Delhi HC stays CCPA norms, says paying service charge a matter of choice

No such charge on takeaway orders: Court

Staying the guidelines issued by Central Consumer Protection Authority (CCPA) saying that restaurants and hotels cannot levy service charges by default on food bills, the Delhi High Court said paying the charge is a matter of choice.

“If you don’t want to pay, don’t enter the restaurant. It is a matter of choice,” Justice Yashwant Varma remarked.

The court also said there will be no service charge on takeaway food orders.

However, food outlets should display that they are levying such charges clearly on their menus so that customers know, the court said.

The order was passed on a petition by the National Restaurant Association of India (NRAI) challenging CCPA guidelines.

“The matter requires deliberation and until the next hearing on November 25, the CCPA guidelines have been stayed. NRAI must ensure that the condition that customers should pay the service charges must be clearly stated in the menu or any other place where it can be prominently displayed. In addition to this, members of restaurant associations must also give an undertaking that no service charge would be levied on takeaway food orders,” the court said.

The court sought responses from the government (respondent) on the matter.

“More than the restaurant owners, the HC order comes as a huge relief for lakhs of restaurant employees,” said Riyaaz Amlani, CEO and managing director at Impresario Homemade Restaurants.

The CCPA, which comes under the Ministry of Consumer Affairs, issued guidelines on July 4 for preventing unfair trade practices and violation of consumer rights with regard to the hotels and restaurants levying service charges.

The guidelines stated that no customer should be forced to pay service charge against their will.

The NRAI, which represents more than 500,000 restaurants in the country, had said the guidelines issued by CCPA had no legal basis.

The restaurant association contended that the service charge cannot just be done away with solely based on these guidelines and that a new law or amendment has to be brought in to abolish the charge altogether.

“The contents (guidelines), therefore, cannot be treated as an order of the government,” the NRAI petition said.

NRAI contended that paying the charge is the sole intention and discretion of the customer. “Once the customer becomes aware of the service charge and they place an order there is a binding contract between the customer and the food outlet to pay,” the association said.

“In between this contract, a third party cannot have a say. The guidelines are arbitrary and should be set aside, the association said.

Food associations have heaved a sigh of relief after the order.

“We are glad that our employees shall continue to avail of the agreed benefits under service charge,” said Gurbaxish Singh Kohli, vice-president, FHRAI (Federation of Hotels and Restaurant Association of India). FHRAI is one of the associations that filed the writ petition in the Delhi HC contesting CCPA’s guidelines.

The NRAI petition also said the service charges collected from customers are distributed among the staff of restaurants and hotels. Without such charges, the well-being of restaurant employees will be affected, the association argued.

According to the association, the standard of levying service charges is not new and many countries, such as the UK, Singapore, Japan, and the US are charging their customers for service between 8 per cent and 12.5 per cent,” the NRAI petition said.

Meanwhile, some customers are worried that the impact of the order could make dining out expensive. Devangshu Tandon, a senior advertising professional who frequents the popular places on Delhi’s Pandara Road, is relatively miffed with the High Court decision. “Family dinner or a night out with friends is certainly going to be pricier. I am better off doing weekend cooking classes instead,” he says.