Delhi High Court Dismisses Petition Against Service Charge Ban; Upholds CCPA Guidelines

The Delhi High Court has dismissed the petition filed by the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurants of India (FHRI) challenging the ban on service charges.

Justice Pratibha M Singh delivered the ruling, which also upheld the guidelines issued by the Central Consumer Protection Authority (CCPA).

Additionally, the court imposed a fine of Rs 1 lakh on the NRAI for filing the petition against the CCPA guidelines.

Court Upholds CCPA’s Authority To Issue Guidelines

The court supported the CCPA’s authority, stating that it is not merely an advisory body but has the power to issue guidelines aimed at preventing unfair trade practices and protecting consumer interests.

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This decision solidifies the CCPA’s role in regulating the food service industry and safeguarding consumers from unfair practices related to service charges.

Petitioners’ Argument Rejected By The Court

The petitioners had argued that there was no law explicitly prohibiting restaurants from charging service fees.

They contended that the CCPA’s guidelines were arbitrary, unstable, and should be repealed.

However, the court rejected these arguments, reinforcing the CCPA’s guidelines as a necessary step to protect consumer rights.

Key Provisions Of CCPA Guidelines

The CCPA’s guidelines, issued in 2022, prohibit restaurants and hotels from automatically adding a service charge to the food bill or hiding it under any other name.

Additionally, the guidelines make it clear that consumers should not be coerced into paying service charges.

The guidelines mandate that businesses must clearly inform consumers that the service charge is voluntary, optional, and at the consumer’s discretion.

Furthermore, the guidelines prohibit the inclusion of a service charge in the food bill that is subject to Goods and Services Tax (GST).

There will be no restrictions on customers based on the collection of service charges, whether it pertains to entry fees or service provision.

Government Support For CCPA Guidelines

The Union Ministry of Consumer Affairs, Food and Public Distribution has also supported the CCPA’s stance, affirming that hotels and restaurants should not add service charges by default to food bills.

They emphasized that service charges should not be levied under any other name, in line with the CCPA’s guidelines.

This ruling reinforces consumer rights and ensures transparency in the hospitality industry, providing clarity on the handling of service charges in restaurants and hotels.