Service charge

Delhi HC remains CCPA compliant, says paying service charge is a matter of choice

Sticking to guidelines issued by the Central Consumer Protection Authority (CCPA) that restaurants and hotels cannot levy default service charges on food bills, the Delhi High Court said that payment of fees was a matter of choice.

“If you don’t want to pay, don’t enter the restaurant. It is a matter of choice,” Judge Yashwant Varma remarked.

The court also said there would be no service charge on takeout orders.

However, grocery stores would have to clearly post on their menus that they are charging the fee so customers are aware, the court said.

The order came following a petition from the National Restaurant Association of India (NRAI) challenging the CCPA guidelines.

“The matter requires deliberation and until the next hearing on November 25, the CCPA guidelines have been suspended. NRAI should ensure that the condition that customers must pay the service fee should be clearly stated in the menu or any other place where it can be prominently displayed. In addition to this, members of restaurant associations must also agree that no service charge will be levied on take-out orders” , the court said.

The court requested answers from the government (respondent) on the matter.

“More than restaurant owners, the HC order is a huge relief to thousands of restaurant workers,” said Riyaaz Amlani, CEO and General Manager of Impresario Homemade Restaurants.

The CCPA, which reports to the Ministry of Consumer Affairs, published guidelines on July 4 to prevent unfair commercial practices and the violation of consumer rights with regard to hotels and restaurants charging service fees.

The guidelines stated that no customer should be forced to pay service fees against their will.

The NRAI, which represents more than 500,000 restaurants nationwide, had said the guidelines issued by the CCPA had no legal basis.

The restaurant association argued that the service charge cannot be abolished based on these guidelines alone and that a new law or amendment must be introduced to abolish the charge altogether.

“The content (the guidelines) therefore cannot be treated as a government order,” the NRAI petition said.

NRAI argued that the payment of fees is the sole intention and discretion of the customer. “Once the customer sees the service fee and places an order, there is a binding contract between the customer and the food outlet to pay,” the association said.

“Between this contract, a third party cannot have a say. The guidelines are arbitrary and should be rescinded, the association said.

Food associations breathed a sigh of relief after the order.

“We are pleased that our employees continue to enjoy the agreed benefits under the service fee,” said Gurbaxish Singh Kohli, Vice Chairman of FHRAI (Federation of Hotels and Restaurant Association of India). The FHRAI is one of the associations that filed the petition for an order with the Delhi HC challenging the CCPA guidelines.

The NRAI petition also said service charges collected from customers are split between restaurant and hotel staff. Without these charges, the welfare of the restaurant’s employees will be affected, the association argued.

According to the association, the standard for collecting service fees is not new and many countries, such as the UK, Singapore, Japan and the US, charge their customers for the service between 8% and 12.5%,” the NRAI petition said. .

Meanwhile, some customers fear the impact of the order could make dining out expensive. Devangshu Tandon, a seasoned advertising professional who frequents popular spots on Delhi’s Pandara Road, is relatively upset with the High Court’s decision. “A family dinner or an evening with friends will certainly cost more. I better take weekend cooking classes instead,” he says.