Restaurants can't force customers to pay service charge in food bills: Delhi HC
The Delhi High Court on Friday ruled that the payment of service charges on food bills by customers is voluntary and cannot be imposed as mandatory by restaurants or hotels, observing that mandatory collection of it amounts to unfair trade practice.
FollowThe Delhi High Court on Friday ruled that the payment of service charges on food bills by customers is voluntary and cannot be imposed as mandatory by restaurants or hotels, observing that mandatory collection of it amounts to unfair trade practice.
Justice Prathiba M Singh delivered the verdict whilst dismissing petitions filed by restaurant associations challenging the Central Consumer Protection Authority's (CCPA) directives that barred hotels and restaurants from imposing obligatory service charges on food bills.
Justice also imposed costs of Rs 1 lakh on the restaurant associations that challenged the CCPA guidelines, Bar & Bench reported.
The order was passed on pleas filed by the National Restaurants Association of India (NRAI) and the Federation of Hotel and Restaurant Association of India (FHRAI). These guidelines were stayed by the High Court on July 20, 2022. The establishments had sought to invalidate the regulatory guidelines, which explicitly prohibited the mandatory collection of service charges from patrons.
What CCPA guidelines issued in 2022 say?
The CCPA issued guidelines in 2022 directing that restaurants cannot automatically or by default add a service charge to the food bill, nor can it be disguised under any other name.
Hotels and restaurants are also prohibited from forcing consumers to pay a service charge and must clearly inform them that it is voluntary, optional, and entirely at the consumer's discretion, the CCPA held.
No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers; and
Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount.
The High Court rejected objections to these guidelines, and ruled, "The CCPA is an authority empowered to pass the guidelines under CPA 2019. Issuing guidelines is an essential function of CCPA. The same has to be mandatorily complied with".
The bench also pointed out that mandatory collection misleads consumers by creating the impression that they are paying service tax or GST.
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