India: Cabinet nod to bring Uber, Ola under Motor Vehicles Act

October 24, 2016

The amendment to the Motor Vehicles Act is not a trivial matter. The amendment bill brings along with it, major changes, that enhances the scope of applicability of the Act in terms of the regulations and penalties. The Motor Vehicle (Amendment) Bill that was introduced in the Parliament by the Minister of Road Transport and Highways, Shri Nitin Gadkari in the month of August, 2016 essentially aims at changing the structure of the old Act. The main objective behind the creation of this bill is to reduce the number of accidents that takes place on the roads. The insertion of Section 110A, is also a significant move by the Central Government in ensuring the accountability of defective vehicles that can compromise the safety of drivers, pedestrians and the environment. The other important change the Act brings about is the addition of “aggregator” to the terms “agents and canvassers[1]” which brings cab services such as Ola, Uber, Meru, etc., under the ambit of the definition of service providers, thus allowing the Central Government to establish a regulatory authority to keep these aggregator services in check. But the Act was held up in Parliament for a while due to some mishap where some members of the Parliament claimed that they did not receive a copy of the bill because of which the discussion for the bill has been postponed to the winter session of Parliament in the month of November[2].

According to a government report provided by the Hindu[3], there is a loss of about 3 per cent of the GDP during the financial year 1999-2000, due to road mishaps, compared to 1.5 per cent for other middle income countries. This is a rather sizeable dent in the economic stability of our country and this is why the Act holds significance to the general populace. More than that, due to the increase in the rate of penalties, the Act will ensure conformity amongst drivers due to the fear of being caught and as a necessary corollary, spike in the usage of public transportation for day-to-day commute. This also solves the chronic problem of large traffic jams in major metropolitan cities. Another important point to be noted is that the Act has enhanced the scope of digital usage for matters regarding licenses, document verification and other tasks that till date could only be fulfilled by waiting in huge queues at government offices.

The Act differs from the old Act in the following ways-

(i) In the existing Motor Vehicle Act, there are 223 Sections, out of which, the Bill aims to amend 68 sections. Further, Chapter 10 has been deleted and Chapter 11 is being replaced with new provisions to simplify third party insurance claims and settlement process.

(ii) The Bill seeks to amend the Motor Vehicles Act, 1988 and seeks to insert Section 110A which provides for recall of vehicles in case certain criteria are met. This essentially gives power to the government to implement the recall policy of vehicles if they are detrimental to the environment or to the safety of drivers and others on the road, regardless of the type or variant of the motor vehicle. PRS India reports that the manufacturer will have to (i) reimburse the buyers for the full cost of the vehicle, or (ii) replace the defective vehicle with another vehicle with similar or better specifications[4]. One of the clauses of the Act talks about a procedure where the Central Government has the authority to appoint an officer who shall have all the powers of a civil court, while trying a suit under the Code of Civil Procedure, 1908 in respect of the following matters, namely:— (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of any document; (c) receiving evidence on affidavit; and (d) any other matter as may be prescribed[5].

(iii) There is a new policy provided in the Bill that comes under the title of “Aggregator services”. According to the Bill, an aggregator means a digital intermediary or market place for a passenger to connect with a driver for the purpose of transportation[6]. Simply put, this means any digital platform that enables a person to establish connection with a driver for transportation purposes, for e.g., – Uber, Ola, etc. According to a report published in the Financial Express[7] , the Bill would like to restrict these aggregators to the definition of ‘service providers’ and regulate their functioning by ensuring that the cabs have city permits and to set a statutory rate for the services as opposed to the concept of “surge pricing” that works on the concept of increase in price with the increase in demand. The bill also states that these aggregator services must comply with the Information Technology Act, 2000.

iv) Earlier, the compensation fine paid by the defendant or the perpetrator of a “hit and run” case was INR 25,000. But, the new bill has increased the statutory limit to INR 200,000.

v) Speaking of increase in fines, the new Act has spiked the penalty prices of offences by a rather large margin as recorded in the table provided on the official website of the Prime Minister’s Office [8].


It can be seen that even the simplest offence such as not wearing a helmet can cost the rider a penalty of INR 1000, which is a huge rise from the earlier INR 100 fine that was imposed.

(vi) Another important feature of the proposed bill is regarding Limited Insurance. It essentially talks about the fact that the injured person can only claim INR 500,000 as the maximum statutory limit and INR 10,000,000 in case of death. As opposed to the earlier Act that allowed for unlimited compensation claims on the part of the insurer. Therefore, this Act puts a cap on the premium insured to victims of road accidents.

In conclusion, the new amendment bill to the existing Motor Vehicles Act brings dynamic changes which entails scope for proper regulations of traffic on the road, stringent penalties and restructuring of certain policies. While there are a number of members in the Parliament who have expressed disapproval regarding the bill in terms of its potential for arbitrary usage of penalties. But all in all, the said changes will go a long way to instill a sense of safety amongst daily commuters and pedestrians.

[1] For more particulars, refer to Section 193 of the Motor Vehicles(Amendment) Bill, 2016

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