The Delhi High Court suspended the recent guidelines preventing hotels and restaurants from automatically levying service charges on food bills on Wednesday.
According to the CCPA’s regulations for the prevention of unfair commercial practises and the protection of client interests, a service charge is imposed in addition to the total price of the food items shown on the menu and applicable taxes, typically disguised as some other fee or charge.
“It may be mentioned that a component of service is inherent in the price of good and beverages offered by the restaurant or hotel. Pricing of the product thus covers both the goods and services component. There is no restriction on hotels or restaurants to set the prices at which they want to offer food or beverages to consumers. Thus, placing an order involves consent to pay the prices of food items displayed in the menu along with applicable taxes. Charging anything other than the said amount would amount to unfair trade practice under the act.”
The Centre has handed a blow to restaurateurs across the country by prohibiting them from adding a service charge to food bills through the Central Consumer Protection Authority (CCPA).
The latest recommendations, according to the CCPA, aim to prohibit unfair trading practises that breach consumer rights.
Hotels and restaurants must not force customers to pay service charges and must explicitly advise them that service charges are optional and that there will be no restrictions on entry based on this, according to the CCPA’s standards.
However, on Wednesday, while hearing petitions from the National Restaurant Association of India (NRAI) and the Federation of Hotels and Restaurant Associations of India, Justice Yashwant Varma stated that the issue needed study and urged the authorities to file their response.
Justice Yashwant Varma questioned the CCPA on where and how it obtains the idea that service charge payment is voluntary or not.
According to the CCPA, the conclusion was reached as a result of numerous complaints filed with the CCPA and registered on the National Consumer Helpline, alleging that restaurants and hotels were levying service charges in the bill by default, without informing consumers that such charges are voluntary and optional.
The court stated that the stay is conditional on the petitioners’ members guaranteeing that the assessment of a service charge in addition to the price and taxes, as well as the customer’s need to pay the same, is duly and prominently indicated on the menu or other locations.
It was also said that the members will not levy a service charge on any take-away items.
“The matter requires consideration, until the next date of listing, the directions as contained in para 7 for the impugned communication/ guidelines of July shall remain stayed. The members of the petitioner association shall ensure that levy of service charge in addition and the obligation of customers to pay the same is duly and prominently displayed on menu or other place where it may be deemed to be expedient. The members of the petitioner associations further undertake not to levy or include service charge on any takeaway orders.”
During the previous hearing, the petitioners argued that the imposition of a service charge is a question of contract and management choice, and that once a client placed an order after being made aware of the terms and conditions, a binding contract is formed.
Following that, no authority can interfere with the binding nature of a legitimate contract unless and until it is revealed and proven to be unconscionable or an unfair trading practise, according to the petitioners. The Court has requested Respondents to file their response, and the next hearing is scheduled for November 25, 2022.