Executive Orders Can't Prohibit Online Booking Convenience Fees Without Statutory Backing; Violates Art. 19(1)(g): Bombay High Court - 2025-07-11

State Cannot Prohibit Online Booking Convenience Fees Through Executive Orders, Rules Bombay High Court

Mumbai: In a significant ruling for e-commerce platforms and entertainment businesses, the Bombay High Court has declared that the State government cannot prohibit the collection of "convenience fees" on online movie tickets through executive orders. A division bench of Justice M.S. Sonak and Justice Jitendra Jain held that such a prohibition, without any statutory authority, constitutes an unreasonable restriction on the fundamental right to carry on business under Article 19(1)(g) of the Constitution.

The Court quashed two clauses from Government Orders (G.O.s) issued in 2013 and 2014 that barred cinema owners and online ticketing platforms from levying any additional service charge on tickets booked online.

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Background of the Case

The judgment came on a batch of petitions filed by major players in the entertainment industry, including Big Tree Entertainment Pvt. Ltd. (which operates BookMyShow), PVR Limited, and the FICCI-Multiplex Association of India. They challenged the validity of:

- Clause 3(d) of the G.O. dated April 4, 2013: This order explicitly forbade theatre operators, owners, and their agents from charging any additional service fee for online ticket sales.

- Clause (a) of the G.O. dated March 18, 2014: This order mandated that all cinema operators set up their own online ticketing systems and prohibited the recovery of any additional service charges from viewers.

The petitioners argued that these executive fiats interfered with their legitimate business operations and the pricing contracts between private parties without the backing of any law.

Arguments Presented

Petitioners' Stance: The petitioners, represented by advocates Naresh Thacker , Rohan Rajadhyaksha , and others, contended that the G.O.s were unconstitutional. Their primary arguments were:

- Violation of Fundamental Rights: The prohibition was a direct and unreasonable restriction on their right to trade and business, guaranteed under Article 19(1)(g).

- Lack of Legal Authority: The State government had no power under the Maharashtra Entertainment Duty Act, 1923 (ED Act) to issue such price-control directives. They argued the Act's purpose was solely to levy and collect entertainment tax, not to regulate the consideration between a service provider and a customer.

- Improper Use of Executive Power: The State could not use its executive power under Article 162 of the Constitution to encroach upon fundamental rights where no specific law authorized such an action.

State's Defence: The State of Maharashtra, represented by Additional Government Pleader Mr. Milind More, defended the G.O.s, asserting that: - The State's executive power under Article 162 was sufficient to issue the directives. - The power to impose such a restriction was implicitly derived from provisions of the ED Act, specifically Section 3(3)(e) and Section 4(2)(b), which deal with the calculation and method of levying entertainment duty.

Court's Detailed Analysis and Findings

The High Court undertook a thorough examination of the Maharashtra Entertainment Duty Act, 1923, and constitutional principles to adjudicate the matter.

No Power Under the Entertainment Duty Act: The bench concluded that the ED Act is fundamentally a fiscal statute designed for the levy and collection of duty. It does not confer any power upon the State to regulate or control the prices charged by businesses. The Court observed:

"The ED Act is enacted for levy and collection of the entertainment duty by the State. Therefore, prohibiting collection of convenience fee by the theatre owners and/or others from its customers on online booking does not fall within the purview and scope of the ED Act."

The Court rejected the State's reliance on Section 3(3)(e) of the Act, which prohibits collecting amounts in excess of the "payment for admission" used for tax calculation. The bench clarified that including a fee for tax purposes is different from prohibiting its collection entirely. It noted, "It is one thing to say that convenience fee collected would form part of ‘gross collection capacity’ for arriving at the amount of duty, and it is another thing to say that the theatre owner would not collect convenience fee at all."

Violation of Article 19(1)(g): The core of the judgment rested on the infringement of fundamental rights. The Court affirmed that charging a convenience fee for the service of online booking is a legitimate business activity. To impose a restriction on it requires a "law" enacted by a competent legislature, not a mere executive instruction.

"To impose any restriction upon a legitimate business, firstly, there must be a law enacted by a competent legislature. Secondly, any restriction imposed by the law must be based on the grounds specified in Article 19(6) and must also pass the test of reasonableness."

The Court held that since the G.O.s were not backed by any statute, they failed to meet this constitutional threshold.

Executive Power Under Article 162 Not Absolute: The bench dismissed the State's argument invoking Article 162. Citing Supreme Court precedents, including Indian School, Jodhpur & Anr. vs. State of Rajasthan & Ors. , the Court reiterated that executive power cannot be used to interfere with private contracts or denude a person of their right to fair compensation without statutory backing. The judgment stated:

"In the absence of any Act regulating the private contract between the two parties, the Respondents would not be justified in taking the shelter of Article 162 of the Constitution of India to save the impugned G.O.s from being quashed and set aside."

Final Verdict

The High Court allowed the petitions and declared clause 3(d) of the G.O. dated April 4, 2013, and clause (a) of the G.O. dated March 18, 2014, as unconstitutional and set them aside.

The Court clarified that its ruling pertains only to the State's power to prohibit the collection of convenience fees and does not decide whether such fees are liable for entertainment duty. It also noted that the validity of a subsequent 2014 amendment to the ED Act, which specifically addresses convenience fees, was not the subject matter of the present petitions.