Delhi HC holds Central Consumer Protection Authority 'no service charge order' on restaurants

|HT|

The Delhi high court on Wednesday put on hold a Central Consumer Protection Authority order that barred restaurants from automatically adding service charges to bills. Justice Yashwant Varma, however, said all eateries must prominently display levy of service charge on menus and other places. The court also recorded a submission by counsels of the National Restaurant Association of India - that they would not levy this charge on takeaway items. The counsel for the CCPA told the court consumers should not be forced to pay the service charge. However, to this, the court said that it is a matter of choice, adding, "Don't enter the restaurant… if you don't want to pay."

"On a more fundamental claim, the court notes there would be serious doubts as to whether service charge would fall within ambit of Consumer Protection Act, particularly in light of NCDRC order where commission upheld service charge," the judge said in his oral order.

The next date of hearing in this matter is November 25, which means restaurants, hotels and eateries can continue automatically levying service charges to food bills till then.

The petition filed by the NRAI had challenged the CCPA's July 4 guidelines, which barred hotels and restaurants from adding service charge by default to food bills. The guidelines also outlined what steps consumers could take in case of violation of the rule. Seeking to set aside those guidelines, the petitioners claimed it was 'arbitrary, untenable and ought to be quashed', as it had been issued without appreciation of facts and circumstances.

"Levy of service charge has been a standing practice in the hospitality industry for more than 80 years, which is evident from the fact the Supreme Court took notice of this concept way back in 1964," their petition said.

Earlier this month the practice of service charges being added to food bills by default were deemed illegal by the government, noting also that it could not be a hidden component of the bill or be charged under a different heading. Businesses must clearly inform consumers of the charge and this can only be collected at their discretion, the government said.

People cannot by denied entry if the do not consent, the government warned.

Restaurant owners have in the past defended the practice by saying ample declarations are made at premises for customers to know they will pay a service charge if they eat here.

An NRAI functionary, following a June 2 meeting, said the money collected is 'not pocketed by the owner, it is equally distributed between everyone who works to make your experience better'.

Consumer rights organisations, on the other hand, contend that service charges are arbitrary and illegal since eateries are free to price food and beverages according to their policies.

(Except for the headline and the pictorial description, this story has not been edited by THE DEN staff and is published from a syndicated feed.)