In a major blow to homegrown ride-hailing service Ola, the Karnataka government has suspended its operations in Bengaluru for six months. The suspension followed a notification from the regional transport office for violating license norms as the Bengaluru-headquartered firm was running bike taxis, which are deemed illegal as the policy framework is not yet clear on them.

The license for Ola is suspended with immediate effect, as per the order issued on March 18.

"Earlier this year, Transport Department officials had seized several bikes which were operating as bike taxis for Ola. The officials probed the case and submitted a report to the Transport Commissioner. According to Section 11 (1) the Karnataka On Demand Transportation Technology Aggregators Rules 2016, the Transport Department can decide to cancel the license of the cab aggregator as there is a violation of rules," the notice read.

According to the notification, on February 15, 2019, the transport department had sent Ola a notice, asking the company to respond to the findings of the probe. Ola sent its reply on March 3, 2019.

"As the company's reply was not satisfactory and did not provide any evidence which proved it did not violate norms, the Transport Department, as on March 18, 2019, has decided to suspend the license of Ola for a period of six months. Ola will have to submit the original copy of the license within three days of receiving a copy of this order."

SoftBank-backed Ola, which earlier this week raised $300 million from Hyundai Motors and Kia Motors Corp, confirmed the development and called it “unfortunate”. It further added that it will address the concerns cited directly with state officials.

"Ola is a law-abiding company that has always worked with the Government to develop livelihoods, improve mobility, and enable a new technology industry. We are evaluating all options to find an amicable solution wherein hundreds of thousands of driver-partners in the state of Karnataka can continue to work and serve the mobility needs of our citizens,” an Ola spokesperson said in a statement.

On the question of running bike taxis, Ola said it halted its bike taxi pilot weeks ago.

"We have been closely working with the authorities on this topic, responding to queries and making proactive representations to the ministry. Despite other companies continuing to operate illegally, Ola halted our bike taxi experiment weeks ago, instead seeking the state's cooperation to develop a legal framework for a pilot that will continue to take advantage of emerging opportunities in the mobility economy,” the spokesperson said. "This notification is unfortunate, and we look forward to an opportunity to address these concerns directly with state officials to find a solution for our driver-partners and millions of Ola users in Karnataka."

In the meantime, it is not clear how much this suspension will affect Ola’s revenues as Bengaluru is one of its most important markets.

In January, Flipkart co-founder Sachin Bansal invested $100 million in Ola. It is the second most valuable Internet startup in India after Paytm.

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