This question is one that tests your morals and courage. What is most important is that the interviewer knows you'd never condone illegal behavior and will do your best to avoid such an ordeal.
Of course, the ideal action to take would be to calmly tell the passengers to step out of the vehicle before reporting it to nearby police. However, there have been cases where volatile and potentially dangerous passengers become aggressive, which is why some taxi drivers choose to stay silent. Tell the interviewer that you're mentally prepared should such a situation arise. Also, mention that if the taxi company already has a protocol for dealing with this kind of circumstance, you'd gladly follow their protocols.
