Win for PVR, BookMyShow as Bombay High Court allows convenience fees on online movie tickets

The Bombay High Court on Thursday quashed the State government's decision to bar multiplexes and cinema operators from charging convenience fees on movie tickets booked via online platforms [PVR Ltd and Ors v State of Maharashtra].A Bench of Justice MS Sonak and Jitendra Jain held that the State has no authority under the Maharashtra Entertainment Duty Act (MED Act) to issue such prohibitions and that the orders violated the fundamental right to carry on business under Article 19(1)(g) of the Constitution. Hence, it struck down part of Government Orders (GOs) issued by the Maharashtra Government that had prohibited multiplexes and cinema operators from collecting such fees.“Therefore, in our view, the impugned G.O.s, to the extent that they prohibit collection of convenience fees on the tickets booked online, violates Article 19(1)(g) of the Constitution of India, and therefore, the impugned G.O.s to the extent challenged herein is required to be quashed and set aside,” the Court said..The Court said that if the customer feels that it is convenient to pay convenience fees for booking online tickets, then the State cannot restrain the multiplex owners from providing the facility. “Suppose the customer feels it convenient to book the tickets online by not going to the theatre and paying the convenience fees. In that case, the respondents cannot restrain the petitioners from collecting the convenience fees since for providing this facility of online booking, the theatre owners/ petitioners have to invest in the technology,” the order said. It further added that economic activity could not be micromanaged by the government in this manner.“If business owners are not permitted to determine the various facets of their business (in accordance with law), economic activity would come to a grinding halt,” the Bench opined..The petitions filed PVR Limited and Big Tree Entertainment Private Limited.(Book My Show) and other cinema operators challenged two Government Orders issued between April 2013 and March 2014. These directed multiplexes not to charge customers any additional amount beyond the ticket price and applicable entertainment duty. The petitioners argued that convenience fees charged for providing online booking services, were a separate component agreed upon between private parties and not subject to regulation under the MED Act. These fees typically covered the costs of payment gateway charges, internet infrastructure and customer support for online platforms. However, the State insisted that such charges were not permitted under the MED Act and could not be collected from consumers..The State primarily relied on provisions of the MED Act, including Sections 3(3)(e), 4(2)(b) and 7, to justify its prohibition. It claimed that convenience fees amounted to an excess charge not factored into the calculation of entertainment tax. It also invoked Article 162 of the Constitution, arguing that the State had the executive power to issue such orders in the public interest. The petitioners countered that no provision of the Act explicitly empowers the State to prohibit such fees and that the collection of convenience fees was a commercial arrangement outside the tax structure..After hearing both the parties, the Court agreed with the petitioner. Referring to Section 10 of the MED Act, that delegates powers to the State government, the Court observed: “We could not find any power in the Act, which permits the Respondents to issue G.O.s prohibiting collection of convenience fees on online ticket booking.”It held that the ED Act does not empower the government to regulate prices agreed upon between private parties and that Section 3(3)(e) only prohibits collection of an amount more than what was considered for calculating gross collection capacity or houseful tax capacity..The Court also rejected the State’s reliance on Article 162 of the Constitution and held that executive powers cannot be exercised in a legislative vacuum. It noted that for any direction issued under Article 162 to be valid, it must be traceable to a specific law. In this instance, the State had failed to point to any statutory framework authorizing it to regulate the commercial terms between private parties.The Court stressed that the executive cannot interfere with pricing or contractual arrangements between two private parties in the absence of a law.Such intervention would be an "unreasonable restriction" on the right to carry on a legitimate business and would be unconstitutional.The Court also clarified that scope of the ruling is limited and does not decide on the question of whether entertainment duty is liable to be paid on such convenience fees..Advocate Naresh Thacker along with advocate Shweta Rajan instructed by law Economic Laws Practice appeared for PVR Limited. Advocate Naresh Thacker along with advocates Chakrapani Misra, Sameer Bindra, Ananya Misra instructed by law firm Khaitan & Co appeared for FICCI-Multiplex Association of India.Advocate Rohan Rajadhyaksha along with advocate Dhirajkumar Totala and Tejas Raghav instructed by law firm AZB & Partners appeared for Big Tree Entertainment Private Limited.Additional Government Pleader Milind More represented the State of Maharashtra..[Read Judgment]