Service Charge Row: Delhi High Court Grants Final Opportunity To Restaurant Associations For Proper Filing Of Compliance Affidavits

The Delhi High Court has granted one last opportunity to Federation of Hotels and Restaurant Associations of India and National Restaurant Association of India for proper filing of their affidavits in compliance of an order in respect of levy of service charge by their members, subject to payment of Rs. 1 lakh each by both of them.

Justice Prathiba M Singh said that neither of the Associations have filed the affidavits in terms of the order passed on April 12 and thus, they are in complete non-compliance of the same.

“Accordingly, one last opportunity is granted to the Petitioners to properly file these affidavits within four days subject to payment of Rs.1,00,000/- as costs in each of the petitions which shall be paid to the Pay and Accounts Office, Department of Consumer Affairs, New Delhi by way of a Demand Draft. Without the cost being deposited, the affidavits shall not be taken on record,” the court said.

The court was hearing the pleas moved by the Associations challenging the guidelines of Central Consumer Protection Authority that prohibit the hotels and restaurants from levying service charges “automatically or by default” on bills.

A co-ordinate bench in July last year stayed the guidelines while specifying that the service charge and obligation of the customer to pay it must be “duly and prominently displayed on the menu or other places”.

Justice Singh had directed both the Associations to submit an affidavit indicating the percentage of its members who are imposing the service charge as a mandatory condition on food bills.

They were also directed to indicate as to whether their members would have an objection in case the term “service charge” is changed to some alternative terminology like “staff welfare fund, staff welfare contribution or staff charges” to avoid confusion in the minds of consumers that the charge is being levied by the government.

During the hearing on July 24, the court was apprised that an affidavit was filed by National Restaurant Association of India on July 21. However, the Union Government was not served. It noted that the affidavit had come on record despite an objection by the Registry that the proof of service was not filed.

Justice Singh was also informed by Central Government’s counsel Sandeep Mahapatra that the service of affidavit filed by Federation of Hotels and Restaurant Associations of India was made at an incorrect email address despite the correct email address being shown on the index where he has been filing affidavits.

“The clear impression that the Court gets is that the Petitioners are in complete non-compliance of the orders dated 12th April, 2023 and had filed the affidavits without serving the Respondents properly so as to ensure that the hearing does not proceed before this Court,” the court said.

ASG Chetan Sharma also submitted before the court that approximately 4,000 more complaints were received from various consumers complaining that the service charges was being imposed by the Associations and their members.

“The Respondents are permitted to file a response to the affidavits, if necessary, by 20th August, 2023 with advance copy to the Petitioner,” the court said while listing the matter on September 05.

Earlier, the CCPA had defended its guidelines by submitting that mandatory levy of service charge by hotels and restaurants is "directly in teeth of the rights of consumers" as well as provisions on unfair contract, unfair trade practices and restrictive trade practice under the Consumer Protection Act.

The authority had further said that by paying such a service charge, a consumer is not buying a distinct good or availing a separate service from the restaurant or hotel.

Case Title: National Restaurant Association v. Union Of India & Anr.

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