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Business Formation

Taxis in India have always been popular but recently, with the increasing use of technology and companies releasing their app-based models, a new market altogether has emerged. Under this app base model, the companies have now started using the internet and satellite facilities to make the provision of taxis more convenient and user-friendly. Not only is it personally beneficial for all the users as it saves time and money for parking the vehicles, relives them of the responsibility to constantly care for it but is also very beneficial for the environment and reduces traffic when a shared model is used. In this blog, we will be looking into the Legal regulations to Start Bike Taxi Business in India.



The growing global market of bike taxis:

Even so, escaping the enormous amount of traffic is not always possible especially during the peak hours of the day. Well, in such a scenario, smaller cars always help but a two-wheeler simplifies the problem to a much greater extent. It allows one to pass through narrow spaces between the vehicles stuck in traffic jams, is much easier to cater to in terms of care and parking spaces in public places and relatively cheaper. Keeping in view all of the above, various companies and start-ups such as Uber, Rapido, Ola, HeyBob etc. have ventured out into this market and this move has also been well appreciated by the consumers. According to a recent report by World Moto Inc., which is a company engaged in the business of making motorcycle taxi meters estimated the bike market of the world to be worth approximately $500 billion.



Start-up’s market summary:

There are a couple of start-ups that are experimenting with this market and trying to compete with the big players such as Ola and Uber. For example, in Gurgaon, we have M-taxi, Bikxie, and Baxi fully functional with 25, 22 and 200 bikes respectively during the year 2016. With these many bikes, they had until that date catered to about a total of 200-250, 7500, and 2000 plus per day rides respectively.  N.O.W., another start-up has entered the Noida market with about 10 bikes and Hey Bob was running about 40 bikes in Bangalore at one point. While there are a couple of States that have eased their regulations for bike sharing and commercial use of bikes, the lack of them in most States has made it extremely difficult for them to function.



The Indian Legal Scenario:



The law on the subject:

In India, the basic law that regulates the transport means is Motor Vehicles Act, 1988. The Act provides for laws governing all aspects that relate to motor vehicles such as its applicability in case of personal vehicles, vehicles being used for commercial use, licenses and permits that need to be obtained, liability in cases of accidents, insurance claims etc. and also provides for setting up of the Motor Accidents Claims Tribunal for adjudication of claims under the Act.

Any vehicle, therefore, running for any commercial purpose such as a taxi or as for deliveries will be first required to obtain clearances from the Transport Offices of the States that they want to run in.



The regional regulation of bike taxis:

The regulatory aspects of this class of taxis have not been very clear in India. While there is gross uncertainty in the rules of the Regional Transport Office (“RTO”) of most of the states, some have attempted to clarify their stand on the issue. Goa was the first state in the country to allow commercial use of bikes. Haryana became the second state to relax their rules in this respect.


The situation is not so favorable to these start-ups in all states. A press statement in the form of clarification disallowing these services was specifically issued by the RTO in Maharashtra stating that these services are not allowed to be provided by the Motor Vehicles Act as applicable to Maharashtra. Time and again, registration of bikes as commercial vehicles has also been refused on account of the lack of a proper framework for the functioning of these cabs in India.


Similarly, in Bangalore also the RTO deemed this practice to be illegal as the Motor Vehicles Act, 1988 does not provide for a separate class of two-wheeler vehicles for the purpose of registration and without a proper Registration Certificate, no vehicle is allowed to run at all, whether privately or commercially. In fact, in a statement by Mr. H.G. Kumar, the Additional Transport Commissioner and Secretary of State Transport Authority, Bangalore expressly remarked that “Companies like Uber are not authorized to carry passengers on private bikes. Uber and Ola are the major culprits and nobody should operate without a proper license.” Additionally, he also stated that these companies in order to run their bikes have gotten their vehicles registered as private vehicles and therefore, are in violation of the law. Further, since they also do not carry proper registration certificates that justify their activities as a commercial taxi vehicle, no claims in relation to insurance shall be entertained in case of any accidents. Interestingly, a couple of days later, the Bangalore authorities once again changed their stand on the issue and indicated the department’s willingness to entertain such registrations as the time and the consumer demands it, which definitely is a welcome step.




Legal considerations before starting a bike-taxi business in India:

Following are some factors that must be kept in mind while starting a bike-taxi business in India from the legal point of view:


  • Does your State allow it? – The first and the foremost consideration is definitely to check with the RTO department of your State and ascertain whether it is legal to run such a business in your State.
  • Compliance with business regulations: if you are running the business as a sole proprietor, or in a partnership, registration is not mandatory. However, if you wish to start your venture as a public, private or a one-person company, or a limited liability partnership, registration is mandatory with the concerned authorities under the relevant laws.
  • Compliance with the motor vehicle laws: The Motor Vehicle Act, 1988 provides that the State Government shall constitute an authority that shall carry out all the functions given under the Act. The entity entering such a business will not only have to comply with the provisions of the Act by obtaining the necessary permissions and licenses but also have to consider the relevant state rules and regulations.
  • Compliance with information technology laws: If you are planning to launch a website or an android or apple mobile-based application, you’ll have to also consider the implications and applicability of the Information Technology Act, 2000 and all the rules made thereunder.
  • Other ancillary laws: You will have to take into consideration other laws that may be applicable keeping in mind the scale of your operations, kind of operations etc., environmental laws, labor and industrial laws, direct and indirect tax laws also.



Conclusively, as soon as the grey area in terms of legal regulators is clearer, no doubt the market for this will see a huge raise in no time.


Start-up process entails complex procedures and many bureaucratic hurdles, entrepreneurs are better off using professional services. Hiring a virtual lawyer and virtual accountant can save time and help ensure that the process goes smoothly. For any Legal and Accounting support, Happy to help you, let us talk! 🙂


 

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