Aggregator Licensing and Non-Transport Vehicle Pooling: Supreme Court Addresses Maharashtra’s Regulatory Framework (7 February 2023)

Introduction

Date of the Judgment: 7 February 2023

Citation: (2023) INSC 97

Judges: Dr Dhananjaya Y Chandrachud, CJI, Pamidighantam Sri Narasimha, J, J B Pardiwala, J

Can a State government prohibit aggregators from pooling non-transport vehicles? The Supreme Court of India recently addressed this question while hearing a challenge to a notification issued by the State of Maharashtra. The core issue was whether the State could restrict aggregators from using non-transport vehicles for ride-pooling services, impacting the operations of companies like Roppen Transportation Services Pvt Ltd. The bench comprised Chief Justice Dr. Dhananjaya Y Chandrachud, Justice Pamidighantam Sri Narasimha, and Justice J B Pardiwala, with the judgment authored by Chief Justice Chandrachud.

Case Background

Roppen Transportation Services Pvt Ltd, an aggregator, applied for a license to operate two-wheeler aggregator services in Maharashtra. The Road Transport Officer (RTO) at Pune rejected their application on 21 December 2022, citing non-compliance with the Motor Vehicle Aggregator Guidelines 2020. The RTO’s decision highlighted deficiencies in Roppen’s application, including lack of simulator training facilities, operation of the app without a license, and insufficient driver experience. The RTO also noted that Maharashtra had not implemented a bike taxi scheme or a fare structure policy for bike taxis.

Subsequently, the State of Maharashtra issued a notification on 19 January 2023, prohibiting the pooling of non-transport vehicles by aggregators. This notification was based on concerns about road safety and the economic viability of vehicles operating with valid permits. The State Government also formed a committee on 12 January 2023 to study the issue of using non-transport vehicles as transport vehicles. Roppen challenged the RTO’s order in the High Court of Judicature at Bombay, which was then overshadowed by the State’s notification.

Timeline

Course of Proceedings

The petitioners challenged the RTO’s order in the High Court of Judicature at Bombay. During the proceedings, the High Court was informed about the State Government’s notification dated 19 January 2023. The High Court noted that the 2020 Guidelines allowed some flexibility to the State Government and that there was no existing policy granting an unrestricted right to obtain a license. The High Court did not address the validity of the 19 January 2023 notification, as the petitioners reserved their right to challenge it separately. The Supreme Court noted that the High Court’s observations in paragraph 59 of its judgment should not preclude a challenge to the 19 January 2023 notification.

Legal Framework

The case is primarily governed by the Motor Vehicles Act, 1988, as amended by Act 32 of 2019. Key provisions include:

• Section 2(1A) of the Motor Vehicles Act, 1988: Defines an “aggregator” as a digital intermediary or marketplace connecting passengers with drivers for transportation.
• Section 93 of the Motor Vehicles Act, 1988: Requires aggregators to obtain a license from the State Government. The amended provision states:
  
  “93. Agent or canvasser or aggregator 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 vehicles or in otherwise soliciting custom for such vehicles, or
  (ii) as an agent in the business of collecting, forwarding or distributing goods carried by goods carriages,
  (iii) as an aggregator,
  unless he has obtained a licence from such authority and subject to such conditions as may be prescribed by the State Government.
  Provided that while issuing the licence to an aggregator the State Government may follow such guidelines as may be issued by the Central Government:
  Provided further that every aggregator shall comply with the provisions of the Information Technology Act, 2000 (21 of 2000) and the rules and regulations made there under.”
• Section 96 of the Motor Vehicles Act, 1988: Confers rule-making power on the State Government for implementing Chapter V of the Act, which deals with the control of transport vehicles.

The Motor Vehicle Aggregator Guidelines 2020, issued by the Union Government, provide a framework for State Governments to issue licenses to aggregators. These guidelines are persuasive but not mandatory. Clause 15 of the Guidelines allows aggregators to pool non-transport vehicles unless prohibited by the State Government. The State Government must provide a written rationale for any such prohibition on its transport portal.

