Bengaluru: Uber’s quest to scuttle the Karnataka On-demand Transportation Technology Aggregators Rule, 2016 suffered a jolt on Thursday with the Karnataka high court upholding the state government’s rights to frame such rules and certain clauses contested by Uber.

The state government had notified the rules on 2 April, which among other things, made it mandatory for ride-hailing services to get a permit before operating in the state. Uber dragged the government to the court, questioning its authority to frame such rules. Rival Ola (ANI technologies Pvt. Ltd), however, got a licence in June.

The high court on Thursday said the state was within its rights to frame such rules and upheld certain provisions contested by Uber, including one that mandated that drivers should be residents of Karnataka for at least two years and possess working knowledge of Kannada language, all vehicles should be fitted with panic buttons and drivers need not work beyond eight hours a day.

Besides, vehicles with all India tourist permits should not attach themselves to such platforms, the court said.

Uber has been allowed a month’s time to comply and get a licence to ensure smooth operations.

In a big reprieve to the ride-hailing services, the court maintained a status quo on the contentious issue of surge pricing, where consumers end up paying multiples of the original fare at times when demand for cars exceeds supply. This implies that while Ola and Uber can implement surge pricing, they can not exceed the Rs19.50 cap per km, including wait time charges, which is Re1 for every minute.

The court also maintained that a criminal complaint filed against a driver is no ground to cancel the aggregator’s licence.

Uber did not immediately respond to an email seeking comments.

The Karnataka On-demand Transportation Technology Aggregators Rule, 2016, which was notified on 2 April, said that ride hailing services are required to obtain a licence under the rules to operate in the state, especially Bengaluru, which is one among the top three markets for the companies, apart from Delhi and Mumbai.

Among others, the new rules capped the maximum fare to be charged from consumers at Rs19.50 in an attempt to contain surge pricing. It also said the only driver licences issued by the Karnataka government will be accepted and made it mandatory for cabs to install digital metres capable of generating printed receipts and a yellow taxi board, among others.

Uber had subsequently dragged the state government to the court, challenging its authority to frame such rules.

In a petition submitted to the Karnataka high court on 2 June, the San Francisco-headquartered company said, “It is submitted that by way of the impunged rules, the respondent state has sought to regulate the business and functioning of aggregators. It is pleaded that the respondent state lacks the mandate to do so under the provisions of the Motor Vehicles Act, 1988. which it has invoked in framing the impunged rules and the impunged rules far exceed the scope of the invoked provisions of the Motor Vehicles Act."

Ride-hailing services also face regulatory challenges in Maharashtra where the state government on 15 October issued the Maharashtra City Taxi Rules 2016, which seeks to cap fares, introduce dress code for drivers, apart from putting a steep price on permits: Rs25,000 for cars with less than 1,400 cc engines and Rs2,61,000 for those with more than 1,400 cc engines.

Uber has also objected to some of the clauses in a letter to chief minister Devendra Fadnavis, Mint reported on 24 October.