The Supreme Court of India, in a judgment dated November 4, 2025, has held that an “approved scheme” for a notified intra-State route under Chapter VI of the Motor Vehicles Act, 1988, overrides the provisions of an inter-State reciprocal transport (IS-RT) agreement made under Section 88 (Chapter V) of the same Act.
A bench of Justice Dipankar Datta and Justice Augustine George Masih allowed a batch of appeals filed by the U.P. State Road Transport Corporation (UPSRTC), thereby setting aside orders from the High Court of Madhya Pradesh. The High Court had directed the State of Uttar Pradesh to countersign inter-State permits for private operators on routes that overlapped with notified routes operated exclusively by UPSRTC.
Background of the Case
The lead appeal, U.P. State Road Transport Corporation v. Kashmiri Lal Batra & Ors. (Civil Appeal No. 10522 of 2025), along with connected matters, challenged orders of the M.P. High Court, Gwalior Bench.
The dispute originated from an IS-RT agreement dated November 21, 2006, executed between the State Transport Authorities of Madhya Pradesh (STA, MP) and Uttar Pradesh (STA, UP) under Section 88 of the 1988 MV Act. Schedule B of this agreement earmarked certain inter-State routes for the exclusive operation of the Madhya Pradesh State Road Transport Corporation (MPSRTC).
A key provision, Clause 4(3) of the agreement, stipulated that if MPSRTC was wound up and its routes were de-notified, those routes “would be deemed to be included in Schedule A,” which was designated for private operators.
Private operators, including Kashmiri Lal Batra, contended that MPSRTC had been wound up and stopped plying buses. They subsequently applied for and were granted temporary (and later, permanent) stage carriage permits by the STA, MP, for these routes.
However, the STA, UP, refused to countersign these permits, preventing the private operators from plying their vehicles on the portion of the routes within Uttar Pradesh. Mr. Batra filed a Public Interest Litigation (PIL) before the High Court seeking a mandamus to compel the STA, UP, to grant the countersignatures.
The High Court, vide its impugned order dated November 26, 2014, directed the State of M.P. to complete the process of granting permanent permits and, within 15 days thereafter, directed the State of U.P. to countersign them. UPSRTC challenged this and similar orders before the Supreme Court.
Arguments of the Parties
The appellant, UPSRTC, represented by senior counsel Ms. Garima Prashad, objected to the maintainability of the PIL, claiming it lacked bona fides. On merits, it was argued that “no private operator has a right to ply a stage carriage even on an inter-State route, a portion whereof is common to a notified route being part of an approved scheme under Chapter VI of the 1988 MV Act, except to the extent allowed by such scheme”.
The respondents (private operators), represented by senior counsel Ms. Shobha Gupta and Mr. B S Rajesh Agrajit, contended that the IS-RT Agreement was binding on the State of U.P. They argued that with the winding up of MPSRTC, the routes automatically fell into Schedule A by operation of Clause 4(3). They maintained that the STA, UP, had no “authority or jurisdiction in law to nullify such a binding agreement.” The operators also cited the proviso to Section 100 of the 1988 MV Act, arguing that U.P. had not shown any “previous approval of the Central Government” for its scheme as it related to an inter-State route.
Court’s Analysis and Legal Precedents
The Supreme Court formulated the “substantial question of law” as: “whether a stage carriage permit can be granted to a private operator on an inter-State route in terms of an IS-RT Agreement executed by and between two neighbouring States under Section 88 of the 1988 MV Act when portion of such inter-State route is common to an intra-State route which has been notified in terms of a scheme approved per the provisions of Chapter VI of the 1988 MV Act?”
The bench found that the answer to this question was “no longer res integra” (Para 28).
The judgment centered on the overriding effect of Chapter VI (Special Provisions Relating to State Transport Undertakings) over Chapter V (Control of Transport Vehicles), as mandated by Section 98 of the Act. Section 98 explicitly states: “The provisions of this Chapter [VI]… shall have effect notwithstanding anything inconsistent therewith contained in Chapter V or in any other law…”
The Court observed that the IS-RT Agreement, derived from Section 88 in Chapter V, “by its very nature is an agreement between two States but not a law under the relevant MV Act” (Para 45). In contrast, an approved scheme under Chapter VI holds statutory force. The judgment affirmed that “Approved schemes and notified routes… would obviously override Section 88, in view of Section 98 of the 1988 MV Act” (Para 45).
The Court relied on a series of precedents to affirm this position:
- T.N. Raghunatha Reddy v. Mysore State Transport Authority (1970): A three-Judge bench held that an inter-State agreement “is not law” and cannot override the provisions of a nationalization scheme (then Chapter IV-A).
- S. Abdul Khader Saheb v. Mysore Revenue Appellate Tribunal (1973): This decision affirmed Raghunatha Reddy, holding that a “scheme of nationalisation approved… would prevail over an inter-State agreement.”
- Adarsh Travels Bus Services v. State of Uttar Pradesh (1985): A Constitution Bench settled the law by expressly overruling a coordinate bench decision (Mysore SRTC (I)) that had favored private operators. The Adarsh Travels case affirmed that private operators are excluded from plying on any common stretch of a notified route, even for inter-State journeys.
- T.V. Nataraj v. State of Karnataka (1994): This case followed Adarsh Travels, reiterating that “in absence of express authorisation in the scheme, the controversy is no more res integra.”
Applying these precedents, the Court concluded that the High Court’s reliance on the IS-RT Agreement to direct countersignatures, despite the existence of U.P.’s notified scheme, was erroneous. The Court also noted that while the operators’ case hinged on the winding up of MPSRTC, there was “no clinching evidence to that effect” on the record (Para 43).
Decision and Directions
The Supreme Court allowed Civil Appeal No. 10522 of 2025 and the connected appeals filed by UPSRTC, setting aside the impugned judgments and orders of the High Court. Writ Petition (C) No. 748 of 2024, filed by private operators, was dismissed.
Despite ruling in favor of UPSRTC, the Court expressed concern over the outcome for the public, noting the “apparent lack of application of mind and of purpose by the States of UP and MP which have dented the prospect of maximisation of public interest” (Para 45).
Citing the “parting observations” from the Adarsh Travels case regarding public convenience, the Court issued directions in paragraph 49. It ordered the Principal Secretaries of the Transport Departments of M.P. and U.P. to meet “within 3 months from date to discuss the modalities for fully working out the IS-RT Agreement.”
The Court directed that if the M.P. authorities can satisfy the U.P. authorities that MPSRTC “has been wound up or is on the verge of being wound up,” an appropriate decision should be taken to include the routes in Schedule A and give effect to the agreement. The bench also urged both states to “consider the desirability of exploring whether partial exclusion of inter-State routes from the approved scheme… can be permitted so as to further the interests of the passengers and the commuters.”
Should consensus not be reached, the Court stated, “the State of MP shall also be at liberty to decide its future course of action.” The proceedings were closed with these directions.