Arguments

Petitioners’ Arguments (Roppen Transportation Services Pvt Ltd):

• The petitioners argued that the requirements of the 2020 Guidelines, based on which their license application was rejected, were unworkable.
• They contended that the State Government’s notification dated 19 January 2023, prohibiting the pooling of non-transport vehicles, was not justified.
• The petitioners sought to provide aggregator services for two-wheeler vehicles across Maharashtra.

Respondents’ Arguments (Union of India & State of Maharashtra):

• The State of Maharashtra argued that the Central Guidelines were intended to ensure the safety of passengers and drivers, justifying the requirements imposed.
• The State contended that it had the authority to prohibit the pooling of non-transport vehicles to ensure road safety and the economic viability of vehicles with valid permits.
• The State highlighted the need for a detailed consideration of the issue of permitting non-transport vehicles to be used as transport vehicles, including for aggregation and ride pooling.
• The State argued that the guidelines issued by the Central Government are not mandatory and that the State Government has the ultimate decision-making power.

Sub-Submissions Categorized by Main Submissions:

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in the judgment. However, the core issues that the court addressed were:

1. Whether the State Government’s notification dated 19 January 2023, prohibiting the pooling of non-transport vehicles by aggregators, was valid.
2. Whether the RTO’s order dated 21 December 2022, rejecting the petitioners’ license application, was justified.
3. Whether the petitioners should be granted liberty to challenge the notification dated 19 January 2023 before the High Court.

Treatment of the Issue by the Court

The following table demonstrates how the Court addressed the issues:

Authorities

The judgment does not explicitly cite any specific cases or books. However, it refers to the following legal provisions:

• Motor Vehicles Act, 1988:
  • Section 2(1A): Definition of “aggregator.”
  • Section 93: Requirement for aggregators to obtain a license.
  • Section 96: State Government’s rule-making power.
• Motor Vehicle Aggregator Guidelines 2020: Issued by the Union Government, providing a framework for State Governments to issue licenses to aggregators.
  • Clause 15: Pertaining to the aggregation of non-transport vehicles by aggregators.

Table of Authorities Considered by the Court:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court used Section 93 of the Motor Vehicles Act, 1988 to emphasize the requirement for aggregators to obtain a license and the State Government’s power to prescribe conditions.
• The Court viewed the Motor Vehicle Aggregator Guidelines 2020 as persuasive, not mandatory, and acknowledged that the State Government has the ultimate decision-making power.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• State Government’s Authority: The Court emphasized the State Government’s authority to regulate aggregators and to make decisions regarding the use of non-transport vehicles for ride-pooling, as per Section 93 of the Motor Vehicles Act, 1988.
• Persuasive Nature of Central Guidelines: The Court highlighted that the Motor Vehicle Aggregator Guidelines 2020 are persuasive and not mandatory, leaving the ultimate decision-making power with the State Government.
• Road Safety Concerns: The Court acknowledged the State Government’s concerns about road safety and the need for detailed consideration of the issue of permitting non-transport vehicles to be used as transport vehicles.
• Subsumption of RTO’s Order: The Court noted that the RTO’s order was superseded by the State Government’s decision to form a committee and issue the notification, thereby rendering the challenge to the RTO’s order moot.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

Logical Reasoning:

The Court did not delve into the merits of the State’s notification or the RTO’s order. Instead, it focused on ensuring that the petitioners had an opportunity to challenge the notification before the High Court, without being bound by the High Court’s previous observations. The Court also emphasized the State Government’s authority in regulating aggregators and the persuasive nature of the Central Guidelines.

The Court’s reasoning was based on the following:

• The State Government has the power to regulate transport within its jurisdiction.
• The Central Guidelines are not mandatory, and the State has the final say.
• The State’s notification was a policy decision that needed to be challenged through the appropriate legal channel.

The Court did not consider alternative interpretations of the law, as its primary concern was to ensure that the petitioners had an opportunity to challenge the State’s notification before the High Court. The Court’s decision was aimed at ensuring a fair legal process.

