Restaurants can’t force customers to pay service charge: Delhi High Court

The Delhi High Court on Friday upheld the Central Consumer Protection Authority’s (CCPA) guidelines that stipulate that hotels and restaurants should not add service charge by default to food bills.

Justice Prathiba M Singh dismissed two petitions filed by the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI) and imposed costs of ₹1 lakh each on the two restaurant bodies.

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.

In 2022, the Central Consumer Protection Authority (CCPA) issued guidelines for preventing unfair trade practices and violation of consumer rights with regard to the levying of service charge by hotels and restaurants.

The guidelines issued by the CCPA stipulate that hotels or restaurants shall not add service charges automatically or by default to the food bill.

“No collection of service charge shall be done by any other name. No hotel or restaurant shall force a consumer to pay service charge and shall clearly inform the consumer that service charge is voluntary, optional and at consumer’s discretion,” the guidelines said.

“No restriction on entry or provision of services based on collection of service charge shall be imposed on consumers. Service charge shall not be collected by adding it along with the food bill and levying GST on the total amount,” it said.

The government had said that service charge levied by restaurants and hotels as it adversely affects consumers on a daily basis. If any consumer finds that a hotel or restaurant is levying service charge in violation to the guidelines, a consumer may make a request to the concerned hotel or restaurant to remove service charge from the bill amount, the government had said.

The central government had also expressed its displeasure over restaurants allegedly making service charges compulsory even though such charges are subject to the customer’s discretion. In a letter addressed to restaurant body National Restaurants Association of India, the Department of Consumer Affairs (DoCA) secretary had said that the restaurants and eateries are collecting service charge from consumers by default, even though collection of any such charge is voluntary, at the discretion of consumers, and not mandatory as per law, a government statement reads.

The letter highlighted that consumers are forced to pay service charge, often fixed at arbitrarily high rates by restaurants. It mentions that consumers are also being “falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount.”