New legal trouble for Pathao

  • A writ has been filed in the Supreme Court challenging the ride-sharing company’s legal status in Nepal
- Tsering D Gurung, Kathmandu

Feb 24, 2019-

A writ petition has been filed with the Supreme Court against Pathao, a ride-sharing service company, challenging the legality of its operations in Nepal and demanding that the company be shut down.

Advocate Shyam Kumar Shrestha, a member of the Nepal Bar Association, filed the writ, arguing Pathao, a subsidiary of the US-based Pathao Inc, has violated multiple foreign investment laws by offering services beyond its stated objectives and engaging in foreign exchange without following due process.

The petition states the company violated the Companies Act 2006 by providing transport service that differs from its original objective listed in the Memorandum of Association, a document prepared for registering a company. Pathao received the permission to operate in Nepal based on its objective which states that it provides IT support services, but it has been providing transport services which is unlawful, reads the petition.

The petition also argues there is no provision within the Foreign Investment and Technology Transfer Act 1992 that would allow foreign investment in transport services, thereby making Pathao’s operation essentially illegal. It also cites the effect allowing the company to operate will have on local businesses.

If the government does not intervene now this could lead to more companies breaking the country’s FDI laws, the petition warns.

The writ petition also called on concerned authorities, including Company Registrar Office, Department of Transport Management, Department of Industry, Ministry of Industry and Commerce, Ministry of Home Affairs, Metropolitan Traffic Police to take the required action.

According to Pathao’s own website, it is “the biggest and most popular e-commerce delivery and ride-hailing service provider in South Asia.”

“We registered our company as per available provisions,” says Shashank Thapa, assistant manager at Pathao in Kathmandu. “The closest that came to describing our objectives was computer services and so that’s what we went with.”

The petitioner also requested the court issue an interim order for a temporary halt of services while the final judgement is pending. While the Supreme Court did not issue an interim order as requested by the petitioner in the preliminary meeting, it has called on all parties concerned to appear before the court on February 26. Following the hearing, the court will decide on whether to issue the interim order or not.

“We are working with our legal team to present our case,” said Thapa. “We are staying positive and hoping this will end well.”

The writ is the latest in a series of challenging Pathao’s existence in the country. Last month, the Metropolitan Traffic Police launched a crackdown on ride-sharing companies, arresting three drivers associated with Pathao, on charges of illegal operation.

But after a public backlash against the government move, Prime Minister KP Sharma Oli issued an order to revoke the ban on the two companies.  

The petition also makes note of ride-sharing not being recognised as a legitimate service offered under any industry as per the Industry Enterprises Act 2016.

The question surrounding the legality of ride-hailing apps such as Tootle and Pathao that provide bike-taxi services have long been a subject of controversy.

On one hand, the government terms ride-sharing business “illegal”, citing a provision under the Motor Vehicles and Transport Management Act which bans the use of private vehicles for transport services. On the other hand, the startup companies decry the outdated law—it was written in 1993—and argue the government needs to amend laws in accordance with time.

In an interview with the Post last month, Sixit Bhatta, co-founder of Tootle, said: “Instead of facilitating the growth of tech startups that address public needs and create employment opportunities, the government is stuck on a 23-year-old law that hasn’t been updated to reflect the change in society.”

Following the debate, the Department of Transport Management announced it would be introducing a new law in April that will include provisions to govern and regulate ride-sharing services.

While last month’s government crackdown targeted both Tootle and Pathao, the two ride-sharing companies in operation in Nepal, the writ only calls for Pathao to be banned. While it is unclear why one of the two companies is being targeted in the writ, Nepal’s regulations have more strict guidelines for companies with foreign investment than for domestic companies.

For Thapa, the writ feels more like a personal attack, especially since the Department of Transport Management has already announced that it would create a new law that will have provisions.

“It’s surprising because it seems to be an attack on Pathao,” he said, “rather than on ride-sharing services in general.”


Published: 25-02-2019 07:30

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