(image/Freepik)
New Delhi: The Delhi High Court on Friday upheld guidelines issued by the Central Consumer Protection Authority (CCPA) in 2022 stating that payment of service charge by customers on food bills was voluntary and could not be made mandatory by hotels or restaurants.
The court imposed costs of Rs 1 lakh on the restaurant associations that challenged the CCPA guidelines. Justice Prathiba M. Singh rejected the pleas filed by the National Restaurants Association of India (NRAI) and the Federation of Hotel and Restaurant Association of India (FHRAI) that challenged the guideline prohibiting restaurants and hotels from levying service charges by default on food bills.
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The CCPA guidelines were stayed by the High Court on July 20, 2022.
The Delhi High Court also held that the CCPA was not merely an advisory body and had the power to issue guidelines for the prevention of unfair trade practices and for protecting consumer interest.
Previously, the CCPA had issued guidelines with the aim of preventing unfair trade practices and violations of consumer rights. As per the CCPA, hotels or restaurants should not add service charge automatically or by default to the food bill; no collection of service charge should be done by any other name; they cannot force a consumer to pay service charge and must clearly inform the consumer that service charge is voluntary.
Additionally, the CCPA also stated that no restriction on entry or provision of services based on the collection of service charges should be imposed on consumers, and service charges should not be collected by adding them along with the food bill and levying GST on the total amount.
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The NRAI’s plea highlighted that there is no law that disallowed restaurants from levying service charges, and there has been no amendment to the existing laws which would render levying the service charge illegal.
