The Delhi High Court on Friday upheld the guidelines issued by the Central Consumer Protection Authority (CCPA) in 2022 stipulating that hotels and restaurants should not add any service charge automatically or by default to food bills.
The single-judge Bench of Justice Prathiba M Singh passed the order on petitions filed by the National Restaurants Association of India (NRAI), and the Federation of Hotel and Restaurant Association of India (FHRAI).
The High Court further imposed costs of Rs one lakh on the restaurant associations that challenged the guideline.
On July 20, 2022, the High Court had stayed the guidelines issued by CCPA to prevent violation of consumer rights and unfair trade practices.
The CCPA guidelines directed hotels or restaurants not to add service charge automatically or by default in the food bill.
It stipulated that no collection of service charge should be done by any other name.
As per the guidelines, a hotel or restaurant could not force a consumer to pay the service charge. The hotels and restaurants were asked to clearly inform the consumer that the service charge was voluntary, optional, and at consumer’s discretion.
No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers, said the guidelines.
CCPA directed the hotels and restaurants not to collect any service charge by adding it along with the food bill and levying GST on the total amount.
NRAI submitted in its petition that there was no law which banned restaurants from levying service charge. There has been no amendment to the existing laws, which would render the levy of the service charge illegal.
It said in the absence of due authentication and promulgation of the guidelines, the contents thereof could not be treated as an order of the Government.
The petitioner-association further contended that the guidelines were arbitrary, untenable and ought to be set aside.