The Karnataka High Court has mandated that prominent app-based aggregators, including Swiggy, Zomato, Zepto, and others, must deposit a controversial gig worker welfare fee with the court registry within three weeks. This interim directive, issued by Justice M Nagaprasanna, comes as these platforms contest the constitutional validity of the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Act, 2025.
The Karnataka Gig Worker Welfare Act
The state legislation, enacted in 2025, requires aggregators to contribute to a state welfare fund. The fee structure is set at 50 paise for every two-wheeler ride, 75 paise for three-wheeler trips, and Re 1 for four-wheeler rides. Additionally, food and grocery delivery services are subject to a 1% levy on payouts, with these collections earmarked to finance welfare initiatives through the Karnataka Platform-Based Gig Workers Welfare Board.
Despite refusing to grant an interim stay on the Act's implementation, the High Court directed that the funds be deposited with the court instead of directly with the state government. This measure aims to balance the interests of the platforms, the state, and the gig workers. The court also restrained the government from taking coercive action against the petitioners, provided they comply with these interim directions. The next hearing for the matter is scheduled for July 31, with the state required to file its objections by July 30.
Arguments from Aggregators and the State
The petitions, filed by the Internet and Mobile Association of India (IAMAI) and several platform companies like Eternal Ltd (operating Zomato and Blinkit), Swiggy, Zepto, Urban Company, and Valmo Transportation, argue that Karnataka's law overlaps with the central Code on Social Security (COSS), 2020. They contend that the state legislation is repugnant to the central law under Article 254 of the Constitution, creating duplicate financial and regulatory obligations for aggregators.
Furthermore, the petitioners claim that contributions from aggregators are already envisioned under Section 114(4) of the COSS and are intended for the national Social Security Fund. They expressed concerns over Karnataka introducing an additional levy without having notified any specific welfare schemes for gig workers, questioning the utilization of the collected funds.
Representing the Centre, Additional Solicitor General Aravind Kamath supported the petitioners' view, arguing that the state legislation directly conflicts with the Code on Social Security. However, Karnataka Advocate General Shashikiran Shetty defended the law, asserting that there is no inconsistency between the two legislations and that the state Act merely supplements the central framework. Shetty also highlighted that similar laws have been enacted in other states such, as Rajasthan, Bihar, and Telangana.
Court's Observations on Fund Utilization
During the hearing, Justice Nagaprasanna questioned the state government about its roadmap for utilizing the welfare fund and requested details of proposed schemes that would benefit gig workers. The judge orally observed that if platforms are charging consumers significantly more, the workers who deliver under challenging conditions should also receive their due benefits. Concurrently, the court emphasized that welfare collections should not be diverted for unrelated purposes and instructed the state to submit a comprehensive statement detailing the proposed utilization of the funds before the subsequent hearing.