The recent incident involving suspension of license of the country's largest cab aggregator OLA for a period of six months by the Karnataka State Transport Authority for supposed violation of the Karnataka On-Demand Transportation Technology Aggregators Rules, 2016 ("Rules") was finally put to rest with imposition of a fine of Rs. 15 lakhs on OLA with commuters and drivers heaving a sigh of relief. Although, OLA in its statement expressed that it was glad that the situation had been resolved and regretted any inconvenience which may have been caused to its driver-partners and passengers, the action and mode of operation of the Government and the Transport Department has left much to be desired.

The Transport Department had issued a show-cause notice to OLA demanding an explanation as to why its license should not be cancelled/ suspended inasmuch as it had supposedly provisioned two wheelers as taxis in the city limits of Bengaluru. OLA did indeed submit its response to this show-cause notice but the Transport Department did not find the response satisfactory and decided to suspend the license for a period of six months. The premise for suspension of license appears to be that under the ODTTA rules, the necessary  permissions had only been granted to provide App Based Taxi Service (Motor Cabs) and not to provide bike taxi service.

Although, bike-taxis have been accepted with open arms by the people of Bengaluru, the Transport Department has not provided any specific reason for debarring OLA from operating the same besides the allegation that bike-taxis cannot be operated by virtue of getting a license under the Rules. Looking at the popularity of this model, and its acceptance in other States, it would be something that the State Government in Karnataka may have to reconsider. It is understood that on earlier occasions, the Transport Department has expressed its willingness to permit operations of bike-taxis, however, the action taken against OLA is sure to dissuade companies from investing in new models of business given the lack of clarity on the regulatory framework.

Also, some amount of concern is to be expressed with respect to the conduct of the Transport Department in light of the fact that a Division Bench of the High Court of Karnataka, had explicitly by way of Orders dated 07.12.2016 and 13.12.2016 prohibited authorities from taking any coercive action against the two aggregators, under the ODTTA rules, till such time the matter concerning constitutional validity of the rules remains sub-judice. As such, being a party to the proceedings and being fully aware of the orders passed by the High Court, the Department ought to have exercised some restraint. However, business considerations appear to have weighed with OLA which chose not to knock on the doors of the High Court.

Also, whatever may have been the considerations at OLA, the amount of Rs. 15 lakhs imposed as fine, in lieu of suspension of license appears to be extremely punitive as the ODTTA rules do not contemplate a financial penalty in excess of Rs. 10,000/-. Assuming some other mechanism was adopted by the Transport Department to reach this magical figure, the initial order of suspension of licence could not have been issued in the first place.

Ultimately, it is for the State to ensure that it acts fairly and without malice. The reasons for taking such strict action only against OLA is still incomprehensible and it remains to be seen whether the Transport Department finally acts against players such as Rapido who have been utilizing the bike-taxi space in Bengaluru for quite some time now. The department has appeared helpless or disinclined to act against such players thus far.

Given that the Lok Sabha elections are right around the corner it seems highly unlikely that the State Government would treat the issue of bike-taxi with any urgency and it appears that this issue stands deferred indefinitely. Nonetheless, the Transport Department may still be able to redeem itself by enforcing its ban against all operators. One can only wait and watch.


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