Service charge

Relief for restaurants after Delhi HC upholds guidelines banning service charges

THE DELHI High Court on Wednesday suspended Central Consumer Protection Authority guidelines prohibiting hotels and restaurants from levying service charges “automatically or by default” in the bill.

“If you don’t want to pay, don’t enter this restaurant. It is ultimately a matter of choice,” Judge Yashwant Varma said, while hearing petitions from the National Restaurant Association of India and the Federation of Hotel and Restaurant Associations of India challenging the guidelines. of the CCAC.

However, the court clarified that the service charge, and the customer’s obligation to pay it, must be “duly and prominently displayed on the menu or in other places.” He also recorded a commitment that the service charge will not be included in the bill for takeout orders.

Seeking a response from the Center and the CCPA to the motions, the court said there would be “serious doubt” as to whether the issue of pricing and service charges falls within Article 2(47 ) (unfair commercial practice) of the Consumer. Protection Act, 2019. “The matter requires consideration,” he said, while setting the case down for a hearing on November 25.

While an order made by a high court is only enforceable within its territorial jurisdiction, the Supreme Court has held in the past that a high court order on writ petitions challenging a central law or rule s would extend “to the whole country”.

In its guidelines released on July 4, the CCPA had stated that “no hotel or restaurant should force a consumer to pay a service charge and should clearly inform the consumer that the service charge is voluntary, optional and at the discretion of the consumer. consumer”. He had clarified that the service fee should not be billed to consumers under any other name.

The NRAI, in its petition, said charging a service charge has been standard practice in the hospitality industry for more than 80 years. “There is no law prohibiting restaurants from charging service fees. There has been no new law or amendment to existing laws making it illegal to charge service fees. In the absence of authentication and promulgation of the guidelines, their content cannot be treated as an order of the government,” he said.

Stating that the guidelines cannot be made binding, the NRAI said the collection of service fees is a matter of contract and management decision. “The collection of service charges is displayed at various places in the restaurant. The same is also displayed on restaurant menu cards. Once the customer places the order after knowing the terms and conditions, there is a binding contract,” he said.

He said the service fee collection system ensures “a systematic and logical distribution of service fee collection among all employees, not just the employee serving the customer”, arguing that other staff members , including chefs and utility workers, would be deprived of the benefit otherwise.