Don't Use Interim Stay To Mislead Consumers On Service Charge: Delhi High Court To Hotels, Restaurants

The Delhi High Court on Wednesday said that its interim order staying the guidelines of Central Consumer Protection Authority (CCPA), that prohibit the hotels and restaurants from levying service charges “automatically or by default” on bills, shall not be shown on the menu cards or display boards in a manner to mislead the consumers that the service charge has been approved by the court.

Justice Prathiba M Singh was hearing the petitions filed by Federation of Hotels and Restaurant Associations of India and National Restaurant Association of India challenging the CCPA’s guidelines.

“It is clarified that the interim order shall not be shown in the display board or menu card in a manner to mislead the consumer that the service charge has been approved by this court,” said the court.

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”.

Additional Solicitor General Chetan Sharma today submitted that various restaurants are “misinterpreting the interim order” by using it to give legitimacy to levy of the service charge.

Justice Singh 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.

The court also said that the response shall indicate as to whether the 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.

“The affidavit shall also indicate the percentage of members who are willing to inform the consumers that the service charge is not mandatory and they can contribute voluntarily,” the court said, while listing the matter for hearing on July 24.

The court also directed the Associations to file a complete list of all the members who are supporting the petitions, within two weeks.

“For a long time, most of us thought that the service charge is being taken by the government. That is where the problem is because people think service charge is like a service tax. A consumer doesn’t know the difference between service tax, GST etc. because people think it is being taken by the government. I have come across a lot of people who think like that,” Justice Singh said during the hearing.

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