ANALYSIS

Regulating Aggregators: A Framework for the Future

Aggregators such as Uber and Ola have become household names over the past decade, propelled by astronomical growth. But clarity concerning their status in law was lacking until recently, due to which issues such as weak passenger safety went largely unaddressed. For years, concerned citizens expressed the need to check such abuse via appropriate regulatory action.

To set the ball rolling, the central government issued an advisory in 2015 calling for the regulation of aggregators. While some states subsequently took up the cause of aggregator regulation by framing rules, legal clarity remained stymied by the lack of any legislative provision explicitly providing for regulation of aggregators.[1] Even the Motor Vehicles Act (“MVA”), which provides for regulation of all classes of individuals relevant to the transportation sector like drivers and cab companies had virtually nothing to say about aggregators.

Fortunately, legal clarity has now been achieved through a 2019 amendment of the MVA.[2] The amended MVA achieves clarity by providing for: 1) a definition of aggregators 2) licensing of aggregators and 3) the division of powers between states and the Centre over regulation of aggregators.

1.Definition: The term ‘aggregator’ is now defined in the MVA. Section 2(1A) provides that aggregators constitute “a digital intermediary or marketplace for a passenger to connect with a driver for the purpose of transportation.” This clear and concise definition, providing that aggregators connect drivers and passengers, settles much controversy going back to at least 2015. Over the years, courts, regulators and policy experts have offered contrary and competing opinions on the definition of aggregators. While some have stated that aggregators are taxi service companies, others have asserted that they are advertisers on behalf of vehicle permit owners.[3]

Going forward, the crisp MVA definition will be a firm guide to states framing rules for aggregators.[4]

2. Licensing: Section 93 of the MVA now provides for licensing of aggregators. Previously, states occasionally relied on other provisions such as section 74 for aggregator licensing.[5] By explicitly providing for licensing under Section 93, the amendment has brought clarity.[6] Indeed, courts have confirmed the importance of designating one section in the MVA for licensing.[7]

Unfortunately, in recent times the Delhi Government has deviated from this framework to formulate an Aggregators Scheme under section 67(3) of the MVA.[8] Permitting states to license aggregators under two different sections – 67(3) and 93 – is redundant and counterproductive. It represents a repudiation of the structure of the MVA, which seeks to confine power to license various entities [including aggregators] to watertight sections that don’t overlap with each other.[9]

3. Federalism: Section 93 provides that while framing rules for aggregators, states are not bound by central government guidelines that may be issued from time to time.[10] While the initial draft amendment provided for mandatory adherence to central government guidelines, Parliament ultimately decided to vest regulatory power with the states.[11] This brings further clarity to states regarding their ability to regulate aggregators by giving them a free hand, unencumbered by the prospect of a meddling Centre.

Thus, as more states look to regulate aggregators the legislative clarity provided by the amended MVA will be of invaluable use. It dispels the uncertainty that once beclouded the regulation of aggregators. Furthermore, by encouraging states to take the lead in regulating aggregators, the new framework ensures that core concerns such as the safety of passengers will be fulsomely addressed in the future.

by Sachin Dhawan [Senior Advisor] and Saptarshi Das [Associate]


[1] Consequently, some High Courts upheld the power of states to regulate aggregators while others did not. See: ANI Technologies Pvt. Ltd. v. State of Uttarakhand and Ors. AIR 2015 UK 90 and Satish N. v State of Karnataka 2017 ILR (Kar.) 735

[2] The Motor Vehicles (Amendment) Act, 2019.

[3] See: ANI Technologies Pvt. Ltd. vs. Government of NCT of Delhi and Ors. (DELHC): MANU/DE/2240/2015; Satish N. v State of Karnataka 2017 ILR (Kar.) 735

[4] See: State of Tamil Nadu v. P. Krishnamurthy and Ors (2006) 4 SCC 517; Satish N. v State of Karnataka 2017 ILR (Kar.) 735 (As delegated legislation cannot exceed the scope of the parent law, the definition of aggregators in states’ rules must conform to the definition contained in the MVA.)

[5] Transport Department, Government of Haryana, NCR Motor Cab (Taxi) Scheme, 2016, 46977/AT-2/ST-III (Notified on 9.8.2016)

[6] While the Centre’s advisory on aggregators also called for licensing under section 93 it was not binding on states.

[7] See: Satish N. v State of Karnataka 2017 ILR (Kar.) 735

[8] Draft Motor Vehicle Aggregator Scheme, 2021, Transport Department, GNCTD, available at https://transport.delhi.gov.in/sites/default/files/All-PDF/Draft_Aggregator_Scheme_.pdf

[9] Additionally, the Delhi Aggregators Scheme violates the MVA by seeking to license goods delivery aggregators in addition to passenger aggregators. As goods delivery aggregators fall afoul of the definition of aggregators in the MVA, they cannot be subject to state licensing power without an amendment to the MVA.

[10] Motor Vehicles Act 1988, Section 93 proviso 1, Ins. by Act 32 of 2019, s. 36, (w.e.f. 27-11-2020).

[11] STANDING COMMITTEE ON TRANSPORT, TOURISM AND CULTURE, Motor Vehicles (Amendment) Bill, 2016, Two Hundred Forty Third Report, ¶ 133 (February, 2017)

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Practice Contacts

Sachin Dhawan

Senior Advisor

Saptarshi Das

Associate