In a significant ruling, the Delhi High Court declared that restaurants cannot impose a mandatory service charge on food bills, affirming that such a practice is an “unfair trade practice.” The court’s judgment came after dismissing two petitions filed by the Federation of Hotels and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI). These petitions had challenged the Central Consumer Protection Authority (CCPA) guidelines, which prohibit the mandatory collection of service charges by restaurants.

Justice Prathiba M Singh, while pronouncing the verdict, emphasized that the service charge should remain voluntary and not be imposed on customers. According to the court, the mandatory addition of service charges to food bills was a violation of consumer rights and went against the law. Consumers, the court stated, are free to offer tips voluntarily if they choose, but they should not be compelled to pay a fixed service charge.

The court further noted that the practice of adding service charges to bills was misleading and deceptive, as it created the false impression that the service charge was a government-imposed tax, like a service tax or GST. This misconception misguides consumers and undermines transparency in pricing, the court observed.

The ruling also classified the mandatory collection of service charges as an “unfair trade practice.” The court pointed out that such practices often exploit consumers by making them feel obligated to pay charges that are not mandatory. In light of this, the court upheld the CCPA’s guidelines, which aim to protect consumer rights and ensure transparency in the hospitality sector.

In addition to dismissing the petitions, the court imposed a penalty of Rs 1 lakh on each of the petitioners, FHRAI and NRAI. The amount is to be deposited with the CCPA to promote consumer welfare. This landmark decision reinforces consumer rights and ensures that service charges are not unfairly forced upon customers.

PTI.