Service charge

Delhi HC urges Center to move single-judge bench on service fee issue

The bench will now hear the case on August 31 “The stay order was passed by the single-judge bench without an opportunity to file responses”

“The stay order was adopted by the single-judge bench without an opportunity to file replies”

The Delhi High Court on Thursday asked the Center to go to a single-judge bench to seek appropriate relief against an order suspending guidelines prohibiting hotels and restaurants from automatically levying service charges on food bills.

A bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad allowed the Center and Central Consumer Protection Authority (CCPA) to make submissions before the single-judge bench on grounds challenging the guidelines. The single-judge bench will now hear the case on August 31.

Additional Solicitor General (ASG) Chetan Sharma, representing the Center and the CCPA, argued that on July 20, the single-judge bench suspended its July 4 guidelines, prohibiting hotels and restaurants from automatically levying service charges. service on food bills.

The ASG said the stay order was passed by the single judge bench without giving them an opportunity to file their responses to the motion of the National Restaurant Association of India (NRAI) and the Federation of Food Associations. hotels and restaurants in India.

The ASG said the issue had “wide-ranging implications” and that it would have been prudent for the single judge to hear from authorities before making his order. The service charge “takes the color” of a “quasi-governmental or governmental charge” and causes embarrassment if one refuses to pay, he added.

The High Court said there was no problem putting a ‘price tag’ on any of the items and asked restaurant associations if they could ‘overlap’ the consumer service charge.

An industrial practice

Lead attorney Kapil Sibal, representing a restaurant association, said charging a service charge was not just about “tipping” and was an industry practice, which has been going on for 70 years. years, governed by company law.

“This problem cannot be worked on a consumer. The fact that you, as an employer, do not want to pay your employee cannot mark the consumer. You pay for your employee… You don’t have to charge a service fee to pay your employees… You are responsible and obligated to pay your employees under various laws. The fact is that this is all up for debate,” the High Court said.

The background

On July 20, the High Court suspended CCPA guidelines prohibiting restaurants and hotels across the country from levying default service charges on food bills. The order came during the hearing of pleas from the NRAI, FHRAI as well as restaurateurs and developers.

The NRAI, which has about 7,000 member restaurants across the country and nearly 2,500 member outlets in the National Capital Region, said charging a service charge has been standard practice in the hospitality industry since over 80 years old.

The association had clarified that in the absence of a service charge, tips are generally paid by customers normally equivalent to 10% of the amount of the bill.

“This sum is pocketed by the servers/stewards who come into direct contact with the customer. This results in the deprivation of all elements of tips going to the back of the house staff, including chefs/cooks/utility workers and others involved in sourcing raw materials, food preparation food and customer service,” read the NRAI’s plea.

The association said the restaurants provide a one-time distribution of service fees collected from customers to all staff, including back-end employees, whose contribution is thereby recognized and acknowledged.