Delhi HC reserves verdict on catering bodies’ plea against service charge ban

The Delhi High Court on Friday reserved its verdict on petitions by catering bodies challenging the guidelines barring hotels and restaurants from automatically deducting service charges from food bills.

“Arguments heard. Judgment reserved,” Justice Prathiba M Singh said.

The Federation of Hotel and Restaurant Associations of India (FHRAI) and the National Restaurant Association of India (NRAI) approached the court in 2022 by filing two separate petitions.

The guidelines, issued by the Central Consumer Protection Authority (CCPA) on July 4, 2022, were stayed by the High Court later that month.

The FHRAI lawyer, in his rejoinder on Friday, claimed that the CCPA had neither the power nor the jurisdiction to impose such a ban, without following the principles of natural justice.

“Merely holding a meeting with the industry body is not in line with natural justice,” he said, “the guideline can only be advisory in nature.”

He said service charges were collected from customers for the benefit of restaurant staff, in line with the fundamental right of owners to carry on any profession, trade or business.

The Centre’s standing counsel said no documents had been placed on record to show how the service charges benefited the staff.

The petitioners argued that the service charge, applicable in recent years, was a “traditional charge” and charged by restaurants after proper display on menu cards and on the premises.

They argued that the CCPA order was arbitrary, untenable and should be overturned.

Seeking dismissal of the petitions, the CCPA, in its counter-affidavit, said the petitioners had “totally failed” to appreciate the rights of consumers, whose hard-earned money was being unfairly collected automatically or by default in the name of payment charges. service.

He added that the aim of collecting mandatory service charges from consumers beyond the price of food items and applicable taxes was “unlawful” as no proportionate service was provided separately to consumers.

On July 20, 2022, the High Court stayed the operation of the CCPA guidelines and declared that the stay was subject to the condition that the petitioners ensure the levy of service charges, in addition to the price and taxes, and that the The customer’s obligation to pay the same was duly and prominently displayed on the menu or other places.