The Court stated:

• “The correctness of the order of the RTO dated 21 December 2022 stands subsumed by the decision which has been taken by the High Court to entrust the examination of the entire issue by the Committee, before it decides on the use of non-transport vehicles for the purposes of aggregation and ride pooling.”
• “In order to allay the above grievance, it needs to be clarified that while considering a challenge to the notification dated 19 January 2023, the High Court shall not consider itself bound by its observations in paragraph 59.”
• “The State Government shall take a final decision on or before 31 March 2023. The Committee shall take its final decision on or before 15 March 2023 so as to leave time to the State Government to take a considered decision by the end of March 2023.”

Key Takeaways

• State Governments have significant authority in regulating aggregators and the use of non-transport vehicles for ride-pooling.
• The Motor Vehicle Aggregator Guidelines 2020 are persuasive but not mandatory for State Governments.
• Aggregators seeking to operate in Maharashtra must comply with the State Government’s regulations.
• The decision emphasizes the importance of road safety and the economic viability of existing transport services.
• The State Government is required to make a final decision on the issue by 31 March 2023, based on the committee’s report by 15 March 2023.

Potential Future Impact:

• The judgment sets a precedent for State Governments to exercise their regulatory powers in the transportation sector.
• It may lead to a more cautious approach by aggregators when entering new markets, especially concerning the use of non-transport vehicles.
• The decision could influence the development of similar regulations in other states.

Directions

The Supreme Court directed the following:

• The petitioners were granted liberty to move the High Court under Article 226 of the Constitution to challenge the notification of the State Government dated 19 January 2023.
• The High Court should consider any such challenge uninfluenced by its observations in the impugned judgment and order dated 20 January 2023.
• The State Government shall take a final decision on the matter on or before 31 March 2023.
• The Committee shall take its final decision on or before 15 March 2023.

Specific Amendments Analysis

This section is omitted as the judgment does not discuss any specific amendments.

Development of Law

The ratio decidendi of this case is that State Governments have the authority to regulate aggregators and the use of non-transport vehicles for ride-pooling, and that the Motor Vehicle Aggregator Guidelines 2020 are persuasive but not mandatory. This clarifies the balance of power between the Central and State Governments in regulating transport aggregators. There is no change in the previous positions of law, but rather a clarification of the existing legal framework.

Conclusion

The Supreme Court’s decision in Roppen Transportation Services Pvt Ltd vs. Union of India & Ors. clarifies the regulatory landscape for transport aggregators in India. The Court emphasized the State Government’s authority to regulate aggregators and the use of non-transport vehicles for ride-pooling. While the Central Government’s guidelines are persuasive, the ultimate decision-making power rests with the State. The Court did not rule on the validity of the State’s notification but granted liberty to the petitioners to challenge it before the High Court. The judgment underscores the importance of road safety and the economic viability of existing transport services in the regulatory framework.

Category

Parent Category: Transportation Law

Child Categories:

• Aggregators
• Motor Vehicles Act, 1988
• Licensing
• Ride-Pooling
• State Regulations
• Section 93, Motor Vehicles Act, 1988

FAQ

Q: What is an aggregator according to the Motor Vehicles Act, 1988?

A: An aggregator is a digital intermediary or marketplace that connects passengers with drivers for transportation.

Q: Do aggregators need a license to operate?

A: Yes, according to Section 93 of the Motor Vehicles Act, 1988, aggregators must obtain a license from the State Government to operate.

Q: Can State Governments prohibit the pooling of non-transport vehicles by aggregators?

A: Yes, State Governments have the authority to prohibit the pooling of non-transport vehicles by aggregators to ensure road safety and the economic viability of existing transport services.

Q: Are the Motor Vehicle Aggregator Guidelines 2020 mandatory for State Governments?

A: No, these guidelines are persuasive but not mandatory. State Governments have the ultimate decision-making power in regulating aggregators.

Q: What should aggregators do if their license application is rejected?

A: Aggregators can challenge the rejection in the High Court under Article 226 of the Constitution.

Q: What was the Supreme Court’s decision in the Roppen case?

A: The Supreme Court did not rule on the validity of the State’s notification but granted liberty to the petitioners to challenge it in the High Court. The Court also emphasized the State Government’s authority in regulating aggregators.

Q: What is the deadline for the State Government to make a final decision on this matter?

A: The State Government is required to make a final decision on or before 31 March 2023, based on the committee’s report by 15 March 2023.