the passengers, through advertisement,
to the vehicles owned and registered by the permit holder on the aggregator’s
platform. The aggregator collects the fare from the passenger on behalf of the
permit holder. The aggregator remits the fare to the permit holder on a weekly
basis. For the service of providing the passengers, and for collecting the
fare, the permit holder, in turn, pays a ‘Service Fee’, and a ‘booking
fee’, to the aggregator. Thus, simply put, the aggregator does work on behalf
of the permit holder”

A ‘canvasser’
has been defined as, “a travelling
salesman who goes out on the road soliciting orders for his firm and taking
with him samples of the goods or wares his house deals in.”5
The noun ‘canvasser’ thus refers to a person who canvasses on behalf of another person.  Similarly, to solicit means, “to entreat (a person) for or to do
something; to importune”, “to ask for
or to seek.”6
Taking this into consideration, the Karnataka High Court examined the nature of
the service agreement that was entered into by the aggregators and the drivers.
It concluded that the relationship between the two independent contractors was
a “symbiotic one” and that,

It is pertinent
to note that in the case of Satish N.3,
the Karnataka High Court, interpreted ‘aggregator’ under the Karnataka on –
Demand Transportation Technology Aggregator Rules, 20164
(which are analogous to Rules under contention) as inclusive of ‘canvassers’
and ‘operators’ and thus concluded the Karnataka Rules to be intra vires  of the Act. The petitioners had claimed that
companies such as Uber and Ola, were merely ‘facilitators’ who by providing a
technological platform connected the intending passengers with the driver of a
taxi and thus did not amount to either ‘canvassers’ or ‘solicitors’.

The Rules have
allegedly been enacted under S. 93 of the Act which deals with ‘agents’ and
‘canvassers’, S. 95 which deals with contract carriages and S. 96(1) and (2),
which bestow ample power in the State Government to enact Rules for dealing
with the provisions of the concerned chapter of the Act. Thus as far as S. 93
goes, the section deals with only two activities performed by the each of the
two classes: selling tickets for the public service vehicle by the agent, and
with soliciting of customers by the canvasser for the public service vehicle.
Hence, the section deals with only two categories of persons, and only when
they perform the two specified functions. Hence, Section 93 (1) of the Act
cannot travel beyond this limited scope. The Act does not talk about

The definition
of ‘aggregator’ has not been provided for anywhere under the Act. However, according
to R. 2(1)(ii) an ‘aggregator’ can be defined as a person who is an operator or
an intermediary / market place who canvasses or solicits or facilitates passengers
for travel by taxi and who connects the passenger / intending passenger to a
driver of a taxi through a technological platform, whether for any
consideration or not. A strict interpretation would thus imply that the
Government cannot draft rules for a class of persons under an Act, when the Act
itself does not provide for such class of persons.

Definition of ‘Aggregator’.

Maharashtra City Taxi Rules, 2017:

The Rules lay
down certain conditions which are discriminatory and which impose unreasonable liability
on both the drivers as well as the aggregators. They further misconstrue the
relation of the drivers with the aggregators by treating it as an employer –
employee relationship. The Rules also prescribe outright prohibitions, which
subordinate legislations are ideally not entitled to impose. Lastly, the Rules
themselves are possibly ultra vires
since the Act does not empower the State Government to draft rules with
reference to certain provisions of the Act.

On 4th March
2017, by way of notification, the Maharashtra Government enacted the
Maharashtra City Taxi Rules, 20171 allegedly
under the powers conferred on it by the Motor Vehicles Act, 19882.
The main purpose of the Rules is to bring mobile app-based cab aggregators such
as Uber India Ltd and Ola Ltd., under uniform regulation on similar lines as
any other taxi service provider. While the said Rules seek to level the playing
ground and ensure fair competition, this subordinate legislation does not only
go beyond the parent legislation but also appears to contradict the same. Thus,
following the enactment of these Rules, six drivers plying cabs with both Ola
and Uber approached the Bombay High Court challenging the rules as
discriminatory, in violation of Art. 14 of the Indian Constitution and beyond
the scope of the parent legislation.



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