Service charge

Delhi HC halts ‘no service charge ordering’ on restaurants, next hearing Nov 25 | Latest India News

Delhi’s high court on Wednesday suspended an order by the Central Consumer Protection Authority banning restaurants from automatically adding service charges to bills. Judge Yashwant Varma, however, said all restaurants must prominently display service charges on menus and other locations. The court also recorded a statement from the lawyers of the National Restaurant Association of India – that they would not levy this charge on takeaways.



CCPA’s lawyer told the court that consumers shouldn’t be forced to pay the service fee. However, to this the court said it was a matter of choice, adding: ‘Don’t enter the restaurant…if you don’t want to pay.’

“On a more fundamental claim, the court notes that there would be serious doubts as to whether the service charge would fall under consumer protection law, particularly in light of the NCDRC order where the commission confirmed the service charge,” the judge said in his oral order.

The next court date in this case is Nov. 25, which means restaurants, hotels and eateries can continue to automatically levy service charges on food bills until then.

The petition filed by the NRAI had challenged the July 4 CCPA guidelines, which prohibited hotels and restaurants from adding a default service charge to food bills. The guidelines also outlined actions consumers could take if the rule was breached.



Seeking to set aside these directives, the petitioners claimed that they were “arbitrary, untenable and should be set aside”, as they were issued without appreciation of the facts and circumstances.

“The collection of service charges has been a common practice in the hospitality industry for more than 80 years, which is evident from the fact that the Supreme Court took cognizance of this concept in 1964,” their petition reads.

Earlier this month, the practice of adding a service charge to food bills by default was deemed illegal by the government, also noting that it could not be a hidden item on the bill or charged under a heading different.

READ | Restaurants cannot charge service fees to users, says government



Businesses must clearly inform consumers of the charge and it can only be collected at their discretion, the government said.

People cannot be refused entry if they do not consent, the government has warned.

Restaurant owners have in the past defended the practice, saying many statements are made on premises to let customers know they will pay a service charge if they eat here.

An NRAI official, following a June 2 meeting, said the money raised is “not pocketed by the owner, it is divided equally among everyone working to improve your experience.”

Consumer rights organizations, meanwhile, argue that the service charge is arbitrary and illegal since restaurants are free to set food and drink prices according to their policies.