Uber/Ola Cannot Charge Surge Price, State Can Impose Cap On Convenience Fee Charged By Them: Karnataka High Court

The Karnataka High Court has dismissed the petitions challenging the legality of the State government's November 2022 notification, which capped the service charge/commission for mobile app-based transport aggregators at 5% plus applicable GST on the base fare for autorickshaws.

The Court emphasized that all vehicles onboarded by the aggregator must be available for hire; if not so available, the aggregator cannot claim additional amounts in the form of surge pricing, peak pricing or dynamic pricing as regards the same. 

The Bench of Justice Suraj Govindaraj observed that, "Peak pricing, dynamic pricing or surge pricing is apparently charged due to non or low availability of vehicles on the app of the aggregator. In my considered opinion, the same cannot be a basis of charge by the aggregator, the aggregator having held out to the passenger/customer that vehicles would be available for hire/hailing; it is on account of the non-availability or low availability of the vehicles on the aggregator app that the above charges called as Peak pricing, dynamic pricing or surge pricing are sought to be levied. Essentially, these Peak pricing, dynamic pricing or surge pricing charges are sought to be levied since no vehicles are available on the app, which is an obligation of the aggregator; the aggregator not having made available the requisite number of vehicles cannot charge Peak pricing, dynamic pricing or surge pricing charges. The same would amount to taking advantage of the aggregator not being able to provide the requisite number of vehicles, no premium can be collected by the aggregator for is own defaults." 

Uber India Systems Pvt. Ltd. and ANI Technologies Pvt. Ltd., operators of Uber and Ola taxis respectively, filed petitions challenging the capping of service charges by the State government of Karnataka. They argued that this cap was unlawful and requested the government to set fares for autorickshaws on aggregator platforms in accordance with the Motor Vehicles Aggregator Guidelines (MVAG)-2020 issued by the central government. The petitioners also sought court permission to charge a 20% commission/service fee and apply a surge price of up to twice the base fare for autorickshaws using their app-based platforms.

The Court further held that an aggregator cannot claim to be entitled to any amounts on account of making available a vehicle, since according to the aggregators, they are not offering/providing or being involved in any transport services; there is nothing done by an aggregator.

It was also observed that, "if such Peak pricing, dynamic pricing or surge pricing is permitted, there is a possibility of the aggregator falsely claiming these amounts when there is a surge or peak, since all the actions on the part of the Aggregators are couched in secrecy and it not being placed on record as to the basis of such charge and in what manner the same would be considered and or calculated. Details of the total number of vehicles onboarded, the number of vehicles in operation at a given time, and the number of vehicles in operation in a given area is not made available by the aggregator to ascertain if there are indeed lesser vehicles."

Cause Title: Uber India Systems Private Limited vs State of Kerala & Ors.

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