Restaurant Lobbies Rejoice As High Court Stays Order Barring Service Charge Levy

The Delhi High Court’s stay on an order prohibiting eateries from levying service charge comes a relief for hoteliers and restaurant owners.

The single-judge bench of the Delhi High Court, in interim order, said the information that a certain restaurant levies service charge must be displayed prominently for the knowledge of customers.

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.

On July 4, the Ministry of Consumer Affairs issued guidelines stipulating that service charge should not be added automatically or by default to food bills. That prompted the NRAI, and Federation of Hotels & Restaurant Associations of India to file petitions challenging the Central Consumer Protection Authority norms.

The guidelines were “arbitrary, untenable and ought to be quashed”, as it was curtailing the already stressed hospitality establishments’ right to conduct business, the petitioners said. The restaurant lobbies also sought clarification on the legality of the CCPA guidelines.

The counsel for the CCPA, however, told the Delhi High Court that consumers should not be forced to pay service charge. To this, the court said, “If you don’t want to pay, don’t enter the restaurant. It is essentially a matter of choice [for consumers].”

The next hearing is scheduled for Nov. 25. Till then, the interim order will remain in place, essentially allowing restaurants to levy service charge.

“The order comes as a huge relief to millions of anxious restaurant workers as the CCPA guidelines were a huge blow to them, given that the service charge constitutes a significant part of their earnings,” the NRAI said in a statement.

According to FHRAI, it is entirely the prerogative of a hotel or restaurant to decide on the structure of the menu and its pricing to suit the business model.

The new guidelines were “against the very grain of practicing business in a fair environment and erroneously proceeded on the basis that service charge is akin to a tip/gratuity and therefore optional”, the association said.

“We are glad that our employees shall continue to avail agreed benefits under service charge,” said Gurbaxish Singh Kohli, vice president, FHRAI.